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This document provides an overview of the key responsibilities and duties of nonprofit board members. It discusses the duties of care, loyalty, obedience, and managing accounts. It emphasizes that board members are responsible for oversight of the organization's mission, finances, and legal compliance. It also notes that while staff are not board members' employees, boards are still responsible for ensuring ethical behavior from staff. Overall, the document outlines the fiduciary duties and legal obligations of serving on a nonprofit board of directors.

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Board/Staff Retreat 2012
“Directors are like parsley on fish— decorative but useless.” Irving Olds, former board chair of U.S. Steel
“All over the world, people just like us serve on all sorts of boards. Some work incredibly well. Some leave members shell shocked or numb with frustration.” The Montessori Foundation “Serving on a Nonprofit Board”
The days of “sitting” on a nonprofit board are over.
“Many organizational leaders...come to the charitable sector motivated by the mission of the organization and may not always have the requisite governance and financial knowledge.” PANEL ON THE NONPROFIT SECTOR
the top 10 things Your Nonprofit Board Needs to Know (plus One Bonus Tip)
No. 1 It’s a whole new ballgame.
“You will be confronted with questions every day that test your morals. Think carefully, and for your sake, do the right thing, not the easy thing.” Commencement Speaker St. Anselm College, 2002
“Ex-Tyco Chief Executive Kozlowski Sentenced to 8 to 25 Years” Headline / Bloomberg.com / 09.19.2005
Strong Fundamental Values “We must demand of ourselves and of each other the highest standards of individual and corporate integrity. We safeguard company assets. We comply with all company policies and laws.” Source: The Tyco Guide to Ethical Conduct
 Regency mahogany bookcase, c. 1810, $105,000 “We safeguard  George I walnut tallcase clock, $113,750 company assets.”  Custom queen bed skirt, $4,995  Ascherberg grand piano, c. 1895, $77,000  Chandelier, Painted Iron, c. 1930, $32,500  Pair of Italian armchairs, c. 1780, $64,278  Persian rug, 20 feet by 14 feet, $191,250
“In corporate America, crime pays. Handsomely. Grotesquely, even.” Arianna Huffington Pigs at the Trough
“We’ve got this idea that business means anything goes. ” R. Edward Freeman, Director Olsson Center for Applied Ethics
“It can be easy for non-profits to feel that the problems of the private sector don’t relate to them...” –Stephen D. Potts, Fellows Chairman Ethics Resource Center
“...that the ‘good people’ who populate the non-profit world are, by nature, more trustworthy.” –Stephen D. Potts, Fellows Chairman Ethics Resource Center
“This is a dangerous assumption.” Stephen D. Potts, Fellows Chairman Ethics Resource Center
“Anderson woman pleads guilty to Humane Society theft” Headline / The Herald Bulletin / 05.11.2009
“Her attorney...presented the court with several character letters from acquaintances and co-workers, and said Sullivan provides live-in care for her sick mother.” Justin Schneider The Herald Bulletin
“We haven’t had a serious review of the tax-exempt laws since 1969. The world has changed since then, and so has the charitable community.” –Senator Chuck Grassley, Senate Committee on Finance
The New 990 (version 2.0)
This is your WAKE UP call
2. You have a duty of care.
Duty of Care Board members have an obligation to make informed decisions and to act with care in their actions.
Commonly described as the “care that an ordinarily prudent person would exercise in a like position and under similar circumstances.”
“Once the Board was made aware of the investigations of Sandusky...the Board, as a governing body, failed to inquire reasonably and to demand detailed information from [President] Spanier.” Report of the Special Investigative Counsel Regarding the Actions of The Pennsylvania State University Related to the Child Sexual Abuse Committed by Gerald A. Sandusky
REMINDER The duty of care legally requires every board member to participate in meetings, provide operational and policy oversight, and exercise a reasonable level of care in making decisions on the organization’s behalf.
Where on the agenda does it say I get to speak?
The board chair is the conductor responsible for making sure every performer contributes.
Board members who regularly miss meetings are neglecting the duty of care.
Come prepared!
THREE: You have a duty of loyalty.
DUTY OF LOYALTY Directors are obligated to set aside personal concerns and make decisions that are in the best interest of the organization.
