Thursday, June 9, 2011

Where were the boards?

If you follow the nonprofit press on even a cursory basis, you probably heard yesterday that 275,000 organizations lost their tax-exempt status.

The spark that put them on the list? They hadn't filed legally-required documentation for three consecutive years. All had warning that this was the path on which they were headed if they did not respond in a timely manner.

According to the Chronicle of Philanthropy, most of the organizations on the list are believed to be defunct. That may be true. I hope it's true, actually. But it does leave one to wonder: for those organizations still in existence, where were the boards?

Assuming even a small fraction of those lost tax-exempt statuses belong to currently living, functioning organizations, this still points to governing bodies that failed to live up to the most basic board responsibilities.

As I reviewed the 666 names on Wyoming's list, I made a rash - though probably not wildly off-track - generalization that most were all-volunteer organizations. Whether or not that is the case, or whether some actually employed full- or part-time staff, they all had boards. Those boards held ultimate responsibility for ensuring that their organization met all fiscal and legal obligations of nonprofit status. Whether they delegated details to a staff person, or whether they took on that role a group, in the end, the responsibility was theirs. There is no one else to blame.

I harp all the time about the critical legal, fiduciary and moral obligations of governance. It's a very, very real responsibility that these leaders take on when they agree to serve on a board. I too often hear the refrain, "They're only volunteers...," usually in the context of explaining why we can't burden boards with the responsibilities of governance.

The consequences of boards not understanding and living up to those responsibilities are all too real. This, unfortunately, is a particularly vivid reminder of what happens when boards don't get that.

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