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Accountability: An Idea Whose Time Has Come
There’s only one thing stronger than all the armies in the world,
And that is an idea whose time has come. –Victor Hugo
Board Members have a fiduciary responsibility for safeguarding the organization’s assets. Not every board member can be a financial wizard. However, every board member needs to be financially inquisitive. Accountability and transparency in financial processes (and beyond) are essential to fulfill this fiduciary responsibility.
A recent, and highly publicized, report from former FBI Director Louis Freeh on the series of failures at Penn State, which led to the cover-up of Jerry Sandusky’s sexual abuse, provides a great case in point. In that report Mr. Freeh cites numerous individual and institutional failings, along with "weaknesses of the university’s culture, governance, administration, compliance policies and procedures for protecting children.” This should send a shiver down the spines of every nonprofit board member! What would Mr. Freeh say about your organization?
What Penn State lacked more than anything was a culture of accountability. The President of Penn State hid problems from the Board of Trustees, (the very people he should have been working with to strengthen the University), not even informing them of the potential criminal investigation after testifying before a grand jury regarding Sandusky. The University lacked policies for complying with laws and regulations for reporting violence and sexual abuse. It failed to train employees on how and when to report abuse. The Administration’s casual attitude toward procedures, safety, compliance and accountability precipitated its fall from grace.
Penn State put reputation before safety and responsibility. Let’s hope Penn State and similarly complacent organizations learn from their mistakes.
While incidents as horrible as those at Penn State are thankfully a rare situation, there are other highly harmful incidents that happen too frequently. What would your donors think of a serious incident at your organization? Would your donors be willing to continue supporting an organization that cannot maintain confidentiality of credit card and other sensitive data? Would members continue to trust an organization that creates undo risk by putting large sums of money in the hands of lesser-paid employees and provides little oversight? Unfortunately experienced embezzlers see a gold mine in nonprofit organizations.
Boards must create a culture where accountability and transparency are expected at all levels, across all departments and in all processes. Executive directors, board members, and other organization leaders – must set high standards and exemplify them. Talk the talk, walk the walk – and most important – walk the talk. Whether it’s embezzlement, safety, regulatory compliance or abuse; executives need to ensure that employees know what they stand for. The Board and other organizational leaders need to openly communicate so employees know whether they stand for accountability and integrity, or complacency and moral ambiguity.
Here are a few tips and strategies for reducing risk in your organization:
• Be intentional. Create a culture of integrity: It is the collective action of an organization’s leaders that sets the tone and defines the culture of your organization. Creating a culture of integrity does not just happen because it’s on your mission statement and in your policies – it must be intentional.
• Be involved. Take your oversight responsibility seriously. Don’t rely on administration/management for all your information.
• Be proactive. Identify risks and take steps to mitigate them. Perform a periodic risk assessment of internal controls. Ideally it will cover financial processes as well as IT and HR processes. Don’t shortchange your fiduciary responsibilities with weak IT controls – you could be the next headline about a data breach or embezzlement.
• Be prepared. Subscribe to a hotline service so your employees, volunteers, vendors and others can report a safety, compliance or process violation. A hotline (also called an anonymous incident reporting service) can be instrumental in identifying wayward behaviors in their early stages. It’s important that tips be anonymous so fear of retribution doesn’t inhibit reporting. Board members should be identified on the hotline’s call list for serious allegations, and should receive summary reports directly from the hotline service so they are aware of the nature of issues being reported.
Trust. But verify.
Denise McClure brings over 20 years of experience in public accounting, business management and non-profit board involvement to her work as a Certified Public Accountant (CPA) and Certified Fraud Examiner (CFE). Her business, Averti Fraud Solutions helps businesses and non-profit organizations become more profitable, secure and efficient by creating accountable and transparent work environments.
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Tags: nonprofit, non profit, accounting software, embezzlement
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