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| On the Board |
Sarbanes-Oxymoron
Matthew Schuerman
07/01/2004
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This debate reflects the concern that governing board
members do not know how to do their jobs properly. “There’s no orientation, no
training,” says Aviv of Independent Sector. “They get a call: ‘Please help me. I
need board members.’ ‘Well, what does it take?’ ‘Just come to two meetings a
year, that’s all.’” Aviv believes trustees should receive training, though she
would not want to see training mandated.
THREE SIGNS OF GOOD GOVERNANCE
• The executive director and other
senior managers are not voting members of the governing board, and the board is
independent from the management.
• The IRS 990 form shows that the
organization has been paying reasonable salaries and directing its payouts to
relevant charitable activities.
• There are no contracts between the
organization and companies in which its trustees have an interest. |
Like other nonprofit leaders, Aviv
would prefer to see charities and foundations adopt the Sarbanes-Oxley
provisions voluntarily. However, that is not happening. Neither BoardSource nor
Independent Sector could come up with examples of nonprofits that had actually
adopted the provisions of Sarbanes-Oxley in the past two years.
Charities
already face several incentives to improve their internal controls. Fitch, a
credit rating agency, announced in January that it would award higher bond
ratings to universities that adopt Sarbanes-Oxley provisions, allowing them to
borrow more cheaply. The Better Business Bureau’s charity index, available at www.give.org, judges charities on a number of
factors, including their governance policies. A higher score would presumably
draw more donations.
Voluntary compliance has its drawbacks, however, as the
reluctance of nonprofits to change their policies in the last two years proves.
“If you run a soup kitchen and your choice is between having an audit done and
giving out five more meals, the way people in the nonprofit world are, you are
going to give out the five more meals,” says Dave Edwards, executive director of
the San Luis Obispo County (Calif.) Community Foundation.
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