Conflict of >> INTEREST
“Getty Book Deal Led to Questions of Conflict” Headline / Los Angeles Times / 06.13.2006
“This is beyond self- dealing. It’s insiders with a sweetheart deal.” -Frances Hill, professor at the University of Miami School of Law
BEST Interest
full disclosure
4) You have a duty of obedience.
DUTYOFOBEDIENCE Directors must remain faithful to the purpose of the organization, and operate within the stated bounds of its mission.
The Barnes Foundation Board president saw “the intent of the donor as a hurdle to be overcome rather than a guiding light.” -Judge Louis Stefan
“The duty of obedience is often overlooked...precisely because it is so basic as to be almost invisible.” Rob Atkinson Professor of Law, Florida State University
“mission drift”
a.k.a. duty of compliance
 Articles of incorporation Comply with:  By-laws and other governing documents  Local, state, and federal laws  Registration and reporting requirements  IRS regulations
5. You have a duty to manage accounts.
Directors are responsible for ensuring the organization’s financial soundness.
“One of the primary duties of the board of directors of a charitable organization is to ensure that all financial matters of the organization are conducted legally, ethically, and in accordance with proper accounting rules.” PANEL ON THE NONPROFIT SECTOR Report to Congress and the Nonprofit Sector on Governance, Transparency, and Accountability
Nonprofit boards need accounting geeks who understand finances themselves and who can make the numbers meaningful to everyone else.
“Accountants aren’t just boring geeks anymore. We’re hot!” Eva Rosenberg, author of Small Business Taxes Made Easy
You have one employee.
only one THE EXECUTIVE DIRECTOR IS THE SOLE EMPLOYEE OF THE BOARD OF DIRECTORS
BEWARE of meddling by self-proclaimed experts
They think nothing of going around the executive director and crossing the sacred line that separates board members from employees.
3000 vs. 36
D&O INSURANCE
“Most of the lawsuits filed against nonprofit directors and officers involve some form of employment practices liability. Insurers are becoming more keenly aware of this exposure and some have made subtle policy changes that restrict coverage in these areas.” Alliance of Nonprofits “Key Facts About Insurance and Legal Liability”
“…while acting in an official capacity…”
Volunteer Protection Act of 1997
“A volunteer of a nonprofit organization generally will be relieved of liability for harm if the volunteer was acting within the scope of his responsibilities and if he was properly licensed, certified, or authorized for the activities.” Volunteer Protection Act of 1997 Section 4. Limitation on Liability for Volunteers
Is it really worth the risk?
7. Although they’re not your employees, it’s your responsibility to ensure that staff members behave ethically.
“People are basically honest. And they’re even more honest when you watch them.” attributed to Alan “Ace” Greenberg The Bear Stearns Companies
United States Sentencing Commission “Criminal liability can attach to an organization whenever an employee of the organization commits an act within the apparent scope of his or her employment, even if the employee acted directly contrary to company policy and instructions.” Paula Desio, “An Overview of the Organizational Guidelines”
PRO ACT U.S. Federal Sentencing Guidelines IVE Seven guidelines used to determine whether an organization shares responsibility for the misbehavior of its employees; adherence can mitigate penalties and fines.
Establish compliance standards and procedures for employees and other agents to follow that are reasonably capable of reducing the prospect of criminal conduct.
codeofconduct: POLICY COVERING THE ORGANIZATION’S STANCE ON—AND EACH EMPLOYEE’S RESPONSIBILITY FOR—WORKPLACE ISSUES, INCLUDING HARASSMENT, DIVERSITY, CONFLICTS OF INTEREST, VIOLENCE, CONFIDENTIALITY, AND EQUAL OPPORTUNITY.
“Was that wrong? Should I have not done that? I tell you I gotta plead ignorance on this thing because if anyone had said anything to me at all when I first started here that that sort of thing was frowned upon, you know, cause I’ve worked in a lot of offices and I tell you people do that all the time.” George Costanza Seinfeld, Episode 29
• Board Member Agreement • Board Self-Assessment • Code of Ethics • Conflict of Interest • Confidentiality • Electronic Media • Equal Employment Opportunity • Executive Compensation • Financial Audits • Gift Acceptance • Investments • Lobbying and Political Activity • Mission Statement • Record Retention and Document Destruction • Whistleblower Protection • Workplace Environment
“One explanation that’s common in the field of business ethics, and this may sound shocking, is that they just didn’t recognize the ethical issue for what it really was.” Thomas Dunfee, Wharton professor
Assign specific high-level individual(s) the responsibility for overseeing the overall compliance with standards and procedures.
