June 2017

Effective governance practices are critical for nonprofits of all sizes, and a key element of these practices is limiting conflicts of interest. To determine where potential issues may arise, many organizations circulate a conflict of interest statement to key stakeholders. Most organizations (88 percent) circulate an annual conflict of interest statement to members of the governing board. More than two-thirds (69 percent) circulate one to management, while 35 percent circulate one to all employees, and 15 percent to volunteers. Over half (53 percent) of public charities circulate a conflict of interest statement to all employees, compared to 35 percent of all organizations. Public charities are also more likely to send a statement to all their volunteers. A notably high proportion (84 percent) of HHS organizations share a conflict of interest statement with management. 



When conflicts do arise, the group assigned to handle the issue varies among organizations. Most respondents (54 percent) cite the governing board as the final arbiter of any conflicts of interest. The next highest proportion (16 percent) gives this responsibility to legal counsel, followed by the president and/or executive director (14 percent) and the audit committee (10 percent).


Comparing responses based on organization size, 19 percent of respondents with over $25 million in revenue cite legal counsel, compared to just 10 percent of those below $25 million, likely because smaller organizations may face resource constraints. 

The vast majority of public charities (74 percent) leave this power with the governing board versus just over half (54 percent) of HHS providers. 

A functioning board is the lifeblood of nearly all nonprofits, responsible for steering strategic direction, ensuring long-term sustainability and enacting sound governance practices. Unsurprisingly, 96 percent of the organizations surveyed require independent board members to evaluate the executive director’s performance and compensation. For nearly all (91 percent) organizations, reviews are conducted on an annual basis. 


Board Practices


Total Years Board Members can Serve

Average: 8.1 years 
  • The majority of organizations (77 percent) allow board members to serve between five and nine years in total.
  • 90 percent of organizations with less than $25 million in revenue have total board service durations of five to nine years, compared to 67 percent of those above $25 million in revenue.
  • Just over one-quarter (26 percent) of organizations above $25 million in revenue have total service durations of 10 or more years versus 6 percent of those below $25 million in revenue. 

Number of Board Members

Average: 20.6 board members 
  • The highest proportion of respondents (43 percent) report having between 10 and 19 board members, while one quarter (25 percent) have between 20 and 29, and 19 percent have 30 or more board members.
  • Over half (61 percent) of organizations under $25 million in revenue have 10-19 board members versus nearly one-third (32 percent) of those over $25 million in revenue.
  • 25 percent of organizations over $25 million in revenue have 30 or more board members versus 8 percent of those under $25 million in revenue.


Number of Board Meetings per Year

Average: 6 meetings 

A plurality of organizations surveyed conduct four or five board meetings throughout the course of the year.


Formal Board Committees 

Regardless of the size of a nonprofit’s board, various committees typically handle certain responsibilities. The most-cited formal board committee was executive (83 percent), followed by nominating (66 percent), investment (46 percent), finance (45 percent), audit (45 percent) and a combined audit and finance committee (43 percent). Thirty-two percent of respondents maintain formal committees not defined in the survey, including groups dedicated to governance, membership, marketing, government affairs, programs and services, fundraising, diversity, human resources, endowment and planned giving, bylaws, compliance, risk assessment and strategic planning. 

Nearly half (49 percent) of public charities have a compensation committee, compared to 24 percent of HHS organizations and 36 percent of overall organizations. Also, a larger percentage of public charities have a nominating committee (77 percent) versus 57 percent of HHS organizations. These differences suggest that public charities may be more thoughtful about compensation and board planning than other types of organizations.


Board Concerns

Over half (52 percent) of organizations name resource constraints as a top concern for boards, followed by managing growth and succession planning (42 percent each) and loss or decline of a major revenue stream (40 percent). One in four boards worry about increases in regulation for nonprofit organizations. Concerns related to technology—cybersecurity and changing technologies—were reported by 18 percent and 17 percent of organizations, respectively. Fifteen percent of organizations cite other concerns, ranging from fundraising and capital campaigns to impact assessments, measurement and mergers.


Looking at the breakdown of concerns by annual revenue, some differences emerge between organizations with annual revenue above and below $25 million. Larger organizations express higher levels of concern related to technology than their smaller peers. Twenty-two percent of organizations above $25 million in revenue cite changing technology, compared with just 8 percent of smaller organizations. Cybersecurity is also a more frequently cited concern for larger organizations—19 percent name it as one of their challenges versus 15 percent of smaller organizations.   

Succession planning is a top concern for nearly half (49 percent) of organizations under $25 million in revenue, relative to 38 percent of larger nonprofits. Smaller nonprofits also cite managing growth more frequently (46 percent) than larger organizations (40 percent). Twenty-one percent of organizations under $25 million in revenue cite increased demand for services without a plan to meet demand versus just 11 percent of organizations above $25 million in revenue.  


Looking across sectors, 46 percent of HHS organizations name increase in regulation as a top concern, compared to just 9 percent of public charities and one-quarter of organizations overall. Resources also seem to be of greater concern to HHS organizations: More than half (57 percent) cite resource constraints as a top concern, compared to 46 percent of public charities. Forty-three percent of HHS organizations also cite loss/decline of major revenue stream as a top challenge versus 31 percent of public charities. In contrast, managing growth is the most-cited concern for public charities (49 percent), compared with 35 percent of HHS organizations. 

Fraud Risk Management

While fraud was named as a board concern by only 3 percent of respondents, managing fraud risk remains an essential responsibility of a nonprofit board. When asked about fraud prevention mechanisms, most organizations cite a whistleblower hotline (67 percent) and an annual risk assessment (66 percent). Over half (51 percent) have an internal audit function, while just 9 percent have a fraud committee. The 10 percent citing other efforts list external audit, corporate training and compliance officers. 

The revenue breakdown finds large organizations are more likely to conduct an annual risk assessment than their smaller peers: 71 percent compared to 58 percent. Looking at the sectors, 62 percent of HHS providers cite internal audit functions versus 47 percent of public charities. 


Audit Firm Rotation

Respondents have engaged their current audit firms for an average of nine years. This is relatively even across the board, with slightly lower averages for organizations with revenue of less than $25 million and HHS providers. A majority of respondents (58 percent) have no formal policy for audit firm or partner rotation. 

When asked about an audit firm or partner rotation policy, answers vary. Twenty-four percent of organizations with annual revenue less than $25 million have a mandatory competitive bid process at five years or some other interval, while only 10 percent of larger organizations follow that practice. Nearly one in four (24 percent) of HHS organizations have a mandatory competitive bid process at five years or some other interval, while 6 percent of public charities say the same. A plurality (43 percent) of HHS providers have no formal policy for audit firm or partner rotation, but this is significantly less than public charities (62 percent).