||| FROM ROBERT AUSTIN |||


It’s a well-known fact that we have a lot of nonprofit organizations here on Orcas, and many of us have had experience volunteering to help them with their missions.  These might range from sailing to education,  raising money for the library to managing our utilities.  One thing they all share in common, in order to maintain their nonprofit status with the IRS, is having a Board of directors, whose job it is to hire, direct, and sometimes fire a manager, as well as to audit and approve a budget, raise funds as needed, etc.
 
Board members often serve for three year terms, or in some cases even longer, while the manager/director they are supposed to supervise might be on a career path, perhaps hoping to eventually retire from their position.  The expertise and knowledge they have acquired over time are  valued by the Board, which  might prefer to maintain the status quo, even in the face of patterns of financial or other irregularities that might have emerged.  Don’t make waves, let’s look to the future, and forget about the past.
 
The Board is also responsible for setting the salary and other compensation for the manager, while authority for determining other employee salaries is usually delegated to the manager.  Board positions in smaller nonprofits are typically volunteer positions, while larger organizations (like OPALCO) pay their Board members.
 
Ideally, a Board should maintain friendly but careful oversight of the manager they supervise.  When a Board starts to rubber stamp whatever the manager suggests, it is sometimes said that the Board has been “captured” by the manager.  Because the Board holds the fiduciary responsibility to the organization, there is usually an insurance policy in place to protect them against some forms of potential liability.
 
I’ve recently analyzed the 990 IRS returns for the top 8 nonprofits on Orcas for the years 2015 through 2022, and noted that the salary increases for these managers/directors ranged from +38% to +165% over that timeframe, with the average being +83%.  During this same period, inflation totaled roughly +20%.  Annual compensation (salaries plus benefits) ranged from $84,209 to a whopping $632,145 in 2022… and these don’t factor in the spike in inflation that occurred in 2022-2023, as compensation rates presumably had been set the previous year.  It would appear that running a local nonprofit is a great way to get ahead of inflation, especially with a properly friendly Board agreeing to the size of annual raises.
 
There is an interesting example of members of a corrupt electrical utility in Oklahoma organizing a recall of that Board’s members, with the goal of replacing their manager, who was using member funds to buy things for himself and gain over a million dollar bonus.  The 16 minute film on this site is well worth watching:  https://weown.it
 
In summary, it’s up to members and other stakeholders to elect a Board that will attend to their interests, and not their own nor to enrich the manager/directors that they hire and are supposed to supervise.  But it’s also up to members to pay attention what those board members and manager are doing, and to care enough to change matters when something goes awry.