skip to Main Content
Nonprofit Board

A Well-Informed Board is Key to Every Nonprofit

Having represented and advised many nonprofit organizations in my professional role as an attorney, and having also had the opportunity to serve as a member of a number of not-for-profit boards, I have seen the importance of good nonprofit board governance from both sides of the table. An effective board of directors that understands and uses its authority well can be a huge boon to a nonprofit organization.

However, I often find that board members need and want more information about their responsibilities and authority as nonprofit trustees. It’s very important that they’re well-informed about their roles, since the Internal Revenue Service (IRS) is increasingly scrutinizing nonprofits. Board members may even have some personal liability if their nonprofit engages in inappropriate behavior or loses their 501(c)(3) nonprofit status.

The following are a few ways nonprofits can help make sure their board members appropriately fulfill their duties as trustees:

Train new board members

Hold a short seminar on the authority and responsibilities of a nonprofit board member. Your board members are probably successful professionals in their fields, but running a nonprofit may not have been part of their prior experience. Clearly distinguish the role of the board of directors (to manage and oversee) from that of the nonprofit’s officers (day-to-day running the organization). Remind board members that they are particularly responsible for helping hire and watch over a competent CEO or executive director—they should not just rubberstamp internal hiring decisions.

Clarify financial responsibilities

Be sure board members know as much as possible about managing the nonprofit in a fiscally responsible way. This is serious business. Nonprofits have a special place in our country’s tax structure (as tax-exempt organizations). Board members should be reminded that they, therefore, have moral, ethical, legal and financial responsibilities to ensure that the nonprofit makes fair use of its funds.

From a practical point of view, this means the board needs to be transparent about the nonprofit’s financial goals, how its funds are used, and its long-term financial health. Fortunately, much of this information is required as part of the nonprofit’s annual Form 990 filing. This is the form watchdog organizations like the Better Business Bureau and Charity Navigator use to evaluate nonprofits’ efficiency on behalf of potential donors.

Good financial governance also means that board members need to be very cautious about benefitting personally from the nonprofit’s funds and resources. For instance, was that directors’ retreat (which included expensive meals and golf, all of which was paid for by the organization) truly a direct benefit to the nonprofit? The board should consider all of its expenditures with a very watchful eye.

Stay clearly focused on the mission

Board members need to ask the tough questions. Their job is to help the nonprofit succeed by providing outside expertise and oversight. If the nonprofit is focused on cancer research, for instance, the board should seriously question any project proposals that stray outside of this key area—no matter how groundbreaking, useful or inspiring those projects may be.

Board members should be particularly cautious about approving projects that could imply a conflict of interest on their part. The nonprofit’s ability to maintain its 501(c)(3) status depends on it.

Finally: Communicate, communicate, communicate

No matter how small or large the nonprofit, board members should be in touch with the organization’s officers regularly—not just at fundraising events and board meetings. It’s not uncommon in some of the best-run nonprofits for the board chair and the executive director to be in contact almost daily.

Even though board members are busy, the nonprofit’s officers should reach out regularly to them with updates and to solicit their feedback. Strong communication all throughout the year can help make formal board meetings run much more efficiently and effectively.

 

 

Important Disclosure Information
Please remember to contact RegentAtlantic if there are any changes in your personal or financial situation or investment objectives for the purpose of reviewing our previous recommendations and services, or if you wish to impose, add, or modify any reasonable restrictions to our investment management services. A copy of our current written disclosure statement discussing our advisory services and fees is available for your review upon request. This article is not a substitute for personalized advice from RegentAtlantic. This information is current only as of the date on which it was sent. The statements and opinions expressed are, however, subject to change without notice based on market and other conditions and may differ from opinions expressed in other businesses and activities of RegentAtlantic. Descriptions of RegentAtlantic’s process and strategies are based on general practice and we may make exceptions in specific cases.

Please note that Edward Ahart is not an employee of RegentAtlantic and this is not an endorsement of his legal services.

Important disclosure information

Please remember that different types of investments involve varying degrees of risk, including the loss of money invested. Past performance may not be indicative of future results. Therefore, it should not be assumed that future performance of any specific investment or investment strategy, including the investments or investment strategies recommended or undertaken by RegentAtlantic Capital, LLC (“RegentAtlantic”) will be profitable.

Please remember to contact RegentAtlantic if there are any changes in your personal or financial situation or investment objectives for the purpose of reviewing our previous recommendations and services, or if you wish to impose, add, or modify any reasonable restrictions to our investment management services. A copy of our current written disclosure statement discussing our advisory services and fees is available for your review upon request.

This article is not a substitute for personalized advice from RegentAtlantic. This article is current only as of the date on which it was sent. The statements and opinions expressed are, however, subject to change without notice based on market and other conditions and may differ from opinions expressed in other businesses and activities of RegentAtlantic. Descriptions of RegentAtlantic’s process and strategies are based on general practice and we may make exceptions in specific cases.

RegentAtlantic does not provide legal or tax advice. Please consult with a legal and or tax professional of your choosing prior to implementing any of the strategies discussed in this article.

Back To Top