What to Ask Before You Join a Nonprofit Board

Serving on a nonprofit Board of Directors can be a very fulfilling experience, though it is also work. Boards serve as the ultimate fiduciary (trusted steward) of the organization, with ultimate responsibility for the financial and strategic health of the org. Before saying yes, here are recommendations for three things to read and three things to ask, at a minimum.

Be sure to speak the CEO, as well as current Board members separate from the CEO.

The Three Documents to Read (at a minimum)

1. The most recent 990

   Organizations with gross revenue of $200k or assets of $500k or more must file a 990 every year. Think of this as a nonprofit tax return. These are usually publicly available. What you are looking for:

   • What was the year end balance- did expenses exceed revenues? This is not an automatic red flag but consistent deficit spending year over year is.

   • What are the main sources of revenue- grants, services, events, etc.

   • Total assets- how lean or how flush?

   • Towards the end, any notes that require disclosing

2. The most recent audit

   The financial threshold varies by state of organizations that must complete a financial audit but regardless, many funders require one. You don't need to be a CPA or finance expert to understand a few key pieces of information. What you are looking for:

   • In the opening letter from the auditor, you want to see the following language, "...present fairly, in all material respects, the financial position... in conformity with accounting principles generally accepted in the United States of America (GAAP)." This is an unqualified opinion, which means it is a clean audit.

   • In the internal controls section, are there any identified material weaknesses or significant deficiencies? This would mean processes are not in place to prevent misstatements of finances or that the absence of controls are leading to less than ideal practices. While this is not necessarily a no-go for you as a potential Board member (let's say you want to join a Board at a turn around moment), it is best to go in with the full picture.

3. The bylaws

   Bylaws dictate and outline the overarching governing mechanics of the Board (roles, voting, etc.). What you are looking for:

   • When was the last update? Are they 20 years old?

   • Are there term limits for the Directors? And Officers? Terms for Directors vary, though on average it is a maximum 6-9 years, with renewable terms in between. Officer roles (Board Chair, Vice Chair, etc.) are often 1-2 year terms that may be renewed.

   • What are the quorum requirements- the number of Directors needed in order to vote on action items?

   • Is there clear language and delineation between the roles of the Executive Director and the Chair of the Boards?

     
     

The Three Things to Ask (at a minimum)

1. What is the CEO annual evaluation process?

   Why you are asking:

   • It will be clear quickly if there is even an evaluation process and if it happens consistently.

   • The Board's top responsibility is to ensure the right leader is in place. If there is no standard evaluation process for the CEO, the Board is not doing its job.

   • A consistent evaluation process that is clearly documented is good for both the CEO and Board- what are the gaps that need to be addressed, where does the leader need more support, where are they excelling?

   • And in the event a leadership changes is needed, a well documented, consistent evaluation process provides the backup to (somewhat) ease that transition.
     

2. Are there any legal issues, litigation, and/or regulatory (or funder) investigations that are currently underway?

   Why you are asking:

   • No surprises! As the ultimate fiduciary of the organization, this becomes your issue as a Board.

   • Is this a one-off or a common occurrence for the organization?

   • What is the current status and what is the temperature among the Board versus the CEO? If there is any daylight between them (e.g., the CEO doesn't think it's a big deal but the Board does), this is a moment to pause.

3. Does the organization have D&O (directors and officers) insurance?

   Why you are asking:

   • Things happen in the course of running an organization and the Board needs to be protected as well.

   • If the answer is no, then proceed no further! Otherwise, you will be personally responsible for the costs of lawsuits and any possible settlements.

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