Financial Responsibility of Board MembersBy: Kelly Duitsman Loschen, CPA

Nonprofits in Numbers

• More than 1.5 million nonprofits are registered in the US – National Center for Charitable Statistics

• From 2001 to 2011 the number of nonprofits in the US grew 25% (Number of for-profits rose by just ½%) – NY Times

• During that period nonprofits outpaced for-profits in their growth percentages of hiring, wages, and contribution to gross domestic product – NY Times

• The nonprofit sector is the 3rd largest workforce in the US (behind retail and manufacturing) – Nonprofit Quarterly

Board Responsibility

• Directors serving on a board are agents for directing and keeping an organization toward the achievement of their mission, whether it be for the purpose of social service, professional development, education, or religion.

• Liability to third parties, employees, vendors, grantors, donors, service recipients, governing agencies

Available Information

• Articles of Incorporation and Bylaws• Mission Statement• Description of formal committees• List of board members and key employees• Calendar of board and committee meetings• Strategic Plan• Financial Statements (audited if available)• Form 990

Available Information (Continued)

• Past Minutes• Directors’ and Officers’ (D&O) Liability

Insurance Policy• Policies

Role of a Board Member

• Attend meetings• Be prepared• Ask questions and offer your opinion• Take responsibility• Hold each other accountable• Maintain integrity

Role of a Board

• Preserving or reshaping the mission• Selecting and evaluating the Executive

Director• Ensuring sound practices• Advocate for the organization• Protect against external threats• Ensure the board has necessary skills and

diversity• Ensure compliance with laws and regulations

Role of a Board (Continued)

• Exercise Financial Stewardship– An external auditor is not accountable to

management– Regulatory issues– Budgeting and financial planning– Overseeing assets– Fundraising– Measure performance

Nonprofit Financial Reporting

• Net Asset Classes• Investments and Endowments• Promises to Give• Expenses• Deferred Revenue• Agency Transactions• In-Kind

Net Asset Classes

• Determined by donor• Board designations• Time vs. Purpose restrictions• Amounts released from restrictions

Investments and Endowments

• Endowment Fund – An established fund of cash and investments that provides income for a nonprofit organization

• UPMIFA• Spending policies and appropriations

Promises to Give

• Written or Verbal• Promises to Give vs. Intentions to Give –

Intentions to give do not represent promises, but merely plans or hopes of the donor

• Conditional vs. Unconditional• Bequests

Expenses

• Natural vs. Functional• Natural Classification vs. Client Internal

Classification• Special Events Expenses

Other Items

• Deferred Revenue• Agency Transactions• In-Kind

Miscellaneous Resources

• Guidestar.org• Parkland College Nonprofit Excellence Training • NFP Training Institute

MHFA Nonprofit/Governmental Team

Top Row: Wade Hoey, Dae Kang, Jeff Livesay, Mark Czys, Greg DouglasMiddle Row: Zach Kallembach, Dave Hood, Mitch Schluter, Bryan James

Bottom Row: Kelly Loschen, Anthony Pendleton, Mandi Alt