|
Nonprofit Governance Indicator Guide (excerpts)Available at www.Governancematters.org Nonprofit organizations are best served by boards of directors that understand and accept their role as the governing body of the organizations they serve. Boards ensure that organizations remain accountable to the community, providing needed services while adhering to rigorous ethical and professional standards. Donors increasingly are paying attention to how nonprofits are governed, as they demand assurance that the organizations they support are well governed. Such organizations tend to be effective and efficient service providers. Governance Matters recognizes the pivotal role of the funder (private foundations, corporate donors, government agencies and individuals) in raising the standards of board performance among nonprofits. Governance Matters, therefore, has developed this Nonprofit Governance Indicator Guide to help funders determine what information is needed from nonprofits, how to evaluate the data received, and how to engage nonprofit organizations in dialogue aimed at improving board performance and, ultimately, the impact of the donor’s grant. It is expected that funders will take a consultative approach to the conversation – not looking for perfection, but for an indication that grantees are aware of possible shortcomings and open to redressing them, possibly with the funders’ assistance, over a reasonable period of time. This tool is meant to be used by all Grantmakers, whether they provide program or general operating support. Its scope is comprehensive to enable individual Grantmakers to use some or all elements are compatible with their organizations’ policy and style in interaction with nonprofit organizations. The bottom line is the effectiveness or impact of the funds, based on how well they have been utilized by the grantee. The structure and functions of the board of a nonprofit organization should support the organization’s strategic priorities, and allow roles and responsibilities to change as organizations move through their life cycles. For example, while small organizations may or may not have a board that is fully engaged (operationally and financially), their strategic priorities and performance objectives should be clearly stated. Larger, more-established organizations are likely to have made a decision to invest in strategic planning and board development, and to demonstrate board involvement in establishing the priorities that guide business decisions. In both cases, the need for ongoing board development should be seen as a way in which organizations can stay ahead of the curve in ensuring that they benefit from a cadre of informed, committed and forward-thinking trustees. The savvy Grantmakers, however, will take nothing for granted, and will ask the questions that will elicit a clear picture of the state of governance within the nonprofit organization. Factors in the Grant maker-Nonprofit Relationship
* Board effectiveness. 1. Board Effectiveness
* The organization is well managed; it has a clear mission, policy and program goals, under the leadership of an able board of directors. Indicators of Good Governance
* The board of directors is actively engaged in its oversight role and knowledgeable of the organization's key external and internal issues that affect its success. It focuses on policy development and on the strategic direction and evaluation of the organization, respecting the staff’s responsibility for implementing policy directives. Funders’ Questions For Nonprofits & Board Practices Is the board playing an appropriate role for the current stage of the organization’s life cycle? Yes. Beyond the start-up phase of the organizational cycle, the board should not be involved in day-to-day operations. There should be clear delineation between governance and operational roles. How frequently does the board evaluate the performance of the chief executive? The board annually evaluates the performance of the chief executive. Organizations that perform executive evaluation sporadically should be encouraged to do it regularly. Is this evaluation based on organizational performance? Yes. The evaluation is based on performance criteria previously agreed to by both the board and the chief executive. How does the board set the chief executive’s compensation? The board sets the chief executive’s compensation at a “market” level, based on research of current data and the performance evaluation. The entire board should be informed of the final decision. Is the board aware of the need for succession planning? Yes. A succession plan is in place or under discussion for both the chief executive and the Board Chair positions. Has the board approved a risk-management policy that dictates how the organization is protected and should act in order to maintain the public trust? Yes. 2. Board Operations * The board meets regularly to address matters of policy, strategic direction, organizational performance and community impact Indicators of Good Governance
* The board meets regularly throughout the year, with a majority of directors in attendance. Funders’ Questions for Nonprofits & Board Practices How often does the board meet? The board meets at least three or four times per year. There is a preference for face-to-face meetings vs. electronic interaction. If the board meets too often, it may be micro-managing the organization. A board that meets rarely tends to have little impact and oversight. In both cases board accountability for the organization is compromised. Does the board practice the basic steps of board development – recruitment, orientation, training, and renewal? Yes. There is a formal process of nominating and interviewing candidates, orienting and training new directors, and continued education of the board. Are there term limits? Term limits are in place and enforced, as part of an established commitment to maintain board effectiveness through renewal. Does the