Westminster Consulting Brochure Endowment & Foundation | Page 22

Qualities to Look For

The key principles of loyalty and care are simple but vague. When
these basic principles get applied, what sort of effect can it have
on a non-profit organization? In short, how do you know if you’re
demonstrating adherence to these principles with your actions or
merely providing lip-service to the concepts without your words
matching your deeds?
There are a few qualities which are highly correlated with good
stewardship. If you want to take a self-assessment, look for these
features:
Governance: Having in place policies and procedures which set the
expectations for actions, like rebalancing, the criteria for selecting
investment managers, delegation of authority. Furthermore, a set
of pre-ordained contingency plans within accepted policies can
allow a charity to be nimble when reacting to time-sensitive needs,
but not forced into poor decisions by ad hoc crises.
Transparency: Every organization has some items they need
to keep confidential (employee records, donor information),
but total secrecy is a rare requirement for charities. Promoting
transparency by disclosing operational details can demonstrate
high accountability and a commitment to fixing mistakes or making
improvements.
Legal Compliance: Obviously, a charity which has trouble meeting
the legal requirements of the various laws (the NYS Non-Profit
Revitalization Act, UPMIFA, etc.) should be held under higher
suspicion.
Independence: Charitable institutions typically have multiple
professional engagements, simultaneously watching each other
to catch mistakes and avoid conflicts of interest. For instance,
it may be problematic if your audit firm is also acting as your
investment advisor. Having independent operators servicing your
plan, with a clear delineation of duties, promotes independent and
comprehensive decision making. Demonstrated independence
via utilization of multiple vendors (including auditors, investment
managers, and investment consultants) can ensure a higher standard
of both loyalty and care.
Low costs: Every fee paid to a vendor diminishes the potential
advancement of the charity’s mission. Excessive salaries to
employees represent an abuse of charitable donations. There
are many charities which abuse the goodwill and donations of
everyday people, but there are an equal number of charities which
keep external costs and internal spending in check.
Longevity: Sadly, some untrustworthy charities exist to collect
donations from generous individuals rather than serve the
advancement of the charity’s supposed mission. On the other
hand, some charities exist for decades because of a demonstrated
ability to meet their goals and value to donors. The longevity of a
charity should give donors the ability to benchmark their history of
supporting their given mission.

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Budgeting: A good steward acknowledges its resources and budgets
them accordingly. A long term, stable budget can set expectations
for the community partners.
Solid returns – It is no coincidence that good practices are highly
correlated with good results. After all, fortune favors the prepared.
Digging Deeper: Governance & Transparency
Let’s revisit the above qualities or visible components of stewardship
and focus on the first two: Governance & Transparency.
Quoting Wikipedia, governance refers to “all processes of governing,
whether undertaken by a government, market or network, whether
over a family, tribe, formal or informal organization or territory
and whether through laws, norms, power or language.” It relates
to “the processes of interaction and decision-making among the
actors involved in a collective problem that lead to the creation,
reinforcement, or reproduction of social norms and institutions.”
Does your organization have its processes expressed in such a way
that an outsider looking in can understand how things get done, who
is responsible for what duty, who owns a particular responsibility,
and where the buck stops? Thoughtful governance documentation
will demonstrate these processes. Board charter, committee
charters, board resolutions, investment policy statements, minutes
(to name a few) are all necessities to demonstrating commitment to
good governance and high standards of “loyalty and care”.
Transparency represents the amino acids or building blocks of
good governance. An organization that welcomes the bright light
of transparency will endure any examination required of it. The
Ford Foundation in its eff