A Publication of WTVP

Key steps board members can take to effectively address their oversight responsibilities…

The most effective not-for-profit organizations understand the importance of quality leadership at the board-of- directors level. Well-led boards understand that proper supervision includes, but is not limited to: governance, legal and financial supervision, executive director oversight, oversight of the board itself, and decision-making based on the objectives of the organization.

Board oversight can sometimes take a back seat to other responsibilities—until something happens that makes people question the board’s existence and its leadership abilities. Then the scramble to right whatever might have gone wrong overshadows the organization’s objectives and mission, damaging the organization’s reputation and eroding contributor confidence.

The likelihood of something going wrong at an NFP organization can be greater than in the private sector. Many NFP organizations operate with—and compete for—scarce resources while trying to maintain or increase service levels. This environment can create incentive or pressure conditions. Some organizations have limited administrative personnel who often don’t have the knowledge or skills to implement and administer an effective system of internal controls. The prevalence of these conditions highlights the need for and importance of board oversight.

There are a few key steps board members can take to effectively address their oversight responsibilities:

Set direction for the organization.

Set the tone of the organization.

Ensure that board members have adequate knowledge or training in their areas of responsibility.

Select a separate audit committee.
The audit committee plays a vital role when it comes to board oversight, especially in NFPs for which accountability to the public and to resource providers is of utmost importance. The main responsibility of the audit committee should be to safeguard the overall objectivity of the financial reporting and internal control processes.

If the organization does not have a formal audit committee, certain board members or the finance committee may serve in this capacity. Regardless of the form, members should be well-versed in financial matters in order to competently execute their financial oversight responsibilities. Typical duties of an audit committee include:

In its report on bridging effectiveness gaps, the National Association of Corporate Directors notes that “effective board oversight demands information that is as current and relevant as possible.” This means, in part, that board members do whatever it takes to stay informed and to keep the lines of communication with management open.

The report goes on to suggest that boards and their committees might “consider asking external parties to gauge their performance.” Such an objective measurement may go a long way towards ensuring the board meets not only its oversight obligations but displays its commitment to leadership and accountability. iBi