The Taxation of Exempts (subscription required) is a thoughtful journal that recruits professionals, generally accountants and attorneys, to provide a snapshot on some aspect of nonprofit law and compliance. The magazine may be a bit esoteric for some folks, those who like their nonprofit literature more along the applied vein, but some of this thinking can be really helpful, particularly for educating boards.
In the November/December 2009 issue an article titled "Selecting the Board of A Public Charity" caught my attention. The article, by Maryam K. Ansari (an attorney practicing in the San Francisco area) provides an interesting framework for thinking about recruiting nonprofit board members. As this is a long article and does not appear available free on-line, I'll just offer some of what I think are highlights.
The article starts off noting that:
A strong board is crucial to the viability of a charitable tax-exempt entity. The board of directors is at once the ear, the brain, and the face of the organization. It is the organization's primary decision maker along with the CEO and other officers. A well-selected board can generate both "brand" recognition and donations. Most importantly, it can amplify the achievement of the entity's exempt purposes. At the outset, an effort generally should be made to select a governing board with members who will further the exempt purposes of the organization while at the same time minimizing the possibility of conflicts of interest.
Pretty good descriptor, although I for one don't generally think about "selecting" and "conflict of interest minimization" in the same breadth. The author goes on to state that:
It is important that possible conflicts of interest be considered and that board members generally be educated regarding which transactions are permissible and which ones raise red flags for the IRs or state attorneys offices. Once initial board members have been selected, they must be well-educated on the issues that may affect the organization's tax exempt status.
Hm, again. Not where I naturally go but a good point. The article's summary states:
The improper selection of a board of directors can jeopardize an organization's tax exemption, while the proper selection of a board can strengthen the organization's exempt status, credibility, and mission. An impartial board demonstrates to the IRS a genuine desire to further the organization's mission and partially negates any suppositions of private gain.
In addition to the selection of board members, their education on the issues affecting tax exemption should never be overlooked, and the necessity for enacting a strong conflict of interest policy for the board can be a crucial step in avoiding future complications. Further...substantiation is of critical importance when dealing with the IRS, and organizations that are exempt from taxes are not exempt from the burdens thereof.
So, there you have it --- food for thought for all ED's and Board Chairs.