By DouglAS W. ofchArSky
A nonprofit’s recipe for successs
The concepT of qualiTy governance
practices within nonprofit organizations is
not revolutionary. historically, however, the
role of those charged with the governance of
nonprofit organizations — the board of directors — has not always been clearly defined.
Many have viewed the board member role
as self-promotion, a résumé-builder. a hands-off approach taken by these board members
can lead to a lack of focus when it comes to
the mission of the organization, and create a
breeding ground for abuse.
Due to the nature of nonprofit organizations and their existence for serving the
greater public good, when abuse does arise
there is almost a disbelief that such activity
could occur. There is a public expectation that
boards will be responsible for upholding the
integrity of their organization, and by extension the nonprofit sector as a whole.
economic downturns drastically highlight
that there truly is a limited number of “
donation dollars” available for charitable contribution. Donors and grantors have become more
selective about their contributions. Boards
have recognized this. They understand that
exhibiting strong governance practices, a
strong focus on their mission, and transparency can result in gaining an edge in the competition to receive much-needed funds.
probably the most influential stimulus for
stronger governance in recent years was the
overhaul of form 990 by the irS, effective in
2008. This significant modification created
waves among nonprofit boards. concepts
such as whistleblowers, conflicts of interest, and record retention demanded the institution of previously nonexistent policies.
an extensive questionnaire on governance,
management, and compensation methods
caused boards to review their organizations
as a whole and revamp their structure and
operations. The requirement that form 990
be presented to the board for its review prior
to filing created deeper analysis, and thus
a better understanding of the organization
by all board members. This review requirement also created an inability for individual
members to claim ignorance of information
reported in the 990. The irS emphasizes that
compliance with the revised form 990 represents minimum requirements, and that
exemplary governance practices would go
above and beyond form 990.
ROLE OF THE BOARD
understanding the role of the board within an
organization may seem to be a basic concept.
Too often, however, there has been only an
informal recognition of its purpose. Strategic planning, oversight of mission-driven
programs, fundraising and risk assessment
should be the key focus. Management and
operational functions sometimes consume
the precious time needed for these goals.
The details of these management and operational functions should be the responsibility
of an executive director. Board involvement
should be called on only when necessary.
Board members should also serve the role
of “cheerleaders” for the organization, promoting its mission wherever possible. This
requires responsibility on each member’s
behalf, as their actions can be construed as
being representative of the organization. a
code of ethics for each member to follow will
help promote exemplary behavior.
members. a mix of experience and youth will
instill time-tested ideals combined with fresh
concepts. for new and younger members, an
effective training system and a manual outlining responsibilities will help them become active and contributory participants. Diversity
among the members could mean innovative
approaches due to differing backgrounds.
lastly, and perhaps the most important
from a governance aspect, is to reduce or
eliminate interrelationships among board
members. having employees serve as board
members creates a conflict of interest. The executive director serves the board: This person
should not be on the board. in this case, governance and operational lines would become
clouded. ensuring independence between
individual board members, employees of the
organization, and related vendors used by the
organization eliminates the potential for decisions and transactions that do not have the
organization’s concerns first and foremost.
SIZE OF THE BOARD
The number of board members should be in
direct proportion to the size of the organization. an oversized board can breed inefficiency, as decision-making will become cumbersome. conversely, a de minimus board can
lack the depth necessary for effective oversight. using external partners (accountants,
lawyers and insurance agents) can reduce
board size and provide expertise for smaller
See NONPROFITS on
Douglas W. Ofcharsky, CPA, is a senior manager of WeiserMazars LLP in Horsham, Pa.
Reach him at douglas.ofcharsky@weiserma-
zars.com. Reprinted with permission from
The Pennsylvania CPA Journal, a publication
of the Pennsylvania Institute of CPAs.
MAKEUP OF THE BOARD
Most nonprofits are started by an individual
or group with a vision. in the early years, the
governance group tends to consist of like-minded individuals. This may be sufficient
during the genesis period, but sustaining
viability will require expansion beyond that
There are several factors to consider regarding the structure of the board. first is
the experience of the individual. Knowledge
of the mission of the organization is an important factor, but business acumen, strong
social skills, or a well-connected network
can rate even higher. Second is the age of the
“How can you leave me? I busted my hump for you!”
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