Not Just a Resume Booster: Tips for evaluating a nonprofit before joining the board of directors

Today is your lucky day. You received an offer to join a board of directors of a nonprofit and you readily accept. You cannot be more excited. It seems like a perfect fit. It has a mission you care about and you cannot help but think how great it will look on your resume. But you soon discover the position is not what you imagined. You are thrown onto the board without any orientation or training, the meetings are disorganized, the members are in uproar, and the organization’s paperwork from budgets to filings is a mess. Your dream volunteer job has quickly turned into a nightmare.

Unfortunately, situations like this are not uncommon. There is so much emphasis on director recruitment from a nonprofit’s perspective that we often forget director recruitment is a mutual selection process from beginning to end. Just as a nonprofit organization should not blindly accept any applicant as a director, an applicant should not blindly accept a director position without some understanding of the organization and his or her responsibilities. Both parties should be evaluating each other in order to mutually decide if it is a good fit.

Here are some tips for evaluating a nonprofit before joining the board:

Legal Compliance: Are you comfortable with the current state of affairs?

As a director of a nonprofit, a critical part of meeting your fiduciary duties is to ensure that the nonprofit is operating in compliance with the law. When it comes to legal compliance, you cannot judge a book by its cover. Here are a handful of documents that you should request and review as part of your due diligence.

• Articles of Incorporation: Does it have unique provisions (e.g., describes the purpose with specificity or makes references to members)? Does it contain other limitations (e.g., assets may only be used towards the communities of San Francisco)? Does the organization adhere to these statements?
• Bylaws: Is it written in understandable terms? Does it have contradicting or confusing provisions? Is this a membership corporation? Does anything stand out as inconsistent with how the organization actually operates? Do the internal governance policies make sense for this organization?
• Conflict of Interest Policy: Who is required to sign the conflict of interest policy? What types of disclosures are required and are these satisfactory? Does it describe a reasonable and adequate procedure for handling potential conflicts of interest?
• Form 990: Has the nonprofit made the required filing in previous years? What is the financial health of the nonprofit? Does the nonprofit use best practices by having non-required policies such as a conflict of interest policy?
• Form 1023: What is the mission of the organization? What are its stated activities? Does it engage in lobbying activities? Is the nonprofit’s exemption application reflective of its current activities and pursued mission?
• Current financial statements (audited, if available): What are the typical sources of funding? Does the organization provide executive compensation? How are the organization’s assets spent each year? Does it operate in the zone of insolvency?

Both Forms 990 and 1023 are required by law to be publicly disclosed. Websites such as GuideStar also simplify this task by posting filed Form 990s.

Additionally, some states provide online search tools for a quick snapshot of information. For example, in California, the Attorney General’s Registry of Charitable Trusts online search feature provides a nonprofit’s status regarding registration and other filing requirements.

These documents undeniably amount to a substantial volume of paperwork but a director’s job will entail review of such documents and more. Therefore, exposure to these documents early on in the process is actually good insight into some of your future job responsibilities as a director.

Relationships: Will you work successfully with others?

Volunteering at a nonprofit is that much more rewarding when you have good working relationships with those around you. A good working relationship is not necessarily one made of homogeneous personalities or views and that is void of any disagreement. In fact, nonprofits can greatly benefit from lively discussions and a board made up of different expertise, viewpoints, and other attributes. It is however important to get a sense of the type of people you will be working with in order to assess for yourself whether you will be a good fit for the organization.

A few ways to assess these potential working relationships are to:

• Ask to attend a board meeting. Meetings can be telling about an organization and commitment, for example, by indicators such as an absence of an agenda or low attendance.
• Meet the other board members. You may be able to get a sense about the personal dynamics, how you will fit in, and how they understand their roles.
• Visit the nonprofit's location. Being present at the organization is a chance to observe the general organizational culture and people involved in its operations.

Another person to consider meeting or learning about is the Executive Director. The board and Executive Director have an intimate working relationship in running a nonprofit. An organization with a strong board and weak Executive Director may clue you in that either an ongoing task of the board has been to increase the Executive Director’s effectiveness and compensate for weaknesses, or even that a search for a new Executive Director is on the horizon. The situation of a weak board and strong Executive Director may suggest that part of your responsibilities as a board member will involve working on board development and improving the working relationship with the Executive Director or that the organization may need a change of board members in the near future.

Education: Will you have the tools necessary to succeed at this organization?

Incoming directors at an organization may have different educational needs for creating the right environment to thrive on the board. Factors such as past board experience or work experience in the nonprofit sector can be useful in quickly adapting to a director role and executing those responsibilities. Likewise, an organization’s investment in or opportunity for board development and mentorship may be an important factor of an ideal work environment for individuals who are first-time directors or new to the nonprofit sector. For those seeking board education, a few topics to consider are:

• Orientation: What information will be covered? What are you expected to take away? What type of resources will be provided? Will you need more help or information after this?
• Training programs: Are they offered? If so, do they address the skills and areas you need the most help with? Are they pre-scheduled or provided as needed? Will you need more training and education down the road?
• Job description: What is being asked of you? Are your responsibilities and duties understandable and realistic? Can you fulfill this role?

Additionally, understanding the fiduciary duties of a director is critical to avoiding legal troubles. This type of overview may be especially important for an individual who is new to nonprofits and could benefit from an introduction to the nonprofit sector as well as key legal principles.

Indemnification & Insurance: Do you feel adequately protected?

An organization’s assurance to take reasonable steps to protect directors from personal liability is another important consideration when accepting a board position. Such steps typically include strong indemnification policies and adequate insurance. As Pamela Davis, president and CEO of the Nonprofits Insurance Alliance Group, explained in a Blue Avocado interview, "A Board Member’s Guide to Nonprofit Insurance,” lawsuits against nonprofits can range from slip and fall accidents to employment issues to professional errors. Therefore, eliminating risk entirely is impossible. Instead, as Davis explains, “for most nonprofits, the amount of insurance they buy relates to their specific situation, their insurance broker's assessment of their risk and the risk tolerance of their board of directors.” As a potential director, it is good to know beforehand what level of protection you will be afforded by the organization. Some considerations worth addressing include:

• Indemnification: Does the nonprofit have an indemnification policy? Is the policy within the protection allowed by law? Does it significantly deviate from indemnification policies of other nonprofits to your detriment?
• Director and Officer Insurance: Does the organization offer it? What types of claims does it cover? When does the coverage begin and end?
• Other Insurance: What other types of insurance does the organization carry? Accident, property, etc.? Does this seem adequate for this specific nonprofit and the types of activities it engages in?

This list of tips is by no means comprehensive and is not to suggest any one of these factors should drive or deter your acceptance as a director of a nonprofit. A good starting point is to understand your responsibilities as a director and to ask yourself what risks you are concerned about. From there, you can take the appropriate steps to learn about those risks and actions that can be taken to mitigate those concerns.

BoardSource provides a useful list of questions to ask before joining a board from programs to finances in its “Q&A: What Should I Know Before Joining a Nonprofit Board?".