CEO Chief Ethics Officer
Exercise “due care” not to delegate discretionary authority to individuals with a known propensity to engage in illegal activities.
“I look forward to pursuing my new responsibilities and continuing to make a contribution as part of Rite Aid’s world-class team.” -Chris Hall Senior VP-Real Estate and Planning former Chief Financial Officer
57 percent of job applicants believe that telling lies during a job interview is acceptable SOURCE: SHL
“Marge, it takes two to lie. One to lie and one to listen.” – Homer Simpson
Take steps to effectively communicate—to all levels of employees—the rules and expectations, such as holding mandatory training programs and distributing written materials.
“Ethics programs are associated with higher perceptions that employees are held accountable for ethics violations.” Source: Ethics Resource Center
78% vs. 39%
Take reasonable steps to achieve compliance, including the use of monitoring and auditing systems designed to detect criminal conduct and methods for employees to report suspected wrongdoing without the fear of retaliation.
“More Companies Squeezing Employee Internet Use” Headline / AccountingWEB.com / April 12, 2007
elp-line hhotline: Call our ethics 1-800-VIO-LATE
Consistently enforce the standards through appropriate disciplinary mechanisms, including punishing individuals responsible for failing to detect an offense.
WorldCom created “a negative culture for compliance. It emphasized making the numbers before all else.” – Deborah House, VP and Deputy General Counsel for Corporate Compliance, Fannie Mae
Once an offense has been detected, take all reasonable steps to respond appropriately and prevent further similar offenses.
“ Fool me once, shame on you. ” Fool me twice, shame on me.
why bother?
THE softer SIDE OF SEARS
“This mitigating credit under the guidelines is contingent upon prompt reporting to the authorities and the non-involvement of high level personnel in the actual offense conduct.” Paula Desio, “An Overview of the Organizational Guidelines”
[8] Although they’re not your employees, it’s your responsibility to ensure that staff members are treated fairly.
fairlaborpractices Fair Labor Standards Act of 1938 (FLSA) Stipulates minimum requirements for compensation issues such as wages, overtime, and equal pay, and specifies those employee classes exempted from its provisions.
“In fiscal year 2008, more than 197,000 employees received a total of $140.2 million in minimum wage and overtime back wages as a result of Fair Labor Standards Act (FLSA) violations.” U.S. Department of Labor 2008 Statistics Fact Sheet
Are your employees “suffering” overtime? Non-exempt employees are prohibited from working more than 40 hours a week unless they are paid time and a half of their hourly rate. Example: An administrative assistant attends a board meeting one night to take minutes and the hours put the assistant over the 40-hour limitation. Did you pay the assistant overtime? Example: A bookkeeper attends your social fundraising event on Saturday evening to help count money. Is it overtime?
“New lawsuit claims back pay for some part-time employees” Headline / FederalTimes.com / 04.17.2007
Donning, Doffing, Walking, & Waiting, L.P.A. Serious lawsuits only, please.
FMLA
“Termination of employees seeking FMLA leave continues to be the primary reason that employees filed a complaint.” U.S. Department of Labor 2008 Statistics Fact Sheet
fundr aising < 9. The watchdogs are watching.
NEW expectations in fundraising
privacy
Ask your donors if you can publicly recognize their gifts or if they prefer to remain anonymous.
Organizations should establish policies that govern the acceptance and disposition of charitable GIFTS
RESTRICTED vs. UNRESTRICTED
“Potential donors seek more information than ever before when determining whether to respond to a charitable appeal.” – Art Taylor, BBB Wise Giving Alliance
Spend at least 65 percent of total expenses on program activities. Spend no more than 35 percent of related contributions on fundraising. Avoid accumulating funds that could be used for current program activities.
FLATRATE (Not commissioned.)
10. SOx is coming.
Sarbanes-Oxley Act of 2002 Public Company Accounting Reform and Investor Protection Act
CORPORATEGOVERNANCE Requirement of boards and auditors to oversee, direct, and report the organization’s practices on behalf of its shareholders.
“ WHILE NEARLY ALL OF THE PROVISIONS OF THE ACT APPLY ONLY TO PUBLICLY TRADED BoardSource CORPORATIONS, THE PASSAGE OF THE BILL SERVED AS A WAKE-UP CALL TO THE ENTIRE NONPROFIT COMMUNITY.”
