How Exemplary Governance Can Keep Nonprofits Operational

While nonprofits can’t control donor behavior, they can optimize their appeal by demonstrating competence, value, and transparency at every level. For nonprofits looking to maximize their outreach potential, exemplary governance is the answer.

By Alan Tyson, DATABASICS

Last year, 75% of nonprofits reported declining contributions, leaving more than half with less than three months of operating revenue and causing many to curtail staff, reduce services, or both.

At the same time, the nonprofit sector is increasingly competitive as a plethora of nonprofit ranking platforms have emerged, challenging organizations to be more transparent and accountable with their limited resources.

In other words, funders have less money to contribute to nonprofits, and they are demanding more proverbial bang for their buck.

1. Commit to Transparent Expense Reporting

For thriving nonprofits, expense tracking and reporting isn’t a tedious obligation reserved for the accounting department. It’s an all-in operational necessity that can improve efficiency and encourage future donor contributions.

For starters, it’s easy for mission drift and slowly-bloating budgets to diminish long-term effectiveness. Expense reporting allows board members and other leaders to evaluate spending priorities and it offers an opportunity to realign budgets appropriately.

However, transparent expense reporting also helps nonprofits attract funding in an already-challenging financial environment. For example, a recent survey of funder behavior found that more than 70% demand insights into overhead costs before contributing to an organization.

To be sure, board members are taking notice of this essential change, requiring more comprehensive and accessible record-keeping. To be successful, nonprofits will need to account for:

a distributed workforce. Many nonprofits will continue operating remotely, and expense reporting solutions need to be as flexible as this work arrangement.
overworked teams. People worked more than ever last year, leaving many exhausted and burned out. That’s why nonprofits need a simple, seamless solution that doesn’t significantly add to their teams’ burden.
agile implementation. Compliance standards, reporting requirements, and financial constraints change with time. That’s why nonprofits should pursue an expense reporting solution that can adapt along with the organization.

Taken together, expense reporting is an effective first step toward exemplary governance, enabling additional priorities to take shape.

2. Implement Time Tracking

Committed staff, eager volunteers, and generous donors are the lifeblood of every nonprofit. Simply put, they are a nonprofit’s most valuable asset.

The past year placed a significant strain on these resources, making it even more critical that nonprofits optimize their efforts and effectively deploy their services. Time tracking allows leaders to assess these placements by evaluating the time spent on specific projects, priorities, and obligations.

For instance, in March, the Council on Foundations circulated a pledge promising new funding opportunities. The Wall Street Journal reported that the foundation called for “reducing reporting requirements and administrative burdens on grantees.” Time tracking measures this commitment and other organizational requirements, allowing nonprofits to quantify these efforts to leadership and potential donors.

Similarly, time tracking initiatives allow nonprofits to demonstrate project investment to donors, conveying value to attract new fundraising opportunities.

Of course, leaders need to be cognizant of the logistical obligations included with time tracking efforts. Any solution needs to be minimally invasive, easy to implement, and broadly accessible.

3. Review Asset Allocation

Even as the effects of the recent pandemic wane, many peoples still face immense challenges, allowing nonprofits to serve their communities and constituencies in new and novel ways. Many nonprofits have quickly pivoted, embracing new demands and obtaining innovative forms of financing.

Now, it’s time to review those efforts, ensuring that assets, including staff and volunteers, are allocated effectively, allowing nonprofits to meet their mission without compromise. A post-COVID-19 landscape is entirely novel, and nonprofits need the capacity to hit the ground running.

In response, the Harvard Business Review encourages nonprofits to reassess their core functionality through a series of essential questions, including:

If we went away today, who would it matter to and why?
What difference are we trying to make in our community?
Who are our core constituents?
What impact do they need us to have?

With these answers in mind, nonprofits can apply data derived from time and expense management initiatives to evaluate asset allocation to ensure that critical services don’t go overlooked.

