07 August 2007
Expert Discusses Effective Principles, Procedures for Nonprofits
USINFO Webchat transcript, August 7
Outi Flynn is the director of the knowledge center for BoardSource, a Washington-based nonprofit organization that specializes in working with boards of other nonprofit organizations. Flynn answered questions on structural and procedural challenges that affect board productivity in an August 7 democracy dialogue webchat.
Following is the transcript:
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U.S. Department of State
Bureau of International Information Programs
USINFO Webchat Transcript
Democracy Dialogues: Principles of Effective NGO Governance
Guest: Outi Flynn
Date: August 7, 2007
Time: 9:00 a.m. EDT (1300 GMT)
Outi Flynn: The scope and diversity of the NGO sector is quite mind-boggling. We all deal with organizations that alleviate hunger and cure illnesses, allow us to enjoy arts and relive history, educate our children and introduce us to new cultures, support our spiritual needs and help us influence political platforms, protect the environment and beautify our neighborhoods. We have organizations with endowments in billions of dollars and others that struggle financially on a daily basis. Some have large staff and others are all-volunteer organizations. But they all have one thing in common: they all have a board.
The role of the governing board in a nonprofit is threefold: (1) It provides direction and guards the mission, (2) it ensures that adequate resources are in place to achieve that mission, and (3) it oversees the activities of the organization and serves as the moral compass. The board is the responsible and liable body for the organization. It has the authority to determine the organization’s purpose and how that purpose is fulfilled.
I look forward to discussing the practices and structures of these effective boards with you today.
Question [Maritere]: I will not be able to follow the discussion in real time since I work all day long, but I would like to know how can you make sure that all the non-governmental organizations are non-profit. Who controls them? How do they recruit people? Do they follow democratic procedures for so? A lot of money is "invested" in projects and when it's time to make them real the money it's not enough for it but some leaders really become wealthy despite this. So I would like to know how you have considered to control this situation. I don't pretend to stop donations, I just would like that more projects become real and they don't keep on the shelf. I hope you can discuss this. Thanks a lot for your attention. Maritere Meléndez
Answer [Outi Flynn]: Maritere, Nonprofit organizations are regulated by their country’s legal system. It is the board’s duty to ensure that all the laws are respected. The board also needs to make sure that internally the organization has policies and procedures that guide staff and individual board members in their respective roles. In short, the board is in control and must assume the responsibility of how the organization functions.
For the outsiders to keep their trust in this system, the board must lead in a transparent manner – share information. It is important to communicate what the objectives of the organization are and how these are achieved. This information includes how the finances of the organization are handled. One way to deal with this is to publish annual reports and conduct independent financial audits.
Q [IRC Antananarivo]: Hi, I'm Pauline from American Corner of Mahajanga [Madagascar]. Can you please give websites that can help NGO leaders in this topic?
A [Outi Flynn]: Pauline, Here are some references for you that discuss the role of the board and overall accountability of nonprofit organizations. (My examples tend to be American resources as I am most directly involved with American organizations.)
• BoardSource (organization that I am affiliated with) focuses purely on governance issues and how to make boards more effective www.boardsource.org
• The Global Forum on NGO Governance is a worldwide forum, sponsored by BoardSource, supporting resource-sharing and idea exchange for all who work with, or serve on, the boards of nongovernmental organizations. www.NGOboards.org
• Independent Sector is the leadership forum for charities, foundations, and corporate giving programs committed to advancing the common good in America and around the world. www.independentsector.org
• The Panel on the Nonprofit Sector is an independent effort by charities and foundations in the United States to ensure that the nonprofit community remains a vibrant and healthy part of our society. It has prepared recommendations for Congress to improve the oversight and governance of charitable organizations.http://www.nonprofitpanel.org
• CIVICUS is an international alliance dedicated to strengthening citizen action and civil society throughout the world. www.civicus.org
• Transparency International is a global civil society organization leading the fight against corruption. www.transparency.org
• The resource Alliance is a UK charity whose mission is to build the fundraising capacities of the nonprofit sector worldwide. www.resource-alliance.org
Q [IRC Antananarivo]: Hi, I'm Hanta from American Corner of Mahajanga. What character is requested to someone who governs an NGO to be effective in his job? [What characteristics make for effective NGO leadership?]
A [Outi Flynn]: Hanta, An essential characteristic of an effective nonprofit board member starts with a solid interest in the mission of the organization. The board member must also understand his or her role; whether he is part of the governing body that oversees the operations or part of the staff that implements the board’s guidelines. (At times, however there is a slightly murky line between governance and management as, to achieve mutual goals, the board and the executive director must work in a constructive partnership together.)
An effective board member understands what a conflict of interest is and successfully manages competing personal and organizational interests. In short, a board member puts the interests of the organization before his or her own needs. Under all circumstances, he or she remembers that he or she acts on behalf of the organization.
