Increased Board Performance Through Diversity

Nonprofit Board Resources - Increased Board Performance Through DiversityWhen non-profit boards underperform against the expectations given, it’s a natural reaction for those in charge to want to terminate board members who sandbag.  But there’s no quick fix for turning around inactive or ineffective boards, so the planning of board member selection needs to be done strategically with deliberate action of injecting cultural and professional diversity.  It’s through diversity that you can increase board performance from the beginning.

Here in the United States, nonprofit organizations are required by law to have a board of directors for the governance of their operations.  Individual states set the requirements that dictate a minimum number of members needed, their duties and responsibilities to the public, and policies they’re mandated to draft.  But depending on the state in question, this may differ.  While forming an organization and acquiring tax exempt status is an arduous task, establishing an effective board of directors remains even more challenging for many.  I’ve seen this first hand.  Someone with a great idea wants to satisfy a need in society, so he or she hastily forms a nonprofit organization to fill that void, oftentimes overlooking program longevity.  The founders of these startup nonprofits recruit board members from their immediate circle of influence including their friends, family, or acquaintances to satisfy those pesky legal requirements.  These are people they trust, which adds a certain amount of comfort in bringing them on board, but over time, what seemed like a great idea turns into a nightmare with challenges around fundraising, recruiting volunteers, managing finances, appointing a CEO, developing programs, and the list goes on.  The board has passion and wants to support.  After all, this is their friend.  But what went wrong?  The answer is simple, what the board of directors lacks in professional know-how, business sense, and social capital, cannot be made up through any amount of passion alone.

What I’m about to say here isn’t new, nor will it shock you, but most people surround themselves with others like them.  While this isn’t a bad thing, and even though these friends (the newly appointed board) are well intentioned, there’s an increased likelihood these “friends turned board members” have similar values, points of views, and perspectives.  The board likely has cohesion, and while not always the case, there’s a possibility that this can result in social behaviors like groupthink.  This is when decision making becomes impaired by cognitive inhibitors due in part to lack of openness and perspective.  The appointing of the board of directors has greater implications on the tone, culture, and overall performance of the non-profit they govern.  Forming the board is one of the first steps in founding a non-profit organization, and it’s also the most important.  Forming the board needs to be done through diversity, because in the end it affects performance.

Strength through diversity

Josefa Iloilo, the former President of the Republic of Fiji once said, “We need to reach that happy stage of our development when differences and diversity are not seen as sources of division and distrust, but of strength and inspiration.”  While this was said in the context of diversity as a sovereign nation, the same can be applied to any workplace, volunteer corps, and board of directors.  There’s a certain agility that comes from having ethnic, gender, and professional diversity.  Having diversity creates a permissive environment for shared openness, different perspectives, a wide array of professional expertise, and social capital.  Pew Research Center projects the disappearance of a single racial or ethnic majority in the United States by 2055, so with a more diverse America, a board that can think and act through the lens of the communities they serve provides advantages.  This is the bottom line; having a diverse board creates an environment where creativity and innovation flourishes.

Why diversity matters in the long run

It’s always the easy choice for organizations to recruit board members from their pool of members and associates (and even friends and family).  However, it’s not always the best idea.  The board has a primary function of ensuring the organization fulfills its commitment and responsibility to the public as stated through their mission, code of ethics, and charter.  They achieve this through a check and balance system where accountability plays a vital role.  Diverse thought and experience will benefit the board when creating policies around whistleblowers, conflicts of interest, and financial auditing and management because diverse groups are likelier to have stronger accountability measures.

Another function of the board is resource acquisition.  When acquiring resources for longevity of organizational success, you also increase the avenues in which you look for support, thus increasing one’s networks.  Some of the resources in question may include human capital or be related to finances, but through diversity, acquiring said resources can be accomplished with social capital.  This can include the board’s access to personal and professional contacts that have the necessary resources for the organization.  A diverse board will be able to satisfy the acquisition of resources through their reputation or credibility (this is mostly true with members who have high visibility).  High visibility board members can create a sense of “legitimacy” to the organization’s stakeholders and the public.

