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Q&A #39 – How should a small-staffed nonprofit address audit findings on segregation of duties?
Addressing segregation of duties findings in an audit is a common challenge for small-staffed nonprofits, and this issue can best be mitigated by proactive front-end outreach and communications with your independent auditors and audit committee, and by submitting a formal written Management Response to be included in the auditor’s Management Letter before the final draft is issued.
When to Prioritize Legal Review of Your Nonprofit’s Contracts
Contracts are the lifeblood of any nonprofit organization’s day-to-day operations, just as with for-profit businesses. In an ideal world free from budget and time constraints, nonprofits would have every contract reviewed by a reputable attorney with the relevant subject matter expertise. However, for some organizations legal review is not always feasible.
Q&A #38 – Is a nondisclosure agreement better than a confidentiality policy?
A nondisclosure agreement (“NDA”) would very likely be more protective than your employee handbook and Board policies. Employee handbook and Board policies addressing confidentiality are helpful because they establish the understanding, culture, and expectation that sensitive information must be kept confidential. However, the remedies for a violation of a confidentiality policy are quite limited.
Strategies to Keep Board Members on Track with their Commitments
Getting Board members to follow through on their commitments of time and money to the nonprofits they serve can be very challenging. Often, we let our emotions rule, getting frustrated and blaming the Board members for lack of engagement. This is misguided. We need to work harder to help Board members engage at higher levels.
Q&A #37 – Should my nonprofit use a Consent Agenda for Board meetings?
There is not one uniform answer to this question for all nonprofits, but the consent agenda is used and recommended by many organizations and nonprofit consultants. The consent agenda is a powerful tool that can save precious Board meeting time and keep the focus on strategic matters where Board discussion is most needed. However, a consent agenda can be tricky to implement, so it is important to be thoughtful about this practice.
Q&A #36 – What Board committees are recommended for a newly formed nonprofit?
Like a lot of things in life, less is more. Generally, for a new nonprofit, especially a small organization with seven or fewer founding Board members, I recommend starting with one governance-focused committee and one key program committee. This results in a tight governance structure consisting of a Board of Directors supported by two standing committees.
Q&A #35 – Is proxy voting allowed for nonprofit Board members?
You should check your applicable state nonprofit corporation statute, but proxy voting is generally not permitted for Board members. In many states, it is challenging to find a clear answer to this question in the statute, but proxy voting by Board members of a nonprofit organization is widely considered to be a poor governance practice that should be avoided.
Three Key Planning Steps to Get a Head Start on Your Next Audit
With disruptions from COVID-19 continuing into the foreseeable future, it is best to start planning for your next year-end financial statement audit early. Odds are that your next audit experience will be different than your last one due to the many programmatic and operational changes that most nonprofits have experienced this year. Investing some extra time in front-end logistical planning will lead to smoother sailing and better outcomes.
Q&A #34 – What does it mean to have ex officio Board members?
The term “ex officio” is widely misunderstood and misapplied in the nonprofit community. Many people understand “ex officio” to be synonymous with “non-voting,” but this is not accurate. “Ex officio” is a Latin term that basically means “by virtue of office or position.” This means that “ex officio” Board members get a seat on the Board automatically because they hold some other specific position. “Ex officio” does not mean “non-voting.” While ex officio Board members often serve in a non-voting role, this is not the case by definition.
A Revenue Aligned Budget is the Safe Way to Go
I feel the time is right to stretch our budget planning and begin to envision operations from the perspective of a balanced budget aligned to a conservative estimate of revenue and funding for the next 12 months. I am now advocating for using a “revenue aligned budget” strategy that is realistic in nature, obtainable, with low risk and a high degree for success.
Q&A #33 – How can we improve Board member engagement with virtual meetings?
Good for you for monitoring Board member engagement, and yes, there are ways to improve engagement and enhance the effectiveness of your organization’s Board meetings. Now that the novelty of virtual meetings has worn off and become a part of our accepted lives for the foreseeable future, making a concerted effort to assess virtual meeting performance and adopt new practices is critical to the overall health of your organization.
Some Legal Issues to Consider When Trying to Get Out of Your Office Lease
As the financial pressures on nonprofit organizations mount and many employees continue to work remotely from home, nonprofits are increasingly examining their options for getting out of their current office leases. This issue is particularly problematic for nonprofits whose current office leases are set to expire years into the future. A careful assessment of your organization’s legal rights and options is critical to navigate this issue effectively.
Q&A #32 – Should I incorporate my nonprofit in Delaware?
It is a very common assumption that all corporations should be formed in Delaware. However, Delaware’s reputation as being the ideal state of incorporation comes from the world of for-profit corporations and has little relevance to nonprofits. Delaware holds no particular advantages for nonprofit corporations, so my rule of thumb is that you should generally incorporate where you foresee the organization carrying out most of its programs and activities, except in special circumstances.
It is Time to Be Proactive With Your Office Lease Situation
A familiar scenario has played out month after month for many nonprofit organizations during this prolonged period of financial uncertainty, remote work, and virtual programs and meetings. The time has come again to pay another month’s rent for your headquarters office. Frustrated that your office space is going mostly unused, you cut the check and feel like this is a wasted expense. While it is easy to feel helpless in this situation, it is time to start the proactive planning process and take control. There are only no options when you have convinced yourself there are no options.
Q&A #31 – Should a nonprofit scrap and replace a strategic plan adopted prior to the pandemic?
Although this sounds counter-intuitive, as of now the answer is no. The world around us is still changing in unexpected ways with unprecedented volatility. Nonprofits are continuing to learn to pivot and adapt to new approaches. The best way to measure performance and outcomes and communicate on management’s actions taken is to compare results and changes to your old strategic plan.