Best Practices

Dan Charobee

Dan Charobee

It’s morning. You walk in, and “BAM”, there it is. Someone did something that will shape your day, week, month; even year. And, it’s not in a good way. So, you begin as a firefighter, with damage control, thinking “how could this have happened”?

Having recently worked with an exceptionally gifted executive going through damage control, I found the OneOC presentation by Jennifer Farr, CPA, MBA of Mayer Hoffman McCann P.C, listing Best Practice Policies Disclosed in Tax Return so compelling that I wanted to share them with you:

  • Executive Compensation – Board reviewed comparability data (compensation survey)
  • Conflict of Interest Policy – including procedures for determining whether a conflict exists; Require directors, officers, and key employees to disclose potential conflicts annually
  • Fundraising Policies – ensuring solicitations meeting federal/state law requirements and solicitation materials are accurate, truthful, and candid

They come from, of all places, the Tax Form 990 that 501(c)s fill out each year. And like most questions on forms, they are answered and forgotten until next year. Jennifer put them in her Best Practice pocket and so should you. She consults nonprofits on finance and tax issues; hinting that they represent major red flags possibly launching an audit for organizations that don’t meet better standards. This can be a painful and possibly status ending experience for an organization.

Making them an integral part of your culture avoids most fires that take you off mission for an uncomfortable time period. So, outside of your finance office, here is the list of relevant questions:

  • 12a Did the organization have a written conflict of interest policy?
  • 12b Were officers, directors, or trustees, and key employees required to disclose annually interests that could give rise to conflicts? 
  • 12c Did the organization regularly and consistently monitor and enforce compliance with the policy? 
  • 13 Did the organization have a written whistleblower policy? 
  • 14 Did the organization have a written document retention and destruction policy? 
  • 15 Did the process for determining compensation of the following persons include a review and approval by independent persons, comparability data, and contemporaneous substantiation of the deliberation and decision?

Each, in itself is a developmental concept well worth the time and effort, making sure your organization stays on mission. Combined, they may make you less of a firefighter, but a better overall service delivery agency.

Author:  Dan Charobee. Executve Coaches of Orange County.