Skip to main content

Do Policies Protect?

By January 17, 2019No Comments

For the next several weeks, we are going to focus on various aspects of board responsibilities and ethical behavior within nonprofit organizations and ministries. Let’s talk about policies to position the organization for success. In other words, in a position where its actions and behaviors will stand up to anyone’s scrutiny.  

Starting with the basics – Nonprofit organizations must follow all federal, state and local laws and its board of directors is responsible for ensuring that this happens.  The IRS gives the responsibility of organizational oversight to the board of directors.

Organizations formed within the decade or so have had to have a Conflict of Interest policy when they filed their corporate documents with the IRS. However, many organizations never look at the policy again. It is a good idea to review the policy on an annual basis and to have all board members sign it.  When new board members come in, the policy should also be shared with them during the orientation process. And, remember that while board members should sign the conflict of interest policy, key senior staff members should also sign one.

Board members will often say, “but I don’t have any conflicts of interest.” When this statement is heard, it can be used as a stepping stone to a conversation about what a conflict looks like. For instance, suppose your organization needs to contract with a business to plow your parking lot when it snows. If one of your board members owns a plowing business and wants to submit a bid, there is now a potential conflict.

Because we, as humans, all have various roles in our lives, it may be perfectly acceptable to have the board member submit a bid for plowing services. But, this needs to be acknowledged and specific steps need to be taken to ensure that a level playing field for all potential bidders exists. Additionally, it is important for the process to be documented in the event a decision is ever questioned.

Over the past several years, there have been many instances of situations where staff or volunteers turned their heads the other way when they saw wrongdoing within the organization.  As a result of these situations (which really are the minority), it is recommended that all organizations have a “Whistleblower Policy.” A Whistleblower Policy outlines policies and procedures for board members, staff, volunteers or clients to report suspected wrongdoing without fear of retaliation. Along with this policy, the organization should also have procedures in place to investigate any reports of wrongdoing.

Another policy that organizations need to have in place is one that outlines the organization’s policies to retain important documents, a document retention policy. Some documents that need to be included in such a policy are those relating to board governance, financial records and historical policy information. Additionally, if the organization receives grant funding, it is important to verify with the funding source how long documents associated with the grant must be kept.

It is the role of the board of directors to ensure that the assets of the organization are protected. Assets include financial resources, human resources, buildings and equipment.  In addition, assets are also non-tangible items such as the reputation and integrity of an organization. An annual review of insurance policies and other operating policies is a best practice to ensure that the organization is prepared in the event of a loss.

Have questions? Feel free to contact us.

Leave a Reply