Gone are the days when nonprofit boards were made up of influential donors who expected little would be asked of them beyond socializing at the occasional fundraiser and giving their sizable contributions. Today, being a board member can be as demanding and rewarding as any full-time profession.
In this difficult economy, nonprofit board members are expected to do more strategic planning for both long- and short-term objectives. They must produce demonstrable results and stretch their already strained budgets.
Furthermore, outside stakeholders are increasingly holding board members to a higher standard of accountability to ensure that the organization not only delivers on its mission, but does so in the most cost effective manner.
A nonprofit board member has a dual role: supporting the organization’s mission and governing how it executes that mission. Taking the time to understand your role and responsibilities as a board member, as well as the current challenges facing nonprofits, can not only improve your board’s decision making process, but also help maximize your involvement.
Greater Accountability Standards
Limited budgets and increasing demands mean that boards are making harder choices with greater accountability. To allocate funds wisely, you must understand the organization’s financial assets, liabilities, and cash flow situation. Nothing is more disturbing to potential donors than the feeling that their money may not be used effectively.
In addition, the IRS is requiring more detailed information about nonprofit finances and governance. Program funders also have increased reporting requirements.
When deciding which grants to make, foundations are asking for more information, greater documentation, and increased evaluation of results. Thus, being able to demonstrate the effectiveness of the organization’s finances is increasingly critical for board members.
As Maddy Metzger-Utt, Executive Director of the Greater Everett Community Foundation, explained, “We often request information about board rosters, minutes, and contributions on behalf of our funders so we can verify that the organization’s board is diverse, committed, and stable. We want to make sure that our grant dollars go to nonprofit organizations that are effective, efficient, and well managed.”
Effective Money Management
Of all the challenges facing nonprofits, financial issues tend to be the most concerning. Many have experienced funding cutbacks.
Even those whose funding has remained consistent are finding that donations have to go further to meet increased participant needs and growing demands on programs and services.
Fundraising for day-to-day operations, staff salaries, and building and equipment maintenance has traditionally been one of the biggest challenges facing nonprofits. Increased participant needs have underscored the importance of having an adequate operating reserve.
But bringing in money is only half the battle. Board members may be unfamiliar with the operational challenges of a nonprofit that businesses don’t generally face, such as fundraising or recruiting and managing volunteers. In some cases, you might be able to adapt businesslike methods for nonprofit use.
For example, appropriately investing short-term working capital can preserve financial flexibility while maximizing resources.
If your group has an infusion of cash that won’t be spent immediately, such as a contribution for a capital expenditure project, consider alternatives for putting at least some of it to work rather than letting it sit idle.
Thoughtful Strategic Planning
Having a thoughtful strategic plan can lead to better evaluation of funding needs and targeted fundraising efforts; it also can help ensure that board members and staff are on the same business plan.
Make sure your plan provides guidance, yet allows staff members to do their jobs without constant board supervision. A board must also ensure that the organization can attract and keep quality leadership. Many nonprofits today are led by executives who are marching toward retirement and who will need quality successors.
As a result, attracting and retaining executive directors will become increasingly challenging—especially when budgets are shrinking. Boards that haven’t already done so would be wise to begin discussing a succession plan for key personnel.
Serving on a nonprofit board today is more challenging than ever, but also more rewarding.
With careful strategic planning and a focus on the overall mission, you as a board member can help an organization make the most of its available resources and still thrive during these difficult economic times.
Now is a great time to get involved!
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