Tuesday, December 3, 2019

TOOL 7 – The Board's Annual Legal Audit

Use This Annual Checklist to Monitor Legal Issues

What if—at your next board meeting—senior staff reported this bad news (a RED alert on your “Ministry Dashboard Signals” report)?

“As of the 30th of the month,
our ministry was $100,000 below the cash reserves threshold
required by our mortgage loan covenants.” 

Use this TRUE OR FALSE annual audit checklist as a first step in assessing your ministry’s compliance with applicable local, state, and federal laws and regulations.

Tool #7 in the new resource, ECFA Tools and Templates for Effective Board Governance, is one of six assessments in Part 2 of this jam-packed 271-page resource. This critical tool will educate your board members on what they should be monitoring and might also enable them to sleep better at night!

The big idea: in addition to regular reports you already review in your good governance practices, this annual checklist of 17 statements will keep the board in-the-know. The two-page checklist asks for a TRUE or FALSE response to each statement—and includes space for answering the question, “How does the board know?” Examples:

#2. “Appropriately experienced legal counsel has reviewed the articles of incorporation, bylaws, and board policies in the last three years.”
#10. “All filings for the ministry’s copyrights and trademarks are current.”
#17. “We have not borrowed any of the restricted asset balances to fund operational expenses in the last year.”

A sample completed checklist is included with Tool #7 and features color-coded “Ministry Dashboard Signals” in the “How does the board know?” section:
   • Red: Act
   • Yellow: Watch
   • Green: Celebrate

Why checklists? Read my review of The Checklist Manifesto. Whether building skyscrapers or prepping for surgery, checklists are being used with increased effectiveness, says Atul Gawande. In a recent global experiment, a two-minute pre-surgery team review of a standard checklist has dropped infection rates, death rates and complication rates by a staggering amount.

Order the tools book from Amazon by clicking on this title: ECFA Tools and Templates for Effective Board Governance: Time-Saving Solutions for Your Board, by Dan Busby and John Pearson. The book gives you full access to all 22 tools and templates—formatted as Word documents so you can customize the tools for your board’s unique uses.

BOARD DISCUSSION: Around the table, answer TRUE or FALSE to this statement: “#5. We are in compliance with our loan covenants.” How does the board know this?

MORE RESOURCES: And speaking of surgeons, would you trust a surgeon who stopped learning? That’s the subtitle to Lesson 1, “Wanted: Lifelong Learners,” in Lessons From the Nonprofit Boardroom: 40 Insights for Better Board Meetings, by Dan Busby and John Pearson. Guest blogger Ralph Enlow notes this about lifelong learning: “…I find that the fatal combination of passivity and agenda clutter conspires to crowd out efforts to walk the talk of continuous board development.”  

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