Governance lessons from Toronto Community Housing, part 2

publication date: Aug 19, 2011
 | 
author/source: Jane Garthson
The first part of this article appears here.

In Part 1, I outlined governance issues that arose at Toronto Community Housing Corporation (TCHC) and commented on lessons in procurement and board information flow. Here are additional lessons I think nonprofit organizations could learn from the fiasco.Jane Garthson photo

Lesson 3: Heed optics - staff get manicures while 200 Wellesley burns

Want to be perceived as uncaring? TCHC staff are supposed to deal with critical issues like fire safety, bedbugs, overcrowding, bad plumbing, crumbling buildings, long waiting lists, lack of security and much more. I am certain most employees are really trying to do just that. But excessive spending on dinner cruises, Christmas parties, a planning retreat in a high-priced location, spa treatments, manicures, massages and expensive chocolates overshadowed their hard work.

Most public agencies wised up about such the optics of such bad spending some time ago. The good ones learned other ways to reward productivity and create positive workplaces that wouldn't make audit highlights or newspaper headlines. TCHC didn't get it. Some excesses continued even after a change of CEO. And at 200 Wellesley, a fire left thousands homeless.

Lesson 4: Know your own community first - Toronto before Sweden

The board met in a high-security, modern building and never even toured, let alone held meetings in, the buildings the organization owned and managed. They had a policy against it! Admittedly, two members were current tenants and some were former tenants. But the board as a whole gave an impression of being completely disengaged from its community.

However, it found money to send two directors on a fact-finding trip to Sweden, with no detail whatever on how over $13,000 was spent. If they learned anything useful, the auditor didn't find it.

Lesson 5: Expense claims are easy targets - justify costs!

THCH expense claim forms included far less than normal information, even leaving out the purpose and guest names at expensive meals. Employees approved their own claims and received advances for which they never accounted. The audit revealed a total disregard for accountability by both staff and board members.

This is low hanging fruit for the media!  The general public may have trouble grasping how hundreds of millions are spent but can easily see how expensive meals at a golf club should be justified or avoided. At TCHC you didn't have to justify such expenses. The costs may not have been material by financial standards, but they matter.

The second audit report, which covers expenses, appears here.

Lesson 6: No time for learning curves - and consequences may be irrational

At TCHC, two of the fired board members were such recent appointees they had attended only one meeting. Could they have done anything differently to prevent the firing?  Probably not, since the decision was made on ideological grounds. However, nonprofits should provide good candidate information packages and immediate orientation in case their new board members have to deal with a pressure situation right away.

Directors usually have a vote on top-level decisions immediately upon election. Often, we let them start making key decisions faster and with less help than we would let a new employee take a phone call.

Separately, the new CEO was praised for professionalism. The auditor noted that she had implemented new purchasing card policies and procedures, established a Compliance and Ethics Unit with internal audit and investigative functions, and implemented an enterprise risk management initiative. Those actions didn't save her, but the auditor's note may have saved her self-respect and helped her career.

Governance risk can be managed, but cannot be avoided. If your board has appointments, the risk includes holding people accountable for things done before their time!

Conclusion

Serving on a crown corporation board or leading its staff can seem very appealing after volunteering or working at struggling charities. Your revenues may come from government or from government-mandated sources, even to the point where traditional fundraising is not needed. You may even get per diem payments for your board service at a crown corporation.

However, you may face considerable additional media scrutiny and political decisions that cannot be explained through any well-reasoned decision process, just as you might at a large or high-profile charity. 

Your reputation may be tarnished by connection to activities before your time or that you could not have prevented. Make an informed choice.

Jane Garthson is president of the Garthson Leadership Centre, dedicated to creating better futures for our communities and our organizations through values-based leadership. She's a contributing author to You and Your Nonprofit. More information here.


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