How Nonprofits and Board Members Can Respond to COVID-19
The COVID-19 pandemic is more than just a health crisis — it has had a ripple effect, impacting all of us and our work. As the world responds to this new threat, many nonprofits are struggling with how to help their communities while also trying to endure the crisis themselves.
We’ve compiled some of the most common questions we are seeing in our sector, answered by our Ask-an-Expert team, along with some of the most helpful resources we’ve found. While our Ask-an-Expert service is typically a members-only benefit, during this time it will be open for the entire community. BoardSource is committed to supporting board and staff leaders during this trying time, and we feel this is important information for every organization.
We encourage you to read what others in the nonprofit sector are doing to adapt to the COVID-19 on our stories page. We’re sharing your stories of success and innovation to celebrate resourcefulness while also providing a path for other leaders to follow.
Quick Access: Resources by Topic
Watch BoardSource on Facebook Live
Over the last few weeks, BoardSource has hosted nonprofit leaders from around the sector on a series of video chats on responding to COVID-19. We recorded each of the conversations and they are available for playback on our Facebook page.
Facebook Live Videos by Topic:
The Role of the CEO and Board Chair in a Crisis (with Anne Wallestad and Cathy Trower)
Nonprofit Legal Issues Stemming from COVID-19 (with Anne Wallestad and Gene Takagi)
Business and Contingency Planning (with Antony Bugg-Levine)
Fundraising Strategy (with Nigel Harris)
Mergers and Dissolution (with Gene Takagi and Nadya Shmavonian)
Board Meetings (virtual), Bylaws, Policies, and Procedures
Virtual Meetings Untangled (now a free download)
Nonprofit legal expert Gene Takagi joined BoardSource to discuss many of the legal issues nonprofits are battling as a result of the COVID-19 pandemic, including employment regulations, bylaws, and the CARE Act
Other Helpful Resources
Going Remote Overnight: Preparing for the Coronavirus (NOBL Academy)
Questions from the BoardSource Network
Q: As a nonprofit, how should we be responding to the current COVID-19 pandemic? Are there specific policies and procedures that should be put in place?
A: What a great question — in these uncertain times, it’s best to be as prepared as possible. Crisis management is difficult under normal circumstances, and with a crisis of this magnitude, it is even harder to predict what policies and procedures you should have in place. The Standards for Excellence Institute has created an ethics and accountability code for the nonprofit sector, which also provides great guidance on crisis planning and key policies that should be included or considered. Below are a few policies that you should consider adapting in times of COVID-19 or items that you could consider adding to existing policies.
You might want to review your sick time and personal leave. If you have not already done do, you will want to adjust this policy to reflect the requirements from the Families First Coronavirus Response Act.
Remote Workers Policy
By now, your organization probably has something in place, but a remote worker’s policy will be helpful in keeping your staff safe and ensure your business operations and services continue.
Nonprofits and their boards should already have internal control policies in place, but these will probably change in light of COVID-19. Things to consider include how to adapt your internal controls during remote work and social distancing. For more information on this, check out our Q&A page.
Programs and Services
A policy like this should consider how you will continue to provide services to those you serve. During COVID-19, this could include how the organization will address safety concerns and basic operational needs, as well as how to ensure you are giving accurate and timely information and instructions for those individuals and communities that need it. Consider how you will keep your employees and members safe, what this system will look like, and how you will communicate to staff, stakeholders, and members the change in services.
Communications/Social Media Policy
This would focus on your internal and external communications, particularly with staff, stakeholders, the board, and the community you serve. During this time, you might want to consider how you are providing information, including what is happening at your organization and whether or not you are sending out external resources to keep your community informed as the situation continues to evolve. For a more detailed look at what this policy can entail, reference the Standards for Excellence Institute guide.
With staff now working remotely, you should consider how you will safeguard your organization’s information. Additionally, this should cover what resources you will need to make remote working sustainable.
There are many other policies you can consider, like a resource development policy, but these are conversations you should be having with your board. You should look through the first resource I listed, compare it to policies you already have in place. It is possible that some policies might have to only be adapted to address COVID-19. You should engage your board in a discussion around what your organization needs in the moment, and what it will need in the future.
Q: Our bylaws say we should follow Robert’s Rules, but some of the meeting requirements seem very difficult to accomplish in virtual meetings. How do we follow our bylaws right now?
