Original post made
on Jul 6, 2012
This story contains 548 words.
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A couple of thoughts emerge from this article. What was the board doing to have this happen to all of the small charities that TVCF was supposed to be helping? If everything that is in this article is true then the board may be grossly deficient in their job. Secondly, are we allowing boards of directors to operate without good training? I know that there are "schools" that can teach a board how to operate as a responsible group to oversee an organization. That being written, I have been on many boards and never been offered the opportunity to be taught what to look for as a board member. This kind of problem is happening far to frequently and maybe we need a regulatory organization to oversee the boards - this hurts my conservative nature but maybe it needs to be done. Another question is about the directors insurance. Does it apply if the director is negligent in their duties? And who decides what is negligent?
This whole thing is a mess and never should have happened. How many dreams of organizations that deposited their funds with TVCF have been wiped out because the board members were negligent in their duties or proper training was not implemented to catch wrongful acts? This has to stop and every board of directors of every non-profit needs to get training for their board.
Interesting quote from the auditor, ""As of June 30, 2009, the foundation had a decrease in total in net assets of $550,963. As a result of these deficits, restricted funds from agency funds were used for working capital purposes with the donor's consent."
That means the Board, which included Ron Hyde at the time, knew about restricted funds being raided. I wonder if any board members checked with the donor's to make sure they really gave their consent. Or did the board even read the auditor reports. David is right that most board members do not have the background at all, or training, to understand financials and audit reports. Not just boards of non-profits like this but I believe this is the case of our elected boards also (e.g., school boards). For the public boards, you can see on TV that the board members just gloss over the details, partially because the employees try to confuse everybody and overwhelm them with information. We see this for public meetings but the same things can go on at non-profit board meetings, as we have seen here. I doubt there were many accountants/CPAs on this foundation board. I feel it is important to have accountants on these boards and I will lump into that category engineers as they are curious by nature and want to understand the data and they have the training to break things down so that the data is understandable. Not saying the whole board needs to be filled with people of these positions but there should be some people on the board who can understand the financials and get into the details.
Whenever an employee of a public or private board, or a board member tells another board member that they are micromanaging and they should trust the employees, that should be a red flag. The boards are responsible and they should have an understanding of the details and ask the tough questions. They should not just trust, but rather verify.
Interesting if you watch the school board meetings, the one people who asks the most questions, Valerie Arkin, has an MBA. The others on the board and staff members try to silence her. The others would rather the board meetings be a meeting of cheerleading of the staff members instead of doing the real work and asking questions.
This never would have happened in the private sector. Just another reason to lower our taxes to keep regulators out of our life. The tide is rising.
You do not need to have a MBA or be a CPA to figure out that if liabilities exceed assets there are going to be problems!
Like I stated earlier in another post, all you need to do is reconcile the bank account with the financials statements. In non-profits it is also wise to use cash-based accounting rather than accrual accounting methods.
It seems that the board either never read the report or just listened to Dave Rice's promises that everything was ok. Either way, it sounds pretty naive.
I agree with most of the comments above including Dave Walden's comments. Boards of directors overseeing an operation should not operate without good training. However, sometimes board of directors act like employees of the administrator in charge of the organization, and the administrator turns the tables and then tries to make the board members work for him or her. The administrator, whenever a question is asked, often then goes into a "how dare you not trust me" mode. The next favorite tactic of administrators are "you are micromanaging my operation."
To expand upon Mr. Walden's comments, boards also need training on the common manipulative maneuvers that administrators do to silence board members, including the "how dare you not trust me," the "micromanager tactic" as well as the "you aren't part of the team/you aren't being a team player" mumbo jumbo that administrators often resort to.
But I do disagree with Arnold in that though rare, this sometimes is seen in the private sector. Sarbanes Oxley demands an independent audit committee that reports directly to the board. In the extreme, like at HP, administrators start tracking board members' every move like the HP pretexting scandal detailed here Web Link .
Valerie Arkin, an MBA, was previously a board member of other organizations which may be one of the reasons why she excels at being able to ask the right questions.