Those are some of the principles that guide effective nonprofit leaders. Naturally, we expect board members to get engaged: be active, commit the time and their talent, as well as enjoy this volunteer service.
Q [Sergio2]: NGO in Brazil are easy and powerful source of revenue from public budget. Facing these facilities, organizations obtain such resources, but expend them in obviously particular or self-interest. How do US Government control such matter? [How does the U.S. Government regulate spending of government grants by NGO’s]
A [Outi Flynn]: Sergio, In the United States — as part of the federal government — the Internal Revenue Service (IRS) recognizes the tax-exempt status of nonprofits and, in return, requires that all of these organizations file an annual public document (Form 990) to show that they adhere to the regulations and keep their mission intact. Form 990 contains detailed financial information and gives a snapshot of the main programs and activities of the nonprofit.
At the state level, each nonprofit that incorporates must follow the state incorporation laws. In addition, most organizations that receive government funding must follow the so-called sunshine laws. That means their board meetings must remain open to outsiders and they must share their meeting minutes with the public. Most government funding grants or contracts also require that organizations above a certain budget level conduct independent financial audits.
Q [yahoo2]: What happens when as an NGO the governance does not work for you? I MEAN WHAT DO YOU DO WITH INACTIVE GORVENERS
A [Outi Flynn]: Normally the bylaws of the organization state how board members are elected, what their terms are and how they can be removed. You can have self-perpetuating boards i.e. the board itself is responsible for rejuvenation of itself and bringing in new members. Your membership may have the right to elect the board. Or, other affiliated entities have the right to nominate board members. However the board is put together, each member has the same responsibilities to act on behalf of the organization.
Usually the body that elects the board also has the right to remove a member. Hopefully mere differences of opinions do not make this happen. Your bylaws may also state what can cause a board member to be removed. Term limits ensure that there is 'new blood' arriving on regular intervals. This is also a considerate and delicate way to deal with troublesome or inactive board members.
Q [IRC Cairo]: Are there other obstacles to NGO work besides the state? ALI EID
A [Outi Flynn]: Nonprofits face numerous challenges, not only political challenges in some countries. Probably the main one is finances - to have adequate resources to do the work correctly. Secondly, nonprofits are not immune to competition. When several organizations work on the same issues and serve the same constituency, only the strongest survive.
It is also challenging to find and keep qualified staff. The nonprofit sector salaries tend to lack behind what the for-profit world is able to pay. Burn out is another challenge. The work never ends andere are too few hours in a day. In addition, we all are challenged to keep the trust of the people who support us. That is the tough task of the board.
Q [IRC Cairo]: Is the world witnessing a global associational revolution spearheaded by development non-governmental organizations? What about the NGO Staff? ARE THEY ANGELS OF MERCY; GOVERNMENT-PAID DEVLOPMENT DIPLOMATS? ALI EID
A [Outi Flynn]: I will respond to your question in a general manner. To get the work done - regardless of the mission of the NGO, the organization needs committed and qualified staff. Just as the board members, staff members have a list of responsibilities. Their performance is evaluated and, under most circumstances, they are compensated for their work. Their loyalty is to the organization and they are there to work towards fulfillment of the mission. Passion and interest in the work of the organization helps!
Q [Lusaka, Zambia]: Hi I’m James Zambia American center, how do you start a non profit making organisation and how do you source funds to implement the project
A [Outi Flynn]: Every nonprofit has a founder or a group of founders. These individuals are the original worker bees who get the organization, hopefully, off to a good start.
Some of the steps in forming a nonprofit include:
• form your first board
• be clear about the mission
• draft your organizational documents
• have a business plan - even nonprofits need one
• know your laws and ensure they are respected
Funding may come from individuals, government, grant making foundations, local businesses, earned income (fees for services, membership fees). You need to have a compelling case to convince your supporters that your enterprise has a purpose, is well structured, and their money will help make the world better.
Q [IRC Cairo: Cairo] Ms Outi FLYNN. Hi, is the NGO culture a democratic one? Ali eid MA DEVLOPMENT STUDIES
A [Outi Flynn]: Generally, NGO culture tends to be participatory and inclusive. That is because NGOs are designed to provide a public benefit – feeding the hungry, caring for the sick, educating the young. In practice, this means that NGO leaders (board members and staff) listen and respond to community needs and concerns. But, NGO boards have the authority to make decisions that are in the best interests of the organization. Sometimes, those decisions will not be the same as what stakeholders want. In the end, the NGO culture may be more democratic, but board members – not members of the community – vote on final decisions.
Q [IRC Cairo]: IRC Cairo, is there a law that control the organizing and working of the NGOs?
A [Outi Flynn]: There is no universal law that covers all the activities of an NGO. These organizations are part of a country's internal infrastructure and the laws of the country determine the framework - authority levels and limitations - for all enterprises. Every NGO also needs its internal regulations and policies that guide its own accountability and determine fair and appropriate processes for getting the work done.