A: I see this as at least two questions: one about bylaws and one about Robert’s Rules of Order (and there’s probably a virtual meeting question in there as well). This may come as a surprise to a lot of people but your bylaws can be changed. And we’ll talk more about that in a second.
First, let’s talk about Robert’s Rules. The truth is, unless you have a very particular type of organizational procedure or mandate, you don’t have to follow Robert’s Rules, even though they have been updated for virtual meeting needs. For most 501(c)3 organizations there is no state law or statute that demands it and most organizations adopted Robert’s Rules out of a historical belief that it’s what they “should” be using. While Robert’s Rules can give you a roadmap to running a meeting and provide an easy way to memorialize conversations and decision making, they’re also incredibly cumbersome and complicated, particularly for smaller organizations. So much so that you would need a parliamentarian to truly follow Robert’s Rules, which means that you probably aren’t really following them, and are already outside of your bylaws. So let’s discuss getting those changed.
Please understand, we’re not lawyers, and we don’t give legal advice. So I’ll start by saying something very non-lawyerly: Don’t beat yourself up if your current situation has caused you to slip outside of operating within your bylaws. It happens more than any of us would like to admit. I’m not advocating that you should be, but there is a lot on your plate and these are challenging times.
When you are able to focus on a noncritical issue like this, your current bylaws should have a provision for amending them. If for some reason they don’t, make sure you follow any state provisions that may govern these rules. Then make the changes you need. During this process, you want to make sure you note things like:
how many votes you need to pass an amendment. For many organizations that number is two-thirds of the board.
ensuring you comply with all applicable laws to make all board members and any other necessary group aware of a meeting to discuss bylaw changes.
the differences between voting directors and voting members, if your organization has members.
Once you have made any necessary changes, create a plan for the future. This may include a plan to have task force or legal counsel review the bylaws periodically (perhaps every other year) to ensure that the bylaws still reflect standard practice and that there have been no changes to state laws or other requirements that would affect the bylaws. In addition, the bylaws should be reviewed whenever any governance problems arise that are not adequately covered by the existing provisions of the bylaws. Once you have made a change, ensure that all board members have a chance to review the new version.
I know for most people bylaws are not top of mind right now, but to give yourself the best amount of flexibility, it may be helpful to have a conversation about them as soon as you are able.
For more information on Robert’s Rules and why they may not be right for you, the Legal Center for Nonprofits may be able to help.
For more information on virtual meetings, check out our publication, Virtual Meetings Untangled. We are temporarily offering this publication as a free, immediate download.
– Andy Davis
Q: I’m the board chair of an animal shelter. Given the quickly evolving COVID-19 situation, I’m wondering if our executive committee should be meeting more often so we can make decisions faster since it’s difficult to get the full board together.
A: In these times of uncertainty, it can be tempting to try to make all of the organization’s big decisions in a smaller group like the executive committee for the sake of efficiency. In general, BoardSource cautions nonprofits to carefully consider whether they need an executive committee since all too often, they lead to disempowering the full board and creating only a core group of board members who are engaged. However, in this current crisis an executive committee could help the board stay abreast of the ever evolving situation more efficiently if handled well. You may indeed find that your executive committee wants or needs to meet more often, which is okay as long as you ensure that the executive committee understands its role and limitations and doesn’t try to supplant the rest of the board.
First, you need to check that both the executive committee’s authority and limitations are outlined in your bylaws. To avoid delegating essential powers away from the full board, your executive committee should not amend bylaws, elect or remove board members, hire or fire the chief executive, approve or change the budget, or make major structural decisions (e.g. add or eliminate programs, approve mergers, dissolve the corporation). For more on the benefits and limitations of the executive committees, check out this resource.
You may want to utilize the executive committee to act as a link between the board and the chief executive and facilitate decision making between board meetings. Even though the committee has special powers in the bylaws and can act on behalf of the board, the full board should always ratify decisions in its next meeting. If your bylaws do not include a clause on the powers of the executive committee, you may need to revise the bylaws (in accordance with the clause in your bylaws that outlines how to revise the bylaws) to include such a clause. Check out this resource on the dos and don’ts of bylaws.
