Printer Friendly

Email to A Friend

Friday August 9, 2002

Enron? Worldcom? What about nonprofit accountability?

Ira Kaminow

Two of America's most powerful institutions, corporations and the Catholic Church, have been rocked by devastating systemic failures. No Jewish institutions have been implicated in the scandals. But that doesn't mean Jewish organizations are immune from scandalous behavior.

The American Jewish community is blessed with thousands of nonprofit organizations that feed the hungry, treat the sick, transmit our tradition and perform countless other essential tasks. They operate with the help of legions of honest, hard-working, dedicated professionals. But no matter how divinely inspired their objectives, these nonprofits are still run by fallible mortals. They are vulnerable to the some of the same sorts of institutional failings in kind, if not in degree, that are shaking corporate America and the church.

Much has been written about exactly why these two venerable institutions slipped so badly. At least one common cause seems to be universally accepted: Highly placed individuals were allowed to operate with inadequate guidance, accountability, oversight, and transparency. Auditors, corporate boards and stock analysts failed in their responsibilities to oversee corporate management. The hierarchy of the Catholic Church acted with no accountability to the laity and provided no mechanism for abused children to get an independent hearing.

Sadly, the lack of effective independent oversight and transparency has occasionally scandalized Jewish organizations in the past. Jewish nonprofits have been held up to shame for covering up child abuse, for submitting deceitful applications for government grants, for accepting financial support from donors with questionable backgrounds and then honoring those donors, and for facilitating misappropriation of funds through inadequate financial oversight. But even apart from the risk of immoral and criminal behavior, organizations that operate without transparency and effective board guidance will likely lose their edge and the opportunity to hear constructive advice and criticism.

What should be done? Nonprofit board members already work with great zeal, and the community owes them much. Moreover, most organizations will tell you how hard it is to recruit effective board members. But it is precisely because board resources are so valuable and so scarce that they should be used as effectively as possible. I can think of nothing more important for boards than to assure the integrity of the organizations they oversee.

In order to maintain their integrity, Jewish nonprofit organizations should take several steps:

First, institute a clear and specific written policy that demands zero tolerance for unethical and illegal behavior and name a trusted, independent ombudsman to whom whistleblowers and others with grievances can go.

Second, establish terms of office for board members that assure a regular supply of new eyes and minds, and designate a nominating committee to recruit board members -- management should not play a significant role in selecting those who will oversee its activities.

Third, designate an informed audit committee to assure effective financial oversight and engage an auditor familiar with nonprofit accounting, selected by the board and serving at the board's pleasure.

To further ensure transparency, nonprofits that solicit funds from the public should have a Web site that provides information necessary for making informed decisions about giving, including a clear description of the activities and accomplishments of each program and complete annual financial statements for the three most recent years.

Nonprofits should prominently display in all solicitation materials the address of their Web sites containing this information. Those organizations that eschew the Internet for religious reasons should make the information available in hard copy, upon written request. Donors have a right to know how funds are spent. And they have a right to prefer organizations whose operations are well-managed and transparent.

Our rabbis consider it model behavior that Moses insisted on an independent accounting of donations used to build the Tabernacle. Who in the nonprofit organizational world is more trustworthy than Moses? If accountability was good enough for him, it ought to be good enough for the rest of us.

Did you find this article interesting? Subscribe to our FREE newsletter and you'll be notified each week when "J." goes online. We'll tell you about the most important stories of the week and give you a link to each one.

This page contains a BETA version of Amazon contextual links. They are marked by the dashed underline.  Your purchases support our site. At times they point to items which are not related to the actual link. Please alert us by email if you discover objectionable links.