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Nonprofit Governance

June 12, 2024 Category: ExplainerMethod

“There is no question that the nonprofit sector has a board problem.”

This is the first sentence of Chapter 2, Problem Boards or Board Problems? in BoardSource’s 2005 “Governance as Leadership: Reframing the Work of the Nonprofit Board” by Chait, Ryan, and Taylor. The problem:

“Boards seem “to be an unreliable instrument for ensuring accountability – the outcome society most wants from it. Behind every scandal or organizational collapse is a board (often one with distinguished members) asleep at the switch.”

In recent years, our community has witnessed the abrupt closures, bankruptcies, and mismanagement of several local nonprofit institutions. In light of these incidents, the question arises as to who was asleep at the switch, and how can we overcome the nonprofit sector’s “board problem” and poor implementation of our nonprofit governance structures.

While the board is not responsible for the day-to-day operations of an organization, nor does it bear the entire burden of an issue, its role is to ensure proper governance, oversee leadership, and steward the mission of the organization through proper governance.

 

What is nonprofit governance?

Nonprofit governance refers to the systems, policies, and processes by which nonprofit organizations are directed and controlled. Effective governance involves the board ensuring that the organization operates within its mission, manages its resources effectively and impactfully, and is accountable to donors, beneficiaries, and the public.

According to the Council of Nonprofits, “Good governance requires the right ingredients (the right mix of board members), a chef to provide leadership and accountability, and careful mixing and stirring of candid discussions, transparent practices, and thoughtful governance policies.”

From our Partners

 

Good Governance

Nonprofit organizations depend on sound governance practices to thrive. Poor governance can lead to irresponsible spending, lack of funding, poor work environment and morale, lack of effectiveness, and a loss of public trust, ultimately jeopardizing the stability and survival of the organization.

Good governance is important to hold leadership accountable, ensure transparency, and effectively manage the organization. Without accountability, no one at the helm effectively owns the work, so no one is responsible for what is not happening or compelled to do what needs to be done. Without transparency, there is no understanding of compliance with an organization’s policies, procedures, or mission. Without effective management and oversight, issues can go unnoticed until they become unmanageable, so the true financial condition of the organization is often discovered too late to rectify leading to closures, bankruptcies, mismanagement, and the inability to fulfill the mission.

Join Generocity over the next several weeks for a look at these critical aspects of nonprofit governance. In our Philanthropy & Accountability series, we will explore best practices, share success stories, and provide insights that help local nonprofit organizations strengthen their governance structures and ensure their long-term impact.

 

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