Board Oversight and Monitoring

Ms. Rose Javier, FICD

Fellow

Institute of Corporate Directors

On December 27, 2019, the Securities and Exchange Commission (“SEC”) issued Memorandum Circular No. 25, series of 2019, also known as the “2019 Guidelines for the Protection of SEC-Registered Non-Profit Organizations from Money Laundering and Terrorist Financing Abuse” (“2019 NPO Guidelines”). These guidelines were introduced in response to the misuse of non-profit organizations, whether intentional or not, for fraud and money laundering. Prior to their issuance, NPOs were not required to establish a board of trustees.

Under the 2019 NPO Guidelines, a Board of Trustees became mandatory to provide oversight and ensure compliance with the governance principles of transparency and financial accountability.

Before 2019, I served as a local fund agent for an international funding body. In that role, implementing NPOs were vetted before any funds were released, and their program implementation, financial transparency, and accountability in the use of donated funds were subject to ongoing review. Because many NPO recipients were led by individuals with strong advocacy commitments but limited understanding of internal controls and risk management, securing their support for our recommendations to strengthen internal controls was a difficult task.

The environment became especially challenging when some individuals tried to bypass the approval process under the guise of expediency or emergency. In hindsight, I believe my role as a local fund agent would have been easier had the 2019 Guidelines already been in place.

In conclusion, the roles of the Board of Directors in for-profit organizations and the Board of Trustees in non-profit organizations are now largely the same. Both are responsible for upholding good governance principles and best practices. The size of the organization does not diminish this responsibility, because good governance is grounded in principle, not in the materiality of transactions.