seeing the word “audit” can stimulate a gut wrenching reaction.
Too often audits are imposed from the outside, painful,
punitive, fear provoking and reactive.
But what if as a board you reframed audit as “Assessment Under
Direction of Intelligent Terrestrials”?
Thirty-five percent of 900 wealthy people surveyed in a
PhilanthropyNow/Luxury Institute study said they didn’t
trust that nonprofits would use their money wisely. Twenty-two
percent said they wanted to learn how to give directly to the
Making accountability more than a mantra makes sense.
Christian Thomas Lee, international fundraising
consultant (www.themercyfoundation.com) notes, “Growing
donor suspicion of nonprofit credibility and ethics now demands
self-auditing to build trust and transparency. Nonprofits must
continually demonstrate their stewardship of donor dollars and
their accountability for results. Getting better at what
nonprofits do ... demands ongoing self-auditing and
implementation of plans for improvement. Boards better
understand that today’s donors aren’t writing charity cheques as
much as they are making social investments.”
Ask for due diligence
But it’s not only
fundraisers that care about accountability. Johnne Syverson,
President of the nonprofit International Association of
Advisors in Philanthropy (www.advisorsinphilanthropy.org),
says, “again and again donor-centric financial advisers are
being asked by wealthy clients to conduct due diligence on
nonprofits before making major gifts. If nonprofits can’t answer
core accountability questions, those dollars go to those who
“Do a positivity audit,” says Drake Zimmerman, chartered
adviser in philanthropy, member of several boards, including the
International Association of Advisors In Philanthropy. “Focus on
what you’re doing right. That builds trust and safety, both on
the board and with staff. Fear drops away, opening the way to
look at what you are doing and how. Areas to improve simply
emerge. By focussing on the positive, you tap energy and
enthusiasm, both of staff and the board. A focus on the positive
gets you the oomph to make your visions reality, and deal with
any issues that come up.”
Zimmerman adds that the lesson is not new, but a longstanding
business principle. “The grandfather of modern management,
Peter Drucker, was fond of saying, ‘feed your opportunities,
starve your problems.’ In later years, Drucker pioneered
applying management principles to nonprofits.”
He explains, “You get what you focus on. By addressing
opportunities first, problems often shrink or disappear
entirely. So start with: What does your nonprofit want to
achieve? Find the strengths of the people and the institution.”
It’s about dancing with the data – not hiding from them. It’s
about asking for feedback early – not waiting until it’s too
late. It’s about engaging stakeholders as partners – not
perpetrators of revolutions. It’s about welcoming feedback as
key to turning “not-yet-successes” into learning opportunities –
not failures to be buried.
Develop deep trust
Deep support for the work
of nonprofits depends on deep trust between donors and
nonprofits. Nonprofit self-audits can help build that trust. The
self-audit referred to here goes beyond a traditional financial
audit to one that addresses seven performance areas and involves
feedback from board members, staff, major donors and other
stakeholders. The seven areas and an example of a pithy question
for each are drawn from the PhilanthropyNow Nonprofit 360
Degree Self-Audit Process:
1. Relationship/Connectedness. Sample question: This
nonprofit has a donor and service recipient complaint resolution
process and staff that quickly handles concerns.
2. Mission/Goals/Feedback. Sample question: This
nonprofit is a legitimate nonprofit with appropriate tax status
and is up-to-date with accurate filing of required status
3. Current Project Assessment. Sample question: Each of
this nonprofit’s current projects is doable and worth doing and
will be evaluated for measurable results.
4. Effectiveness/Efficiency/Sustainability. Sample
question: This nonprofit has honestly and fully documented
fundraising and administrative expenses lower than ___% (you
specify and justify).
5. Leadership. Sample question: This nonprofit has a
stable, active, accountable board that focusses on the big
picture and is more than just names on letterhead.
6. Volunteer Management. Sample question: This nonprofit
monitors volunteer performance and coaches volunteers for
accountability and growth.
7. Donor Direction of Gifts. Sample question: This
nonprofit has and follows a written, easy to understand policy
that explains how it makes decisions about allocating gifts.
Act of courage
To self-audit is an act
of courage. There are many motivations, some proactive and some
reactive, for self-auditing ... and some risks. Before taking
this step, read each indicator and assess what’s possible and
what’s at risk in doing or not doing an audit.
Place a check mark next to each of the indicators that address a
factor of importance to your nonprofit and its stakeholders.
A self-audit of our nonprofit would likely:
- Create a breakthrough
in trust and accountability with stakeholders
- Respond to a donor complaint or alleged
- Earn community respect by self-auditing
without being asked
- Lift a veil of misunderstanding between
donors and the nonprofit
- Proactively pinpoint our nonprofit’s
“prouds” and “do betters”
- Help us sleep better knowing our house is
- Correct an error, integrity lapse or
- Make it easier to do our job effectively
- Ensure a check and balance between staff
- Put rigour and heart back into conscious
- Differentiate our nonprofit in the minds
of donors and funding agencies
- Tap the savvy and bond board members and
staff so they become part of the solution
- Make us a role model and “way-shower” for
- Build donor trust so they can open their
minds, hearts and chequebooks
- Make it easier to attract and keep top
- Allow us to conduct our own due diligence
before someone does it for us
- Deliver predictability and transparency
so everyone knows where the money is going and how dollar
allocation decisions are made
Can you follow up?
Caveat: If you
can't afford to hear the answer ... don’t ask the question.
Before conducting a self-audit, ask yourself, “can we afford to
hear the answer and then will we commit the resources to make
essential changes?” If not, you may want to delay self-auditing
until a later date. Asking for feedback and not acting on any of
it can irrevocably alienate those who complete the audit.
So what are the forces in your organization that would be
drivers for a positive self-audit process? How will you mobilize
the drivers? What are the blocks that you will need to honour
and take into account? How will you mobilize the drivers and
address and dissolve the blocks?
For example: A driver is that the self-audit is requested by the
board. A block is a fear of loss of donors. A driver mobilizer
is asking the board who else they want to invite to participate.
A block remover entails involving key donors in the self-audit
design and review of results.
The self-audit implementation steps should include a progress
report that shows actions taken, by when and by whom, the
current status, and the outcome.
For further information: Charles Bernard Maclean, Founder and
Chief Committed Listener, PhilanthropyNow, 503/2997-1490,
this article first appeared in Charity Channel’s Nonprofit
Boards and Governance Review,