Who owns your nonprofit? Do you really have as much operational latitude as you think you do? Have you or your board ever stopped to ask yourself these questions? In business, a board of directors is elected to represent the enterprise owner so shouldn’t the same principle apply in the nonprofit world? I say yes…
The board of directors has a weighty responsibility-to convert the vision of an owner into a viable organization and to keep it in alignment with that vision. Its job is to take the owner’s concept, create it and watch over it once built. In this process, the board’s job is to accurately reflect the owner’s vision and values. For this reason, I think my question raises serious issues, especially if you haven’t thought about it previously…so, who owns your nonprofit?
Now for faith-based ministries this question is a no-brainer. Most faith-based boards recognize and acknowledge God as the owner and those who started it or carry it today feel commissioned to carry out what they sense God has called them to do. And, their job includes installing Godly values and requiring the ministry to operate subject to them. However, for secular nonprofits the answer may not be so clear.
I imagine most non faith-based (secular) boards would say the board owns the nonprofit; some may say the community owns it, maybe the state where it is domiciled, maybe the founder. Nonetheless, whomever you settle on as the owner, there is where the board’s responsibility rests and where its duties lie.
I don’t think boards have as much leeway as they think they do when making decisions. A board’s latitude should depend on the original vision of the owner who ever that may be. Yet, do boards typically refer back to the owner’s wishes, vision or mission when making key decisions about budgets, programming, goals, etc? Probably not often enough so I tend to doubt it.
Regardless of who you determine is the owner, when individual directors think about the concept of nonprofit ownership, it really is a game changer. Most do not think in terms of having responsibility to some higher authority so they feel a freedom they perhaps don’t really have. This idea may feel very constricting to many boards yet boards with a clear understand where they are going probably have no problem with this ownership concept. So, are you doing what you are supposed to be doing? And, how do you know?
If more boards thought in terms of having a responsibility to an owner, I wonder how different (and more effectively) they might operate? What do you think? What would happen if you introduced this idea to your board? Where would the conversation lead?
Anyone who believes they have a right to dispose of the assets of a non-profit ought to check that fact with the State Attorney General. The A.G. may not claim ownership, but will exert control and exact criminal sanctions for unapproved asset distribution.
Completely agree. Ownerhsip still must act within etablished laws..that applies to everyone and every business.
As with most endeavors the initial focus has much to do with the eventual outcome. After reading the comments, I find myself agreeing. If a non profit board understands ownership then individual responsibility for the mission objectives becomes clear. Especially when the board has clear individual roles and responsibilities.
A specious argument. No one owns a nonprofit, even in a figurative sense. A nonprofit has a responsibility towards its mission, full stop.
I firmly believe that my non-profit is “owned” by those who expressly benefit from the mission. IN my case the mission is: to provide a place in perpetuity where people with disabilities can be equal, capable,and successful… So as far as I, the founder, am concerned, people with disabilities who utilize the program are the owners. The volunteers are responsible to provide the mission and the Board is responsible for financial liquidity. When we get to the stage of having paid staff the staff will have specific responsibilities to carry out the program itself, maintain the facility, or raise the funds to continue the mission.
You will find many, many people agree with you that the clients own the agency and the mission. Thanks for your thoughts.
State attorneys general enforce the use of nonprofit assets for generally charitable purposes, and may sometimes intervene if, as in the case of the Terra Museum of American Art, a local charitable purpose looks like it may be undercut by board action. Courts may become involved if there is a question of direction of donated funds to an unintended purpose. Thus, Roosevelt University thought it could take funds given through a subordinate “board” for the Auditorium Theater (which is owned by Roosevelt, and houses its downtown campus) for a Schaumburg campus. The university had to give control of funds to the subordinate board that raised them. Similarly, church denominations often get to keep facilities given for their type of church when congregations want to change their doctrines and reject continued affiliation.
Tax exemptions may also limit Board authority. The IRS may also question an organization’s tax exemption if it steps outside the “social benefit”, or “political action”, or other purpose recognized as a basis for exemption under the Internal Revenue Code. Similarly, hospitals have recently lost charitable care based property tax exemptions in Illinois for their medical office buildings and other high cash flow offsite facilities.
At a minimum, therefore, Boards should know about the charitable trusts laws, Internal Revenue Code and local property tax and sales tax exemptions, and other rules administered by outsiders when making their program and property decisions. These regulators are not “owners”, but they can be very loud “silent partners.”