A Audit-related functions should be performed only by independent, financially literate directors.
in·de·pend·ent Adjective. Free from the authority, control, domination, or influence of somebody or something else.
“All nonprofit organizations that conduct outside audits, particularly medium to large organizations, should consider forming an audit committee and should separate the audit committee from the finance committee.” –BoardSource, “The Sarbanes-Oxley Act and Implications for Nonprofit Organizations”
financial EXPERT
I Independent auditors must be rotated and may not provide consulting services unrelated to the organization’s audit.
Changing auditors every five years ensures fresh scrutiny. If that’s not practical, an option is to ask the auditing firm to assign a different reviewing partner every five years.
“Nonprofit organizations would be well served to adopt the Sarbanes-Oxley rule of preventing auditing firms from providing non- auditing services.” BoardSource
exceptions: AUDITING FIRMS OFTEN PROVIDE TAX SERVICES AND PREPARE FORM 990 FOR THEIR NONPROFIT CLIENTS. SUCH ARRANGEMENTS MAY ACTUALLY REDUCE A NONPROFIT’S EXPENSES.
M Management’s compensation should be determined based on achievement of objective, predetermined goals.
“Senators critical of salary expenses at Boys & Girls Clubs of America” Headline / The Washington Post / 03.13.2010
Without specific, WARNING measurable, and well- communicated grading criteria, outsiders will assume the worst about how evaluation decisions are determined.
QUESTION: Could you defend it?
D Develop procedures for handling confidential and anonymous complaints.
“Employees who learned about improper corporate adjustments appear to have feared senior management’s criticism or even the loss of their jobs. It was common for employees to be denigrated in public about their work.” Source: Report of Investigation by the Special Investigative Committee of the Board of Directors of WorldCom
SAFETY FIRST Organizations must focus on identifying and removing problems, not on shooting the messenger.
M Monitor, justify, and carefully administer intentional document destruction.
I said, “Ship the documents to the feds.” She heard, “Rip the documents to shreds.”
L Loans to directors and executive officers are prohibited.
At best, insider loans raise conflict-of-interest questions. At worst, they could qualify as illegal executive compensation.
bonus tip: avoid groupthink!
COHESION A demonstrated tendency for a group to stay together and remain united in the pursuit of its goals and objectives.
 More personal job satisfaction  Higher team tolerance for Good Cohesion disruptions results in higher  Less turnover individual effort  Greater adherence to group norms
Cohesion can also have negative effects on group performance. And when it’s bad, it’s really, really bad.
“Because people value their membership in cohesive groups, they are willing to adjust their behavior to group standards.” SUSAN CAROL LOSH, Ph.D. FLORIDA STATE UNIVERSITY
GROUPTHINK occurs when the pressure to conform within a group interferes with the group’s decision making ability.
A B C Exhibit 1 Exhibit 2
Solomon Asch Subjects went along with the clearly erroneous majority 33 percent of the time 74 percent conformed to the majority at least once 28 percent conformed more than half the time
“The tendency to conformity in our society is so strong that reasonably intelligent and well-meaning young people are willing to call white black.” Solomon Asch 1951
Groupthink stops members from suggesting ideas that might deviate from the collective opinion, causing a deceptive appearance of group consensus when, in fact, only one approach is considered.
The days of “sitting” on a nonprofit board are over.
the top 10 things Your Nonprofit Board Needs to Know (plus One Bonus Tip)
Unison

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Unison

  • 1.
  • 2.
    “Directors are like parsley on fish— decorative but useless.” Irving Olds, former board chair of U.S. Steel
  • 3.
    “All over theworld, people just like us serve on all sorts of boards. Some work incredibly well. Some leave members shell shocked or numb with frustration.” The Montessori Foundation “Serving on a Nonprofit Board”
  • 4.
    The days of“sitting” on a nonprofit board are over.
  • 5.
    “Many organizational leaders...cometo the charitable sector motivated by the mission of the organization and may not always have the requisite governance and financial knowledge.” PANEL ON THE NONPROFIT SECTOR
  • 6.
    the top 10 things Your Nonprofit Board Needs to Know (plus One Bonus Tip)
  • 7.
    No. 1 It’s a whole new ballgame.
  • 8.
