Our board has swindled us. Nobody has trust in other team members anymore

Question

I'm in a precarious situation. The board of our community, which has been elected a year ago for a 2-year period, has swindled us. This involves the complete board: the chairman, the finance chairman, the cash auditors and the secretary.

A lot of money is involved in this case, so much that we might not be able to recover in a year or two but we could basically "live on". (The club can't expand the fitness programme, isn't able to provide money for investments, repairs, etc. and can't completely pay coaches.)

The organization is a sport club with over 1000 members. For each election, representatives are sent from the different departments (gymnastics, soccer, acrobatics, etc.) and these representatives elect the executive board which administers finances, press and other relevant things. The uproar was enormous because something didn't add up and the board couldn't explain why. The fraud was discovered and the vast majority of members now think that the representatives (including me) are involved in the case. I can just speak for myself right now and know that I haven't committed such actions, however, 800 of 1000 people believe that I did.

The situation now is really troublesome. The club is built upon the principles of democracy and right now the members want a grave structural change. I understand that, but I'm really upset because I'm involved in this even though I didn't know of it. We, as representatives, voted for the board because they have done valuable things for the club in the past. It makes the situation even worse as the mistrust between members and representatives grows rapidly.

One important thing is that the representatives are also the chairs of the different sport departments. If we all get kicked out at once, the chance that the sport club crumbles is especially high.

An emergency summit has been announced for the next week where we will literally decide if the sport club will ever recover of this. The board has already been kicked out and they will face their actions in a trial. Right now, the other representatives and I administer the club. As this is a special case (the board is gone), now all members have the right to vote for changes. Changes may be suggested by both the departments' leaders and the members themselves. This means that basically anything can happen.

The higher ups made a terrible mistake and members think now that the whole staff is involved. How can I make clear that this was something that nobody was aware of except the board and that the staff did not know of such actions? How can I build up trust again?

Answer 1

Ouch. You have a few problems here:

1. Recovering the misappropriated funds. I assume you are already pursuing legal remedies here.

2. Figuring out what was broken in your governance that allowed this to happen. Why did this go undetected for so long?

3. Restoring trust in the community.

You're asking about #3, but #2 is going to be part of the answer too.

(My background: (1) I am a past and present member of the board of trustees for my congregation, and a member of the bylaws committee. In other words, process is part of my job. (2) I was a member of an organization whose board was engaging in financial shenanigans, and was ultimately the lead plaintiff in a demand for access to the books.)

Restoring trust will be challenging. I can't tell you you'll succeed, but in my experience, the more of the following you can do, the better:

• Make information available. Nothing that would violate privacy policies or put your legal case at risk, but other than that, talk to your members about what happened. Be careful to distinguish facts from analysis, but share both -- what happened, how did you get here, what went wrong?

• Be responsive and not defensive. When a community member raises an issue, respond quickly with what you can say and promise (and deliver) more later if you need more time. And that response should serve the community; being defensive will hurt you. If people wait days or weeks for any response at all, they'll assume you don't care or are hiding something. Don't wait for the polished final response to say anything at all.

• Admit your (you plural -- the representatives) part in this. You didn't swindle the community, but it happened on your watch. You thought there was sufficient oversight (or that trust was warranted) and it turned out you were wrong. Own up to that. Use that as an entry to a discussion about operational changes.

• Try to focus the conversation on action, not witch-hunts. Yes, your previous board did some terrible things and your members need to know that you're doing all you can to hold them accountable, but what you really need the community to focus on is moving forward -- adjusting your programs to require less money (at least in the short term) and fixing your operating procedures to make this less likely to happen again.

• Ask for their help. You're going to get it anyway, it sounds like, but make it clear up front that you don't consider this an "us vs. them" situation. You want to work with the members of the community to fix the problems.

• Between meetings, communicate frequently. Send out summaries of meetings so that people can see that you heard their concerns.

• If your governing documents don't cover your current situation (entire board removed), the community is going to have to improvise to seat a new board. Talk with them about how to solve the one-time problem -- maybe you want a direct election by the membership for a one-year board term, for example. If a new board is put in place and the members don't feel they had a voice in it, that will dominate member discussions.

The board we had to sue got almost all of this wrong. They declared a financial emergency (with unpopular emergency remedies), then refused to answer questions or allow qualified members to inspect the books (an audit that was actually specified as a member right in the bylaws). They did this for weeks, leading to the court filing to open the books, and then they fought that suit for another eight months. During this time their message was "trust us; we know what we're doing", rather than open communication. By the time members gained access to the financial records (and found gross incompetence but not malfeasance), the damage to many relationships within the organization had been done.

Answer 2

At the vary least you need to fire or remove these people from running the community.

I would also consider talking to a lawyer on what you can do to get the money back but this depends on exactly what you mean by "Swindled" and the amount.

You also need to he honest with your community which means tell them exactly what's going on and ask for suggestions on new rules to prevent this from happening again.