Nonprofit boards come under very careful scrutiny from contributors. Their tax returns are public knowledge, so it’s easy for granting agencies to see when board members are doing their jobs well and when they’re letting things slide.
At the same time, there’s increasing competition for grants in Idaho, a state with 4,800 charitable nonprofit organizations. That’s why it pays for board members to make sure they have the skills and experience to perform their duties well. The organizations that receive grants and donations must be able to prove without question that they are solid, legally compliant and are making meaningful efforts toward meeting their mission performance goals.
With all this responsibility, membership on a nonprofit board is not simply something that’s useful for building up a professional resume. Instead, board members have a duty to serve as stewards of the public’s money, with the expectation that they carry out their organization’s goals and adhere to its principles. Board members are obliged to be informed, enlightened and competent.
Many board members do recognize the social and moral responsibilities of board membership. But they often overlook the financial and legal obligations that go along with the role.
Membership comes with unexpected legal and financial responsibilities. For example, some board members are expected to donate, and the board is counting on that donation. Legally, board members act in a fiduciary capacity and are ultimately responsible for the nonprofit’s mission, charitable trust assets and role in the community.
If there are problems, they might not come to light until the nonprofit folds and the volunteer board member ends up listed on a lawsuit filed by creditors or other parties.
A little education can go a long way toward helping board members understand the expectations and responsibilities of the job.
Here’s our board membership 101:
Some board cultures frown on questions, or veteran members seem intimidating to newcomers. Don’t be deterred from questioning what you don’t understand. Failing to ask questions can be costly. For example, organizations can go outside their mission to generate money, and fail to look at the tax consequences. The money comes in and is spent, and then six months later the nonprofit is stuck with a tax bill it can’t afford. A simple question regarding the charitable purpose of the activity could have helped the board make a more informed decision.
The board and the organization are much more likely to succeed if everyone on the board clearly understands the mission or goals, and everyone is working toward them. Often, when a nonprofit fails, it’s because board members were absent or there was inadequate focus on goals.
Every board member is responsible for ensuring financial stability. Often, members of small nonprofit boards lack the skills to review financial reports. They describe themselves as mentally “not a numbers person” in an attempt to let themselves off the hook. But this is no excuse. If they can’t work with numbers, they need to get some training. Board members must regularly review financial statements to make sure the organization isn’t overcommitting itself and is in a financial condition to carry out its mission. All board members carry fiduciary responsibility.
A board self-assessment helps members see if they’re meeting benchmark practice standards. That information helps guide improvements, and it gives members a shared understanding of the board’s responsibilities in compliance, accountability, financial oversight and ultimately in setting direction.
Self-assessment also provides the framework for setting priorities. An effective board functions as a team.
The goal is to get the right mix on the board, with members whose strengths are fundraising, management, finance or other attributes that can assist the organization in growing.
A board that’s functioning well is engaged. Members are working well together and with the organization’s staff. Those are the boards with staying power.
Christal Holmes is a senior tax accountant at Harris & Co. PLLC and has more than eight years of experience in public accounting. She is treasurer of the board for the Boise nonprofit New Leaf Kitchens.