Why Now Is a Great Time: Preparing for Your Board’s Governance Audit

By Lynnette Heard, M. Ed. April 15, 2020 May 13th, 2021 Blog Post

Opinions expressed in AGB blogs are those of the authors and not necessarily those of the institutions that employ them or of AGB.

Perhaps unlike any other time, boards have been called to action and are navigating their campuses and institutionally related foundations through the shadows of the COVID-19 global pandemic. With their duties of loyalty, care, and obedience ever more heightened, boards are making difficult, unprecedented, and challenging decisions about the vibrancy, sustainability, and strength of their institutions.

Some institutions have discovered their governing documents lack guidance on the legalities of videoconferencing board meetings using Zoom, Skype, or other similar technological platforms while maintaining compliance with open meetings requirements. Others have members located throughout the world where the pandemic is crippling the daily routines and norms of institutional operations. Board members’ availability to be present to deliberate institutional matters could be challenged while they attend to their own professional and personal demands, placing those as a higher priority for the time being.

While addressing the immediate needs of their institutions, students, faculty, staff, alumni, and other constituents is of greatest importance, boards should consider setting aside time now to conduct an internal governance audit. Questions about the board’s ability to function in the midst of a crisis will continue to emerge as an extraordinary risk and opportunity. While conducting an internal governance audit is likely to be time-consuming, it will prepare boards and the leadership team to: 1) recognize areas needing review; 2) revise policies and practices that might be outdated; and 3) ensure compliance with new risk mitigation practices.

An integral component of enterprise risk management, internal governance audits often are conducted in tandem with the board’s audit committee and the institution’s audit or financial leadership teams. In other cases, external auditing firms conduct annual audits, which are prompted by industry “best practices” or weaknesses displayed in their enterprise risk management analyses. Boards should seize the opportunity to take a hard, but necessary look at the high-level standards for board governance, management, and compliance.

Why Now Is a Great Time

Higher education institutions and institutionally related foundations regularly conduct financial audits to test and gain assurance about their financial strength. To receive a favorable financial audit, good internal controls are needed. This is a norm in all solid business environments.

The effectiveness of the governance structure and how it functions has an impact on board members serving on behalf of our nation’s colleges, universities, and foundations. In fact, boards are active “owners” in the system of governance. Is your board equipped with the proper governance tools to quickly and nimbly respond to the next emerging crisis or critical issue? Should your board just assume the governance system is operating as it should? How would board members know if it is not?

Often taken for granted, governing documents and policies that guide the work of the board should be considered integral to successful business continuity and heightened risk mitigation. Conducting periodic governance audits provides reassurance that board operations are functioning at the highest levels possible. The audit not only examines how the governance structure is designed, but also how it is actually operating. It determines whether or not adequate checks and balances are in place for effective governance.

What Should Be Audited

Although this is not an exhaustive list, take time to review and assess areas such as:

  • Updates and amendments to articles of incorporation, bylaws, federal and state documents, conflicts-of-interest statements, codes of ethics, and whistleblower policies
  • New state or federal legislation and how these directives affect your institution
  • Committee charters
  • Board member manuals and biographies
  • Disclosure statements and summary reports
  • Voting records of individual members
  • Changes in board members’ status (i.e., requests and approvals for leaves of absence, removal of board members, or approval for members to move to emeriti status, etc.)
  • Attendance records of board members and supporting documentation of any requests for leaves of absence and, if required, written evidence of the board’s review and acceptance of board members’ excused absences and their continuing commitment to serve
  • Nomination processes and procedures for addressing vacancies
  • Succession analysis and planning
  • Notices of annual meetings in compliance with timing as required in bylaws
  • Notices of special meetings in accordance with bylaws
  • Evidence of service and leadership term limits
  • Signed minutes (if required) of all board meetings
  • Evidence of board members’ compliance with end-user IT policies and confidentiality agreements
  • Evidence of individual board members’ commitment to institutional philanthropy

Get Organized

While the leadership of a governance audit typically falls within the boundaries of the board’s governance committee, collaboration between the board professional, executive leaders, and other key board members can produce significant and eye-opening results. For example, when questions arise regarding adherence to board members’ compliance with institutional end-user IT policies, relevant discussions and planning can occur with internal operational leaders regarding board members’ access to institutional data resources and cybersecurity awareness.

Establishing a designated and centralized board repository or separate portal access to examine the key resources and documents for review will aid the audit team in its efficient and effective access. AGB’s Risk Management, Second Edition: An Accountability Guide for University and College Boards offers wide-ranging perspectives on this and other risk management topics.

While we don’t know what the future holds, taking time now to conduct governance audits can provide reassurance to volunteer boards and other internal and external stakeholders that integrity will continue to guide the vision and direction of the institutions they serve and support.

Lynnette M. Heard is a senior consultant at AGB.

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