One final note about executive committees — never let your executive committee replace the board. Sometimes when the executive committee is very active in making decisions, the rest of the board feels left out and disengaged. It is helpful at every opportunity to review the scope and necessity of the work of the executive committee. While it may seem easier or more convenient to leave a decision in the hands of the executive committee, that does not mean it is appropriate.
The full board is responsible for the organization and during these difficult times, so the full board needs to understand what is happening. All members’ leadership and experience can help support your chief executive, the organization, and the core purpose that your organization exists to serve.
Q: Our board has traditionally been terrible at meeting virtually so we stopped doing so. We have now held our first two virtual emergency COVID-19 meetings and things have not gotten better. How can I, as the chair, get my board to be as engaged as possible in these meetings?
A: Thanks for your question. I know this is a difficult situation, especially right now. We are all experiencing this differently and we all have unique challenges and issues to overcome.
What is not unique, however, is that for many organizations in the sector, our work cannot be put on hold. In fact, for many of us, our work is more important during this situation than it ever has been before. And while people love to malign and complain about meetings, the fact of the matter is, meetings are where the work of running our organizations gets done.
There are many reasons why a virtual meeting might not go as well as one hopes. However, I’d like to focus on what you — or whomever your meeting facilitator is — can do immediately. Leading a complex discussion and debate can be difficult for the board chair. In face-to-face meetings, a skilled chair studies board members’ body language and facial expressions and is able to react immediately to the mood of the room. In virtual meetings, the lack of visual cues — which can also be an issue in some videoconferences — means that the chair needs to learn different engagement strategies.
It is the facilitator’s responsibility to make sure that every element of a virtual board meeting is handled correctly and efficiently. You will have to be more assertive, organized, and highly focused than usual, without dominating the meeting’s airtime — and while juggling the tools of the virtual meeting platform. It is imperative to communicate to board members that they need to be just as engaged in discussion and prepared for decision making as they are when meeting in person. That may require a higher energy level on the part of the facilitator and clear instructions for everyone attending the meeting. The brilliant Beth Kanter has a blog post on the 9 Best Practices for Facilitating Engagement, that I think would be helpful.
In addition, it may be helpful to create a list of SOPs for board members so they can be ready when the meeting begins. The list can include items like muting the telephone and logging on early to check for any technical issues. This will allow you to start the meeting on schedule and use the full time to discuss important issues.
I also think it is wise to encourage participants to be on video whenever possible and use the computer screen to your advantage. Board members may find it hard to follow a complicated presentation without visual incentives. And, don’t forget to let that one person know that, no, no one cares that you look like you just got out of bed. These are uncertain times and we should all be able to see each other and connect in the most familiar ways possible even if we are physically miles apart.
Lastly, some of these issues will take care of themselves the more you meet. Board members want to do their best and with a little instruction and great facilitation, virtual meetings will continue to feel more natural and you will experience less frustration. Hang in there and keep at it. You’re doing great.
You can read more about virtual meetings here in our downloadable publication, Virtual Meetings Untangled. We are offering this publication as a free, immediate download during this time.
Q: Our annual meeting is coming up, and we are wondering if you have any templates for virtual annual meeting standing rules or standards?
A: Thanks for reaching out. Having to make this transition is hard, especially when you have to decide what makes the most sense for your board. We do not have a standing set of rules for virtual meetings, but we can offer some guidance on how to adapt your normal practices to a virtual setting. First, I would pull out your annual meeting standing rules and see what needs to be adjusted/amended to make virtual meetings effective. One of the main things you might have to adjust is how you vote. I would recommend you take a look at your state’s voting laws and your bylaws to see what they say about virtual meetings and voting. Board Effect has put together a resource that allows you to find your state, and see what’s allowed. For example, in Georgia, boards are allowed to hold virtual meetings and are able to vote, as long as all board members are able to hear the proceedings. This means that the board can meet by phone or video conferencing technology.
The board can also vote by email, however it must follow certain procedures. First, each board member must vote by email, and there must be unanimous consent — this protects a board member’s right to question the action or insist that the board discuss the matter. Remember, each state is different, and you will want to make sure your organization is following the laws of your state. We did not have a hand in the resource that I provided from Board Effect, and would encourage you to double check your state laws — you can probably find these on your state association’s website. You can find your state association on the National Council of Nonprofit’s website.
