Evaluating Nonprofit Boards

As a CPA servicing nonprofit clients, I am often asked my opinion about the characteristics of an effective and functional nonprofit board. When assessing an Organization’s board of directors, I ask three questions: who are they, what do they have to offer the Organization, and have they drifted from their mission? My goal is to provide sound, practical advice for nonprofit organizations in order to ensure the communities that they serve thrive.

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When assessing the Organization and its board members, my personal goals don’t necessarily have to align with the Organization; however, once I accept a nonprofit organization as a client, I become part of a new community. In order to help this new community thrive, I cannot accept clients who do not align with my basic core values. By completing this assessment, I want to see how the Organization describes and portrays itself vs. the reality of their work. An Organization that has not drifted far from their own definition indicates a strong sense of mission, integrity and leadership.

Evaluating a board’s stability is important as well. Again, this goes back to their mission and strength of leadership. Turnover on a Board is normal and even healthy; however; wholesale changes may indicate that the Organization’s vision is not clear. It may also be a sign of overbearing leaders in the Organization who treat the Board of Directors like window dressing.

I am also evaluating how much of the Organization’s resources are directed toward non-program-related activities. Organizations must allocate and spend money on governance, and with today’s expectation of transparency, that involves raising a lot of money. Boards of Directors must take this fundraising task seriously and dedicate the proper resources to this function. While this all comes at a cost, an Organization that expends a majority of their resources on administration and fundraising may be an indication of a sham or a revenue source for upper management.

Another important question to ask; is the intermediate vision manageable, and is the Board a fundamental part of that vision? I like to see Organizations setting a strategic plan for the next 5 years or so. This is an indication that Board members are strategic thinkers and not just reactionary. The most effective Boards maintain the Organization’s vision and hold management accountable for their actions. I also like to see that there are regular meetings of the full Board and any subcommittees. Reviewing the documents of these meetings (if any) gives me a sense of the tone and flavor of the Board, as well as how they interact with their community.

I would also like to see that the Organization appoint an audit committee. This is important because this provides the auditor with specific individuals to whom I need to be held accountable. The audit committee is a valuable resource for determining whether there have been any large changes during the past year in the Organization’s vision. The committee also provides the auditor with a dedicated group with whom they can discuss any audit problems (for example, particularly sensitive or political issues involving management).

Lastly, I assess if the necessary regulatory filings are up to date. The federal Form 990 contains important information about related-party transactions and corporate governance. This Form is another indication about the Organization’s integrity and whether they have suffered from mission creep.

Properly assessing the Board of a nonprofit organization, at the beginning of our relationship, allows me to better serve my clients and, ultimately, their communities. I know I have achieved true job satisfaction when I am available to serve as a resource or sounding board for nonprofit organizations.

Author: Debbie Roessl Dimery, CPA, Partner

 

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