More importantly for organizations that are focused on social reform and advocacy work, there’s also the consideration of board members who have political clout.  Political capital that exists amongst the board (think connections with local, state or federal governance) can work wonders when advocating or trying to change legislation that impacts those you serve.  Diversity can also assist in setting the organization apart from others.  There’s an added benefit of being held in higher esteem by the public versus organizations that aren’t diverse.  Boards that are diverse are adhering to social norms and acceptance, sometimes resulting in garnering more support.

Tips to increase diversity

Whether your board is already formed, or you’re starting from scratch, it’s not too late.  Try some of these practices to develop a board that’s inclusive and starting off on the right foot.

  • Implement and enforce board terms and term limits.  Have a set number of years per term, and also limit members to a set number of terms.  This forces selection of “new blood.”  With the introduction of new members comes new ideas, different perspective, skills, and access to resources that can be acquired through a member’s social capital.
  • Avoid generalized screening methods.  Implement a process that screens for particular skills and expertise in areas where you have requirements.  With a more stringent vetting process, you weed out those who may be well intentioned, but lack management skills or those who may be incompetent.  This results in onboarding of members who exercise critical thinking and sound decision making and who work effectively.
  • Provide diversity training.  Invest time and money into training your board of directors like you would for other volunteers or paid staff.  Like skills training, other forms of training will benefit the governing board.  Even though the effectiveness of diversity training is largely debated, there’s evidence that training helps create empathy, reducing discriminatory behavior.  Training alone isn’t the cure, but it’s a great step towards minimizing discriminatory behavior that negatively impacts the board’s satisfaction.
  • Include others in a diversity strategy.  Diversity means inclusion, so take an inclusive approach, allowing others to be part of a holistic strategy beyond a single person or decision maker.  This can take the form of working closer with cultural centers, community partners, and other reputable nonprofits who specialize in diversity and inclusion.  By working with partners who may be subject matter experts, you can increase immersion into the cultures you’re trying to better understand and serve.

Diversity isn’t the “end all,” it’s just the start

While diversity in and of itself won’t lead to success, this is a great start.  By implementing a selection process, adopting governance policy, and investing in workforce training, you take necessary measures to set up the board for success.  These steps will encourage and foster an environment of inclusion for the organization’s other aspects.  The impact will transcend staff, even increasing diversity in the volunteer corps.  Boards with cultural, ethnic, gender, and professional diversity tend to have a more diverse leadership cadre, resulting in diversified resources.  Just be sure to err on the side of caution, don’t get overzealous and select polar opposites; this may create the perfect environment for conflict.  Doing so could act as a pitfall if not navigated in a thoughtful manner, but when done correctly will increase the likelihood of success from the onset.  Diversity in nonprofit governance will continue to be a sought after “must have,” and not just for the obvious reasons of cultural and societal norms.  Diversity also impacts long term performance of an organization, so get ahead of the curve and plan for the future today.




Tips for Achieving Diversity on Nonprofit Boards

Tips on Developing a Nonprofit BoardI knew that question would arise. My last article was entitled “Diversity on Nonprofit Boards.”

The question I received was “You have convinced me that diversity is important. But how do I go about achieving diversity on my board?” I knew that excellent question would arise.

First, identify the diversity you would like to include on your board. Perhaps you realize the need for young people on your board or African-Americans or program participants.

Then tell your board and staff members about this need. Ask them to send you information about the individuals they are recommending.

If you do not receive sufficient names of applicants this way, check with groups in your community which serve individuals in whichever diversity you are seeking. Ask the local boy scout or girl scout troop for recommendation of young people. Ask the NAACP President to recommend African-Americans. Check with the Hispanic Community Center or the pastor of the Hispanic Church to obtain names of possible Hispanic board members.

If you would like program participants specifically to join your board, send a brief note to all present and past program participants, asking them to volunteer or to recommend others.

Give the board’s Nominating Committee the responsibility of reviewing the various recommendations you have received. Then have a member of the Nominating Committee set up appointments with prospective members. You might want to hold the meetings in the organization’s office and include a tour e.g., day care program, senior citizen center. Holding the meetings at a local coffee shop may work as well.

