Nonprofit Management: Board Election
So you have a pet cause and are considering or have recently started a nonprofit. Who do you invite to join your board? New public charities are often founded by a group of people united by the same mission. Environmentalists connect with green boards, teachers identify with educational charities, creative types gravitate toward the arts, and sympathetic souls align with humanitarian causes. Such camaraderie is commendable, but in their passion to make an impact, young boards often lack the depth and breadth of skills needed to grow the charity beyond the neighborhood fringe.
There were 845,233 public charities registered with the IRS in 2004, a staggering 64.7 percent more than ten years earlier. Add private foundations and that number topped the 1.4 million registered charities in 2004.
If you’ve made it this far, you’re familiar with Form 1023 and the EIN, but what happens when your charity starts to grow? Suddenly you come across a barrage of mysterious jargon (NTEE codes, D&O, 990, SOX, proformas, bylaws, quorums) and find this new vocabulary a bit different from what you and your friends discussed. sitting around a kitchen table when they decide to help the victims of the latest catastrophe.
Nonprofit boards need members who have more than just enthusiasm for their cause. They need board members who have skills in accounting, tax, auditing, law, marketing, fundraising, event management, grant writing and more. Over time, you will retain professionals in each of these fields, but you must first reach a level where you can afford these services. Most are not cheap, and while pro bono work can be negotiated, it sometimes only lasts so long before the provider expects compensation for their services.
But even when you can afford the services of paid professionals, boards need basic experience in each of these areas. The contracting of professional services does not exempt the board of directors from its fiduciary responsibilities. For example, two-thirds of all charities have their 990 prepared by an outside tax professional, so obviously the other third must be smart enough to do their own taxes, but it’s perhaps not that obvious that 100% of all boards should know enough about accounting and taxes to review their returns before mailing them to Uncle Sam, regardless of who prepared them. Just as each of us is individually responsible for the accuracy and timeliness of our own personal tax returns, the board is ultimately responsible for your charity’s returns.
Young charities don’t necessarily need board members to pour all these skills from day one; They can add them as needed, but the key for young boards to keep in mind is to identify their needs up front to prepare a board hiring strategy that’s right for their organization. This will allow them to know their requirements and time for expert skills, and allow them to recruit the right talent when needed, thereby avoiding a board that comprises all the “cause champions” but lacks these other vital competencies. .
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