organizational culture – Nonprofit Auditor

Tip of the week— it’s the integrity

I recently watched an old video about Warren Buffett, wherein he described how he picks winners – that is people (company leaders) he will trust his investments with. It said he uses three criteria. He started with the second characteristic, which he called energy, then moved to a third which was intelligence. It was not just regular intelligence. It was what was termed adaptive intelligence. An example he gave was a person running towards a destination and on seeing a post in the way, taking measures to avoid the post or minimize its impact, so as to continue running towards the destination – rather simple but key. Now it was the first and most important criterion he cited, integrity that most impressed me. By integrity the Buffet meant knowing when to say no. Basically integrity meant knowing limits and not overcommitting. As an example he discussed how a child understands love. A child understands love to mean time, time spent. Integrity is therefore reflected in commitments made and time spend to correspond with the commitments. Saying no to things we claim are not as important and spending the resources on what we say is important.

As an auditor, I look for integrity in the budget figures and other similar governance documents. When I see no resources committed to a goal e.g. no full time staff or worse staff committed without awarding the needed resourcing or awarding unsteady (reactionary) resource levels, I immediately know and understand the business goal is not critical or prioritized.

Many leaders today regrettably pay lip service to goals around culture, compliance and internal controls, but they lack the resources to support it. Where is the culture budget, the compliance budget – how does our annual budget reflect commitment to stewardship. Particularly, in our nonprofit sectors, where the mission can become an easy cop out to making important business investments towards internal controls and compliance goals. Where stewardship is often about cutting cost rather than investing in robust cultures and infrastructure to support stewardship. Often it’s just that missing leadership quality called integrity and we should look for it our leaders and all our staff.

Internal audit contributes to the mission too – be positive

“Why, then, ’tis none to you, for there is nothing either good or bad, but thinking makes it so. To me it is a prison. Well, then it isn’t one to you, since nothing is really good or bad in itself—it’s all what a person thinks about it. And to me, Denmark is a prison.” – William Shakespeare

Throughout my career, I found that I did my best internal audit work when I had optimistic thoughts about the mission and about teaming up with management as a partner to make improvements. It is so important for internal auditors to bring optimism to the job. To think of possibilities and be balanced about the risks they observe.

No doubt, we must remain objective in our assessments and exercise professional skepticism in our confirmations. Nevertheless, I strongly believe that advancing the mission, being mission driven, in part means positive thoughts about the organization and the people. Taking a minute to see the good things and to appreciate management’s strengths can be just as important as the exceptions we point out in our audit report.

Such an attitude to audit work, to the audit team, has the added benefit of helping break communication barriers with auditees and encouraging the free flow of information.

Share your thoughts on positive thinking in audit engagement. Has it been helpful to you? How do you stay positive when everyone expects the “mean” auditor? How do you balance due professional skepticism with positive thoughts? Is audit organizational culture relevant to adding value?

Sex abuse and misconduct will not be tolerated – DFID

Regrettably, for all the good work that nonprofits do around the world, they have not been exempt from issues of abuse and sexual misconduct in the work place and towards beneficiaries. The last two years have brought to light many scandalous acts of sex misconduct and abuse that were perpetrated by humanitarian aid workers.

At a recent summit held by DFID (the UK’s aid agency), the issues were addressed in a series of papers and resolutions that provided guidance for international humanitarian aid agencies to follow. (See a summary at the link below).

In the #metoo era nonprofit auditors should also consider how to gain better assurance over such sensitive culture areas. They can bring all nonprofit work to a standstill.

Some questions. How is your audit function dealing with the topic? Can guidance provided by DFID and other agencies be useful for auditors, perhaps to establish an assurance baseline? Do we need more guidance from donor agencies, management and boards? Should auditors ignore such risks all together? If not involved in the assurance/checking work in this area, are those that are charged in your organization providing robust assurance?

My view is that auditors definitely need to engage management on the topic? Query how management is measuring the implementation of such guidances and of other countermeasures against sex abuse and misconduct. Auditors should follow up to ensure management has lived up to established standards and goals in the next years.

The scandalous nature of such issues, debases the work of all actors in the humanitarian sector. DFID’s call for collaboration amongst all agencies is to my mind vital to snuff out those involved in the misconduct and abuse and to address the cultures that look the other way.

See the below article that summarize the conference outcomes.

www.gov.uk/government/publications/safeguarding-summit-2018-hosts-outcome-summa

10 Things Keeping Nonprofit Auditors Up At Night – The NonProfit Times Article

What is on your audit plan for 2019? Have you begun to consider topics to address? Here’s a list of the top 10 challenges keeping nonprofit auditors up at night, and possible remedies (see link below) to help auditors continue their critical contributions to nonprofits.

Changes to organizational strategy
Organizational culture
New technology
Cybersecurity
Compliance with funder requirements
Financial controls
Reliance on third parties
Procurement procedures
Transportation and distribution (logistics)
Fraud and corruption

What do you think? I definitely agree with a good many of the items on the list.

In my experience the challenge is that nonprofit management and boards tend to constraint auditors to execute cyclical and compliance based audits of various organization segments/units and organization partners. This mostly out of habit and such audits tend to miss important entity level risks.

Click the article for more details and for some great proposed remedies. I might add that I know the authors well and they are quite knowledgeable about the challenges.

Source: 10 Things Keeping Nonprofit Auditors Up At Night – The NonProfit Times