Ultimate Account Blog

Nonprofit Board Service - A Right or A Privilege?

nonprofit boards,

 

 

Pretty much every parent of a 16- or 17-year-old has a discussion about the use of a vehicle. In order to convey their concern about their child’s safety, parents often indicate that driving is a privilege and not a right. The main difference is that a right is something you own, whereas a privilege is something that another person or entity owns that they allow you to use.

 

Most people understand the concept of rights and privileges, but when it comes to board service on a nonprofit organization, many potential board members, as well as not-for-profits, view board membership as a right.

 

Anyone who has been involved in board governance knows how challenging it can be to recruit talented individuals who want to donate a significant amount of time toward forwarding the mission of the charity. Therefore, when a willing individual volunteers their time and talents and asks to be on a board, the organization will often jump at the opportunity without going through the proper screening process.

 

A recent BDO study shows that most nonprofit organizations, approximately two-thirds, employ a nominating committee, which is a good start. The nominating committee can establish what the desired qualifications of a board member are and make an initial assessment of whether a candidate will be a valuable addition to a board of directors.

 

nonprofit, not-for-profit, charity board of directors

 

Different organizations will have different needs for a board member. Some may be specific. For instance, a board may be in need of investment, treasury or legal assistance, requiring them to recruit a banker, accountant or attorney. Aside from a specialized skill, however, some charities are driven by fees for service (an ambulance or other medical provider), grants and donations (a homeless shelter), or a combination of the two (a community fitness center).

 

Board members on a fee-for-service charity will not have as much of a requirement to raise funds as members of an organization whose sole sustenance is the gifts of others. Directors of donation-based charities may spend as much as 75% or more of their time, on average, fundraising. Different types of agencies may ask their board members to take a greater hand in governance and direction. Very rarely should a board of directors get into the everyday matters of the organization; that’s what the staff is charged with executing.

 

If fundraising is a major responsibility of board members, consideration should be given to the wisdom of having significant donors become part of the board. On one hand, having a significant donor so close to the decision-making will make it easier for the donor to continue to provide funds for the organization (although there are IRS guidelines about how much board members can contribute without jeopardizing the public charity status of the organization).

 

Conversely, a large donor may think that he or she can determine the course of action of the entire organization by joining on the board, an act that may or may not be completely altruistic. There is a fine line between a feeling of entitlement and the desire to provide impartial direction.

 

I recently read an article that lists a number of good questions for a nominating committee or board at large to ask a board candidate. Doing the due diligence up front and having a game plan for bringing on board members will avoid unnecessary conflict and anguish of having a director who has a separate agenda from the rest of the organization.

 

by Dan Massey, CPA, Manager

 

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