    “You will beconfronted with questions every day that test your morals. Think carefully, and for your sake, do the right thing, not the easy thing.” Commencement Speaker St. Anselm College, 2002
  • 9.
    “Ex-Tyco Chief Executive Kozlowski Sentencedto 8 to 25 Years” Headline / Bloomberg.com / 09.19.2005
  • 10.
    Strong Fundamental Values “Wemust demand of ourselves and of each other the highest standards of individual and corporate integrity. We safeguard company assets. We comply with all company policies and laws.” Source: The Tyco Guide to Ethical Conduct
  • 11.
     Regency mahogany bookcase, c. 1810, $105,000 “We safeguard  George I walnut tallcase clock, $113,750 company assets.”  Custom queen bed skirt, $4,995  Ascherberg grand piano, c. 1895, $77,000  Chandelier, Painted Iron, c. 1930, $32,500  Pair of Italian armchairs, c. 1780, $64,278  Persian rug, 20 feet by 14 feet, $191,250
  • 12.
    “In corporate America, crime pays.Handsomely. Grotesquely, even.” Arianna Huffington Pigs at the Trough
  • 13.
    “We’ve got thisidea that business means anything goes. ” R. Edward Freeman, Director Olsson Center for Applied Ethics
  • 14.
    “It can be easy for non-profits to feel that the problems of the private sector don’t relate to them...” –Stephen D. Potts, Fellows Chairman Ethics Resource Center
  • 15.
    “...that the ‘good people’ who populate the non-profit world are, by nature, more trustworthy.” –Stephen D. Potts, Fellows Chairman Ethics Resource Center
  • 16.
    “This is a dangerous assumption.” Stephen D. Potts, Fellows Chairman Ethics Resource Center
  • 17.
    “Anderson womanpleads guilty to Humane Society theft” Headline / The Herald Bulletin / 05.11.2009
  • 18.
    “Her attorney...presented the courtwith several character letters from acquaintances and co-workers, and said Sullivan provides live-in care for her sick mother.” Justin Schneider The Herald Bulletin
  • 19.
    “We haven’t hada serious review of the tax-exempt laws since 1969. The world has changed since then, and so has the charitable community.” –Senator Chuck Grassley, Senate Committee on Finance
  • 20.
    The New 990 (version 2.0)
  • 21.
  • 22.
    2. You havea duty of care.
  • 23.
    Duty of Care Boardmembers have an obligation to make informed decisions and to act with care in their actions.
  • 24.
    Commonly described as the“care that an ordinarily prudent person would exercise in a like position and under similar circumstances.”
  • 25.
    “Once the Boardwas made aware of the investigations of Sandusky...the Board, as a governing body, failed to inquire reasonably and to demand detailed information from [President] Spanier.” Report of the Special Investigative Counsel Regarding the Actions of The Pennsylvania State University Related to the Child Sexual Abuse Committed by Gerald A. Sandusky
  • 26.
    REMINDER The duty of care legally requires every board member to participate in meetings, provide operational and policy oversight, and exercise a reasonable level of care in making decisions on the organization’s behalf.
  • 27.
    Where on the agendadoes it say I get to speak?
  • 28.
    The board chairis the conductor responsible for making sure every performer contributes.
  • 29.
    Board members whoregularly miss meetings are neglecting the duty of care.
  • 30.
  • 31.
    THREE: You have aduty of loyalty.
  • 32.
    DUTY OF LOYALTY Directors are obligated to set aside personal concerns and make decisions that are in the best interest of the organization.
  • 33.
    Conflict of >> INTEREST
  • 34.
    “Getty Book DealLed to Questions of Conflict” Headline / Los Angeles Times / 06.13.2006
  • 35.
    “This is beyondself- dealing. It’s insiders with a sweetheart deal.” -Frances Hill, professor at the University of Miami School of Law
  • 36.
  • 37.
  • 38.
    4) You havea duty of obedience.
  • 39.
    DUTYOFOBEDIENCE Directors must remain faithful to the purpose of the organization, and operate within the stated bounds of its mission.
  • 40.
    The Barnes Foundation Boardpresident saw “the intent of the donor as a hurdle to be overcome rather than a guiding light.” -Judge Louis Stefan
  • 41.
    “The duty ofobedience is often overlooked...precisely because it is so basic as to be almost invisible.” Rob Atkinson Professor of Law, Florida State University
  • 42.
