Many Nonprofit Groups Are Tightening Governance Policies, Study Finds

By Harvy Lipman

More than half of nonprofit organizations have made changes to their governance policies in the past three years, according to a new survey.

Many of those changes have come in response to demands from government and watchdog groups that nonprofit groups become more open about their operations, said a report on the survey, which was conducted by Grant Thornton, a Chicago company that provides management and accounting advice to charities and other organizations.

The company's survey was based on data provided by 960 chief executive officers, chief financial officers, and board members at a range of nonprofit organizations.

About two-thirds (66 percent) of large organizations (those with annual budgets of $100-million or more) have instituted new governance policies, on issues such as avoiding conflicts-of-interest or establishing updated internal audit functions. Half of those groups with budgets smaller than $20-million have done so.

The biggest increase came among organizations that have put new policies in place to prevent conflicts-of-interest. More than three-quarters (78 percent) said they have taken such a step, compared with 67 percent that said they did so last year. The share of groups with audit committees increased from 60 percent to 64 percent.

Forty percent of the respondents said the nonprofit board's most important responsibility is providing strategic planning. About one-fifth (22 percent) said fund raising was the board's key task, while the same percentage said that management and oversight is the board's top priority.

Nearly 80 percent of those surveyed said their boards range from six to 30 members, although a small number (4 percent) said their organizations had more than 50 directors or trustees. The survey found that most of the larger boards were the result of charities placing big donors on the board to assist in fund raising, and that in those cases most of the actual governance responsibility rested with the board's executive committee.

Grant Thornton's 2006 "National Board Governance Survey for Not-for-Profit Organizations" is available free on the company's Web site.