5 Tips for Effective Service on a Nonprofit Board of Directors
Many of us at some point in our careers will be approached to join a board of directors for a nonprofit organization. During the early stages of your career this can be a great way to network, become involved in your community and continue to build your resume. As you progress in your profession and build your network, the board positions you hold can help provide job or career opportunities, name recognition, and more than likely, more organizations asking you to join their board of directors.
Being involved with a nonprofit that you believe in and support can provide a sense of fulfillment and deeper appreciation for the mission of the nonprofit. But when we agree to join a board of directors, do we know what we are signing up for? Have we thought about the responsibilities of a board member? This article will help identify and define board member roles and provide some helpful tips to consider as a board member of a nonprofit organization.
From the Council of Nonprofits, board members are in place to provide “foresight, oversight, and insight” to the management of the organization. As a board member you also have a fiduciary duty to that organization. Holding a fiduciary duty means that as a board member, you act in the best interest of the organization. Combining a board members’ oversight of the organization with their fiduciary responsibility leads us to assume that a board member is integral in the success of the organization, and not simply a rubber stamp of approval.
Tip #1: Learn how to read the organization’s financial statements
Reading and understanding the financial statements is the first step to becoming a better board member. Understanding whether the financial statements accurately reflect the true financial picture of the organization will lead to better budgeting and forecasting, better operational decisions, and more productive conversations between board members and management. If there are financial statement items or disclosures that you don’t understand or feel comfortable with, don’t hesitate to inquire of the organization’s finance director or the external CPA firm for guidance.
Tip #2: Review the bank statements and bank reconciliations
Make it a practice to review the bank statements and bank reconciliations. Ensuring that cash is reconciled at the end of each month can help prevent longer term problems. If the bank balance does not reconcile to the accounting records, the financial statements you just learned how to read in Tip #1 are misstated. This may not be something that is reviewed by the board each month, depending on the size of the organization, but a few times per year is worth considering.
Tip #3: Make risk assessment part of the annual process
Understanding what internal and external factors are a risk to the organization is instrumental to continued success. Ask questions such as: Is the organization at risk of losing their primary funding source? Are there any upcoming anticipated cash flow problems? Is the technology too far out of date and need replaced? Is our executive director retiring and we don’t know who will be the replacement? These types of questions can initiate conversations and lead to productive board meetings.
Tip #4: Help management set goals, both financially and operationally
Goal setting is good practice in our personal and professional lives. Integrating goal setting into an organization that we serve as a board member can help keep the nonprofit on track in completing their mission. Reviewing budget to actual will help identify potential areas for goal setting in a financial sense. Reviewing operational metrics such as clients served, results of fundraising events, or number of annual contributors can help find areas of improvement to set attainable and measurable goals for the nonprofit.
Tip #5: Develop policies
A policy and best practices handbook to define operational guidelines will help direct the staff, management, and board as they work towards accomplishing the mission of the nonprofit. The bylaws typically include the primary policies of the organization, and an annual review of the bylaws should take place to determine if any revisions need to be made. The board of directors should also consider developing board specific policies. These policies could include: election of officers, conflicts of interest, code of conduct, confidentiality, compensation, reimbursement of travel expenses, and board member term limits, among others. Developing policies will help provide clear direction for the organization and ensure that future management and board members have the information and ability to continue to carry out the mission of the nonprofit.
If you have any questions feel free to reach out to any of the KTLLP Nonprofit Team members.