Make appointments to see several individuals in each category. Leave enough time to set up the appointments and to hold them before board nominations are due. Remember that many individuals you visit may decline an invitation to serve on your board.

Start by telling the prospective board member about the services provided by the organization.
Tell the individual about the board’s role in setting policy. Give the individual a copy of a board member job description. Make sure you emphasize that all new board members will receive an orientation.

If you are going to recommend that the individual be offered a board position, tell them you will
contact them soon. If you decide that you are not going to recommend them for a position, just be positive and thank them for the opportunity to tell them about your program.

One recommendation I have dubbed the “Noah” approach. If your board is not diverse, try to name two African-Americans or Hispanics or young people to the board at the same time. Then the new individual might feel a little more comfortable.

At each new board member’s first meeting, make the new board member welcome. Make sure to have all present board members introduce themselves. It is not necessary to identify their “diversity.” They will know right away that they are the only program participants or African-Americans without you having to announce it to the entire board.

After the meeting, make sure the Nominating Committee member who met with the individual, now a board member, calls that individual on the telephone. Answer any questions the individual might have. Thank them again for attending. Remind them of the date of the next board meeting.

You will find that diversities disappear. The new board member who may have seemed “different” now is just a board colleague who has an interest in promoting your organization or program.


Navigating Ventures between Nonprofit and For-Profit Entities – National Geographic Society and 21st Century FOX: Thoughts on a New Deal

Navigating Ventures between Nonprofit and For-Profit Entities

In September 2015, The National Geographic Society (“NGS”), an Internal Revenue Code (IRC) Section 501(c)(3) organization,  announced that it was forming National Geographic Partners (“NGP”), a for-profit joint media venture, with 21st Century Fox (“Fox”). The announcement was met with a flurry of attention and commentary because of the participation of a high profile charity and a large financial investment by Fox ($725M). While many details of the transaction are not yet known, because a wholly-owned second tier subsidiary of NGS holds its interest in the venture, the venture appears to follow IRS guidelines, which sanction the properly structured use of for-profit subsidiaries by IRC Section 501(c)(3) organizations.

Nearly two decades ago, NGS joined with the predecessor corporation of Fox and other for-profit entities to commercially distribute its documentaries, which were initially produced for public television stations, and to establish international broadcasting outlets for its products. In this new venture, Fox has paid $725M to NGS for  the contribution of NGS assets, including its television channels, related digital and social media platforms, as well as travel, location-based entertainment, catalog, licensing and e-commerce businesses. According to NGS’s press release, the transfer of these assets to the venture will allow NGS to focus on its Section 501(c)(3) purposes of increasing knowledge through science, exploration and research. NGS’s ability to achieve these goals will be enhanced by the $725M it received from Fox.

It appears that NGS’s media expenditures have exceeded revenues from educational activities.  For example, on its most recent publicly available Form 990 tax return for 2013, NGS expended $168.3M to produce National Geographic Magazine, which generated $52.8M in revenue from an average worldwide circulation of 6.2M readers.

NGS’s 27% interest in NGP is being held by a second tier for-profit subsidiary, i.e., a wholly owned NGS for-profit subsidiary is the sole owner of a for-profit entity that will hold NGS’s share in NGP. For its 73% interest in NGP, Fox is contributing the $725M and its expertise in global media platforms. Reflecting NGS’s indirect ownership in the venture, control of NGP does not parallel the parties’ respective financial interests; rather, the eight member board of directors of the venture will have equal representation from NGS and Fox. In addition, the chair of the board will alternate annually, with NGS and Fox controlling the selection on an alternating basis with the initial chair having   been chosen by NGS. We understand that NGS obtained opinions of counsel regarding the valuation of the assets it transferred to the venture as well as regarding the tax aspects of the underlying transaction itself.

