Has your not-for-profit considered these five important aspects of governance?
If you sit on a Not-for-Profit’s (NFP) board, you will know how critical governance is to delivering great outcomes to your stakeholders. The following five aspects of governance should be considered by all NFP boards.
Reporting and disclosures
A crucial source of information for all NFP boards is its financial reporting. Ensuring high quality financial reporting is delivered in a timely manner should be a key consideration for all NFP boards. Timely, high quality financial reporting is crucial for both the boards own decision making and it’s relationships with key stakeholders. High quality reporting should, (in addition to presenting all information required by law) tell a story of what the organisation achieved throughout the year.
Each NFP board should adopt a meaningful code of ethics that align its core values and mission. Once set, this code should be communicated with all employees. It is the board’s responsibility to monitor adherence to the code and hold board members, executives and staff responsible for acting ethically at all times.
Risk management and internal controls
It is critical that NFP boards understand the nature of the operational risks they face and its planned responses to mitigate these risks. A risk register will form the basis of the board’s risk management framework. Once set, it is crucial that the operation of a NFP’s risk management framework and internal control processes are regularly reviewed by the board.
Each NFP board should ensure the quality and independence of the external audit process. The board must select auditors on the basis of professional merit, understand the purpose of the audit, and ensure that no relationship exists that could compromise the auditor’s independence. Audit fees must also be disclosed.
A NFP board should have clear policies for relationships with its significant stakeholders. It is important to develop a sense of the significance of each stakeholder category and the type of relationship the board should expect to see developed. A stakeholder relationship plan can help manage the conflicts that arise when stakeholder expectations do not align with the best interests of the organisation.
For more assistance with the challenges that arise with NFP governance contact your local BDO adviser.