Board Responsibilities and Liabilities
I recently attended the BoardSource Leadership Forum called Governance by Design as an exhibitor. The classes were created to provide information to CEOs and Board members. I attended with two objectives in mind: My objective as an exhibitor was to meet potential clients. My objective as the treasurer for a non-profit organization was to learn from the classes.
I have attended many other non-profit leadership classes and found that there are a few central themes in regards to becoming or serving as a board member—understanding the responsibilities and risksof being a board member. Many individuals are asked to join a non-profit board as a favor to a friend, while others look for organizations to lend a hand for a cause they want to support or possibly as a requirement of their job. In this blog, I’ll discuss why board members of non-profit organizations should know their responsibilities and risks before they accept a position. This will allow them to swiftly adjust to their board position and serve the organization accordingly.
If you are recruiting board members or being recruited, make sure you understand the organization needs and what the position requires. Know what your board is missing to seek individuals to help in select areas, and know which area you are asked to serve if being pursued.
Knowing the mission of the organization and its leadership is just the very beginning in making a decision. You must recognize the time commitment required from board members for meetings, committee involvement, activities and events. Know whether you can provide the requested service, whether it’s advocacy in the community or state legislature, fundraising or personal donations, or professional expertise in law, finance or a specialized field.
Also understand that there are personal risks. There are many compliance issues the organization must adhere to, and although most have officer and director insurance, it does not provide complete coverage. Good leadership is necessary for all organizations, but ultimately, the board members are responsible for the operations of the non-profit. For instance, one of the BoardSource leadership classes discussed the issue of excess benefit in which board members can be held personally liable for costs incurred by management, including taxes and penalties.
Ultimately, organizations and individuals are looking for a good fit on how each can benefit the other when it comes to selecting board members. As long as both are honest about what is expected, the relationship can work well for the individual and the organization. There may be struggles along the way, but getting started on the right foot is very important.
I was originally approached to take the treasurer’s position since I have accounting and audit expertise. The time requirements were disclosed and I was asked to meet with other board members and executives to make sure it was a good fit. Unlike many others put in my position, I would not be asked to fundraise or actively advocate. I had years of experience in working with this service organization as a volunteer and was happy to offer additional help in my area of expertise.
I have personally grown from my experience as a board member. I met some great people and watched the organization grow. I hope you have the same experience or find a similar board member to assist your organization. Just be honest with the expectations and risks so an informed decision can be a win-win situation.
A CPA since 1998, Doug Whitescarver is the Client CFO at Lumix CPAs and Advisors with over 20 years of experience in accounting and management. He is responsible for all aspects of Lumix’s Client Accounting Services. Doug has extensive tax experience and previously served as an audit manager. He is a soccer coach, fisherman, and avid outdoorsman.