The IRS has long sanctioned the creation of for-profit subsidiaries by Section 501(c)(3) organizations. The purposes are varied: to insulate a charity’s assets from liability relating to a particular activity or transaction; to separate one or more commercial activities from the charity’s exempt activities; to avoid unrelated business taxable income; and/or to avoid jeopardizing the parent’s exempt status.[1] When using a taxable subsidiary in a transaction, it is important to maintain corporate formalities and independence of the subsidiary’s board, so that separate identities of the organizations will be recognized, thereby avoiding attribution of the activities of the for-profit subsidiary to the parent. This is important so that the Section 501(c)(3)’s programs and activities will remain “exclusively” in furtherance of its charitable purposes.  While there can be some board overlap, it is advisable to keep the boards as separate as possible. Moreover, the operating documents should reflect that there is no agreement, oral or written, that the parent charity would be allowed to actively participate in the subsidiary’s day-to-day activities.[2]  The goal is to make sure that the taxable subsidiary does not appear to be an instrumentality of the charitable parent.[3]

In addition to the guidelines that apply when for-profit subsidiaries of a Section 501(c)(3) are the parties to a venture with a for-profit, the IRS has provided guidance when charities engage “directly” in joint ventures with for-profit entities. Revenue Ruling (“Rev. Rul.”) 98?15 and Rev. Rul. 2004-51 both describe the consequences of joint ventures between a nonprofit and for-profit corporation that participate in a joint venture by forming a limited liability company.  According to Rev. Rul. 98-15, the IRS will look to the governing documents of the joint venture to determine whether it furthers the charitable purpose of the nonprofit partner or is driven to maximize profits. [4]

In Rev. Rul. 98-15, the critical issue was whether the nonprofit party retains ultimate day-to-day “control” of the joint venture and “control” over all charitable aspects of the joint venture. Rev. Rul. 2004-51 further clarified the control issue in an ancillary venture, by stating that control can be bifurcated, so long as the exempt organization controls the substantive, charitable aspects of the joint venture. In this type of venture, day-to-day control over the entire joint venture is not required, although there could be an issue of unrelated business taxable income (UBIT) arising from the venture.[5] The potential issue of UBIT in the NGP venture seems to have been addressed head-on by virtue of NGS’s subsidiary being subject to tax as a for-profit entity.

While the IRS has provided some guidance, every joint venture between nonprofit and for-profit entities is examined based on all of the facts and circumstances. It is important to note that the IRS will not issue rulings on a proposed joint venture between a charity and a for-profit partner except in connection with an application for exemption.  In general, a 501(c)(3) will not jeopardize its tax exemption when entering into a joint venture with a for-profit organization so long as (1) the 501(c)(3)’s participation in the partnership furthers its charitable purpose and the partnership will operate exclusively for charitable purposes; (2) the 501(c)(3) maintains control over the partnership’s charitable assets and activities; and (3) there is no impermissible private benefit to the for-profit entity.

The revenue rulings also provide unfavorable factors that should be avoided, such as a disproportionate allocation of profits and/or losses in favor of the for-profit partners;[6] a profit motivation by the exempt partner;[7] or a guaranteed return for the for-profit partners.

While NGP is a venture between a second tier for-profit subsidiary of a Section 501(c)(3) organization and a for-profit partner, the fundamental principles  behind the joint venture guidelines are applicable: the charity should retain control over the venture’s programs and activities and there must be no inurement to the for-profit partner. Although Fox will own 73% of NPS, the type of control the IRS is concerned with is not ownership control, but rather voting control, which will be split 50-50. NPS will have an eight member board with equal representation from NGS and Fox; the current NGS president, Gary Knell, will serve as the initial board chair.

CONCLUSION

Fox and NGS have partnered for nearly twenty years. In this new venture, it appears that both Fox and NGS are motivated by increasing their respective revenue streams and the scope of their media outreach. The $725M million payment will increase NGS’s endowment to nearly $1 billion that will be used to further its educational goals, along with income from the venture, while consolidating its media and related ancillary operations. For its part, Fox will gain access to millions of new NGS customers, including 6.2 million magazine subscribers, 100 million Facebook followers, 10 million Twitter followers, and 30 million Instagram followers.  Equal board representation by NGS and Fox will allow NGS to protect its interests while providing a revenue stream that is taxable at the subsidiary level but tax free as a dividend at the NGS level.  Once again, NGS appears to be at the forefront of strategic planning initiatives.