Annual standing meeting rules will be different at each nonprofit. My best advice is to follow those rules as best you can, but don’t get bogged down by them. Focus on making sure your virtual meeting is well facilitated and is following your state laws. Our board chair, Cathy Trower, wrote this great blog post on how to quickly adapt your meetings to a virtual setting. Other best practices we would recommend for virtual meetings include:
- Have everyone log on early to test the technology, and trouble shoot for errors
- If using a videoconferencing platform, have everyone be on camera. This helps keep the full board engaged and allows for the facilitator to be better able to adapt/react to board members’ responses and expressions.
- Using a platform that has a chat feature: Microsoft Teams, Zoom and Webex are all good options, especially if your meeting consists of voting and raising hands
- Have board members mute their microphones if they are not speaking
- Additionally, consider using a board portal, which can be helpful in tracking votes
While our first instinct is to adapt during a crisis like COVID-19, this could also be a time to reflect on your practices and rules. The other day my colleague Andy Davis said something that really struck me — “In times of crisis and chaos, the natural inclination is to move away from the traditional guardrails that good governance provides. When, in fact, this is a good time to shore up our governance practices and ensure that everyone really understands their roles and responsibilities.” I think this directly applies to your situation. Consider this: why not change or disrupt past practices? this is the time to reflect on what is best for our organization in this moment and get away from rules that we have followed simply because they have always been in existence. Now is the time for you to think about better meeting practices. How could your board meeting practices be changed to be allowed for better conversations, decision-making and inclusion of all of your board members? Consider checking out the following resources to incorporate generative thinking into your board meetings:
- Using Generative Governance Principles for Better Boardroom Conversations
- Strategic Board Meetings
- Board Culture and Meetings
Change is hard, but good. And, while none of us would ever want to be in this situation, we might just give our boards the opportunity to truly transform practices and allow us to let go of those processes that have been keeping our boards from moving from good to excellent.
The Role of the Board
Other Helpful Resources
Coronavirus (COVID-19) Resources: Governing in Crisis (National Association of Independent Schools)
Show Up: Your Role as a Board Member During a Pandemic (Cause Strategy Partners)
Dissolving a Nonprofit Corporation (National Council of Nonprofits)
Questions from the BoardSource Network
Q: We have two new board members who are scheduled to start their onboarding process next week. Any suggestions on how best to approach this, since we are all now remote? We are trying to avoid sending a lot of information over.
A: Thank you for reaching out. This is a great question and is just one example of how boards have had to quickly adapt to the new normal. With so many unknowns, and no end in sight, it’s smart to have a plan. Board orientation is essential for getting your new board members ready for active participation. Especially during times of crisis, you will need everyone fully engaged and ready to go. Going virtual poses a lot of challenges, and you will want to make sure that the individual leading the onboarding process is a great facilitator. Virtual meetings in general can be difficult and can feel even less engaging and cumbersome when one person does all the talking. Reading through this blog post on facilitating engagement, and adapting it for your on-boarding process might be helpful. Also think about breaking up the information — no one wants to listen lecture style for hours on end. While the board chair typically leads the process, think of ways that other board members or the CEO can get involved. While time is precious right now, and all of these items might not be realistic during a time of crisis, it may be helpful to consider the following to get new board members oriented to the work of board:
- Think critically about what a new board member needs to know in this moment to be an effective and engaged board member. This will drive the rest of the onboarding process.
- Instead of having a board mentor system, assign a new board member a small group of current board members. Suggest having them meet virtually via Zoom or another teleconferencing platform. This is a time for the new board member to ask questions and get a crash course on the work of the board.
- Explain what the organization is doing now, how that has changed from the way it has done things in the past, and why this is important.
- Discuss the board’s role in the organization’s crisis planning. This blog post we wrote about the board’s role in addressing COVID-19, might be a helpful read.
- Provide new board members with talking points for the organization, so they can have informed discussions.
- Host a virtual coffee break or happy hour for the full board. This ideally should be before their first board meeting. Let this be an opportunity for new board members to ask the full group question like, “what did you wish you had known before you joined the board,” or “what is the top priority right now, and what should we be focusing on?”
- Ask all board members to be on video during the next virtual board meeting, so new members can see their faces.
