Episode 69: Nonprofit Governance - I Got The Power
Ever wonder why there are so many trainings focused on the board of directors? It's because the IRS Who has bestowed the Board of Directors (not the Founder If they are Executive Director) the power in a public charity. Learn what that means and how that impacts the decision-making, funding, and more!
LINKS:
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NONPROFIT SPOTLIGHT: Pico Union Project
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Podcast Transcript
Speaker 1 (00:04):
Welcome to On Air with Amber Wynn, where nonprofit leaders learn to fuse passion and commitment with proven business strategies to create long-term funding impact and sustainability. And now here's your host and resident Philanthrepreneur, Amber Wynn.
Speaker 2 (00:26):
Hey, fam, it's your girl back in the hot seat today. I'm excited to share with you that I'm going to do another series. This one is on nonprofit governance. For those of you not familiar with that term, nonprofit governance refers to your board of directors. Now, I just have to say this upfront. A lot of people don't understand the importance of the board of directors, and I'm going to go ahead and admit when I was an executive director, neither did I. Do you know why? Because as executive director, I was doing everything. I had 15 hats on y'all. So if you are an executive director, especially if you are a founder, this series is for you because if you understand the IRS's decision to have the board of directors as the governance of your organization, it is going to change your world. If you have been doing all things, if you're fundraising, if you are securing resources, you're doing the programming, you're doing the hiring. If you're doing everything in your organization, then it says that you don't understand the purpose, the function, the fiduciary responsibility of your board of directors, and I want to shed some light on that because it's going to shift your world. It's going to shift your world, and I need your world to shift if you're doing all things. So when we get back, we're going to dive into I got the Power.
(02:05):
That's the name of this episode. I got the Power because the power lies with your board of directors. When we get back,
Speaker 3 (02:17):
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Speaker 2 (03:17):
Welcome back to On Air with Amber. We're starting our next series, which is nonprofit governance, talking about all things board of directors. When I was executive director, I was like, why are there all of these trainings out here for the board of directors? It's the executive director that's doing all the work, not knowing, not understanding how the IRS set up the nonprofit. Now, if you have Mookie, Pookie, and Sheik and them on your board, I'm going to say this series is for you. We get our friends, our family, our roommate, our cousins to sit on the board because the preparer tells you when you're forming your 5 0 1 C3, you need three people. You need the president, the treasurer, and the secretary in order to form your business, which is true, but what they're not explaining to you is their role. Because if you understood their purpose, their role, according to the IRS, you would be very selective about who you put in those roles.
(04:22):
What I will say is that 99% of people who start their nonprofits start them with friends and family who love them, who have no idea what they're supposed to be doing on the board who says, yeah, put my name on there. You can start your because they believe in you, but at some point you get burnt out because you're doing everything and you're doing everything because you don't understand the role of the board of directors. Let me ask you a question. Who has the most power in the nonprofit? Guess what it is? Your board of directors, I don't care if you are the founder and you started the organization. If you function in the role of executive director, then the board has more power than you because number one, you don't own the organization that you founded. You just founded it. You started it. Amen.
(05:15):
Thank you very much. But the most powerful entity in the nonprofit organization is the board of directors. The IRS gave them that power. They said, as the nonprofit governance entity, you are authorized to hire support and fire the executive director. The executive director is the highest ranking individual on the implementation side. So this is how it goes. The board is responsible for setting the vision of the organization, making sure that it's ethically run for fundraising. That is their responsibility. When things go down in the public eye, who do they turn to? They turn to the board and they're like, what's up? You didn't know your person was mismanaging funds. That means that you're not doing your job because your board is supposed to meet. Review the financials, make sure that the organization is being run ethically, that everything is above board, and if they're not doing those things and they're not doing their job, that's why if you have your cousins and your mom and your husband on the board and they don't have that skillset, it's putting your organization in jeopardy.
(06:26):
So during this series, we're going to talk about all of the things that the board is supposed to do, and I'm hopeful that after you hear what they're supposed to be doing that you'll be like, oh my. Well, no wonder I'm so tired because I've been doing all of the things that the board is responsible for doing. Most importantly, we will have an episode where I talk to you about how you rotate the people off of your board, thank them very much for their service, and then start to recruit seasoned board members who can step in and be partners with you in running your organization. Because with that partnership, it's going to help to increase your capacity, and it's going to help to ease your load, which is what the board is supposed to do, right? So today I wanted to share with you what it is that the IRS says that the board is responsible for, and it doesn't matter.
(07:20):
I have this conversation a lot with my clients. They're like, well, I'm the one who's this. We don't have to worry about the board. They're going to sign off on it. Here's the thing, your board should be seasoned because they have the fiduciary responsibility. That is the legal responsibility of running this organization, of overseeing the organization. I take that back, the executive director's responsible for running it, but the board of directors is responsible for overseeing it. So you want to make sure that it's more than just three names on an application. You want to make sure that they have resources, that they have the time, and that they have the skillset and knowledge about how to run a nonprofit. We're going to talk a little bit later in one of the future episodes about the challenges that arise when the executive director has no nonprofit knowledge and skill, and the board of director has no knowledge and skill.