board conduct annual or periodic self-evaluation? How are the results used? There is periodic evaluation of board performance to assess membership composition, selection process, structure, satisfaction, turnover and overall performance. Results are used to develop a plan for further board development as warranted. Does the board have a committee structure? Please describe. How do the committees operate in relation to the full board? There are active standing and/or ad hoc committees that bring matters to the full board for discussion or approval at each meeting or on a regular basis. The board may use a consent agenda – or – the board operates on a model that mandates action by the full board. How does the board manage its legal obligations? Are board members aware of their legal responsibilities to the organization? Is there an enforced conflict-of-interest policy? All the relevant policies are in place and enforced, including a Conflict of Interest Policy which is reviewed and signed annually by each board member. 3. Strategic Planning * The board upholds the organization's mission, and can articulate a clear vision for its future and the values that will guide decisions and behavior. The board is integrally involved in setting strategic direction through strategic planning, organizational alignment and implementation. Indicators of Good Governance
* A strategic plan, with attainable goals, has been developed and approved by the board, with staff input and support. What was the extent of the board’s involvement in the planning process? Did the board approve the plan? When? The full board was involved in the development of the plan, including review of mission statement, objectives and priories with the participation and support of staff. The full board adopted the plan. How often are progress reports on the plan provided to the board? Regular updates are provided to the board, depending on the organization’s needs: at each board meeting, quarterly, semiannually, or annually. Does the board have a clear understanding of the organization's mission, relative to the current competitive environment? Do key leaders articulate a vision for its future? Yes, the board has developed a vision that distinguishes the organization's place in its field, with its desired impact on its constituents. The vision motivates staff and volunteers. 4. Program Effectiveness
* All programs and services are aligned with the mission of the organization. Therefore, synergy from an integrated portfolio of programs provides clients with highly responsive services and results in cost savings for the organization and efficiencies in application of their grants. Indicators of Good Governance
* Program development is consistent with the organization’s mission and strategic directions laid out by the board. Funders’ Questions For Nonprofits & Board Practices How do the organization’s programs reflect its structure and functions and support its mission? There is in place a system of program review and development that ensures congruence with the organization’s mission, vision and values, and it is not driven primarily by funding availability. How does the board support efforts to form strategic alliances to maximize client benefit? The board is aware of the significance of collaboration to leverage resources and maximize services to the community, and factors this in to policy making and organizational review. Does the board receive reports on program performance and the impact on fiscal health? The board receives and reviews regular reports on program accomplishments. How does the board ensure program integrity and effectiveness? Measures are in place for observation, data gathering, assessment and application of learnings. 5. Stability of the Funding Base
* The organization has an appropriately diversified funding base, and sufficient funding and financing to support the programs and organization. Indicators of Good Governance
* The organization is aware of the benefits of having a diversified funding base that promotes sustainability. Funders’ Questions For Nonprofits & Board Practices Does the board approve an annual fundraising plan? Yes. Is the organization’s support base appropriately diversified? What opportunities would/does increased funding diversity bring to the organization? Would/do other funding streams enable you to leverage government support? Would/does government funding enhance the reach or effectiveness of your programs? Yes. Board members are aware of the benefits of a diversified financial base and are able to discuss its utility to the organization. Are board members involved in securing funding for the organization, from individuals and institutions, including their personal/business contacts? Does the board make an annual, personal contribution to the organization? How is the contribution level encouraged or enforced for individual board members? Yes, board fundraising is a systematic process managed by a fundraising committee and approved by the board. This committee contributes to and approves the organizations’ fund development strategy. In addition, Board members contribute consistently, and support fund development through individual solicitation, site visits with funders, and annual fundraising events to reach predetermined goals. Personal gifts are made by each board member commensurate with their means. A minimum “get and/or give” contribution may be required by some boards. Is there an active fundraising committee of the board? Yes, or the board operates on a model that mandates action by the full board. (The absence or inactivity of a fundraising committee might compromise the effectiveness of board and organizational fundraising. Committees that exist only for the purpose of an annual event are “event committees” and should be evaluated as such.) 6.Financial Oversight
* Grant funds are managed capably and resources allocated efficiently. Accurate financial reports enable the funder to track use of the funds. Indicators of Good Governance
