Nonprofit Boards: Confused or M.I.A.
Businesspeople who volunteer to serve often fail to fulfill their duties, say nonprofit leaders
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“When I started our first capital campaign, my board chair said to me, ‘Why do I have to fundraise, isn’t that why we hired a development director?’ ”
—Mary N., CEO of a cultural organization.
“When I tell the board that funders often require 100 percent board participation, they say, ‘Isn’t our time enough? We’re all professionals; our time is worth something.’
—John D., executive director of a human services agency.
“Several of my board members actually told me they would never ask their friends to support our agency; it would be too embarrassing.”
—Amy L., executive director of an environmental organization.
“Our board chair said flatly he won’t donate, won’t raise funds, and won’t quit.”
—Mike T., CEO of an arts group.
Money is king. And for most nonprofits, fundraising is the single most important responsibility of the board of directors. That’s because it almost always takes cash for organization to accomplish its mission. It’s true that board members are often recruited for other reasons – financial or legal skills, for example, or cultural or technical knowledge – but these attributes are rarely sufficient. A board member’s time and talent are useful, of course, but they don’t pay the rent or insurance, they don’t cover the salaries and benefits of employees, and most importantly, they don’t pay for food for the hungry, educational programs for the environment, medical treatment for the sick, or any of the countless other programs that fall within the missions of Hawaii’s nonprofits. That takes cash, says van Bergeijk of the Hawaii Community Foundation. And it’s the board members’ role to donate or, better still, raise that cash from the community.
“I think the prevailing expectation today,” van Bergeijk says, “is that, if you’re on a board, you must make sure the organization has the resources they need to do the job. That equals fundraising. It shouldn’t be only fundraising, but that’s the prevailing expectation. If you’re on a board, you’ve got to help raise money. And not everybody’s cut out to do that.”
This judgment is nearly universal among nonprofit professionals. And yet the board members of many nonprofits often fail to participate in fundraising in any meaningful sense, leaving it to the executive director or to one or two more committed board members. Christine Valles, a member of numerous nonprofit boards herself, and owner of Silver Lining Consulting, a company that advises nonprofit organizations, believes this problem, like many of those facing nonprofit governance, is another outcome from how board members are recruited in the first place. No one tells them what’s expected of them.
“It has to be clear to the new board member that they’re responsible for fundraising,” Valles says. “That’s universally agreed upon in the nonprofit world. They have to provide some means for the financial stability of the organization. But that part is really underplayed when board members are recruited. No one takes the time to say, ‘You know, you’re going to have to take the lead at raising money. You’re going to have to make a personal donation, and you’re going to have to ask your friends for their support.’ Even though that’s simply saying what boards do. You’ve got to say, ‘As board members, we’re all responsible for fundraising. So if you’re not actively asking people to give money, you probably shouldn’t be on a board.’ ”
This reliance on the board for fundraising isn’t universally true. Many organizations that provide social services, for example, rely mostly on government contracts for their funding. Other nonprofits depend largely on grants, either from government sources or from private foundations. And because the agency staff usually writes and prepares grant proposals, that relieves the board of some of its responsibility to raise funds.
It’s worth noting, though, that many private foundations and wealthy individuals will not support an organization unless every board member has contributed money. And the vast majority of Hawaii’s 6,000 or so 501.c3 nonprofit organizations depend on financial support from the community for their survival. In some ways, that’s the theory of having a board in the first place: to provide a link to the community, a way to ask the public for its support.
At large nonprofits with institutional boards, this concept is generally (though not universally) understood. One of the reasons the boards of organizations like the Aloha United Way or the Easter Seals are so large (Easter Seals Hawaii, for example, has more than 30 board members) is to spread out the burden for raising funds. In fact, new board members are often selected as much for their ability to attract financial support as for any contacts or skills. This is why most institutional boards try to attract bank executives as members. Robbie Alm, vice president of Hawaiian Electric Company, and a board member for more than 20 nonprofits over the years, points out that senior business executives recruited this way usually understand their role.
“Certainly, many of the large nonprofits are very deliberate in their efforts to do that,” Alm says. “And it works. If I agree to go on the board of an organization, not only am I going to give, but most likely my company will have a table at that fundraiser dinner, that we’ll be at that luncheon or attend that ball.”
The problem is that the board members of smaller and mid-sized organizations often fail to make that assumption. These nonprofits are frequently stuck at the organizing board stage of their evolution, and their members are either unable or unwilling to actively raise funds.
The solution is clear. Executive directors say their nonprofit boards need to be much more engaged in the organization’s fundraising. Members should donate according to their means and actively solicit donations from their friends and contacts. Holly Henderson offers perhaps the best advice for potential board members: “Pick an organization doing something you’re passionate about. That way, you won’t feel uncomfortable asking people to support its mission.”
“We’re not responsible for the financial filings, we’re just an advisory body.”
—James K., board chair of a cultural organization.
“The board has always refused to pay for an independent audit of our finances.”
—Donna T., board member of a community development organization.
“The ED of my former agency never filed a grant report on time, and used the agency’s accounts like a personal slush fund.”
—Tom G., staff member at a Honolulu social services organization.
Most nonprofit boards understand that they’re responsible for oversight of the organization. The problem is that, all too frequently, they believe this is limited to hiring and firing the executive director. In fact, their oversight responsibilities are more comprehensive. For example, it’s the board, rather than the executive director, that’s legally liable for much of the financial regulation of the organization.
Partly, this is the result of the Sarbanes-Oxley Act, Congress’s response to scandals at Enron and WorldCom. “Even though it was primarily targeted at publicly traded companies,” says Anna Elento-Sneed, an attorney at Alston Hunt Floyd & Ing specializing in nonprofit law, “there’s a section that applies to nonprofits. Basically, it says, ‘Thou shalt have transparency. Thou shalt have no conflict of interest.’ ”
That gets to the heart of a board’s function. Few board responsibilities seem as obvious as those that generally fall under the heading, governance. Executive directors say (some of them reluctantly) that these includes basic functions: assuring that the organization complies with legal requirements, like making its IRS filings on time; making sure there are adequate policies to prevent issues like self-dealing and conflicts of interest; and recognizing that the board is the organization’s primary vehicle for public relations. These responsibilities aren’t all that different from those that for-profit boards assume.
When you talk to executive directors, especially those that have been successful, they almost uniformly say that nonprofits and their boards need to be more “businesslike.” For the board, that means making sure your executive director and staff perform their duties as professionally as possible given their resources. It also means being accountable for your own responsibilities, which ultimately are the health and welfare of the whole organization. Because the board of directors isn’t simply an advisory body added as an afterthought. The board is the legal embodiment of the organization.
It’s a concept that flies in the face of the egalitarian ethics of most nonprofits. “You want it to be all cordial relationships,” Holly Henderson says. “You want everyone to be equal. But in the end, you can’t get around the fact that the board is the boss.”
Now, if they’d just act like one.
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