publication date: Aug 19, 2011
author/source: Jane Garthson
The first part of this article appears here.
In Part 1, I outlined governance
issues that arose at Toronto Community
(TCHC) and commented on lessons in procurement and board
information flow. Here are additional lessons I think nonprofit organizations
could learn from the fiasco.
Lesson 3: Heed optics - staff get manicures while 200 Wellesley burns
Want to be perceived as uncaring?
TCHC staff are supposed to deal with critical issues like fire safety, bedbugs,
overcrowding, bad plumbing, crumbling buildings, long waiting lists, lack of
security and much more. I am certain most employees are really trying to do
just that. But excessive spending on dinner cruises, Christmas parties, a
planning retreat in a high-priced location, spa treatments, manicures, massages
and expensive chocolates overshadowed their hard work.
Most public agencies wised up about
such the optics of such bad spending some time ago. The good ones learned other
ways to reward productivity and create positive workplaces that wouldn't make
audit highlights or newspaper headlines. TCHC didn't get it. Some excesses
continued even after a change of CEO. And at 200 Wellesley, a fire left
Lesson 4: Know your own community first - Toronto before Sweden
The board met in a high-security,
modern building and never even toured, let alone held meetings in, the
buildings the organization owned and managed. They had a policy against it!
Admittedly, two members were current tenants and some were former tenants. But
the board as a whole gave an impression of being completely disengaged from its
However, it found money to send two
directors on a fact-finding trip to Sweden, with no detail whatever on how over
$13,000 was spent. If they learned anything useful, the auditor didn't find it.
Lesson 5: Expense claims are easy targets - justify costs!
THCH expense claim forms included
far less than normal information, even leaving out the purpose and guest names
at expensive meals. Employees approved their own claims and received advances
for which they never accounted. The audit revealed a total disregard for
accountability by both staff and board members.
This is low hanging fruit for the
media! The general public may have
trouble grasping how hundreds of millions are spent but can easily see how
expensive meals at a golf club should be justified or avoided. At TCHC you
didn't have to justify such expenses. The costs may not have been material by financial
standards, but they matter.
The second audit report, which
covers expenses, appears here
Lesson 6: No time for learning curves - and consequences may be irrational
At TCHC, two of the fired board
members were such recent appointees they had attended only one meeting. Could
they have done anything differently to prevent the firing? Probably not, since the decision was made on
ideological grounds. However, nonprofits should provide good candidate
information packages and immediate orientation in case their new board members
have to deal with a pressure situation right away.
Directors usually have a vote on
top-level decisions immediately upon election. Often, we let them start making
key decisions faster and with less help than we would let a new employee take a
Separately, the new CEO was praised
for professionalism. The auditor noted that she had implemented new purchasing
card policies and procedures, established a Compliance and Ethics Unit with
internal audit and investigative functions, and implemented an enterprise risk
management initiative. Those actions didn't save her, but the auditor's note
may have saved her self-respect and helped her career.
Governance risk can be managed, but
cannot be avoided. If your board has appointments, the risk includes holding
people accountable for things done before their time!
a crown corporation board or leading its staff can seem very
appealing after volunteering or working at struggling charities. Your
revenues may come from government or from government-mandated sources, even to
the point where traditional fundraising is not needed. You may even get
per diem payments for your board service at a crown corporation.
However, you may face
considerable additional media scrutiny and political decisions that cannot be
explained through any well-reasoned decision process, just as you might at a
large or high-profile charity.
Your reputation may be tarnished by
connection to activities before your time or that you could not have prevented.
Make an informed choice.
Jane Garthson is
president of the Garthson Leadership
Centre, dedicated to creating better futures for our communities and our
organizations through values-based leadership. She's a contributing author to
You and Your Nonprofit. More information here