Q [IRC Lusaka2]: I’m Maxwell from Zambia I’m in the process of starting a non profit organization, so my question is how do I get started?
A [Outi Flynn]: Maxwell, Please see my response to a previous question. Naturally, starting an organization is more than a short list of steps but with a concerted effort to focus on the essentials helps you form a solid foundation for your organization.
Comment [Lusaka, Zambia]: I am Nkole Mwamba in Lusaka, Zambia. I would like to make a Comment. A good Governance is when Public accountability, transparency and resources are used properly.
Q [IRC Cairo]: GOOD GOVERNANCE - WE SHOULD BE HELD RESPONSIBLE FOR OUR ACTIONS AND ACHIEVEMENTS; WE WILL DO THIS BY having a clear mission; organizational structure and decision-making processes; by acting in accordance with stated values and agreed PROCEDURES. Do you agree with me? Ali Eid
A [Outi Flynn]: Of course, NGOs should be held accountable for their actions and achievements. This means that NGO leaders need to start with a clear mission and use that mission to guide the organization. An organization needs staff to manage the programs and deliver the services, a way to reach the community, and a budget with income and expenses. The board should monitor these activities to make sure that they are, indeed, happening. The board and staff need to agree on values that will guide their decisions and their action, goals that they will measure their progress against, and procedures for running the organization. The board then needs to make sure that decisions are implemented and that the programs are working. One way to do this is to report regularly on what has been accomplished (e.g., 12 wells dug, 250 children inoculated, etc.) and what it costs to do so (how much money was raised, how much was spent on programs, staff, utilities, etc.). This information should be shared regularly with the board and at least annually with the community – donors, stakeholders, etc.
Q [Lusaka, Zambia]: How does a board look like and how would one recruit board members should he/she pick from any discipline or should be just from the field the nonprofit will be operating in? I am Kennedy Chisanga in Lusaka, Zambia.
A [Outi Flynn]: Thank you for an excellent question, Kennedy. When forming a board, you want to determine what skills, expertise, perspectives, backgrounds you need to help form an educated decision. You want to find individuals who are willing and able to spend the time it takes to serve on your board. You want people who are willing to make a personal contribution - the most powerful tool to use when they solicit funds from others. Make sure your board members are familiar with your constituency and its needs. And, at the end, bring in people with independent minds and capacity to work in a team environment.
Q [Lusaka, Zambia]: I’m Reuel from Zambia, you said that an NGO should have a business plan. How do you create one? and is it possible to have a final document?
A [Outi Flynn]: An NGO like any enterprise needs a plan. There are different kinds of plans – strategic plan, business plan, operational plan – and they can take many different forms. The most important thing, however, is to have a plan that answers fundamental questions. What is your purpose (mission)? Who are your clients, customers, and stakeholders? What do they need? What can you provide (Be clear about what programs and services you can deliver and what ones you cannot)? How will you deliver them (What staff, materials, equipment, offices, etc. do you need)? How much will it cost? Where will you get the money (Be realistic)? What will it take to do this year in and year out (Remember it takes time, people, and money to manage things)? Any kind of plan will need to be updated at least annually as you learn what your programs worked, what it really cost to deliver the services, whether you can raise the money you need, etc.
Q [Lusaka, Zambia]: Kennedy Chisanga in Lusaka, Zambia again. Is a Business plan for nonprofits equivalent to a Project Proposal?
A [Outi Flynn]: Business plans and project proposals can sometimes be the same thing. But, generally, a business plan is a larger, organization-wide plan with more numbers and a longer time frame. A project proposal may be limited to only one program or even a part of a program. For example, a business plan might show how the organization plans to expand from one town to three towns. This plan might be shared with several different donors to see if they could each provide funding toward the whole plan. A project proposal might focus on one specific program – let’s say care for children under 5 years old – that is part of a larger program for educating children.
Q [Lusaka, Zambia]: I’m RICHARD NGOMA, LUSAKA, ZAMBIA, I’m among young Zambians who are deeply concerned with youth’s participation in issues of national interest. However, my question is, why are youths not given a platform to get involved in issues affecting them socially, economically, politically etc by there respective governments especially in Africa.
A [Outi Flynn]: Richard, It is essential for all nonprofits to engage more youth in their activities. Youth is the future. It's a two-way street: the leaders of the organization must realize the assets young people bring and young people should not lose hope and get discouraged. To get involved, start by volunteering. Request more responsibility after you have proven yourself. Educate yourself. Bring others with you.
Moderator: We wish to thank Outi Flynn from BoardSource for joining us today. The webchat is now closed. Please visit our USINFO Webchat Station homepage at http://usinfo.state.gov/usinfo/Products/Webchats.html for more information on upcoming events and a transcript of today’s discussion (posted within one business day).
[Guests are chosen for their expertise. The views expressed by guests are their own and do not necessarily reflect those of the U.S. Department of State.]
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(Distributed by the Bureau of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)
