Table of Contents
Introduction
Chapter 1: The Role of a Nonprofit Board Member
Chapter 2: The Benefits of a Powerhouse Board
Chapter 3: How to Recruit Nonprofit Board Members
Chapter 4: Attracting Quality Professionals
Chapter 5: The Board, The Key to Fundraising
Chapter 6: Five Simple Steps for Building Your Board
Conclusion
Preview of ‘Nonprofit Program & Service Delivery: Comprehensive Guide on Developing Dynamic and Innovative Programs and Services’ Check Out My Other Books Bonus: Visit The Institute for Nonprofit Management at www.ifnpm.org for downloadable templates and Free Resources for nonprofit leaders.
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Introduction Thank you and congratulations for your decision to download this book, “The Nonprofit Board of Directors: How to Attract Powerhouse Board Members”. It contains proven steps and strategies on how to attract powerful, experienced, and active board members. If you’re like most dedicated community leaders you’re robbing Peter to Pay Paul, doing all you know to do to keep your organization afloat. You’re probably not drawing a salary large enough to take care of your family and plan for your future. And if you are, you’re probably struggling with attracting skilled staff because you can’t afford to pay them competitive salaries and fund your daily operations. If any of this sounds familiar, then this book is the key to resolving those problems for good. A Powerhouse board is the key to a nonprofit organization’s success. Many new founders start their organizations with grand hopes, passion, and not much else. Their board members are Peaches, Mikey, Angie, Tim-Tim, Big Joe and ‘nem. Typically friends and family members; people who love and support them, but lack the financial resources, connections, or board experience needed to support the work of the Executive Director. What many fail to realize is that a powerful board translates into a simpler life for them. Board members are your partners, your support system, and their sole purpose is to help you, as the person making things happen in the community, get your job done more effectively and efficiently. Board members have the power to ensure that Executive Directors make a six-figure salary. But they also have the power to fire the very person who founded the organization after putting in years of blood, sweat, and tears – and there’s no legal recourse to stop it. Board members are charged with guiding the organization, functioning as the visionary team that determines the direction of the organization’s programs and services. It’s a huge responsibility that the IRS has conferred upon these leaders as their Fiduciary Responsibility to provide oversight to assure that all company business is transacted legally. The Board, not the Executive Director is held legally responsible for the decisions made on behalf of the organization, up to and including imprisonment. All of this and more is discussed in this book, including a specific plan on how nonprofit organizations can attract these powerful individuals. Enjoy, and thanks again for downloading this book!
Chapter 1: The Role of a Nonprofit Board Member There are many misconceptions about the role of a Board Member, leading up to and including whether they are paid or not. Let’s clear up some of these misunderstandings so that you are clear as to the legal charge of a Board member. Below are ten basic responsibilities of Nonprofit Boards: 1.
Determine mission and purpose. It is the board's responsibility to create and review a statement of mission and purpose that articulates the organization's goals, means, and primary constituents served.
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Select the chief executive. Boards must reach consensus on the chief executive's responsibilities and undertake a careful search to find the most qualified individual for the position.
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Support and evaluate the chief executive. The board should ensure that the chief executive has the moral and professional support he or she needs to further the goals of the organization.
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Ensure effective planning. Boards must actively participate in an overall planning process and assist in implementing and monitoring the plan's goals.
5.
Monitor, and strengthen programs and services. The board's responsibility is to determine which programs are consistent with the organization's mission and monitor their effectiveness.
6.
Ensure adequate financial resources. One of the board's foremost responsibilities is to secure adequate resources for the organization to fulfill its mission.
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Protect assets and provide proper financial oversight. The board must assist in developing the annual budget and ensuring that proper financial controls are in place.
8.
Build a competent board. All boards have a responsibility to articulate prerequisites for candidates, orient new members, and periodically and comprehensively evaluate their own performance.
9.
Ensure legal and ethical integrity. The board is ultimately responsible for adherence to legal standards and ethical norms.
10. Enhance the organization's public standing. The board should clearly articulate the organization's mission, accomplishments, and goals to the public and garner support from the community.
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If you’re like 99% of most founders, your board consists of family members and friends. This is a normal practice, because your family and friends typically know you and support your2vision. They don’t require much convincing. And at its inception, the organization doesn’t require much from its Board outside of signing a few documents. However, the one decision (to place family and friends on your board, unless of course they are experienced professionals with connections and resources) can be the very downfall of your organization. Board of Directors’ primary responsibility, outside of providing leadership to the organization, is to raise funds to ensure its sustainability. If you have to train your board on raising funds; if you are the one doing all the outreach and networking; if you are the one figuring out how the bills are going to get paid – then your board sucks, and you need a new one. Not only are they not doing their job as a governing board, but they are preventing you from doing your job as an Executive Director. We’ll talk later about how to get rid of dead weight and put active, involved and well connected members on your team. But for now, know that your goal, as soon as possible, is to transition your friends and family off of your board, and recruit board members who will help make your life easier!