[1]  General Counsel Memorandum 39,326 (January 17, 1985); Private Letter Ruling 9542045 (October 20, 1995).

[2] Private Letter Ruling 9542045.

[3] Private Letter Ruling 1999938041 (September 27, 1999).

[4] A model joint venture participation policy is provided in Joint Ventures, Appendix 4B.

[5] See Joint Ventures, Section 4.6, “Revenue Ruling 2004-51 and Ancillary Joint Ventures.”

[6] Gen. Couns. Mem. 39,862 (Nov. 21, 1991).

[7] Id.

By Michael I. Sanders, Esq. with assistance of Dustin Lauermann, an Associate at Blank Rome LLP, and Gayle Forst, Of Counsel at Blank Rome.

Five Reasons You Need Accounting/Financial Experience on Your Board

Nonprofit Accounting Advice It has long been sound practice for nonprofit organizations to have a member or members on their Board of Directors with accounting or financial experience. Legal, governance and ethical responsibilities are such that at least one person on the board should have more than a passing understanding of budgets, financial statements and nonprofit tax law. Applying for grants, implementing capital reserve funds, fundraising—all require good financial judgment if the nonprofit organization is to run efficiently and effectively.

In addition, new financial statement reporting requirements and the expanded IRS Form 990 nonprofit tax return make it even more important for accounting and financial literacy to be part of a nonprofit board’s makeup. So does the increasing public demand for transparency in all organizations—especially those we donate money to.

If you’re a new organization or if you’re considering bringing new members on your board, you might be thinking you need high-profile individuals who would add prestige to your board. That is all well and good, but what about also inviting someone who isn’t well known but has sterling financial/accounting credentials? Here are five key reasons why financial/accounting experience is so important.

  1. Basic responsibilities demand financial insight

The legal, governance and ethical responsibilities of a nonprofit board all include activities that require keen financial understanding and insight.

  • Legal responsibilities. Boards should ensure prudent use of all assets for the nonprofit’s effectiveness and sustainability. This includes not only making decisions in the best interests of the organization and knowing and obeying all applicable laws, but also complying with all IRS and state laws concerning required filings and lobbying activities. It’s important to remember that, if the IRS suspects any fraudulent behavior or a donor sues for misuse of his or her contributions, the entire board is held responsible, not just the organization itself or the treasurer.
  • Governance responsibilities. Boards should approve the CEO’s, Executive Director’s, or top management official’s compensation, review the annual IRS Form 990—which has become more complex in recent years—and provide for appropriate internal accounting roles so that all assets are used in accordance with their intended purpose. In addition to considering policies on whistle blower protection and document retention and destruction, the board is also responsible for the oversight of establishing policies on acceptance of gifts—both cash and non-cash varieties.
  • Ethical responsibilities. Board responsibility for the organization’s assets extends to evaluating both staff and other board members to determine that each member is performing ethically concerning those assets. (Interestingly, the IRS found in a study of nonprofit audits that fraud was more frequently committed when there was one main board member who had the control.) Boards also define performance expectations for themselves and for staff members to be sure everyone’s judgment and ethical values reflect those adopted by the organization. For example, I know of an incident in which a board member questioned discrepancies between fundraising donations and cash deposits. It turned out a staff member had been pocketing some of the checks he was responsible for depositing. That’s good work by a financially literate board member who knew what to look for!
  1. Board 101: The ability to read financial statements

In my work, I’ve seen many board members “zone out” when it comes time to review an organization’s financial statements. Putting a budget together, analyzing and approving it and comparing budget with actual numbers are financial skills that many successful people just don’t have. This technical knowledge is critical to an effective board, however.

Board members with these skills can keep the board’s focus where it needs to be, and ensure that items are reported correctly. They will also know the right questions to ask. How will building repairs affect the investment strategy? How do we plan for the potential loss of a grant? How do we conduct and report fundraising activities in different states? These are all questions that a financial/accounting person can answer, and teach others on the board to answer as well.

