A Corporate Governance Framework for Non-Profits – May 2014

This topic is relevant for those in the non-profit sector.

Non-profit entities are often totally committed to the cause they serve.  In many cases, this zeal leads them to overlook sound corporate governance principles.  In such cases, the CFO can devote the time and effort necessary to design and implement strong corporate governance policies.

To start, the CFO must look at the big picture.  This entails several important subjects related to the organization’s values.  First, the CFO must ensure that there is a written code of ethics that the states the organization’s values and drives its culture.  Second, the CFO should establish a conflict of interest policy that is rigorously enforced, requires periodic disclosures, and is frequently monitored.  Third, the CFO needs to provide that the board is a manageable size, solid structure, and substantially independent.  In addition, all governing documents and board minutes must be made available to appropriate parties.  Such practices encourage transparency.

After these policies have been established, the CFO must determine the policies that relate to more to the day to day activities of the non-profit organization.  One is a whistleblower policy that removes fear of retaliation.  Another is a gift acceptance policy to deter conflicts of interest.  Policies that govern grant recipients, endowment spending, and fundraising are also important to insure the non-profit’s resources are effectively used in pursuit of its mission.

As one would expect, the CFO must also devise policies related to everyday accounting matters.  This means establishing policies that govern document retention and destruction; monitor expense reimbursement; develop compensation policies, particularly at the board level; review tax returns; and assure the independent review of financial statements.  Effective policies in these areas will serve as a strong deterrent to fraud.

Active involvement of the CFO in the foregoing matters will be an immense help in enabling the officers and employees of non-profits pursue the causes dear to their hearts.

For additional information on this topic please see the following link:

http://www.journalofaccountancy.com/Issues/2013/Sep/20138255.htm

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