February 2019

We’ve all heard the term conflict of interest, but what is it exactly? If I’m on a nonprofit board and I also run a marketing agency, can I charge the board when I make up flyers for an event? If I serve on two boards and there’s an opportunity that would be great for both, how do I choose which one to share it with?

The Law Dictionary defines a conflict of interest as “a situation in which a person has a duty to more than one person or organization, but cannot do justice to the actual or potentially adverse interest of both parties.”

We usually think of a conflict of interest as something personal, such as when there is a conflict of interest between a person’s best self-interest and that of the organization or company they serve. But there can be conflicts of interest at a nonprofit, too. To avoid them, you’ve got to recognize them first.

Types of Conflict of Interest

In general, there are two types of conflict of interest.

1. Financial conflict of interest, in which a nonprofit board member receives financial benefits from their involvement with the nonprofit or their connections.
2. Organizational conflict of interest, or when a board member has an affiliation with a person, group or organization, and the relationship may induce the board member to act against the best interests of the nonprofit.

In Washington state, the law is clear: a board member must perform his duties with loyalty to the organization. He or she must be faithful to the organization. When acting on behalf of a nonprofit, board members must set aside personal interests and relationships to make decisions that best serve the nonprofit.

Examples of Conflict of Interest

Sometimes it helps to look at examples to see how conflict of interest happens in real life. Below are a few fictional examples of conflict of interest.

1. Sam runs a construction company and serves on the board of directors for a local school for special needs children. The school plans to add a wing to their original building and publishes an RFP for construction companies to bid on it. Sam knows he can’t bid on the project, but he gives insider tips to Warren, his old friend who also runs a construction company. In return, Warren gives Sam two lucrative projects as a “thank you.” In this case, Sam has engaged in a financial conflict of interest. He has profited financially, albeit indirectly, from his involvement with the nonprofit board and its connections benefited him personally.
2. Fran serves on the boards of two health-related nonprofits and hears about a grant available for healthcare nonprofits. Fran chooses to share it with Nonprofit A instead of both nonprofits. In this case, Fran exhibits organizational conflict of interest. Fran’s actions act against the best interests of Nonprofit B, which may also benefit from the information about the grant.

To avoid a conflict of interest, Sam should have remained quiet and not given Warren tips for winning the RFP, or he should have declined any contracts or gifts from Warren. Fran could have given the grant application information to both organizations and allowed them to choose if they wished to apply for the grant or not. In both cases, the choices and subsequent actions of Sam and Fran made their situations into conflicts of interest.

Although federal laws governing 501(c) (3) organizations do not require a conflict of interest policy, it is often a good idea for nonprofits to have one in place. Simple guidelines may be all it takes to get people to think twice before acting in a way that could harm your nonprofit’s best interests.

Welter Consulting

Welter Consulting bridges nonprofits and solutions to help them find technology that works for them. We invite you to contact us for any assistance you need with nonprofit technology and business solutions. Call 206-605-3113 or contact us.

You’re a mission-driven organization. You focus on shaving costs without sacrificing services so that you get the most bang for your donor’s buck.

Yet there’s one final puzzle piece that donors look for: IMPACT.

What is the impact of your work? What results are you delivering? How can you quantify them?

These are important questions that investors, donors, and granting organizations want answered. Yet answering such questions is challenging.

Measuring Impact

Nonprofits who fail to answer these questions leave themselves open to criticism and suspicion. Yet it can be challenging, as well as expensive, to have an independent auditor fully evaluate the impact that your organization’s programs and services make on your constituents.

There is a middle ground between answering the impact question and avoiding it. Several tools exist to help nonprofits demonstrate a commitment to making an impact and using funds wisely towards fulfilling their mission.

• Impact Matters: Impact Matters offers a simple and free tool to quantify the impact that nonprofits make. With permission, the company also posts the results to Charity Navigator. This provides a clear signal to people searching Charity Navigator that you take impact seriously. The tool is relatively new, and may not be free forever, so you may want to investigate it as soon as possible.
• Charting Impact: Charting Impact is a joint project of Independent Sector, GuideStar, and BBB Wise Giving Alliance. It provides a questionnaire that helps you build a framework within your organization to measure the impact of your work. By using this framework and sharing the results with your constituents, you provide them with a transparent look into your organization’s education to making an impact.
• Give Well: Give Well states that it is a “nonprofit dedicated to finding outstanding giving opportunities through in-depth analysis.” The organization conducts its own research into the effectiveness of specific charities. Organizations which have been assessed by Give Well tend to see increases in donations, according to the site, because of the independent evaluation Give Well provides.

