By Janet Brown from her blog Better Together
From large major institutions to small nonprofits, one of the critical responsibilities of volunteer board members and funders is to assure best practices in fiduciary and organizational management. When a management issue arises that threatens the stability of a nonprofit arts organization, “where was the oversight?” is often the question on everyone’s lips. There are some common misperceptions and unfortunate “group think” that prevent or discourage adequate oversight by board members. Here are a few:
Funders have a unique responsibility, and in many ways, an easier job of dealing with the signs of organizational dysfunction. Their first responsibility is to make sure their contribution (the investment from their foundation or tax-payers dollars) is being used for the intent in which it was given and that the organization is operating with sound leadership and proper governance. There are also some misperceptions and idiosyncrasies that hinder funder oversight:
The nonprofit sector has come far in the past three or four decades in establishing its credibility to provide programs in an administratively sound manner. There continues to be growth in infrastructure of technical assistance and best practices. But, there also continue to be negative stereotypes that, all too often, reflect reality.
The elements that can make an organization successful also can work in reverse to take it down…exciting vision, sound implementation and transparent governance and financial management. Exciting vision without sound management only harms our efforts to secure wider funding and support. Sound financial management without a vision for the mission and the artform is also ineffective. This takes a team…a team of artist, manager, board member and funder. If any one link drops out of the oversight management team, there is trouble.
Board members and funders, please ask the hard questions. When was the last audit? Can you really afford not to have an audit? Shouldn’t you have monthly financial statements? What makes up the net assets number on the balance sheet? Follow your instincts. If you get excuses instead of answers to your questions, your instincts might be right and the results of doing nothing could be a betrayal of the public good.
Artists and arts managers, please be diligent to educate board members and funders about your organization, its strengths AND its weaknesses. Also be transparent about your personal strengths and weaknesses. It’s OK to ask for help. These are your partners, your guides, your fallback in times of trouble. Don’t blind-side them…bring them with you. And be grateful for that funder or board member who asks the tough questions.
When it comes to understanding how nonprofit boards can operate successfully, John Carver wrote the bible, “Boards that Make a Difference” (Jossey-Bass, 3rd edition, 2006.) Information on the board’s oversight of nonprofit finances can be found on lots of accounting firm sites but also national groups like the Nonprofit Finance Fund and Grantmakers in the Arts.