The Cost of Doing Good-Roles and Responsibilities of the Non-profit Board

By Sandy LeDuc
LeDuc and Sikowitz

Business leaders are frequently asked to bring their experience and influence to the boards of not-for-profit organizations. In the years before Enron many board members could feel good about their ability to help promote the causes they believed in and to be available to counsel management in resource-starved organizations to support the executives who asked them to serve. Many not-for-profit boards failed to operate in ways that promoted accountability from management or from themselves.

Sarbanes-Oxley, frequently thought to be aimed at public for-profits businesses, has had a spillover effect into private businesses and not-for-profits. Regulatory agencies are adopting many of the requirements that mimic Sarbanes provisions with the goal of tightening up operations and financial accountability to assure public confidence.

What are the responsibilities of a not-for-profit board member?

• Maintain the organization to assure continuity.
• Select the chief executive and review his or her performance.
• Govern by policies and procedures established by organizing documents and adopted by management and staff.
• Oversee organizational planning.
• Raise funds and manage resources to support the public purpose of the organization.
• Promote and manage ethical behavior throughout the organization.
• Assure financial accountability to the public, stakeholders and regulatory agencies.

Financial accountability requires awareness of the way the organization raises funds and operates to fulfill its mission as well as how transactions are reflected in the books and records. Board members should have an understanding of budgeting, establishing and testing internal controls, monitoring fiscal results, and establishing policies that protect the public and beneficiaries’ interests. Members will be required to think strategically.

Not all board members will be adept in these skills. The typical member will have to work hard to understand most of these areas of operation and reporting. Their expertise may be critical to the specific mission but will not necessarily encompass finance. Establishing executive, audit, compensation, finance and other committees will disperse duties. Working with the independent auditor to understand the product of their work will be important. Part of their role is to discuss and inform the board on issues critical to the fulfillment of these responsibilities. They can be an important part of the education of a board member.

Fall 2006 -Volume 16, Number 4

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