  1. Someone who can do and teach

Someone on the board must be able to review, understand and explain to other members the organization’s annual budget and financial health of the organization. The stereotype of the gray-haired, introverted accountant with an eyeshade and an adding machine is a thing of the past. Today’s financial, accounting and tax experts are typically extroverted individuals who not only know how to look at the numbers and assess the big picture, but also to communicate what they see to others.

Gone are the days when organizations bring in accountants just to do their tax returns. Financial/accounting experts are also there to teach board members and staff how to keep their fingers on the financial pulse of the organization, and read it correctly. They must have excellent language skills, and they must be able to condense many details into short, bullet-point nuggets that get the message across.

This is especially important when it comes to navigating the maze of fundraising rules and regulations. For example, if you sponsor an auction or a bingo game, are you required to and how do you register? If more than one state is involved in your fundraiser, do you have to pay an annual filing fee? The individual state regulations that govern charitable solicitation are really an attorney’s bailiwick, but understanding them often becomes an accountant’s responsibility because they fall under the broad category of “fundraising.”

  1. Avoid a seat-of-the-pants approach

A nonprofit board should have a member who can recommend and work with the organization’s staff on financial policies and procedures, including the organization’s investment policy, the timing of grant proposals, and the approach to fundraising. How do you book a grant even though you haven’t received it yet? How do accurate forecasting and budgeting help you make the most productive use of the money you raise? How do you develop the most beneficial investment policy? How do you set up a debt repayment schedule so the pay-down is reasonable and your program services do not suffer from funds being diverted?

Financial/accounting professionals can help answer these questions and avoid the seat-of-the-pants approach that some boards—without the necessary financial/accounting experts among their membership—unfortunately use today. That person can make everyone on the board good stewards of the organization’s assets and supporters of sound policies and procedures. In doing so, that person can give the organization a more confident future.

Financial/accounting professionals can also help establish the best accounting methods for an organization. What are the differences between cash and Generally Accepted Accounting Principles (GAAP) accounting? What internal controls and financial tracking need to be in place to dictate what the organization reports to the IRS? These professionals are also good with the software side of financial procedures—suggesting which accounting packages are best for the organization’s needs, and recommending the right resources for installation and training. This knowledge can help ensure the organization’s staff can work productively and efficiently.

  1. New requirements demand more financial/accounting savvy than ever before

Financial Accounting Standards Board (FASB) requirements are now stricter than ever before regarding nonprofit financial statements. Specifically, nonprofit organizations must split expenses by both their nature and function (i.e. programming, administrative and fundraising) when reporting those activities on the financial statement. Although these changes are good because they allow the public to look at an organization’s financial statements and see exactly what was spent and where, they require more detailed effort and earlier reporting practices, both for tax returns and for audits. A financial/accounting expert on the board can help ensure these new requirements are met, as well as help set up the approach of splitting expenses between the function categories.

In addition, the Exempt Organization Office of the IRS releases an annual work plan indicating where they will focus their energies for the next year. For the last several years, Unrelated Business Income Tax (UBIT) has been on the list. UBIT must be paid when a charitable organization has business (not charitable) income, and UBIT tax and penalty dollars help the IRS’ bottom line. An accounting/financial expert would be able to help calculate the allocation of direct and indirect expenses to lower your organization’s tax bills and IRS exposure.

The growing public demand for transparency—especially in organizations that accept donations—also requires a more intense financial focus by nonprofit boards. That demand drove voluminous changes in IRS Form 990 in recent years. Today, the form is extremely detailed. Those details can’t be overlooked, especially when watchdog groups like the BBB Wise Giving Alliance (BBB WGA) and Charity Navigator are grading your organization heavily based on the information included on your tax return. Guiderstar.org makes it easy for anyone to go online and check an organization’s tax return with the click of a mouse.

What’s more, the economic upturn is raising additional financial questions for nonprofit organizations. Simply put, people are donating more money to charitable causes than they did three or four years ago. It’s a good problem to have, but how do you deal with increased donations in the most prudent way? Start a capital reserve? Pay off debt? Expand the building? Invest in the organizations infrastructure? Boards need to plan carefully how to manage increasing contributions, and be sure they don’t get careless now that times are a little easier.

