The Importance of Governance

Choosing your board is a critical component to effective nonprofit management, obtaining 501(c)(3) status, and qualifying for grant funding. Many nonprofit boards are commonly made up of people with a similar interest in the mission of the nonprofit organization. This is especially true in smaller, local nonprofits who selected their board members based upon their most common connections in their neighborhoods or clients. Although this strategy does provide a strong community connection to those who are served by the nonprofit’s mission, it does not fully address the factors that need to be considered when selecting quality governing board members.

Community Engagement

The more involved the nonprofit becomes in their community, the stronger the level of volunteer support emerges. Many who volunteer to participate in a governing board may not be fully educated on what their responsibilities are. Many newer nonprofits tend to select friends and family members to start. However, in order to qualify for 501(c)(3) governance through the IRS, there needs to be representation of the general public present in the governing board. Avoidance of partiality is critical and the effectiveness of the nonprofit can actually be hindered when kept too tightly within a family or tight friendship alliance. The threat to not meeting the public’s interest in such a board structure is high.

IRS Requirement

To alleviate the potential of such challenges, the IRS requires a 51% “disinterested parties” representation within every 501(c)(3) governing board. Disinterested parties are merely those who have no relationship with others on the board and do not receive any form of compensation for their contribution to the organization. Boards should be volunteer and many grant funders expect board members to contribute financially to the organization.


How to Select Board Members

Board members need to bring certain skills to the table to be truly effective. The following are key traits or skills to look for when selecting your governing board members:

  1. Knowledge of ethical governance practices and experience in the nonprofit sector. Their dedication to compliance is also important.
  2. Skills in accounting, legal matters, business administration, and the type of programs your organization intends to implement.
  3. Resources in the community such as connections in local corporations, legislature, private potential donors.
  4. Character is important to them. Nonprofit standards must be upheld to the highest possible level to obtain the confidence of the public, their donors, and regulatory agencies. The behavior of individual board members can actually harm the organization’s overall reputation, so it is important to select board members with exemplary reputations and ethical behavioral standards.
  5. Board members must be passionate about the organization’s mission as they are held to the mission in guiding board decisions. Demonstrated commitment and encouragement for fellow board members to uphold their commitment helps to keep the organization on the right track. 

Nonprofits are a critical component to solving many of our community challenges and as such, they are held to a higher standard of serving the public interest. Remember that your board is there to help guide your organization to make well planned steps to ensure the organization’s mission statement and goals are upheld. Select your board members wisely and you will find your nonprofit flourish with strong community volunteer and financial support. You will also find outside funding agencies such as corporations and private foundations more willing to offer grant funding to help you facilitate your objectives. Your board selection is a key piece of what they consider, so your board selection is literally one part of your grant application. Take it very seriously.