To Pay, or Not to Pay . . . It Shouldn’t be a Question I am often asked if a Board member should be paid. And every time I answer the same way, “No.” Allow me to clarify . . . If you serve on a Nonprofit Board, then the expectation is that your service is a voluntary one because your support the mission, goals, and vision of the organization. If you serve on a Corporate (For Profit) Board, then these positions typically come with some type of compensation. The Explanation behind the “No” The passage of the American Competitiveness and Corporate Accountability Act of 2002, commonly known as the Sarbanes-Oxley legislation, has caused more concern about the compensation of board members in the last few years. Industry practice around providing compensation (excluding reimbursement of expenses) to members of a board of directors in a nonprofit organization, vary. There are significant differences between the responsibilities of nonprofit and for-profit organizations. For-profits engage in commerce in order to earn financial return for their shareholders. Nonprofits operate to achieve their missions without the motivation of financial gain. Nonprofit organizations do not have stakeholders. Instead, nonprofits owe allegiance to members, funders, grant makers, beneficiaries and employees as well as to the public, which has given nonprofit organizations special status in society.
In a corporation, the board 3 of directors, as a body, has a fiduciary responsibility for the decisions they make with regard to corporate assets. The fiduciary responsibilities of a nonprofit organization’s board members includes: • • • •
Avoiding conflicts of interest Acting in the interest of the company rather than the member's personal interest Providing oversight to assure that all company business is transacted legally Making decisions to protect the assets of the corporation.
Typically in your organization’s bylaws, there is a section that specifically addresses the topic of compensation:
Section 5: Directors Section 5.6. Compensation. Directors shall not receive salaries for their services, but by resolution of the Board of Directors, expenses of attendance, if any, may be allowed for attendance at any regular or special meeting of the Board. The Corporation shall not provide personal loans to any Director.
It is not illegal for a nonprofit to compensate its board members with reasonable fees unless prohibited by the organization’s bylaws. If compensation is authorized, it is advised that compensation amounts be set by independent directors or an independent compensation committee with input from outside advisors. It needs to be clear that compensation does not imply monetary profit. It is very important that board compensation be comparable to that of other nonprofit organizations and not deemed excessive by the IRS.
Federal Laws to Consider There are several laws that should be reviewed and interpreted when considering board compensation. First, there is the Federal Volunteer Protection Act of 1997 (42 U.S.C. 14501 et. seq.) which is intended to encourage volunteerism. This act also defines a volunteer as an individual performing service who does not receive compensation, other than reasonable reimbursement or allowance for expenses actually incurred. Form 990, which has extensive reporting requirements, is the next point to consider. Starting in tax year 2005, this form (also known as the “Return of Organization Exempt from Income Tax”) will request thorough and complete information about an organization’s compensation arrangements, as well as possible conflict of interest for officers and others.
Finally, there is the private inurement and excess benefits regulation which directly impacts the amount of compensation nonprofits may reward board members. Organizations should be aware that section 501(c)(6) of the Internal Revenue Code prohibits any part of net earnings benefiting individuals. Section 501(c)(3) contains excess benefits rules, which bar board directors and officers from profiting from their positions within a nonprofit organization. Paying reasonable fees to board members for services may be legal in some circumstances, but paying more than the recognized market average can result in stiff penalties to a nonprofit organization.
Ultimately, the decision of whether to compensate a nonprofit board is 4 determined by the organization based on its culture, funds, members, donor expectations and the image it wishes to portray. If you pay board members or plan to pay them in the future, here are my recommendations to consider: • Establish policies with clear objectives and indicate how compensating the board of directors will benefit the organization • Determine what is considered reasonable • Determine which of the board members will be compensated - the chairman, board officers, or all of the board members • Determine how the compensation will be structured (i.e., flat fee, retainer, per diem, formula), how it will be distributed, and the tax implications • Determine how much each board member will be compensated and whether the chairman will be paid more Blah, blah, blah . . . All of that to say, Keep Things Simple, Uncomplicated, and Run a Smart Business: Do Not Pay Your Board Members! Then why would anyone who is expected is to leverage their time, resources, and connections, serve on a board? There is some connection to the mission that connects with the Board member. Typically it is personal. I serve on two boards, the Vanguard Cancer Foundation and Peace Ambassadors International. I know first hand the responsibilities that come with serving on a board of directors, so I chose to volunteer my time selectively. My dad died from prostate cancer, my mom from breast cancer, and my boyfriend from lung cancer. For me, the promise of hope is what connects me to Vanguard. During my time as caregiver to the members of my family, I was distraught and felt hopeless. Vanguard supports Personalized Cancer Care treatment options which basically means doctors treat each person as an individual - not as some statistic. As a statistic, what the caregiver is told is that the person they love has an 85% certainty that they will die. With Personalized Cancer Care treatment options, patients are given a diagnosis based on their individual case.
5 I volunteered to serve on the Board because I wanted to ensure that more family members have access to quality support services and alternate treatment options. I don’t receive compensation for my service, but as a nonprofit expert, I bring a lot of talent, experience, knowledge and resources to the Foundation. And I do it freely and willingly because I’m committed to the mission. People join boards for different reasons. We’ll spend more time talking about people’s personal agendas, but for now the primary reason for individual serving on a board with no monetary compensation is because they believe in the mission. Some like the prestige of serving on the board. And others still like the ability to list their service on their resume to show the world that they are caring, giving individuals.
