Are You Board-Ready?

Business Owners

Are You Board-Ready?

Overseeing a nonprofit is an honor that comes with potential liabilities.

November 10, 2016

There’s a certain nonprofit organization whose work you’re passionate about, and you’d like to take the relationship to another level – as a member of its board.

This is an opportunity to be a leader in your community, do work with purpose and expand your network, and it will look great on your LinkedIn profile. Plus, you know the basics: you’ll need to further the group’s mission through fundraising, advocacy and governance, making sure management is doing its job. What else is there to think about?

Taking Stock

First, you’ll need to set aside some time. The average board holds seven meetings a year, at about 3.4 hours each according to nonprofit group BoardSource. The average length of a member’s term is three years, and in general the position is unpaid – only 3% of the nonprofits surveyed offer an honorarium for service.

Also, you’ll need to think of what resources and skills you can dedicate. In a 2015 BoardSource survey, 42% of board members provided names of potential donors to receive letters and calls, and 22% met with prospective donors face-to-face. Nearly 70% of nonprofits also require a personal contribution.

Keeping It on the Up-and-Up

Next, it’s time to think integrity. As a board member, you have an obligation to put the interests of the organization ahead of your own and avoid any conflicts. For example, if you have a direct financial relationship to the nonprofit (such as being its landlord or legal counsel), serving can pose a risk.

Also good to know: You can be held personally liable for decisions made on behalf of the organization. If a nonprofit doesn’t pay enough in payroll taxes for its employees, for example, the IRS can hold the board negligent. To guard against this risk, ask about the group’s liability insurance and possibly secure your own insurance policy as well. Once you’re on the board, review financial statements and budgets with care to ensure good stewardship.

Giving with Confidence

It’s not unheard of for a board member to be asked to cover a budget gap at the end of the year. Avoid surprises by asking upfront how much you’re expected to donate, and run that figure by your financial advisor to ensure it fits with your financial plan. With proactive planning, you can avoid getting in over your head.

If you were recruited because of your skill set rather than your wallet, it may be possible to use in-kind services toward your required donation. If you were tapped because of your extensive contacts in the community, bringing in big donors might be enough of a contribution.

Next Steps

Perform your own due diligence:
  • Review annual reports, recent financial statements, and staff and board organization charts.
  • Get to know the current board members and their affiliations.
  • Request a description of board member responsibilities.
  • Ask how much you’re expected to donate.
  • Review a schedule of board meetings.
  • Request a program site visit.
  • Ask about liability insurance.
Talk to your professional team:
  • Discuss budgeting for donations.
  • Consider risk management strategies.
  • Verify insurance coverage.

Working for a mission you believe in can enrich your life and future career prospects. However, it’s important to weigh whether you’re truly up for board membership. Your advisor can help ensure you are financially prepared for this important endeavor and help you coordinate with other members of your planning team.

Seeking a board seat? These sites might turn up an opportunity.

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