New Hampshire Bill Requires Board Training for Nonprofits

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January 27, 2012; New Hampshire Business Review | Some legislators in New Hampshire think that the leaders of nonprofits need a little unsolicited help. The New Hampshire Senate passed a bill requiring at least one member of each nonprofit board to go through training sessions emphasizing fiscal management and ethics. 

Nonprofits decried the legislation as contrary to the “live free or die,” anti-regulatory spirit of the Granite State, an ethos that crosses party lines. The bill was sponsored by Republicans but got Democratic support. The idea, however, came from the state’s Health and Human Services commissioner, who said it was necessary because “boards need to be trained to understand what their fiduciary duty is.”

The initial version of the legislation was pretty strict, requiring nonprofits that received a total of $250,000 in funding from government (at any level) to send all board members as well as the CEO and CFO for training every four years, or else risk getting cut off from public funding for two years. In the amended bill that passed, the state Senate requires only one board member to go through training, albeit every other year. At the moment, penalties for noncompliance are unspecified.

Democratic State Sen. Sylvia Larsen voted for the bill in committee but then denounced it on the New Hampshire Senate floor. Larsen explained that one reason for her about-face on the bill was her fear that the training requirement would have a chilling effect on people who might want to serve on nonprofit boards. But that’s not a persuasive argument, as most nonprofits, at least the larger ones, provide some sort of training for their board members, and most nonprofit management support organizations promote and market this kind of training.

But there are other compelling reasons to oppose such legislation, such as the burden on small nonprofits that don’t have the resources to pay for third-party training programs. Is the state going to finance a variety of multi-service organizations to deliver the mandated training? Is it going to help build the capacity of the trainers so that they can meet the demand?

But the real issue is equity. Why is it that nonprofits have to get this kind of training, but the owners, investors, and governing boards of businesses aren’t treated the same? After all, many of these businesses are functioning as vendors of goods and services to government, or as developers of real estate with government funding, or as recipients of various government tax incentives for economic development. What makes the for-profit sector so automatically more responsible about fiduciary and ethical matters than nonprofits?

Truth be told, there’s not a whit of evidence that nonprofit CEOs and board members are any less attentive to their organizations’ finances and programs than those in the for-profit sector. The New Hampshire legislation is one more indication that, against all logic, too many legislators have gone back into the skein of viewing nonprofits as less capable, less responsible, and less trustworthy than for-profit businesses. This inequitable treatment of nonprofits warrants the serious attention of national and regional nonprofit leadership organizations, else the pernicious message of the New Hampshire legislation will fester and spread. –Rick Cohen

  • Kelly Kleiman

    We don’t have to think nonprofit Boards are more feckless than their for-profit counterparts to believe that the public interest requires training of the former but not the latter. For-profit Boards lose only their investors’ money, while nonprofit Boards can through incompetence or carelessness deprive citizens of services and taxpayers of proper stewardship of their funds. But New Hampshire has chosen the wrong way to combat this difficulty: instead of mandating Board training, it should provide it at no charge to the agencies or Board members, the way the SBA provides expertise to small businesses. If the legislature isn’t prepared to back its mandate with cash, it’s interfering with rather than improving the operation of nonprofits.

  • Jose R Hernandez

    I could not agree more Kelly… The GOV is always suggesting ethics without essences. With the economy today board training should be mandatory…

  • Thomas Berger

    Right intent, wrong approach. Difficult to mandate and enforce, but absolutely needed. Larger organizations should have the staff technical expertise to provide solid financial training for every new trustee as part of their orientation, and then provide ongoing updates.
    Smaller organizations could look first to a current trustee with financial expertise or to the outside member of their audit committee with same. A local college or university professor is another possibility. Thanks to the NH legislature for recognizing the problem. Let’s try to find an appropriate solution.

  • Katherine Wertheim

    I disagree. You have two different points: that large organizations already provide this kind of training, and that small organizations can’t afford it. However, if an organization is receiving $250,000 in funding from the government, they’re large enough to afford training for a board member. I’ve been on ten boards of directors, including local, state, regional and national boards, and the majority provided no training at all in any aspect of the organizations work. None of them mentioned fiduciary responsibilities. Most board members don’t have umbrella insurance personally and don’t know how board service would impact their ability to obtain that insurance. Most don’t know their fiduciary responsibilities. You look at some of the multi-million dollar organizations that have folded recently, including Jane Addams Hull House and the Syracuse Symphony, and ask yourself if those board members were clear on their fiduciary responsibilities. I’ll bet they weren’t. So I applaud this legislation and I hope other states emulate it.

  • Michael Brand

    I doubt ‘training’ will make any difference in the performance of an organization. My question would be if the government is unhappy with the performance of a nonprofit receiving funds, what type of due diligence is done BEFORE awarding contracts or dispensing $$$.

  • Terry Fernsler

    I find myself in the extremely rare position of disagreeing with Rick on this one. Nonprofit boards are different from for-profit boards in two ways: they have a double bottom line, and they actually have responsibility for the organization, unlike a for-profit corporate board that most often simply rubber-stamps the corporate management decisions.

    I have seen so many board members who simply do not understand the roles and responsibilities of being a board member. When these members constitute the majority of a board, all hell can break loose. For example, I am aware of one nonprofit that recruited a CPA as a board member so that she would conduct the annual audit for the organization at a greatly-reduced rate (to paraphrase the late Mr. Rogers: Can you say conflict of interest? Sure, I knew you could)!

    I would love to see more nonprofits provide training for their board members. If a state government or some other sufficiently-endowed institution would provide it for the small and medium-sized nonprofits that typically cannot squeeze the cost into their budgets at a subsidized rate (to protect the public interests for which nonprofits are responsible), I would rejoice. My trepidation, on the other hand, is that most (or all) states are so narrowly focused on financial accountability these days that board training overseen by them might do little to solve most board and organizational governance issues.