Why is the Board So Important? An unfortunate, but common mistake among many nonprofit leaders is failing to understand, and capitalize, on the value of its Board Members. From inception, the Board plays a crucial role with the establishment, direction, and impact of the organization. Yet, even at the moment when strong board members are needed the most, they are selected without the strategic forethought or practical understanding that is prudent at this juncture. During the organization’s formation IRS requires the following three officers of the Board: President, Treasurer and Secretary. More times than not, founders will place friends and family members in these roles. It’s natural, but not recommended. Unless friends and family have extensive board experience and resources that would move the organization forward, having them in Board member roles goes against the best interest of the organization. If you’re like most community leaders, you are holding down the fort pretty much single-handedly. Sure, you have your support system, friends and family members, but after reading all that the board is legally charged to do, why wouldn’t you take advantage of this resource? A better way to view your board is to see them as a partner, like in a very loving and healthy relationship. Your members should have certain talents that strengthen and enhance the relationship. In a relationship they might have great
listening skills, or perhaps they would be the provider in the family. While your 6 role might be the organizer who schedules everything and makes sure all the pieces come together. Your board is your partner in creating dynamic and innovative programs that will be around for generations, making a lasting impact in the community you serve. If you can start to view them in that capacity you’ll have great success in attracting powerful members to your organization. Currently, most people view their Board as this silent entity that they turn to when they need to get a document signed; or this group of people who they give updates to every quarter. This perspective perpetuates the Single Mom syndrome, and we need it to stop right away! While single moms do an amazing job raising their children, ask any one of them and they will tell you it’s a heavy burden to bear. If they could have the support -- financially, emotionally, and physically -- they would gladly accept it because it would make their lives much easier. And this is the ultimate goal: Make your life as the founder/person delivering the programs and services, EASIER! Your board is going to help you accomplish that. This is the primary reason why the Board of Directors is so very important. Once you understand their role, their power, and how to navigate that relationship, you are on your way to creating a successful nonprofit organization. Trying to manage an organization on your own will ultimately lead to burn out. It’s just too much for one person, I don’t care how committed, talented, and resourceful you are. Your goal as a community leader, Executive Director, the founder of your nonprofit organization, is to provide meaningful, long-term programs and services to your community. That can only happen if you have the support system you need to make decisions that will yield this impact. An experienced board will ensure the financial solvency of your organization. They will take their fiduciary responsibilities seriously, which means they will make sure that the nonprofit organization they are charged to serve is a sustainable organization. Below are the questions a seasoned board will routinely ask themselves.
Questions Board Members Ask to Ensure Financial Fitness A sound strategic plan linked with a realistic financial plan will ensure that the nonprofit organization is using its resources effectively. Board members periodically should ask these questions about the organization’s finances: ®
Have we run a gain or loss? (i.e., are we better or worse off financially than we were a year ago?)
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Are our key sources of income rising or falling? If they are falling, what are we doing?
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Are our key expenses, especially salary and benefits, under control?
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Do we have sufficient reserves?
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Has the board adopted a formal policy for the establishment of reserves? Is our cash flow projected to be adequate?
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Are we regularly comparing our financial activity with what we have budgeted?
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Is our financial plan consistent with our strategic plan? 7 Is our staff satisfied and productive?
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Are we filing on a timely basis all the reporting documents we are supposed to be filing?
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Are we fulfilling all of our legal obligations?
Check Out Additional Books in the Series 8 Below you’ll find some of my other popular books that are popular on Amazon and Kindle as well. Simply click on the links below to check them out. Alternatively, you can visit my author page on Amazon to see other works in this Nonprofit Management Series. Why Nonprofits Fail: The Truth Every Executive Director Should Know on Amazon How to Start a Nonprofit: A Comprehensive Guide on How to Start a Nonprofit Organization, Made Easy! on Amazon Developing the Nonprofit Infrastructure: A Step-by-Step Guide on How to Write and Effective Mission Statement, Vision Statement, Organization History, and Program Description on Amazon The Annual Budget: How to Develop an Annual Budget for Nonprofit Organizations on Amazon Nonprofit Sequencing: A Step-by-Step Process for Building a Sustainable Nonprofit Organization on Amazon The Nonprofit Board of Directors: How to Attract Powerhouse Board Members on Amazon Nonprofit Program & Service Delivery: A Comprehensive Guide on Developing Dynamic and Innovative Programs and Services on Amazon Funding a Nonprofit: How to Create a Diversified Funding Strategy on Amazon The Art of Networking: What to Say and Do to Get Donors, Volunteers, and Partners to Support Your Nonprofit Organization on Amazon Nonprofit Donor Cultivation: How to Turn Annual Asking into Annual Giving on Amazon The Greek Exchange: Leveraging BGLO Sponsored Nonprofits for Community Impact on Amazon The Greek Exchange II: From Tradition to Innovation . . . A Dynamic Partnership for the Future on Amazon
If the links do not work, for whatever reason, you can simply search for these titles on the Amazon website to find them.