By Carolyn McLaughlin, retired Executive Director, BronxWorks, and Moderator, 2014 New York Community Trust Nonprofit Excellence Awards Best Practices Workshop
The New York Times and the Wall Street Journal recently reported (April 9, 2015, April 10, 2015 and April 19, 2015) that New York Attorney General Eric T. Schneiderman’s Charities Bureau is investigating Cooper Union’s Board of Directors’ financial oversight of the college. Public outcry, including a lawsuit, after the decision to charge tuition for the first time in the college’s 156 year history, followed complicated real estate transactions that appear to have damaged the college’s financial health.
Although we do not know the Board’s reasoning or the details of the deals, we do know that it is unusual for the Charities Bureau to take such a proactive role and investigate before a nonprofit is in danger of closing. The article quotes Mr. Schneiderman discussing the significant role nonprofits play in New York State’s economy and the importance of protecting this sector. We hope that this type of proactive investigation does not have a chilling effect on individuals’ willingness to join nonprofit boards but rather serves to motivate more disciplined oversight.
One of the tenets of nonprofit management is strong, transparent, and accountable financial management, and another is having a governance structure that moves the organization forward.
Questions raised by the coverage thus far include the following:
- Did individual board members critically examine each of the deals before approving the transactions?
- Was financial information prepared in such a way that the risks were clear?
- Did any of the board members have a conflict of interest, and if so, how was this handled by the board?
- Was the leadership of the college so enthralled with the idea of a new building that they lost sight of their mission?
- How active was the board in overseeing the college’s endowment?
It is worth our time to follow this story to see what we, staff and board members, can learn from it.