“Huff, puff, puff” says “The Little Engine That Could...”

Do you remember reading this classic children's storybook as a kid? This story is a life lesson about a little engine that was lacking confidence in its ability to successfully climb up a steep hill. After all, the risks facing the little engine were unmanageable, or were they? The story relates how with fortified determination and relentless effort, “The Little Engine That Could” faced the risks head-on and accomplished this feat. It's a lesson for nonprofits not to give up on their passionate and committed pursuits in fulfilling their mission. The lesson of this classic children's story can also carry the heading of  “The Little Board Committee That Could...” for the sake of nonprofit leaders and managers. How can nonprofit board committees manage risks?

Each little board committee, similar to little engines, will undertake complex matters of its nonprofit. Applicants who accept a position on a nonprofit's general board will have been selected their skills, expertise, knowledge, and a passion for the mission of the nonprofit.  For example, a retiree may apply for a board position with a nonprofit that trains dogs to be service dogs to disabled persons. The application of this retiree shows that he has accounting and audit experience, along with some insight on insurable risk. The nonprofit would most likely ask him to accept a position on the board with the intention of placing him as chair for the Financial and Audit Committee. These board members deserve our respect as they receive no compensation for their time and expertise to contribute toward the success of the nonprofit's mission.

The number of board members to serve on a committee varies based on the nonprofit's size and operational complexity. A large nation-wide nonprofit organization may have three to seven board members serving on a committee with each board member to serve on no more than two committees. Committees are formed by the general board and the executive director, with decisions being made as to what essential functions require a formation of a committee. Committees can be many or few for nonprofits of various sizes and operational complexity.

Board committees for small to medium sized nonprofits may have oversight on two functions. For example, board members on the Financial and Audit Committee may oversee financial and audit matters and mitigation of risk. In recent years, the responsibility of risk management has been placed upon the general board through formed committees. As each board committee is created, the Governance Committee will implement a formal charter with stated objectives, and timely reviews of each committee's progress will allow for updates or revisions. Policies and procedures for functions of a nonprofit such as financial duties, handling of IT routines, or a volunteer implementation program, to name a few. should be drawn up.

The responsibilities of board members serving on committees will vary among the committees of the nonprofit board. The Finance Committee in its oversight of financial reporting can also have oversight to ensure assets are properly insured, and that the level of reserves is adequate to cover deductibles such as damage to property and equipment. The Audit Committee will have the oversight of monitoring internal controls of financial reporting along with the security of the information technology (IT). This committee can also have the oversight of implementing and monitoring a whistle-blower policy to ensure risk mitigation.

When board members work together on a committee, the purpose is to address complex matters and risk concerns in detail and to bring the recommendations to the general board meetings. Monitoring risks is a dynamic process that committees need to do in a timely manner as changes in regulations or in financial reporting may require evaluation of new risk concerns. The audit committee should identify risks during its review of financial statements, thus enhancing the nonprofit’s ability to be empowered to provide risk assessment and monitoring. Through training and information sharing, members of board committees within a nonprofit can implement risk management concepts in its oversight process of risk mitigation and monitoring. Therefore, much like the successful endeavor of “The Little Engine That Could,” so can “The Little Board Committee That Could” be successful in its fulfillment of its nonprofit's mission. 

Sources:

Burns, M. (2016). Changing and Enhancing Not-For-Profit Risk Management. The CPA Journal, 04/20/16, Volume 86, Issue 4.

Ries, R. (2016). How to Evaluate Risk in the Modern Not-For-Profit Industry. The CPA Journal, 04/2016, Volume 86, Issue 4.

Sannella, J. (2016). Board Committees: Essential Elements to Success. Nonprofit World, 07/20/16, Volume 34, Issue 3.

Working at Phoenix City Hall for almost 15 years, who could resist taking a few classes at the ASU Downtown Phoenix campus? Facing the challenge of finishing the last two classes with severely decreased vision, Kathy was granted the MNLM degree in December 2016. As a volunteer,  she will "go forth and do good" in sharing her newfound skills and knowledge to empower leaders in the nonprofit sector to  enhance the strategic goals of their mission statement.

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