RISK INSIGHTS records . It should specify which documents the nonprofit must retain and for how long , and outline the process and schedule by which documents will be destroyed .
• Gift acceptance — A gift acceptance policy can help board and staff members understand which donations and gifts are appropriate to accept while maintaining positive relationships with donors and mitigating risk .
• Conflict of interest — Governing conflicts of interests is one of the most critical policies a nonprofit board can implement . This policy should require those with a conflict of interest to disclose it and prohibit them from voting on any matter in which there is a conflict .
• Train board members on reviewing Form 990 . Tax-exempt organizations must file Form 990 annually with the Internal Revenue Service ( IRS ) to ensure that the organization fulfills its tax-exempt purpose . Form 990 Part VI , Line 11a , inquires whether the organization provided a copy of the form to all governing members before filing . Due to its public disclosure requirements , Form 990 is available for public inspection for three years following its filing , so having the policy to train board members can ensure that all involved have had the opportunity to contribute .
• Document and retain meeting minutes . The minutes of board and committee meetings provide an official record of any action . Having a standard process for the documentation and preservation of meeting minutes ensures that a consistent record is available for those who need it .
• Implement an attendance policy . For board members to exercise their governance authority , they must attend meetings . Having a meeting attendance policy ensures that board members can participate in informed and independent decisionmaking . Send out the agenda and meeting invite in advance so members have time to plan .
• Adopt term limits for board members . Board member turnover can help avoid stagnation by removing unproductive members . Set term limits to continuously expand the board ’ s available contacts and influence .
• Analyze and improve board recruitment . Member recruitment must be strategic for it to be effective . Determine what qualities , characteristics , and perspectives are missing and direct recruitment efforts toward filling those gaps .
• Develop an organizational strategy . Nonprofits need direction , and it is the responsibility of the board to develop , approve and support organizational strategy .
• Approve the annual budget . The annual budget should be developed by staff in conjunction with the financial committee before being submitted to the board for approval . The budget should reflect the organizational strategy and work to advance the long-term fiscal health of the nonprofit .
• Undertake an audit . Nonprofits should determine if they are required by law to conduct audits . Nonprofits that are not required by law to perform audits should still assess the potential benefits and costs and decide when it is appropriate to conduct an audit .
RISKS OF POOR NONPROFIT GOVERNANCE
Failure to adhere to good governance practices can cause stakeholders to lose their confidence in the organization and result in devastating consequences , such as :
• Loss of funding — When strong governance policies aren ’ t in place and followed , mistakes and liabilities are more likely to occur . If donors stop believing in the work of the nonprofit , the organization may be forced to close its doors .
• Poor reputation — Governance failures can cause the nonprofit ’ s reputation to suffer . A damaged reputation can detract volunteers , funding , and staff .
• Increased fees — Bad governance practices can increase legal liabilities , and regulatory issues can become costly for nonprofits .
Implementing governance best practices can ensure that the above risks don ’ t derail the efforts of a nonprofit , as well as help achieve organizational goals . For more risk management guidance , contact us today . +
BY : GWENYTH P . LUU , CLCS DIRECTOR - COMMERCIAL LINES JGS INSURANCE
Gwenyth Luu helps organizations improve their bottom line and lower their total cost of risk by implementing the JGS Proactive Service Platform . The JGS Proactive Service Platform is an inclusive strategy that focuses on primary cost drivers of a risk management program . Gwenyth helps businesses understand all of their potential and actual costs and liabilities , execute an actionable strategy , and deliver superior client service and support . The JGS Proactive Service Platform is driven by continuous strategy and service delivered on a daily basis throughout the year . The service platform includes risk control strategies , claims advocacy and management , contract reviews and insurance program design reviews .
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