6 Things to do Before You Agree to Join a NPO or Charity Board

They say that life begins when you are 45 years old.  This is the age at which many people start volunteering and giving back to their communities.  Its also when most people start to feel happier.  So volunteering to serve on an NPO or Charity board is a definite win/win – good for the organization and good for the individual.  However, serving on a board comes with duties and responsibilities and you need to take reasonable precautions to protect yourself.  Here are six reasonable and responsible things to do before you join board:

1. Read “Primer for Directors of Not-for-profit Agencies: Rights, Duties & Practices”
Every director or prospective director of any NFPO or Charity should read this.  This document was published by Industry Canada specifically to help existing and prospective board members  understand their legal duties and responsibilities as a director.  It should be required reading for anyone who is already on a board or considering joining one.

2. Confirm the organization has Directors & Officers Insurance
Directors get sued.  Not often, but they do get sued by participating in poorly run organizations. The required level of skill, diligence and effort required by directors continues to increase over time.  If you do get sued as a director of an organization, you want that organization to have a good D&O policy that will cover any costs you might otherwise have to incur to defend yourself as well as cover any settlement costs or damages you might otherwise have to pay.  Ask for a copy of the policy, read the policy, make sure the insurance limit is high enough to cover your potential risk, and confirm whether the limit included costs of defence.

3. Read the most recent annual financial statements – and understand them
The buck stops with directors. They are ultimately responsible for the direction and operation of the organization.  Prior to joining any organization, you should ensure you understand its financial  health.  Read the financial statements and read “A Guide to Financial Statements of Not-for-profit Organizations: Questions for Directors to Ask” and ask questions.  This guide was prepared by CPA Canada specifically to help existing and prospective board members understand how to read NFPO and Charity financial statements.  If you join an organization that is in financial difficulty it can be very risky for you personally.  Help reduce that risk by making sure the organization that you want to join is financial healthy.

4. Confirm that the organization is in compliance with Canada Revenue Agency
Directors can be held personally responsible for any GST payments or installments required but not paid as well as any payroll remittances not paid.  Ensure the organization has a process in place to ensure that returns and remittances are filed on time and the organization always stays in compliance with the CRA

5. Google the organization and its directors
You want to know who you’re getting in bed with.  If you become a director, your personal and professional reputation will be linked to the organization and its board members.  Do your research.  Luckily, Google makes that easy.  Check out the organization on google and the directors on Google and LinkedIn.  it’ll give you an idea of the people you’ll be working closely with in the future.

 6. Ask to attend a board meeting as an invited guest
Boards, like families, tend to exist in a variety of states of dysfunction from mostly functional to entirely dysfunctional.  The people around the table may or may not
  • get along well – there may be significant personality conflict
  • follow best practices for organizational management
  • work well as a team
  • have the right combination of skill sets to discharge their legal obligations as a board
  • have hidden agendas
How much you enjoy working with the organization will depend on how well the other board member function well as a team and support each other.  Make sure that board is comprised of reputable individuals who work well together as a team.  If the organization is run by a bully or someone who is incompetent, it won’t be much fun for you.

Obviously being a volunteer director can be personally and professionally rewarding.  But make sure that you don’t take on too much personal risk by following these six steps prior to joining any board.