Conclusion

Demand for nonprofit goods and services is surging, making it imperative that they rise to the occasion by identifying new ways to demonstrate competence and value at every level. In doing so, nonprofits can maximize efficiency, compete for funders, and serve their objectives.

Exemplary governance is the key to producing these results, and like many sectors, the future of thriving nonprofits will be forged by data-driven decision-making and unequivocally accountability.

Time and expense management doesn’t deliver critical services or provide valuable resources to constituents. Rather, it’s the tool that can keep nonprofits thriving and operational in today’s increasingly challenging landscape.

Author Bio:

Alan Tyson serves as the CEO of DATABASICS, an enterprise-grade time and expense management solutions provider recognized by leading global organizations for its deep expertise, next-gen technology, and customer-focused platform including such nonprofits, associations and philanthropies as the Consortium for Ocean Leadership, The Trust for Public Land, ATSSA, Pathfinder International, National Quality Forum, and American Academy of Physician Assistants. Connect with Alan on LinkedIn or follow on Twitter @DATABASICSinc

FAQ

What is exemplary governance in the context of nonprofit organizations?

Exemplary governance in nonprofit organizations refers to the implementation of robust policies, practices, and structures that ensure transparency, accountability, and ethical conduct in decision-making and operations.

How does exemplary governance contribute to the operational sustainability of nonprofits?

Exemplary governance contributes to the operational sustainability of nonprofits by fostering trust among stakeholders, attracting and retaining donors and supporters, mitigating risks, enhancing organizational efficiency, and promoting long-term strategic planning and stability.

What are some key components of exemplary governance in nonprofits?

Key components of exemplary governance in nonprofits include a well-defined mission and vision, a competent and diverse board of directors, clear roles and responsibilities for board members and staff, transparent financial management practices, and regular performance evaluation and accountability mechanisms.

How does a competent board of directors support exemplary governance in nonprofits?

A competent board of directors supports exemplary governance in nonprofits by providing strategic oversight, setting organizational goals and priorities, ensuring compliance with legal and regulatory requirements, and holding leadership accountable for achieving mission-driven outcomes.

Why is transparency important in nonprofit governance, and how can it be fostered effectively?

Transparency is important in nonprofit governance as it builds trust with stakeholders, enhances credibility, and promotes accountability. It can be fostered effectively through open communication, timely and accurate financial reporting, and proactive disclosure of organizational policies and practices.

What role does ethical conduct play in maintaining exemplary governance in nonprofits?

Ethical conduct plays a crucial role in maintaining exemplary governance in nonprofits by guiding decision-making, fostering integrity and trustworthiness, and protecting the organization’s reputation and mission. It involves adherence to ethical standards and values in all aspects of organizational operations.

How can nonprofits ensure diversity, equity, and inclusion (DEI) in their governance practices?

Nonprofits can ensure diversity, equity, and inclusion (DEI) in their governance practices by recruiting board members and leadership from diverse backgrounds and perspectives, fostering a culture of inclusivity and belonging, and implementing policies and practices that promote equity and accessibility.

What are some common challenges to exemplary governance in nonprofits, and how can they be addressed?

Some common challenges to exemplary governance in nonprofits include board member turnover, conflicts of interest, and lack of resources or expertise. They can be addressed through board development and training, implementation of conflict-of-interest policies, and leveraging external resources such as consultants or advisory committees.

How can nonprofits leverage technology to enhance governance practices and operational efficiency?

Nonprofits can leverage technology to enhance governance practices and operational efficiency by implementing board management software for document sharing and collaboration, using online platforms for virtual meetings and voting, and adopting digital tools for financial management and reporting.

What are the long-term benefits of investing in exemplary governance for nonprofits?

The long-term benefits of investing in exemplary governance for nonprofits include increased organizational resilience and sustainability, enhanced credibility and trust with stakeholders, improved decision-making and strategic planning, and greater capacity to achieve mission-driven impact over time.

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