National Standard 5: A Board and Staff that is Responsible for Operational Health

A community foundation's governing body ensures the financial health and sustainability of the foundation by:

  1. Ensuring adequate human and financial resources that are used solely in furtherance of the foundation’s mission,
  2. Approving the foundation’s budget and monitoring performance related to the budget,
  3. Ensuring sound oversight and transparency of investment and spending policies and practices, and
  4. Holding the foundation's chief executive officer (or equivalent in the case of all-volunteer foundations) accountable for the operations of the foundation.
Key Elements 

5.1 Does each employee receive and sign an employee handbook that is kept up to date and meets the legal requirements of the state where you are incorporated?

5.2 Does the organization’s hiring process comply with the Americans with Disabilities Act and all laws prohibiting discrimination? For more information, visit http://www.eeoc.gov/.

5.3 When is the last time your foundation reviewed its insurance needs, including coverage, adequacy of policy, limits, and deductibles (e.g., directors and officers, building and content, employment practices, unemployment, liability)?

5.4 If the foundation uses outside fundraisers, does it have an audit mechanism to ensure that all collected funds are remitted to the organization (e.g., planned giving advisors, online vendors, professional fundraisers, and event planners)?

5.5 Does the board approve the budget each year?

[Helpful Hint: The reviewer checks whether the budget documents reflect actual revenues and expenditures compared to the budget to date.]

5.6 Does the board receive budget reports on a regular basis that include income and expense line items (detail) that properly reflect the foundation’s activities and analysis of budgetary variance?

5.7 Did your foundation become aware of any significant diversions of the foundation’s assets in the past two years. A significant diversion is one required to be reported on Form 990. (Form 990, Part VI, Q.5 and instructions.)? 

5.8 Has your foundation been notified that it is under investigation by a federal or state regulator in the past two years (including an IRS Audit)?

5.9 Does the community foundation have an annual performance review process for the CEO?

5.10 Is the CEO’s compensation set by the board based on the performance review and a review of a relevant salary survey?