(08:16):
It just makes for a very challenging time for a nonprofit. It's important that your board knows what they're doing because they're supposed to be guiding the organization. But if both of you guys had no knowledge, I don't know, it is just going to be this cycle of just nothingness happening then. And when I say nothingness, it doesn't mean that you're not delivering services to your community, but in terms of strengthening your organization, growing your organization in resources for your organization, nothingness is going to be happening. Okay, so first episode, I got the power. The power belongs to the board of directors. That's the bottom line for this start to our nonprofit series on governance. Your board is your governing entity. Your executive director reports to the board. The executive director says, Hey, this is what's going on in our day-to-day. Is this okay? Do you have any issues with it?
(09:16):
This is how we're running the programs. This is how we're collaborating. What say you and the board says, yay, or the board says nay, and whichever way they go, the board has the final say. So because the IRS has given the board the authority to ethically run the organization, I'm so excited to be able to share more in depth about fundraising, about conflicts of interest, about that delicate balance between the executive, the director, and the involvement of the board. The board goes through certain transitions, and it's important that at some point the board transitions from being in the day-to-Day, to really just allowing the executive director to run the organization. And we're going to talk about all of that in this series. So first things first, know that even if you found the organization, your board of director has the ultimate power. When we come back, we're going to move into Ask Amber where you get to ask your burning questions. But for right now, let's take a pause. I see you in a few minutes.
Speaker 4 (10:30):
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Speaker 2 (11:44):
Welcome back. You're on air with Amber Wynn, Phil, entrepreneur, your biggest cheerleader. Today, we are talking about nonprofit governance and who has the power? It is the board of directors, but right now we're sliding into the part of the episode where you get to get your questions answered. Ask Amber, is your time to ask me your question? This question comes from Jeremiah in Ohio. Hello, Amber. This is Jeremiah from Ohio. My question is about reimbursement. I'm the founder of my nonprofit and I'm spending a lot of my personal funds to get things started. How do I go about getting reimbursed or does the IRS expect this to be a donation? Great question. So Jeremiah, the IRS does not expect this to be a donation. The IRS does, however, expect for everything to be documented, right? So you should document all of the expenses, what you spent it on, the date that you spent it right after that or before that, you should draw up an agreement that is signed by the board that you'll be reimbursed.
(13:00):
And if it's possible, if your board is active and engaged, then they have a fundraising strategy. They can say that you will be reimbursed by whatever year or whatever month. We'll reimburse you in three months or six months if that's possible. Get that in writing too. But if they don't know it's a new board, they're like, well, whenever we get it, we're going to reimburse you. Just have it in writing. But this is what I want to encourage you, Jeremiah, is to make sure that those reimbursed funds do not come from restricted dollars. What does that mean? Typically, you'll get a grant, right? But you've written that proposal, and in that proposal you've said, this is what we're going to do with this grant money, and it's typically about programs we're going to deliver this program. You cannot take your reimbursement from that grant money because it is restricted funds.
(13:55):
You told your funder we're going to do X, Y, and Z with that money. You have to do X, Y, and Z with that money. You can't just take grant money and reimburse yourself. That's why it's important that your board understands their role. Their role is to generate unrestricted funds. So let's just say the board says, okay, we're going to host a gala and the proceeds from that gala, some of it is going to go to reimburse you, and then the rest of it is going to go towards programs. That's perfectly fine because it's unrestricted funds. I don't want you to get a grant and say, well, I'm taking my money back because this is what I put in there, because you can go to jail for mismanagement of funds. So draw up a document, make sure your board signs off of it saying, yes, we promised to reimburse you for the expenses, and make sure that when the unrestricted funds come into your organization, that is the pot of money that you take that reimbursement from.
(14:53):
Jeremiah, thank you for your question. Anyone out there, if you have a question that you'd like to ask me, you can hit me up on all my social media channels. You can hit me up on my website, my Facebook, Instagram, email me at amber@amberwin.net. I'd love to answer any of your pressing questions. Now, we're going to shift to the time in the episode where I get to do the thing that I love most, which is to put a spotlight on a nonprofit. Nonprofit organizations are out there doing the work, got their heads in the sand, grinding, doing the dang thing, and I love to put a spotlight on you guys because you're doing the work. Number one, it allows you to be seen by your potential constituents, your clients, your customers, whatever you call them, but it also allows you to be seen by funders, which is what I want to do. I want to give you the visibility that you need so that you can generate more revenue. Today, our focus is on Pico Union Project. Pico Union Project is a vibrant cultural center that builds community health, resilience, and neighborhood revitalation. In the Pico Union area of Los Angeles. They strive to be a source of light and equity for all, providing the community with access to fresh, nutritious food, healthcare services, creativity classes, and opportunities for meaningful paid work. Let's take a look at one of the projects from Pico Union Project.
