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Serving Is Not an Honorary Entitlement

Partners' Network Blog

Many people serving on charity and public agency boards of directors assume huge responsibilities, yet many act as if they are entitled and accept it for the “honor.”  They are foolish and are cheating those entrusting them to oversee the organization they are supposed to be serving.

Recently a very large NY agency “discovered” that some employees were making annual salaries of upwards of $350,000 because of overtime payments.  And it isn’t one or two people – it is of epidemic proportions.  Furthermore, a week doesn’t pass without a news story about a major embezzlement or theft in a local charity or governmental body.  My question is simple: Who is responsible and why weren’t they watching what was going on?

When these are discovered the directors all profess ignorance of the egregious shortages, saying that management let them down.  Bull doody!  They are the ones that let management, the public and all stakeholders down.  And if they took their responsibility with the least seriousness it is highly likely these defalcations, overcharges or immoral payments would not have continued for as long as they have.

Here is what they could have done to possibly have prevented the continuance of these misuse of public funds:

They could have looked at the financial statements that were available to them.

Noticed that I said looked – not studied.  If they received the right reports and spent three minutes each time reviewing them, there is a high likelihood they would have noticed something they would have questioned.  I know about this stuff.  I work with it all the time and teach it to MBA students.  Directors regularly receive or should receive, pretty adequate financial data.  The problem as I see it is that they are not looked at.  Usually they are “too busy,” don’t understand them, or do not believe it as being part of their job.  Neither reason is valid and in my opinion, makes them negligent in the performance of their responsibilities.  Either way we should all resent their inaction and dereliction of their duties.

 

It is too late to stop what has happened, but not too late to start anew if you are on board.  When you get the financial reports, at least quarterly, look them over and if you do not understand them, ask the person that prepared them to explain them to you.  If you still don’t understand them to ask for reports that you do.  Also, I have a simple rule for you to follow:  If the preparer cannot explain it so you understand it, assume they are wrong or don’t know what they are doing; and find someone that could help you.

Final comment: If you are a member of a board of directors you have a trusted responsibility to review the financial data and to understand it as it relates to the organization’s mission, funding and financial controls.  You either need to meet that trusted responsibility or resign.

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If you have any questions or comments, please do not hesitate to contact me at emendlowitz@withum.com or by filling out the form below.

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