Kelly faced pressure. She does not have enough money to send her son to the US for medical treatment. Also, being a mother, she must save her only son and hence, she must raise the medical expenses. Furthermore, as a finance manager of the orphanage, Kelly may have felt ashamed to borrow money from her colleagues or superior as she wanted to protect her dignity.
As a finance manager, Kelly had complete access to the finance of the Orphanage. She had the right to issue cheques up to $200,000. Additionally, there is no proper control implemented to monitor the flow of donations. Lastly, the accounts of the orphanage have not been checked by any other auditors. Hence, the opportunity to commit fraud become visible. With weak internal control and authority held, Kelly can easily get around by issuing multiple cheques of $200,000 from the donations.
Kelly rationalised her actions by telling herself that she was just saving her only son’s life. Moreover, she had been a loyal and hardworking employee, so she will just “borrow” money from the orphanage and will pay it back. Lastly, with her contributions to the organisation, she had all the right to do it.
2. Corporate Governance
The Orphanage can increase the confidence of the public by ensuring accountability, transparency, integrity, and fairness in corporate governance.
Accountability. The principles of corporate governance require those involved to understand their authority and accountability for key responsibilities at all levels and in all areas of the organisation (Deloitte, 2013). For the Orphanage to establish accountability, it must comply with non-profit financial standards and demonstrate to key stakeholders that controls and oversight needed are put in place to manage funds (Blackbaud,2011). Hence, there will be greater confidence from the public as it shows assurance that the Orphanage is ethically and financially sound.
Transparency. Transparency means openness to the public (OECD, 2008). It provides stakeholders with confidence regarding in the decision-making and management processes of a company (Pearse Trust, 2014). For instance, fundraising partners of Children’s Cancer Foundation (CCF) are routinely informed about fundraising policies and the non-profit is fully accountable to all its donors. These have helped the organisation to boost donor confidence (Sebastien & Usman, 2015). Hence, the Orphanage can strengthen the confidence of the public by making financial information and donor impact transparent. These can inevitably enhance the relationships among donors and volunteers.
Integrity. Integrity means honesty and objectivity with high levels of propriety and probity in the stewardship of public funds and management of the company’s affairs. An individual personal standard and professionalism will reflect the organisation’s decision-making practices and procedures and in the quality and credibility (Boamah, n.d.). Hence a culture of integrity in the workplace give a positive reputation to the public and thus build confidence and trust.
Fairness. Fairness where there is equal treatment among stakeholders (Pete, n.d.). For instance, there should be no favouritism in the Orphanage. Favouritism can be hugely detrimental to workplace morale and productivity (Phillpott, 2017). Hence, it will portray to the public that the individuals appointed to the board lack of professional ethics.
Difficulties in recruiting and retaining new Board Members. The directors of the orphanage are to serve as volunteers and hence, they must be able to devote the time and effort in carrying out their duties like a compensated director. A report done by Bain & Company states that the number of talented individuals available to serve the board has not been matched with an equal rise in the growth in volunteerism and donations (Lamy & Akhtar, 2015). For a small-sized orphanage, people are less likely to join as it lacks the attractiveness possessed by bigger organisations (Sim & Tay, 2015). Additionally, the Orphanage may face challenges in attracting adequate numbers of qualified directors from outside their organisation. As a result, the board may only contain the members of management within the Orphanage (Deloitte, n.d.).
Lack of financial management expertise. According to a survey by Centre for Non-Profit Leadership, Accounting/Auditing was the most desired skill sets on the board with 100% of charities seeking for it (Refer to Appendix, Table1). Additionally, Banking/Financial Services topped with 95.3% for the most desired industry experience needed on the boards (Refer to Appendix, Table2). Hence, the orphanage may not have an effective financial oversight. With the lack of expertise, it can only rely on members who may lack skill in scrutinising financial statements or provide the oversight that is required. As a result, it can easily find itself in serious financial trouble (Pettey, n.d.).
Lack of Resources for continuing board education. The education programs help directors to become productive members of the board by ensuring that they familiarise with the board issue and can contribute to the board continuously. However, the orphanage might face time constraint, insufficient budget, and expertise. Overall, this will affect the structured learning process of the directors (Deloitte, n.d.).
To attract new members, the Orphanage may try to recruit younger professionals who are acquiring directorship experience and want to share their knowledge. These professionals are socially conscious and have interest in contributing to the community. The Orphanage can try to advertise directorship positions from local professional or industry association (Deloitte, n.d.). Furthermore, the board can plan forward talent needs with respect to its strategic goals. For instance, recruit talent as volunteers first, and then mentor them to serve as a volunteer committee before appointing them as a board member (Diez, 2017).
To overcome the challenges for better financial oversight, the orphanage can implement internal controls, work with auditors to identify vulnerabilities and create a whistleblowing policy that ensures confidentiality (Pettey, n.d.).
The best practice for directors to continue their board education would be making use of free or affordable online resources. Moreover, they can organise annual board retreat or in conjunction with board meetings to help keep the board members informed on emerging issues such as new laws and regulations (Deloitte, n.d.).