Speaker 5 (16:24):
We created an event called Be Asana, which allows community members to come have a safe space to educate themselves about cooking, nutrition. They can learn about the Los Angeles Department of Transportation. They can learn about getting a library card. They can get their blood pressure taken,
Speaker 6 (16:46):
And Ana means healthy living in Spanish, and it is our way of creating community, building community and being of community
Speaker 5 (16:57):
While we actually give them produce, and then we show them how to use it. So it's a twofold kind of enrichment and engagement with our participants, which encourages them to eat the produce. So
Speaker 6 (17:11):
We have people from the community who come and participate in one of three or four activities. We have a cooking class that takes place usually that integrates the food that is being distributed for free outside later in the afternoon, showing how to use that food, how to cook that food, how to prepare the food.
Speaker 5 (17:30):
So the impact is great in that Rand Corporation followed us around and they basically did a study on our participants and how much produce they were eating compared to the average Californian, and it showed that they eat about 60% more produce than the average California.
Speaker 6 (17:55):
We have a yoga class for kids. We have a art class for kids, we have reading
Speaker 7 (18:07):
For kids.
Speaker 5 (18:12):
What excites me the most about this event is the faces of our participants when they get to go home with a whole basket full of produce, knowing that they're not going to have to spend their hard-earned money on food for the week or on specific produce for the week, just making a dent in their lives, even if it's a little bit, that's what excites me the most.
Speaker 2 (18:43):
Union. If you guys would like to support this amazing organization, you can find them at www.picounionproject.org. I'm so excited to be with you today. Today we started the series on nonprofit governance, talking about a really important part of the nonprofit that most people have no idea is the purpose of, right? Most people don't understand what the board is about in this mindset minute. I just want to spend just 60 seconds talking about you as the founder, you as the executive director, and my question for you in this mindset minute is, are you ready to lead? Are you ready to lead?
(19:38):
When I talk to potential clients, I ask them about their board, and the most common complaint I get about a board of directors is they're not doing anything. They don't help me. I can't get them to fundraise. They're not supporting me. And my question for the executive director, my question for you that I want you to sit with right now is, do you as the founder, executive director, do you even know what a board is supposed to do? Because listen, if you started this nonprofit, then you are driving the culture of your organization, and if you don't even know what it is that a board is supposed to do, then you can't help guide them. I hear a lot of times, oh, well, they're not paying their dues. What amount of money do you expect them to bring in? Well, whatever they can give. So what that says to me is you don't understand what a board is supposed to do.
(20:34):
So what I'm going to encourage you to do, if you are a founder or an executive director and in your heart that you have no idea what a board is supposed to do, I'm going to ask you to commit yourself to this series so that once you've learned about what a board is supposed to do, their roles and their responsibilities, you can be better situated to create the structure for your board. If you are the founder, here's the reality, you're going to have to create the culture. What does that mean? That means the board packet, making sure that the meetings are pre-scheduled, making sure that the financials are there for your board to make decisions. If you come in and you don't know what a board's supposed to do, and especially if you have friends and family, they're going to show up and be like, well, what am I supposed to do?
(21:24):
You chose people who did not know what their role is, so you have to own that, and in owning that, you now need to train your board to be an effective board. If there are people who believe in your mission, they believe in you, then they're going to receive that training so that they can be effective board members. If they only allowed you to put their name and they're showing up because they love you, then they're going to need to rotate off, and that's fine. You need to rotate on people who understand what it is they're supposed to be doing. But it all starts with you as the founder, you as executive director, understanding what it is a board's supposed to do. Once you have that knowledge, then you can start to build in the infrastructure that's going to allow your board to be effective, active, and engaged.
(22:13):
But if you don't even know what a board is supposed to be doing, then you can't make them accountable and you can't create the culture that's needed for them to be effective. Most importantly, you will be unsuccessful in recruiting that next phase of board members, right? Let's just say we get rid of Mookie, Pookie and Sheik and them. What you don't want to do is then go and recruit another set of Mookie and Shiek and them. So you need to understand what caliber, what type of skill sets, what type of character you need in a board member so that you can then start to recruit people who are going to help to move your organization forward. Are you ready to lead? If you are, then join me in the next couple of weeks as we continue this series on nonprofit governance. Alright, that's all I got for you today. Thank you for joining me, and if you think that this is something that is beneficial to some of your colleagues out there, people who have started a nonprofit, be sure to share. Be sure to like, subscribe, and yeah, I will see you next week. Bye now.
Speaker 1 (23:24):
Thanks for listening. If you enjoyed this episode, subscribe and leave a review on iTunes. Head over to www.amberwynn.net/podcast for the links and resources mentioned in today's podcast. See you next time.
