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David Hanlin: Accountability 101

February 01, 2012|By DAVID HANLIN

The volunteers staffing the various fire and rescue companies in our county are great at protecting lives and property. The members donate incredible amounts of time, and risk their lives to do essential jobs. I am very grateful to each individual and company. And I thank them.

In Washington County, there are 27 legally separate volunteer fire and rescue companies with a jointly sponsored county association. This fragmented structure makes it very challenging to try to coordinate essential services into a system that protects everyone, yet ensures accountability.

Arnold Platou’s recent investigative series published by The Herald-Mail raised concerns about the management of some of the companies and, specifically, the accounting for Gaming Commission funds. Only a few of the companies seem to have problems. However, these few have serious problems that reflect upon the entire system. Rather than engage in finger pointing, let’s resolve the problem.

The problem that needs to be addressed is not one that is unique to volunteer fire and rescue companies. Other nonprofit organizations should take note. Nearly every organization has a board of directors. Each individual board member should be sure that he or she understands and makes sure that as a board a set of principles that defines good corporate governance is followed. Principles of good corporate governance have evolved over centuries to ensure that boards of directors and managers behave and operate in ways that benefit the organization, the public and lessen the prospects for problems. In the cases pointed out by The Herald-Mail, some of these principles were violated. I doubt these principles were blatantly ignored. I suspect, in reality, the members didn’t know that these principles exist or, if they did, they did not understand them.   

In the case of the volunteer fire companies, the most egregious violation was that their boards did not understand that there was a “source of authority” that granted power to them to manage the organization and that they had a responsibility to that authority. Simply stated, authority refers to the owners who grant the board its power, purpose and mission.

In Fortune 500 companies, the source of authority for boards of directors rests with stockholders. In the case of nonprofit organizations, the source of authority is not as clear. Authority to nonprofit boards of directors is conveyed by state law, the organization’s members and those with an interest in the well-being of the corporation. This authority is articulated primarily through the corporation’s bylaws. However, that is not always sufficient. There is an implicit level of trust between the directors and its authorities that the board will care for the organization. If left undefined by bylaws or statue, the board must sometimes define when and how the board will comply with these principles. Few principles are more important than transparency, through such things as audits, public reporting, newsletters, annual reports, and regular and special public meetings. It is each board member’s responsibility to seek maximum transparency and to define how and when that will occur. After all, transparency breeds trust. 

 I believe the Washington County Fire and Rescue Association could do a great service to the community, by restoring the integrity of all companies. The Association derives its authority from its members and the community it serves. The Association, in conjunction with the responsible member fire and rescue companies, can take steps to encourage reforms.

1. Encourage all new company and Association board members to receive training on good corporate governance practices so they will understand their duties as members of boards of directors. Maybe the County Commissioners should insist on it as a condition of receiving future funding.

2. Encourage all companies to include nonvolunteer members on their boards of directors.

3. Develop a consensus system of accounting, chart of accounts and financial reporting. Present that system to the County Commissioners.

4. Develop a clear statement delineating the source of authority for all companies. All companies have a sense of responsibility to their general members and to the people they protect. It is helpful that this be publicly declared.

5. Some companies have so few members that there is virtually no membership base. In this case, the smaller company should merge with an adjacent company to make sure critical service is provided, the purpose of the organization is fulfilled and that accountability is enhanced.

Published comments by the new president of the Washington County Volunteer Fire and Rescue Association indicate that the organization’s finances must be more transparent and accountable. This reform effort should be expanded to include other issues of corporate governance and extended to all companies. Adherence to the principles of good corporate governance will not only go a long way to restoring credibility in our community, but also serve as an example for all nonprofit organizations and their boards of directors.


David Hanlin is a Hagerstown resident. His email address is davidhanlin54@gmail.com.

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