What to look for

A nonprofit organization with no financial or accounting people on its board of directors recently asked if I would teach a class on what a board or audit committee should know from a financial perspective. It’s another example of the surprising lack of financial expertise on nonprofit boards. But it doesn’t have to be that way.

If you want to bring financial/accounting expertise to your board, here are three qualities to look for when you start your search:

  • Passion and energy toward the nonprofit and what you are trying to accomplish. It is difficult to find someone with all the right accounting/financial qualifications, but if someone is passionate enough about the organization, he or she can research and learn.
  • Technically proficient financial skills and the ability to communicate. Look for someone who can help others who do not know their way around a financial statement or other financial documents.
  • Experience working with nonprofits. Even if you have difficulty finding someone with direct financial/accounting experience, anyone who has worked with nonprofit organizations can usually bring valuable experience to your board. If that nonprofit experience was with a quality organization, it more than likely includes a basic understanding of nonprofit financial issues—experience that can be shared with others.

Should you consider being more specific and narrowing your search to a CPA? There are advantages. Because CPAs can lose their licenses if convicted of fraud, felony, professional malpractice or ethic violations, your organization would have another layer of protection with a licensed CPA on your board. On the other hand, you limit yourself from broader choices. Financial planners, investment professionals, bookkeepers and others with financial/accounting experience can bring many of the same values to your board and give you a wider pool of candidates to choose from—even though they all don’t carry the license of a CPA.

It’s also a good idea to make it clear to new candidates that you want your board to do more than simple financial oversight. Bringing financial literacy to your board can take you a step further, helping you chart a realistic course to your future, and build the financial model to get you there.

Diversity on Nonprofit Boards

Diversity on Nonprofit Boards

A nonprofit board has the responsibility of setting policy for the organization.

I believe that in order to perform this responsibility effectively, the board should include a wide variety of individuals.  Every board should have a discussion of the ideal board makeup in terms of diversity.

Here are some of the diversities each board should be discussing:


Race
It is clear that in America, the large majority of African-Americans have different cultural experiences than Caucasians.  Each board should then take a look at the individuals the agency serves.  If the agency serves African-Americans, then African-Americans should serve as board members.

Hispanics and Other Ethnicities
The same reasoning applies here. If the agency serves a percentage of Latinos/Hispanics, individuals from these cultures should sit on the board.

Income Level
Here is where many boards have conflicting opinions.  Of course, having rich people on the board increases the amount of donations. But many times, rich people have different values and interests than the individuals served by the agency.  So I suggest a mix—wealthy, middle-class and low income individuals.

Not long ago,  I led a board training workshop for a senior citizens center.  Before the workshop, I visited the center to learn about its activities.  Most of the activities were geared to low-income seniors. For example, the most popular program was a literacy program.  Yet every board member was either upper-middle class or wealthy.  It was clear from the discussion at the board meeting that not a single board member had a clue of the needs and interests of the program participants and therefore they could not set policy effectively.

Program Participants
Make sure to include on the board representatives of the population being served.  This is extremely important.  A head start parent should serve on a head start board. A mental health “consumer” should serve on a mental health board, etc.

Gender
Why should YMCA or YWCA boards be composed of all men or all women when both organizations serve both men and women?  Why should domestic violence boards or rape crisis center boards exclude men from board participation.  Programs to reduce the number of male perpetrators are essential to fulfilling the mission of these organizations. Males should certainly serve on these boards.

Religions
Look at both the religions represented in the community and in the client population. If an organization serves Muslims, for example,  Muslims should be included on the board.

Ages
Look at who is served by the agency.  I think there is wide agreement that a senior center should include seniors on its board.  I would also recommend that organizations serving teenagers should include youth on the board as well. It is a good idea to include individuals of all ages on any board.

 

(Michael Sand provides consulting and training for nonprofit organizations.  Please contact him at MSand9999@aol.com.  He will write a subsequent article which includes ideas for encouraging individuals of diverse backgrounds to become active on nonprofit boards.)


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