Before You Donate: Know Who's Running the Show
March 29, 2010
Suggestions for Donors - As part of our work in helping increase charity accountability, we will be posting regular suggestions about what donors should look for to ensure the charities are using donated dollars most effectively. These suggestions will come from the BBB Wise Giving Alliance Standards for Charitable Accountability.
Today: What's a Board, and Why is it Important?
In assessing charities, the BBB staff uses the Wise Giving Alliance's Standards for Charitable Accountability. One important standard is whether the organization has a board of directors that provides "adequate oversight of the charity's operations and its staff."
A board is simply a group of individuals who take responsibility for ensuring that the organization meets its stated purpose, acts within the bounds of expected conduct and legal requirements, and has adequate leadership, resources and financial management to continue doing its job. Boards do not have to be large to be effective, but must be large enough to ensure that all control is not invested in one or two individuals.
Indication of adequate oversight includes, but is not limited to, regularly scheduled appraisals of the CEO's performance, evidence of disbursement controls such as board approval of the budget, fund raising practices, establishment of a conflict of interest policy, and establishment of accounting procedures sufficient to safeguard charity finances.
To determine compliance with this standard, the BBB reviews the financial audit, the 990 (tax form used by charities), and the annual budget.
To pass the standard, the organization must have at least five Board Members, who meet at least three times per year, and no more than 10% of the board may be compensated, with no transactions which constitute a conflict of interest between their personal/business interests and those of the organization.
The next time you are asked for a donation, ask if the organization meets these standards, which have been developed by the BBB and with the help of the nonprofit community. They represent best practices in nonprofit management, and help to ensure donors that those organizations will be good stewards. Now you know!