Onboarding should also include information about the organization. The chief executive is usually best suited to talk about the organization’s plans, programs, and finances. The CEO will be busy, but try and schedule a Zoom meeting for the new board member. It’s important that they get time with the CEO, so they can get the most essential information they need and can ask questions. Key board and staff members might also be particularly helpful in sharing stories about the organization. Reach out to old board members, and see if they are willing to share mission moments or advice.
I can’t imagine how difficult it is trying to plan an orientation during the midst of a crisis. Despite everything going on in the world around us, you are taking the time to make virtual onboarding the best possible experience for your new board members, and we commend you for this! Remember, onboarding is not a one-time thing. This is an ongoing process, and should not overwhelm your new board member. Also, don’t overburden yourself. We are all dealing with the effects of COVID-19 at work and in our personal lives.
Q: Hi – I am the board chair at a nonprofit whose mission is to serve the homeless youth population in our town. For the last few years, one of our main programs is handing out pre-prepared meals in a local park. Since the coronavirus outbreak, the organization has not been able to carry out this program due to social distancing measures and many volunteers needing to be with their families. As the board, what is our role in helping the organization adapt in order to achieve our mission?
A: We love seeing so many board members reach out for resources and information on how to support their organizations. As board chair, you play a special role in supporting the CEO. You are there to make sure they have what they need — you listen, provide feedback, and above all, make sure that the full board is engaged. These are uncertain times — and not one person has the right answer, which is why it is so important for the full board to come together in support of the CEO.
In a recent Q&A, BoardSource’s president and CEO, Anne Wallestad, said that right now, the number one mistake a board member can make is asking themselves how they would handle this situation. The board needs to be confident that the CEO is handling the situation in the best way possible. One way to help is by asking probing questions like, “how are you thinking about this,” or in the context of your situation, “how can we pivot, and still support our community?” The board should be curious, ask thoughtful questions, and let the CEO know that the board is there to support and advise them, help approve overall organizational policy, and provide oversight. It can be difficult to not have a leading role here, but supporting the CEO and then trusting they’re making the best decisions for the organization is critical.
Q: I am the executive director of a local foodbank. Over the last few months, the board and I have been discussing how to partner with other nonprofits in our community to help people with food insecurity. With the COVID-19 virus, we want to move even faster. How do I start to find potential partners?
A: I’m so glad to hear you and your board are on the same page about the need to work with other nonprofits to help those in your community most impacted by COVID-19. We are all being called to collaborate with each other to address this crisis. Nonprofits also need to be agile and flexible and move at a faster pace than ever before.
To start finding potential partners, do a scan of your community. What other nonprofits, government agencies, and corporate foundations are currently meeting food insecurity needs? Are any organizations meeting related needs like housing, unemployment, or childcare?
Other strategies for identifying partners during the COVID-19 pandemic might include:
- reaching out to organizations in your community with whom you already have relationships
- asking your funders who they think might make good partners in the community
- tracking your local and state media to find out which nonprofits, government agencies, and corporations have stepped up to deliver services in your neighborhoods
- reaching out to local and state nonprofit associations or resource centers to find out if they are building coalitions that you might join. Many are hosting networking calls this week and next, such as the Fort Collins Nonprofit Networking Group’s virtual “Nonprofit Networking: COVID-19 Panel”
- posting on social media about your search for potential partners to start discussing how you might collaborate
- hosting a virtual town hall or Facebook live event and inviting the community – you never know if a critical player might attend
Another great resource for finding potential partners are your board members. When working with the CEO, board members can play a valuable role in helping to identify and connect with potential strategic partners, in addition to helping think through a broader strategy.
Before reaching out to your potential partners, you and your board might consider the following questions identified in The Power of Possibility discussion guide, which includes some great resources on strategic alliances:
- What programs and functions are absolutely core to our purpose? What functions are necessary but not core to our purpose that could be stopped, put on hold, or outsourced to another organization during the COVID-19 crisis?
- Are there ways that we could outsource to or share certain functions with another organization that would be more effective in meeting our stakeholders’ needs? What are the potential benefits and risks of doing so?
Once you and your board have identified potential partners, you can initiate a conversation with the partners about your joint goals and explore whether you might:
- add or combine programs
- expand your scope, either through geographic or group-served expansion
- find efficiencies and ways to decrease overlap between organizations without an infusion of resources
Q: As the board chair of a nonprofit, I’m wondering if you have any advice for how I can best support our executive director during this pandemic? I see how hard he is working right now and I want to help lighten his load. Most of our board members are retired and could help out virtually.
