Top 10 Issues For Nonprofit Boards (Part 2) Featuring Ellie Hume on The Nonprofit Show

May 21, 2024

On this second part of a two-part series, you’ll learn about the critical differences between IRS classifications like 501(c)(3) and 501(c)(4) and understand the strategic roles of nonprofit board committees in governance and operational oversight and hear about the importance of strategic planning and succession management, with Ellie Hume, from Your Part-Time Controller (YPTC.com). She offers quite extensive advice on compliance, effective ways to show leadership, and engage board members in meaningful nonprofit governance.

Ellie begins by describing a common oversight among nonprofit boards: the assumption of knowledge regarding IRS classifications and the implications for organizational operations. “Right, you have to understand what you can and you can’t do. And there definitely are definitions for these things,” she asserts, highlighting the perils of ignorance in these regulatory nuances and setting the stage for the broader discussion on board diligence.

The conversation covers several critical areas that boards often neglect but are essential for effective governance. First, Ellie addresses the complexity of IRS status, particularly the differences between 501(c)(3) organizations and other classifications like 501(c)(4) and 501(c)(6). Each category has specific restrictions and permissions, notably in terms of lobbying and tax-deductible contributions, which can significantly influence fundraising efforts and public engagement strategies.

Continuing, the dialogue, hosted by Julia Patrick, shifts towards the operational involvement of the board through committees, with Ellie emphasizing that serving on a nonprofit board should be treated with the professionalism of a job, where members engage deeply with specialized committees. These bodies play a crucial role in governance, financial oversight, and program management, ensuring that the organization sticks to its mission and compliance requirements.

Strategic planning also emerges as a pivotal theme in this episode. Ellis criticizes the disconnect between boards and executive teams regarding who should initiate and develop strategic plans. She argues for a collaborative approach, where both sides actively participate in shaping the organization’s future. This cooperative strategy ensures that plans are not only visionary but also practically funded and aligned with long-term organizational objectives.

Ellie also covers the importance of succession planning and sustainability, pointing out the frequent disconnects that can occur without proactive and inclusive planning efforts. These aspects are crucial for long-term stability and adapting to leadership transitions without disrupting the nonprofit’s mission or operations.

From all this, Ellie hopes the viewers will realize that nonprofit governance is an intricate tapestry of compliance, strategic foresight, and active participation, where assumptions can be risky. And Boards must embrace a holistic approach to governance to ensure the things they do and strategies they take are as informed and forward-looking as the missions they serve.