* The board has established sound internal financial controls. Funders’ Questions For Nonprofits & Board Practices Has the board approved a fiscal policies and procedures manual, including policies on record retention and whistle blower protection? Yes. Note than an absence of internal controls, or a clear Board role in maintaining them, places the organization at high risk for mismanagement. Does the board approve the budget prior to the beginning of the fiscal year? Yes. Does the board receive regular, year-to-date, comparison budget reports with a management narrative highlighting significant areas of focus? Yes. Is there a standing committee that oversees and evaluates the organization’s fiscal performance? Yes. Note that the treasurer alone should not fulfill this role, but should work in conjunction with board members to whom s/he has no filial or business ties. Is there an annual audit? Is it overseen by an audit committee? Is the audit approved by the board? Yes. Yes. Note that the treasurer alone should not fulfill this role, but must work in conjunction with board members to whom s/he has no filial or business ties. Yes. Does the organization have financial reserves? How are the reserves invested? Who monitors or manages the investments? Yes. The reserves are managed or monitored by a board committee. 7. Constituent Representation * The composition of the organization’s board, staff and clients reflects the interests, needs and concerns of the constituency it serves and the community in which it operates. The composition also reflects the distinct needs of the organization at its particular stage of development. Indicators of Good Governance
* The inclusion of diverse viewpoints and representation adds value to the organization’s mission and work and furthers its success. (Funders should be sensitive when exploring this area with grantees, as the definition of inclusion is the organization’s prerogative – unless it is far off base.) Funders’ Questions For Nonprofits & Board Practices How does the organization define its constituency – in terms of client base, geographic region, board, staff, and other stakeholders? How do you determine the appropriate level of board representation for each segment of your constituency so that its needs and perspectives inform strategic and policy decisions? There is an objective and systematic process for attaining inclusion. The organization is sensitive to this issue and actively seeks to achieve a balanced representation of relevant groups and their interests. What structures do you use to ensure that constituents’ needs are understood and addressed? What vehicles do you use to support your goals for representation? How do these activities support the cultivation of future organizational leaders? There are in place sustainable structures, such as an advisory council, alliances with representative organizations, or access to designated resources or contacts to provide input to the organization’s strategic decisions. The board actively cultivates leadership through these activities. What challenges do you face, at this stage of the organization's development, in cultivating or maintaining the involvement of the constituent groups, and how do you address them? At key phases - founding, growth, alliance/merger, maintenance, dissolution - the board places greater emphasis on particular functional skills and resources. If the lead team does not individually reflect a key constituency group, the organization actively seeks guidance and feedback from external sources who do. 8. External Relations
* The organization and its programs are publicly recognized for their quality and effectiveness. The funder, by association, is similarly acknowledged. Indicators of Good Governance
* Board members can describe the mission and key programs accurately, and demonstrate understanding of their competitive advantages and developmental needs. Funders’ Questions For Nonprofits & Board Practices How do board members engage their networks to support the organization’s mission? Board members actively promote the organization’s interests outside the boardroom, using their professional and personal contacts. Note that boards that maintain an entirely internal focus risk having limited understanding of the organization’s context and limit its access to external resources. How do board members learn about programs and clients? Board members receive formal orientation and materials. Other exposure: occasional visits to programs, staff presentations at board meetings, historic volunteer or staff involvement. In this way they remain up-do-date on the organization’s activities, personnel, and general impact on client needs. Is there a strong board presence at major events? Yes. Has the board developed and approved a public relations strategy? Yes. 9. Evaluation of the Organization’s Operations and Impact
* The organization has identified meaningful performance measures and tools – for the program(s) and for the organization as a whole. Indicators of Good Governance
* Evaluation measures mentioned in the proposal exist and are used by the organization. Funders’ Questions For Nonprofits & Board Practices How do you evaluate the effectiveness and efficiency of your programs and operations? Qualitative and quantitative evaluation measures are in place. How are the results of your evaluation used? Evaluation results are used to improve programs and operations, and to monitor the impact of the organization’s work. Does the board review evaluation reports annually? How does this evaluation influence planning for the subsequent year? Results are reported to funders, and are reviewed annually by the board. The ED/CEO is held accountable for outcomes, and charged with ensuring improvement, as necessary. Without such accountability, organizations risk achieving highly variable results, outcomes and competitive advantage.
|