  • 43.
    a.k.a. duty ofcompliance
  • 44.
     Articles of incorporation Comply with:  By-laws and other governing documents  Local, state, and federal laws  Registration and reporting requirements  IRS regulations
  • 45.
    5. You havea duty to manage accounts.
  • 46.
    Directors are responsible for ensuring the organization’s financial soundness.
  • 47.
    “One of theprimary duties of the board of directors of a charitable organization is to ensure that all financial matters of the organization are conducted legally, ethically, and in accordance with proper accounting rules.” PANEL ON THE NONPROFIT SECTOR Report to Congress and the Nonprofit Sector on Governance, Transparency, and Accountability
  • 48.
    Nonprofit boards need accounting geeks who understand finances themselves and who can make the numbers meaningful to everyone else.
  • 49.
    “Accountants aren’t just boring geeks anymore. We’re hot!” Eva Rosenberg, author of Small Business Taxes Made Easy
  • 50.
  • 51.
    only one THEEXECUTIVE DIRECTOR IS THE SOLE EMPLOYEE OF THE BOARD OF DIRECTORS
  • 52.
    BEWARE of meddling byself-proclaimed experts
  • 53.
    They think nothingof going around the executive director and crossing the sacred line that separates board members from employees.
  • 54.
  • 55.
  • 56.
    “Most of thelawsuits filed against nonprofit directors and officers involve some form of employment practices liability. Insurers are becoming more keenly aware of this exposure and some have made subtle policy changes that restrict coverage in these areas.” Alliance of Nonprofits “Key Facts About Insurance and Legal Liability”
  • 57.
    “…while acting inan official capacity…”
  • 58.
  • 59.
    “A volunteer ofa nonprofit organization generally will be relieved of liability for harm if the volunteer was acting within the scope of his responsibilities and if he was properly licensed, certified, or authorized for the activities.” Volunteer Protection Act of 1997 Section 4. Limitation on Liability for Volunteers
  • 60.
    Is it reallyworth the risk?
  • 61.
    7. Although they’re not youremployees, it’s your responsibility to ensure that staff members behave ethically.
  • 62.
    “People are basically honest. And they’re even more honest when you watch them.” attributed to Alan “Ace” Greenberg The Bear Stearns Companies
  • 63.
    United States SentencingCommission “Criminal liability can attach to an organization whenever an employee of the organization commits an act within the apparent scope of his or her employment, even if the employee acted directly contrary to company policy and instructions.” Paula Desio, “An Overview of the Organizational Guidelines”
  • 64.
    PRO ACT U.S. Federal Sentencing Guidelines IVE Seven guidelines used to determine whether an organization shares responsibility for the misbehavior of its employees; adherence can mitigate penalties and fines.
  • 65.
    Establish compliance standards andprocedures for employees and other agents to follow that are reasonably capable of reducing the prospect of criminal conduct.
  • 66.
    codeofconduct: POLICY COVERING THEORGANIZATION’S STANCE ON—AND EACH EMPLOYEE’S RESPONSIBILITY FOR—WORKPLACE ISSUES, INCLUDING HARASSMENT, DIVERSITY, CONFLICTS OF INTEREST, VIOLENCE, CONFIDENTIALITY, AND EQUAL OPPORTUNITY.
  • 67.
    “Was that wrong?Should I have not done that? I tell you I gotta plead ignorance on this thing because if anyone had said anything to me at all when I first started here that that sort of thing was frowned upon, you know, cause I’ve worked in a lot of offices and I tell you people do that all the time.” George Costanza Seinfeld, Episode 29
  • 68.
    • Board Member Agreement • Board Self-Assessment • Code of Ethics • Conflict of Interest • Confidentiality • Electronic Media • Equal Employment Opportunity • Executive Compensation • Financial Audits • Gift Acceptance • Investments • Lobbying and Political Activity • Mission Statement • Record Retention and Document Destruction • Whistleblower Protection • Workplace Environment
  • 69.
    “One explanation that’scommon in the field of business ethics, and this may sound shocking, is that they just didn’t recognize the ethical issue for what it really was.” Thomas Dunfee, Wharton professor
  • 70.
    Assign specific high-level individual(s)the responsibility for overseeing the overall compliance with standards and procedures.
  • 71.
  • 72.
    Exercise “due care”not to delegate discretionary authority to individuals with a known propensity to engage in illegal activities.
