Principle 19

The board should establish and review regularly the organization’s mission and goals and should evaluate, no less frequently than every five years, the organization’s programs, goals, and activities to be sure they advance its mission and make prudent use of its resources.

As stewards of the public’s trust and the resources invested in an organization, board members have an obligation to ensure that the organization uses its resources as effectively as possible to advance its charitable mission. Every board should therefore set strategic goals and review them annually, generally as part of the budget review process. This assessment should address current needs and anticipated changes in the community or program area in which the organization operates that may affect future operations. It should also consider the financial and human resources needed to accomplish the organization’s goals and mission. Such periodic performance reviews and assessments are a common feature of many self-regulation, accreditation, and funding programs in which nonprofit organizations participate.

Although discussions of individual program activities and accomplishments are typical of most board meetings, these are not a substitute for a more rigorous periodic evaluation of the organization’s overall impact and effectiveness in light of the goals and objectives the board has approved.

Because organizations and their purposes differ, it is incumbent on each organization to develop its own process for evaluating effectiveness. Most organizations should have at least an informal review of their progress on goals and objectives annually, but, because of the time and cost involved, they may choose to conduct a more rigorous evaluation less frequently. Even for organizations whose work is not properly measured in one-year increments, such as scientific research or youth-development programs, interim benchmarks can be identified to assess whether the work is moving in the right direction. It is important to acknowledge that some organizations are tackling intractable and other problems, challenges, and opportunities that do not readily provide evidence significant progress from year to year, yet they are nonetheless being effective and contributing to better overall outcomes.

When an organization considers taking on a new business or earned income opportunity, the board and staff should examine whether and how that activity will further the organization’s mission and how it will fit in with the organization’s overall revenue mix and staffing allocations. Income derived from activities unrelated to the organization’s charitable mission may be subject to an unrelated business income tax and, if sufficiently substantive, could have ramifications for the organization’s tax-exempt status. It is important to weigh the potential financial returns from a new business venture against the time and resources it may draw away from the organization’s primary program and management functions. The board should establish regular check-points to evaluate the progress of new ventures it decides to undertake and assess whether those ventures are appropriately advancing the goals they were intended to serve as well as the impact they are having on the organization’s overall services and programs.