Nonprofit Kit For Dummies. Stan Hutton

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situation. Nothing is more dismal than finding out, for example, that an organization has been ignoring its payroll taxes, and could create personal liability for the directors (check out Chapter 7 for more info about the board’s personal liability). A word to the wise: Insist on good financial reporting. At a minimum, have the board treasurer (or perhaps the executive director or bookkeeper, if you have one) prepare monthly financial reports and distribute them to your board for review.

      ESTABLISHING AN ADVISORY BOARD

      Some organizations form advisory boards, which have no governance responsibilities. Advisory boards are optional, and how they operate and relate to the governing board of directors varies widely among different nonprofit organizations. Generally, their role falls into one of the following two categories:

       Members provide advice and guidance because of their professional expertise.

       Prominent names are be listed on the organization’s letterhead.

      We favor advisory boards that actually give advice (which generally means you have to ask for it) — even if they do so only once a year. Some organizations also use advisory board appointments as a way of getting to know potential board members.

Many people join boards because they care about and understand the nature of the service that the organization provides, but they may not be trained in bookkeeping and accounting. These board members must try not to let their eyes glaze over when the financial report is reviewed at the board meeting, because part of a board member’s job is to understand finances. If members don’t understand the financial fine points, they need to ask questions of staff and other board members until they do understand them. Of course, they also can study Chapter 12 on nonprofit budgets and financial statements.

      

Sometimes the problem is more than a lack of comprehension. For instance, the financial information may need to be presented more clearly. If one board member doesn’t understand the financial reports, chances are good that other board members don’t understand them, either. If your organization uses an outside accountant or bookkeeper to keep track of finances, ask for a brief meeting with that person to explain how they have presented the information. Many nonprofit service organizations offer affordable workshops on nonprofit finances and recordkeeping to assist board and staff members; others have programs that place volunteers from businesses into nonprofits.

      Sharing responsibilities among the board, staff, and volunteers

Defining roles causes problems for a number of nonprofit organizations. Should the board of directors be involved in day-to-day management decisions? No, probably not. An executive director and their staff don’t need board members to approve every management decision that comes along. The board must trust the staff to run the organization. To put it simply, the board sets the overall goals and policies, and the staff implements them. But (and this is a big but) many nonprofits have limited staff or even no staff. What happens when the organization’s work is done by the board and other volunteers?

      In the case of volunteer-run organizations, board members must wear two hats. Most importantly, they must exercise their fiduciary responsibilities. When they meet as a board of directors, they must see the larger picture and make group decisions that benefit the organization and its programs and clients. But, at the same time, when they have to do the hands-on work needed to provide the services and perform the day-to-day tasks of running a nonprofit, board members must act as if they were employees or volunteer staff members. They may even hold regular, unpaid volunteer jobs with job descriptions and scheduled hours. Confusing, isn’t it? Still, anyone who serves as both a board member and a volunteer or staff member needs to keep this distinction in mind.

      

In any organization, building practices that create financial checks and balances is a good idea. These practices are particularly important when board members also act as staff. For example, an organization has better financial oversight and control when one person approves bills for payment, a different person signs the checks, and another person reviews the canceled checks and monthly bank statements. You don’t have to use this system — it’s just one way to make sure that funds are used and accounted for properly.

Recruiting the Right People for Your Board

      You don’t want just anybody to serve on your board. You want to choose the members of your community who believe in what you’re doing and who will attend all your meetings, advocate for your programs, provide honest and ethical oversight to the organization, make regular and generous donations, and sweep the floor on weekends.

      Perhaps, not surprisingly, you won’t find many board members who fit this description. Even so, the following three traits are critical to the success of the organization:

       Believing in the mission

       Being a strong advocate on behalf of its programs

       Serving the organization as a careful and honest board member

      Sure, having wealthy members who do the dirty work when needed is nice, but, most importantly, you must find board members who understand and believe deeply in your work. Showing up for board meetings is a nice habit, too.

Think seriously about the skills that board members bring to your organization. Do you need an accountant to set up financial systems? A public relations specialist to help with media campaigns? An attorney to help with legal matters? Yes, you probably do. But don’t expect the accountant to do your audit or the attorney to represent you in court. You need a disinterested professional to do that work.

      

Your board should reflect your organization’s character and mission. A community-organizing group dedicated to collective decision-making may want board members who work well together. A neighborhood development organization clearly wants board members from its neighborhood. A youth leadership organization may want to invest in future leadership by creating positions for youth members on its board. (Note: Before adding young people to your board, check whether your state laws allow minors to serve on nonprofit boards. If your state prohibits minors from serving, consider inviting them to serve on advisory committees instead.)

      

Although having a friend or two on the board is fine, be careful about overloading the board with golfing buddies and carpool partners. Boards need diverse opinions and honest feedback from members.

      Incorporating diversity, equity, and inclusion in the board’s composition

Every governing board should represent the community-at-large that your new nonprofit organization plans to serve. For example, you’re planning to locate your new nonprofit in Tucson, Arizona. Before you start recruiting board members, take the time to research the most recent US census demographics for the city, town, village, hamlet, or region where services will be provided. Table 3-1 takes a look at the most recent demographics for what ethnic groups are represented

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