  • 73.
    “I look forwardto pursuing my new responsibilities and continuing to make a contribution as part of Rite Aid’s world-class team.” -Chris Hall Senior VP-Real Estate and Planning former Chief Financial Officer
  • 74.
    57 percent ofjob applicants believe that telling lies during a job interview is acceptable SOURCE: SHL
  • 75.
    “Marge, it takes twoto lie. One to lie and one to listen.” – Homer Simpson
  • 76.
    Take steps toeffectively communicate—to all levels of employees—the rules and expectations, such as holding mandatory training programs and distributing written materials.
  • 77.
    “Ethics programs are associated with higher perceptions that employees are held accountable for ethics violations.” Source: Ethics Resource Center
  • 78.
  • 79.
    Take reasonable stepsto achieve compliance, including the use of monitoring and auditing systems designed to detect criminal conduct and methods for employees to report suspected wrongdoing without the fear of retaliation.
  • 80.
    “More Companies Squeezing Employee Internet Use” Headline / AccountingWEB.com / April 12, 2007
  • 81.
    elp-line hhotline: Call our ethics 1-800-VIO-LATE
  • 82.
    Consistently enforce the standardsthrough appropriate disciplinary mechanisms, including punishing individuals responsible for failing to detect an offense.
  • 83.
    WorldCom created “a negative culture for compliance. It emphasized making the numbers before all else.” – Deborah House, VP and Deputy General Counsel for Corporate Compliance, Fannie Mae
  • 84.
    Once an offensehas been detected, take all reasonable steps to respond appropriately and prevent further similar offenses.
  • 85.
    “ Fool me once,shame on you. ” Fool me twice, shame on me.
  • 86.
  • 87.
    THE softer SIDE OF SEARS
  • 88.
    “This mitigating creditunder the guidelines is contingent upon prompt reporting to the authorities and the non-involvement of high level personnel in the actual offense conduct.” Paula Desio, “An Overview of the Organizational Guidelines”
  • 89.
    [8] Although they’renot your employees, it’s your responsibility to ensure that staff members are treated fairly.
  • 90.
    fairlaborpractices FairLabor Standards Act of 1938 (FLSA) Stipulates minimum requirements for compensation issues such as wages, overtime, and equal pay, and specifies those employee classes exempted from its provisions.
  • 91.
    “In fiscal year2008, more than 197,000 employees received a total of $140.2 million in minimum wage and overtime back wages as a result of Fair Labor Standards Act (FLSA) violations.” U.S. Department of Labor 2008 Statistics Fact Sheet
  • 92.
    Are your employees“suffering” overtime? Non-exempt employees are prohibited from working more than 40 hours a week unless they are paid time and a half of their hourly rate. Example: An administrative assistant attends a board meeting one night to take minutes and the hours put the assistant over the 40-hour limitation. Did you pay the assistant overtime? Example: A bookkeeper attends your social fundraising event on Saturday evening to help count money. Is it overtime?
  • 93.
    “New lawsuit claims back pay for some part-time employees” Headline / FederalTimes.com / 04.17.2007
  • 94.
    Donning, Doffing, Walking,& Waiting, L.P.A. Serious lawsuits only, please.
  • 95.
  • 96.
    “Termination of employees seeking FMLA leave continues to be the primary reason that employees filed a complaint.” U.S. Department of Labor 2008 Statistics Fact Sheet
  • 97.
    fundr aising < 9. The watchdogs are watching.
  • 98.
    NEW expectations in fundraising
  • 99.
  • 100.
    Ask your donors if you can publicly recognize their gifts or if they prefer to remain anonymous.
  • 101.
    Organizations should establishpolicies that govern the acceptance and disposition of charitable GIFTS
  • 102.
  • 103.
    “Potential donors seek moreinformation than ever before when determining whether to respond to a charitable appeal.” – Art Taylor, BBB Wise Giving Alliance
  • 104.
    Spend at least65 percent of total expenses on program activities. Spend no more than 35 percent of related contributions on fundraising. Avoid accumulating funds that could be used for current program activities.
  • 105.
  • 106.
    10. SOx iscoming.
  • 107.
    Sarbanes-Oxley Act of2002 Public Company Accounting Reform and Investor Protection Act
  • 108.
