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Safeguard Your Nonprofit's Assets: Crafting the Tone at the Top

best practices board finances foundation fraud Apr 20, 2023

Safeguard Your Nonprofit’s Assets: Crafting the Tone at the Top

      No one wants to think about their nonprofit being involved in a financial scandal… but it happens. Scandalous headlines are pretty rampant, even today as I read the news. Well, one of the things I know for sure is that you can do something  to prevent this in your organization. You can start today and work at it every day. You can craft the T.O.N.E. at the top. 

When creating a culture that prevents and protects your organization against fraud and mismanagement of resources, the most important thing you can do is to start with the T.O.N.E. at the top, or the guiding values, climate, and culture an organization’s leadership. This begins at the board level, with the chief executive, and trickles down in a healthy organization. I want to share with you four principles that are represented by the acronym T.O.N.E. These will help you create, communicate, and cultivate those guiding values throughout your organization. 

T-   Transparent

     First, I encourage you to create a culture that's incredibly transparent. Does that mean everybody knows everything? Should each staff member know how much every other staff member gets paid? No, it doesn't mean that. But it does mean that we all answer questions about our financial behavior. For instance, if I've gone to lunch and I have a receipt, then I should be ready and willing to share details about that lunch rather than thinking, “Well, it doesn't matter. You don't need to know.” In order to determine if that meal furthered a nonprofit’s mission or purpose, we need to know who was there. Now, does that mean you need to tell us what you talked about? Well, that’s definitely taking transparency a step further. It never hurts! Some organizational cultures create an expectation for that level of detail, but at the bare minimum, we need to know the name of the people who ate the meal. 

O-   Only One Person

     Our next safeguard is to intentionally avoid any situation in which only one person interacts with financial resources. For example, when money comes in and needs to be counted, we don't count it in the presence of only one person and then have only one person take it to the bank. Instead, when money comes in, we bring it into a safe place like a safe where it's either dropped immediately, or receipted and dropped. Then we intentionally create a setting where someone else comes to help count. Counting money should always be done in the presence of two people, which  helps to avoid the “only one person” scenario. Things that are done in hiding can be hidden. Transparency is best cultivated out in the open.


N-   The “NOT me” mentality

     Our next safeguard is to avoid the mentality of thinking, “That does not apply to me.”  When setting our tone at the top, we want to be careful to avoid any expectation that certain policies do not apply to certain people at the top. For instance, your organization may have a policy that requires an itemized receipt for all credit card transactions. Well, in that case, each meal receipt should include the actual menu items purchased, not just the signature copy with a total. Whatever your policy may be, you’ll want to make sure that it is applied to everyone in your organization, including those at the top. The best nonprofit leaders model these principles. They live them out, and it creates the tone and the pattern for everyone else to follow.

E-   Ethics

     Finally, you can protect your nonprofit’s assets through organizational ethics that are clearly defined and frequently communicated. As nonprofit leaders, we all want to believe that certain beliefs and ethics are shared universally in our organization without exception. We tend to think that everyone’s commitment to our shared ethics will protect us from certain financial behavior. Unfortunately, the reality is that we don’t always share the same commitment to ethics; therefore, it’s even more important to define and communicate your organization’s ethical priorities. This is not accomplished in a one-time memo, but rather an intentional and ongoing infusion into the culture of your nonprofit. 

     One way to clearly communicate these ethics is through a financial policy and procedure manual where you can outline and discuss policies such as the examples I've shared here today. Have you outlined your policies for each of these situations? If so, do you regularly communicate these elements with your staff? Does your newest hire know you have a manual full of clear and consistent guidance on specific situations?

     As always, I hope that this has been helpful to you as a nonprofit leader. I want you to know that I have developed a powerful and practical 12 question assessment to help you identify areas of potential financial risk in your nonprofit. You can access this assessment for free on my website by clicking here. I’ve designed the assessment to be an approachable starting point for checking in on the financial health of your organization. I hope this helps you begin to craft your T.O.N.E. at the top! 

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