If you have been asked to serve on a nonprofit board of directors it is now more important than ever that you understand what such service involves and that you treat seriously your responsibilities.
First, did you know that most nonprofit organizations are now required to file a Form 990 with the Internal Revenue Service that states, among other things, that you have been provided a copy of the form? Part VI-B, 11-a states, “Has the organization provided a copy of this Form 990 to all members of its governing body before filing the form?” As if that is not enough, the next question on the form asks how such disclosure was made. That should get your attention.
My point is that if you have been asked to serve on a nonprofit board, or if you are serving on a nonprofit board, you should make it a point to understand IRS Form 990, and you should be concerned if your executive officer has filed the form without providing you with a copy of the form in some manner. If this has not happened to you then you may want to add an agenda item to the next board meeting to this issue. I would even go so far as to recommend that you get a copy of the instructions for completing IRS Form 990 to get an idea of what the IRS now requires of nonprofit boards.
Also, keep in mind that no all nonprofits are required to file the form because some are exempt.
Before going further, allow me to emphasize that I am not an attorney or a tax expert, nor am I providing tax advice. My purpose is simply to alert you that serving on a nonprofit board is an important matter that deserves your attention. Many people serve on nonprofit boards because they have been asked to by a friend or business acquaintance. They attend board meetings and hear reports, never realizing that they have important responsibilities.
One good source of such information is Richard T. Ingram’s “Ten Basic Responsibilities of Nonprofit Boards, Second Edition” (BoardSource 2009). Those responsibilities are enumerated below, along with some of my commentary.
>> 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. Not only that, but IRS form 990 (2010 edition, Part III-1 requires a statement of the mission of the organization.
>> 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.
>> 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.
>> Ensure effective planning. Boards must actively participate in an overall planning process and assist in implementing and monitoring the plan’s goals. Good nonprofits boards have an annual planning retreat that includes an orientation for new members and a goal setting session for the coming year. This is a good time to review Part VI of IRS-990, which is about the governance of the organization.
>> 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. Everything the organization does should be aligned with its mission. Too many organizations get sidetracked away from their missions because of funding issues and opportunities. Organizations, especially those with financial and funding issues, get away from their missions because they discover the opportunity to apply for a grant. The more successful nonprofits are mission-driven.
>> Ensure adequate financial resources. One of the board’s foremost responsibilities is to secure adequate resources for the organization to fulfill its mission. This is an area that causes some discontent. Often the executive director will say that he or she looks to the board to provide funding, while the board looks at the executive director’s job as having a funding component. Obviously, as a new board member you want to understand what your role is as regards funding of the organization.
>> 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. For most boards, this involves an annual audit.
>> 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. Many boards struggle with what to do with board members who do not attend board meetings and what to do with members who seem to perpetually serve on the board. There should be term limits for board members. Generally, one third of the board should be new members, one third should be current members and one third should be outgoing members. This is not to say that board member cannot be re-elected to the board.
>> Ensure legal and ethical integrity. The board is ultimately responsible for adherence to legal standards and ethical norms. Any indication of unethical or illegal conduct discovered by a board member should be dealt with immediately.
>> 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.
Phil Hardwick is coordinator of capacity development at the John C. Stennis Institute of Government. Contact Hardwick at firstname.lastname@example.org.