When $826,000 Goes Missing, We Need to Talk About the Board

It is always disappointing to see stories like this come across my news feed.

A former executive director of Prescott Area Habitat for Humanity was recently sentenced to 62.5 years in prison after being convicted of stealing $826,000 from the nonprofit. According to investigators, nonprofit bank and credit-card accounts were used for personal expenses ranging from a mortgage and home renovations to vacations, vehicles, veterinary bills, taxes and personal legal expenses.

Let me be very clear: the person who stole the money is responsible for stealing the money.

There is no excuse for fraud, theft or abusing the trust placed in you as a nonprofit leader.

But as a nonprofit nerd, fundraiser, consultant and governance junkie, I think we also need to ask another uncomfortable question:

Where was the board?

I am not suggesting that every board member in this particular case knew what was happening. We don't have enough information to make that claim.

What I am saying is that nonprofit boards have a responsibility to ask questions, understand the financial health of the organization and provide meaningful oversight.

That is literally the job.

Being a board member is a serious commitment.

Too often, people agree to serve on nonprofit boards because they love the mission, know someone who asked them, or want to give back.

Then they show up to a handful of meetings a year, receive a packet of financial statements, approve the minutes, vote on whatever is put in front of them and go home.

I call these "rubber-stamping board members."

And they do a disservice to the organization they are supposed to serve.

You are not simply there to cheerlead. You are part of the governing body. You have fiduciary responsibilities and are entrusted with protecting the organization's assets and ensuring it is responsibly governed.

That means board training matters.

It matters that board members understand their fiduciary responsibilities, understand the financials, know what a Form 990 is and understand the difference between governance and management.

And it absolutely matters that they feel empowered to ask questions.

Financial oversight isn't optional.

One of the most important things a nonprofit board can do is review the financials.

Not glance at them. Not assume someone else understands them.

Review them. Ask questions.

If you don't understand something, ask someone to explain it.

If revenue suddenly changes, ask why.

If expenses are significantly over budget, ask why.

If one person has complete control over financial transactions, ask whether there are appropriate checks and balances.

And if something doesn't make sense?

Don't be afraid to be the person who asks the uncomfortable question.

Board training and ongoing financial education aren't "nice to haves." They are part of building a board that can actually govern.

The board can't outsource governance.

You can have an executive director, CFO, bookkeeper, accountant, outside auditor or finance committee.

But you cannot outsource governance.

The board retains responsibility for oversight.

That means knowing how money moves through the organization.

• Who can sign checks?

• Who approves expenses?

• Who has access to the bank account and credit card?

• Who reviews the monthly financial statements?

• Who reviews unusual transactions?

• Who reviews the executive director's expenses?

• Who reviews the Form 990 before it is filed?

Those aren't annoying questions. Those are board questions.

I have seen what happens when boards aren't paying attention.

As an interim executive leader, I have stepped into organizations that have experienced financial misconduct and other nefarious activities.

I've seen organizations dealing with significant financial issues and basic compliance failures, including not filing required Form 990s. In some cases, things had deteriorated to the point where the IRS was getting close to knocking on board members' doors because of the organization's lack of financial oversight and compliance.

Board members care deeply about the mission. They want to help. They trust the people running the organization.

But trust is not a substitute for oversight. Board members cannot be asleep at the wheel.

And this is where my heart breaks for the nonprofit sector.

When stories like this make the news, they don't just affect one organization. They affect all of us.

Every time the public hears about a nonprofit executive stealing hundreds of thousands of dollars, it reinforces a narrative that nonprofits aren't trustworthy, aren't responsible with money and aren't worth supporting with your time, talent or treasure.

And that makes me incredibly sad.

Because the overwhelming majority of people working in the nonprofit sector are good people doing incredibly important work.

Nonprofits are run by people. And people make mistakes.

People make bad decisions. People sometimes make unethical decisions.

That's exactly why organizations need strong systems, appropriate controls, trained boards and healthy accountability structures.

We cannot build a nonprofit sector based entirely on the assumption that everyone will always do the right thing.

We build a stronger sector by creating organizations where doing the wrong thing is harder to do and easier to detect.

Passion isn't enough.

I love passionate board members. We need them. But passion without governance can become dangerous.

You can love the animals, the children, the arts, housing or your community. You can believe deeply in the executive director. But loving the mission does not mean you should blindly trust the person running the organization.

In fact, one of the best ways a board can support its executive director is by creating strong governance and accountability structures.

Good internal controls aren't an accusation. Financial oversight isn't micromanagement. Asking questions isn't being difficult. Board training isn't a punishment.

It is good governance.

So here's my challenge to nonprofit boards.

If you currently serve on a nonprofit board, ask yourself:

Am I actually governing, or am I rubber-stamping?

• Have I received meaningful board training?

• Do I read the financials before the meeting?

• Do I understand our revenue and expense model?

• Do I know our largest financial risks?

• Do I understand our internal controls?

• Do I know who has access to our accounts?

• Do I understand our compliance obligations?

• Do I know when our Form 990 is due?

• Do I ask questions when something doesn't make sense?

And most importantly: If something went terribly wrong tomorrow, could I honestly say I was paying attention?

Nonprofit boards are entrusted with something incredibly valuable: public trust.

Donors give because they believe their money will advance a mission. Volunteers give their time because they believe their contribution matters. Communities depend on nonprofits to deliver services and create change.

We owe it to all of them to do better.

So yes, let's hold individuals accountable when they steal.

But let's also have the harder conversation about governance.

Train your board. Review the financials. Ask the questions. Know your responsibilities. Don't be asleep at the wheel.

Because when something goes wrong, the consequences don't stop with the person who caused the problem. They ripple through the organization, the community and the entire nonprofit sector.

And we all have a responsibility to protect the trust that makes philanthropy possible.

Because being a nonprofit board member isn't about putting your name on a website or adding another line to your résumé.

You are the governing board. Act like it.