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Charities and governance
On one reading, not-for-profit have really lifted their governance since the implementation of Sarbanes-Oxley.
As per Grant Thornton's fifth annual National Board Governance Survey for Not-for-Profit Organizations, 75 percent of not-fot-profits say their organization has a code-of-ethics policy, in comparison to 17 percent in 2003. And 89 percent have a conflict-of-interest policy, a substantial increase from 24 percent several years ago. Almost nine out of 10 (87 percent) respondents have adopted a written investment policy, in comparison to 63 percent in 2006 and 92 per cent have implemented new accounting policies and procedures, in comparison to only 59 percent in last year's survey.
As Sarah Johnson at CFO.com points out, a lot of that is due to the Internal Revenue Service asking for more detailed financial information.
Still, it's not convincing if the track record of charities and non-profits outside of the US is anything to go by. Keeping in mind that they are all struggling with the same forces, there is some way to go.
In Britain, The Guardian reports that a report from the Association of Chief Executives of Voluntary Organizations has observed that charities are having real trouble with transparency and governance.
And in Australia, I have written a piece detailing how the Perpetual Foundation, which holds the biggest charitable trust book in the country, observed that the non-profit sector had bad governance and little accountability. And the problem started with the boards.
"As per the report, directors of non-profit boards were inept at strategic planning and financial management, were ineffective at dealing with government and had been put there because of their political connections. They tended to fight with chief executives, interfered with management, got involved in petty issues and were self-serving. They lacked appreciation of their legal responsibilities, did not have the right skills and struggled to do their job, especially if they were doing it after-hours.".