VCG Governance Matters: Good Governance Guide

Funding Stability

The organization has an appropriately diversified funding base, and sufficient funding and financing to support its programs and organization.
The various programs attract donors, both individual and institutional, who fund in the organization's area of work.
The organization is fully compliant with all state laws regarding registration to solicit funds and the use of third-party, professional fundraisers by tax-exempt entities.

Indicators of Good Governance

The organization is aware of the benefits of a diversified funding base that promotes sustainability.
The board oversees the fundraising function of the organization. It is active in securing funding and other resources through identifying prospects, supporting donor cultivation and solicitation, and direct contributions.
The board annually reviews a three- to five-year fundraising projection as well as an annual plan. These reviews should reflect the priorities identified in the annual and multi-year budgeting process.
Where financing is appropriate, board members develop and/or approve proper financing strategies.
100% of board members make an annual financial contribution to the organization, indicating that the board is engaged, supportive and committed.
The board has an active fundraising committee that oversees the fundraising program and assists the professional staff in planning and raising funds from all sources.

Funders’ Questions For Nonprofits

Board Practices

Does the board approve an annual fundraising plan as well as review the multi-year program for fundraising?

Yes.

Is the board aware of and prepared to use, when appropriate, diversified funding sources such as: other funding streams that would enable it to leverage government support and government funding that might enhance the reach or effectiveness of programs?

Board members are aware of the benefits of a diversified financial base and have taken action to diversify the financial base where appropriate and feasible.

Are board members involved in securing funding through their personal and business contacts, both individual and institutional?

Board fundraising is a systematic process managed by a fundraising committee and approved by the board. Board members contribute consistently to fund development through individual solicitation, site visits with funders, and annual fundraising events to reach predetermined goals.

Is there an active fundraising committee of the board?

An active fundraising committee leads fundraising efforts and reports regularly to the full board. [Note: Committees that exist only for the purpose of an annual event are "event committees" and should be evaluated as such.]

Does 100% of the board make an annual, personal contribution to the organization at a level that is encouraged or enforced for individual members?

Personal gifts are made by all board members, commensurate with their means. [Note: A minimum get and/or give contribution may be required by some boards.]

Does the board understand the impact of restricted funds and manage them correctly?

its responsibility to ensure that restricted funds are used only for their specified purpose;
what the restrictions on each fund are;
what costs, if any, may be incurred before funds become available;
what costs are not covered by or can be disallowed in the contract;
the procedures needed to ensure that all restrictions are met.

What specific action can funders take to encourage better governance in this area?

The funder can encourage the organization to develop new sources of funding for specific programs as well as for general support.
The funder can explore opportunities to leverage this funding relationship with colleagues who provide support in this field.
The funder can suggest and provide access to/support for appropriate training or consultation in fundraising.
The discussion can be followed-up when the nonprofit presents a grant report or makes a renewal application.

Case Studies