    CORPORATEGOVERNANCE Requirement of boards and auditors to oversee, direct, and report the organization’s practices on behalf of its shareholders.
  • 109.
    “ WHILE NEARLY ALL OF THE PROVISIONS OF THE ACT APPLY ONLY TO PUBLICLY TRADED BoardSource CORPORATIONS, THE PASSAGE OF THE BILL SERVED AS A WAKE-UP CALL TO THE ENTIRE NONPROFIT COMMUNITY.”
  • 110.
    A Audit-related functions shouldbe performed only by independent, financially literate directors.
  • 111.
    in·de·pend·ent Adjective. Freefrom the authority, control, domination, or influence of somebody or something else.
  • 112.
    “All nonprofit organizations that conduct outside audits, particularly medium to large organizations, should consider forming an audit committee and should separate the audit committee from the finance committee.” –BoardSource, “The Sarbanes-Oxley Act and Implications for Nonprofit Organizations”
  • 113.
  • 114.
    I Independent auditors must be rotated and may not provide consulting services unrelated to the organization’s audit.
  • 115.
    Changing auditors everyfive years ensures fresh scrutiny. If that’s not practical, an option is to ask the auditing firm to assign a different reviewing partner every five years.
  • 116.
    “Nonprofit organizations would be well served to adopt the Sarbanes-Oxley rule of preventing auditing firms from providing non- auditing services.” BoardSource
  • 117.
    exceptions: AUDITING FIRMS OFTENPROVIDE TAX SERVICES AND PREPARE FORM 990 FOR THEIR NONPROFIT CLIENTS. SUCH ARRANGEMENTS MAY ACTUALLY REDUCE A NONPROFIT’S EXPENSES.
  • 118.
    M Management’s compensation should be determined based on achievement of objective, predetermined goals.
  • 119.
    “Senators critical of salary expenses at Boys & Girls Clubs of America” Headline / The Washington Post / 03.13.2010
  • 120.
    Without specific, WARNING measurable, and well- communicated grading criteria, outsiders will assume the worst about how evaluation decisions are determined.
  • 121.
    QUESTION: Could you defend it?
  • 122.
    D Develop procedures for handling confidential and anonymous complaints.
  • 123.
    “Employees who learnedabout improper corporate adjustments appear to have feared senior management’s criticism or even the loss of their jobs. It was common for employees to be denigrated in public about their work.” Source: Report of Investigation by the Special Investigative Committee of the Board of Directors of WorldCom
  • 124.
    SAFETY FIRST Organizations must focus on identifying and removing problems, not on shooting the messenger.
  • 125.
    M Monitor, justify,and carefully administer intentional document destruction.
  • 126.
    I said, “Shipthe documents to the feds.” She heard, “Rip the documents to shreds.”
  • 127.
    L Loans to directorsand executive officers are prohibited.
  • 128.
    At best, insiderloans raise conflict-of-interest questions. At worst, they could qualify as illegal executive compensation.
  • 129.
  • 130.
    COHESION A demonstrated tendencyfor a group to stay together and remain united in the pursuit of its goals and objectives.
  • 131.
     More personaljob satisfaction  Higher team tolerance for Good Cohesion disruptions results in higher  Less turnover individual effort  Greater adherence to group norms
  • 132.
    Cohesion can also havenegative effects on group performance. And when it’s bad, it’s really, really bad.
  • 133.
    “Because people valuetheir membership in cohesive groups, they are willing to adjust their behavior to group standards.” SUSAN CAROL LOSH, Ph.D. FLORIDA STATE UNIVERSITY
  • 134.
    GROUPTHINK occurs when thepressure to conform within a group interferes with the group’s decision making ability.
  • 135.
    A B C Exhibit 1 Exhibit 2
  • 136.
    Solomon Asch Subjects went along with the clearly erroneous majority 33 percent of the time 74 percent conformed to the majority at least once 28 percent conformed more than half the time
  • 137.
    “The tendency toconformity in our society is so strong that reasonably intelligent and well-meaning young people are willing to call white black.” Solomon Asch 1951
  • 138.
    Groupthink stops members from suggesting ideas that might deviate from the collective opinion, causing a deceptive appearance of group consensus when, in fact, only one approach is considered.
  • 139.
    The days of“sitting” on a nonprofit board are over.
  • 140.
    the top 10 things Your Nonprofit Board Needs to Know (plus One Bonus Tip)