DIY Methods of Measuring Impact

Let’s assume you work in a small nonprofit. What are your options for measuring impact? You’re not working with multimillion dollar budgets or global issues; you’re trying to help clean up the local waterways, or reduce illiteracy, or find a safe haven for battered women. How can your nonprofit evaluate its impact?

1. The first step is to have a solid mission statement. The mission statement of your organization is more than just a nice paragraph to recap your organization’s purpose. It should be the yardstick by which you measure all new activities and expenditures. Dust off your mission statement and review it.
2. Next, decide the “how”. How will you achieve your mission? List the programs and services that your organization participates in that support its mission.
3. Now think about all the ways in which you can measure those programs and services. Perhaps it is the number of people served or animals adopted, the amount of trash you’ve cleaned up, or the improvements in the water quality. Quantifiable data is great (number measurement) but qualitative data may also be important.
4. Record your improvements and establish a timeline by which you will measure them regularly.
5. When you’re confident in your findings, publish them so that your constituents gain insight into your organization’s results.

You can’t measure what you can’t monitor, so don’t reach too high and pick things to monitor that are impossible to measure with any certainty.

And remember the importance of storytelling when it comes to making an impact. Yes, numbers are important, but so too are case studies, photos, and videos of people sharing how your organization has made a difference in their lives. It is this complete picture of both qualitative and quantitative data that helps constituents understand the full impact of your organization.

You make a difference. Now it’s time to measure its impact! Get started today, no matter how small or simple the steps, and gain confidence as you move forward. There’s no time like the present to start.

Welter Consulting

Welter Consulting bridges nonprofits and solutions to help them find technology that works for them. We invite you to contact us for any assistance you need with nonprofit technology and business solutions. Call 206-605-3113 or contact us.

Nonprofit leaders know the importance of performing an annual internal audit. But do you know the importance of adding a cyber security audit to your financial audit?

Travelers insurance puts the cost of a data breach in a nonprofit organization at $221 per record, which doesn’t sound like much until you count up the number of potential records in your nonprofit’s files. Then you realize the eye-opening fact that you could be on the hook for thousands, perhaps millions, of dollars in damages should hackers get into your records.

But the cost to your organization doesn’t stop at monetary damages. There’s also the loss of trust, which is invaluable. It may take years to rebuild the trust damaged by a data breach.

Now you understand why it is critical to tighten up your cyber security. What better time to do so than when you perform an internal audit?

What Nonprofits Need to Know – and Do – to Improve Cyber Security

As you prepare for your organization’s internal audit, it’s a good idea to schedule a cyber security audit. Board members who meet to review the financial audit may also wish to review the findings from a cyber security audit so they can make decisions related to its findings.

To conduct your own cyber security audit, here are several suggestions.

1. Review current cyber security plans: Depending on your role within the organization, you may be well aware of any plans in place to protect against or respond to a cyber threat. As your first step, take time to speak with your IT manager, CIO, or other technology leader. Ask all department heads to provide you with any information they have on cyber protection, training, or risk management. Once you have all the information, you can make a good assessment of what is being done to protect against cyber threats.
2. Contact third party vendors: Third-party vendors who receive or manage any data from your organization should also provide you with details on what they are doing to prevent security threats. This includes the obvious providers such as cloud software providers but the not-so-obvious ones as well, like your mailing house, which addresses and sends donation solicitations, catalogs, and other direct mail. Other vendors may include the company you use for your email list management, website hosting, and similar third party vendors.

Once you’ve reviewed both internal and external security processes and precautions, you can make an educated guess as to your risk level.

What Next?

If you were buying a home, you’d want to know if it’s in a flood zone so you could assess the risk of flood damage and the need to purchase flood insurance protection. The same goes with cyber security threats; once you understand the potential risk and your organization’s specific vulnerabilities, you can take steps to protect against threats.

Some steps to take may include:

• Implementing internal security controls over software and technology services. This may include authorizing only IT staff to download software, updating and enhancing virus protection, and keeping databases behind a secure firewall.
• Requesting that all vendors provide you with security plans and protection, if possible, or at least an understanding of their security protocols.
• Training your internal teams on how to spot phishing schemes and preventing common cyber fraud and crimes.
• Finding a cyber security expert to work with or retaining a consultant in the event a breach occurs.
• Purchasing cyber insurance for your nonprofit, a policy which would protect against financial damages and technology repairs in the event a cybercrime occurs.

The time to take steps against cybercrime is now, before it happens. You have strong locks on the doors of your office to prevent thieves from stealing your computers. Do you have similar “locks” on your data?

Welter Consulting

Welter Consulting bridges nonprofits and solutions to help them find technology that works for them. We invite you to contact us for any assistance you need with nonprofit technology and business solutions. Call 206-605-3113 or contact us.