Several years ago, I was asked to join a board for a local nonprofit. Because I knew and respected many of the board members and believed in the organization, I did not spend much time on my personal due diligence efforts before committing to serve.

The board members and executive director were upstanding citizens, well-liked within the community and many were my friends.

As a new board member, I looked forward to the scheduled meetings partially to catch up with the other members.

Within a few months, I realized that I was in for more than I had anticipated. The board members were easy to work with and agreeable to the action items presented at the monthly meetings. In retrospect, maybe too accepting.

In the same period, I also discovered that one of the senior paid staff members was not easy to work with. This person agreed to complete all requests the board members made for supporting data but rarely fulfilled the action items to present the data at the following board meeting.

There was always a reason the task was not completed, and someone else was always at fault. Additionally, the documents presented were not consistent month to month and the data was incomplete, incorrect, or absent from the meetings.

Eventually, we learned that, behind the scenes, the senior staff member was berating and intimidating the support staff. We later learned that several staff members were afraid to speak up when asked to at the board meetings. By browbeating the staff, the senior staff member was able to control the outcome.

Unfortunately for this person, the board members soon realized something could be wrong. They started to ask deeper questions and made a request to review bank and credit card statements. This ended with the unpleasant discovery that the senior employee was embezzling from the organization.

Before committing to nonprofit board service, familiarize yourself with the culture, governance and finances. Take some time to do your research and ask questions about the organization.

Before you agree to serve, consider the following:

Due diligence

Even if you are willing, never commit to serve on a board without spending some time researching the organization. Don’t assume because you are personal friends with board members that the organization is well-managed. Often board members don’t ask questions, especially when it comes to finances.

Review the bylaws, current financial statements, and recent board meeting minutes, and attend a meeting or two as an observer before joining the board. Are the meetings run professionally? Do the board members seem engaged? Are they asking good questions? Are the financial statements current?

If you are interested in joining the board after observing how the meetings are managed and the data presented, then ask the following:

–Does the board host an annual board orientation to which new and returning board members are invited?

–Is there a history of board minutes documenting communications to the board to keep the governing body apprised of programs, major contractual agreements, staffing changes, threatened or ongoing litigation, and finances?

–Is there an employee handbook and other written employment policies?

–Are there any prior or pending lawsuits?

— Does the organization have the appropriate annual audit reports?

— Is the board apprised of the steps in place to protect the nonprofit and its governing team?

— How are board members held accountable for their commitments?

— Are members of the board educated on their responsibility to disclose actual and potential conflicts of interest? Is there a written conflict of interest policy?

Is the organization insured?

What risk management practices do the organization have to prevent or minimize exposure to litigation? The organization should carry general liability coverage, professional liability coverage and directors’ and officers’ liability insurance.

Sometimes a board will carry general liability and professional liability insurance but will not purchase directors’ and officers’ insurance. If you plan on serving on a nonprofit board, always ask if a current D&O policy is in place. Remember: You have personal exposure when serving as a board member. Directors’ and officers’ insurance helps mitigate your personal risk.

Can you commit?

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Never agree to serve as a board member without asking questions first. Do you believe in the cause the organization supports? Are you willing to put your personal interests aside when voting on the issues presented to the board? Do you have the time and resources to support the mission of the nonprofit? Are you prepared to donate to the organization, seek sponsors, and fundraise?

Additionally, before accepting the opportunity, make sure you are serving for the right reasons. And if you do not have the time or desire to commit — or you question the integrity of the organization — respectfully decline the invitation to serve.

Nonprofit executive directors have many varied daily responsibilities. In addition to managing their staff, they handle finances, engage donors, and serve those in need. Their focus is on implementing the organization’s mission, so they may not have time to give due attention to managing the risk to which board members are exposed.

Make sure that you have the time, commitment to the cause, and adequate protection against risk so that your focus can be placed on helping to fulfill the mission of the organization.  Then, it’s a win-win for everyone.

Teri Parker is a vice president for CAPTRUST Financial Advisors. She has practiced in the field of financial planning and investment management since 2000. Reach her via email at [email protected]