• Stephen Usery

Non-profit and Association Fundamentals #1: The Governance Audit

Updated: Aug 15, 2019

This is the first in a series on non-profit and association fundamentals and how to ensure that your organization is working to achieve peak performance. In this post, we discuss the value of an annual governance audit and how investing a few hours each year can help prevent major headaches.

As I write this, Major League Baseball’s spring training is underway. Every year, players in this demanding sport join their teammates in rigorous preparation for the season ahead. These athletes are the best of the best. Many of them seasoned veterans. And every year in spring they spend countless hours reviewing and practicing the fundamentals of the game. The most basic plays. The most common situations. Nothing is taken for granted.

Non-profits and associations, too, can benefit from a disciplined focus on the fundamentals. No matter how large or small. No matter how well-functioning and seemingly “on track.” A review of the basics can identify and correct small problems before they become big ones and prevent problems from arising at all.

One disciplined way to focus on the basics is to conduct an annual governance audit. With the help of a structured checklist, this audit can be conducted in just a few hours. The audit can be conducted by staff or in combination with board members, typically from the Executive or Governance committee.

What should a governance audit checklist include? At minimum, an organization should review:

  1. Core governance documents such as articles of incorporation and bylaws

  2. Policies and procedures, especially those related to financial and personnel matters and, for associations, antitrust compliance and lobbying activities

  3. Tax, regulatory and other government filings

  4. Documentation of all board and committee meetings

  5. Insurance coverages

  6. IT security, including account access and password updates

  7. Contracts and leases, including employment contracts

  8. Physical and intellectual property protections

  9. Disaster recovery and business continuity plans, including an executive transition plan

  10. Board training for all new members and refresher training for the full board.

While an annual governance audit is highly recommended, it is imperative that organizations perform a detailed review at any time a major transition occurs. Triggers for a detailed governance audit include executive transition, adoption of a new strategic plan, expansion or change in composition of the Board, and major programmatic changes.

We have seen firsthand the consequences of failure to maintain good governance structures and, in a word, it can be disastrous. At a recent Board retreat on governance, our client’s Board chair said, “I hate going through governance stuff. It’s a slog. But it is also critically important.”

Future posts in this series will dive deeper into each of the governance fundamentals listed above. Next up: A Bylaws Review.

To learn how we can help your organization ensure a solid governance foundation, contact us today.

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