A: First of all, the fact that you are thinking about wanting to help lighten the executive director’s load shows the empathy that executives hope for and need from their board chair. Your relationship sets the tone for the whole organization and the board. So thank you for caring about your executive director and being willing to use your leadership to gather the board to be helpful.
Here are a few ideas:
- Schedule a call with your executive director and ask for a standing meeting that meets their schedule. Ask them if they want to talk daily, every couple days, or weekly, and create a standing check in. Then make yourself available if they need to talk in between meetings or if an impromptu meeting is needed given the ever changing developments of this COVID-19 crisis. You should emphasize that you do not want to add to the workload but instead are looking for ways that the board can be the best partner possible.
- Work with the executive director to develop an agenda for the next board meeting and be sure to include time to share what is keeping them up at night, what their biggest accomplishments have been, and specific tasks the board could do to help them right now and in the next few weeks.
- Ask your executive director what you and your board could be doing to help with fundraising. So many boards are reluctant to fundraise for the organization, but it is a key board responsibility and as you’ve heard from us more than once, now is the time for board members to engage in fundraising like never before (with the direction of the executive director and/or development staff, if you have staff).
- Encourage your executive director to be open about any challenges, and remind them that they don’t have to be perfect. We are all finding our way through this difficult time and the pressure on executive directors/CEOs is heavy in the best of times and even more so now that we are in crisis.
- Offer to lend a sympathetic ear, share self-care resources, or help make connections for your executive director to other EDs that might be an emotional support to them. Many ED/CEOs are struggling with the worst kinds of decisions: whether to lay off or furlough staff, discontinue programs they are passionate about, watching vulnerable stakeholders no longer get the services they need all while being social distanced from their own family and friends or helping to care for and educate children or aging parents. It could be helpful for them to have other EDs or CEOs to talk with about these challenges. If you are a BoardSource member, they could access our Board Member Exchange to pose questions to other EDs or other nonprofit leaders in your mission area.
- Chief executives are also having to be leaders to their staff and help keep staff connected and engaged. Ask how you can support them or offer to share your own mission moments about what the organization means to you as a board member. One of our board members shared their board’s story which we will soon be sharing on our website, and it was so motivating for me to think about the work I’m doing to create resources for nonprofit boards.
- Be sure to highlight and celebrate the ED’s accomplishments. Did they write a great letter to a funder, send out clear updates to their stakeholders, or accomplish a program milestone? Taking the time to congratulate them and honor their service is a wonderful way to lift up your EDs right now and set an example for them to do the same with their staff. As my teenage daughter said to me yesterday, “I need you to set an example of positivity right now”.
- Make yourself available to the other board members too, so they aren’t tempted to contact the executive director for every piece of news or idea. You can help your executive director by answering fellow board members’ questions so the ED doesn’t have more emails to address.
- Be open and vulnerable yourself and share your struggles and successes with the ED. Showing up and being ourselves is what we all need at this time.
Q: Our board and chief executive have decided that the best thing for our board would be to extend all board appointments (including officers and the executive committee) for six months during this pandemic. What is the best approach to this extension?
A: Thank you for your question. This is one many boards and chief executives are probably also dealing with. During a pandemic like COVID-19, when there are many uncertainties and tough choices to be made, maintaining consistency might be the best option. This means that boards might have to decide to extend their board members’ terms as they oversee and lead their organizations through this crisis.
Under normal circumstances, if your board wanted to extend the terms of board members, the board would need to revise the bylaws to reflect this new term length. Most bylaws require a super majority or 2/3 vote to pass this change — you should follow whatever is in your bylaws as the process for amending bylaws. Given that the COVID-19 pandemic has caused boards to postpone meetings or move them online, many boards are not able to follow their bylaws to the letter or always achieve a quorum for meetings. In these emergency situations, boards are tasked with making the best decisions they can meaning, meeting virtually and making decisions sometimes without the required quorum or outside of full compliance with bylaws.
I want to be clear that I am not advocating for boards to not care about being in compliance, but board members are the fiduciaries and stewards of the organization, and in their duty of care, they are required to make the best decisions possible for their organizations. If the board finds that the best way to support the organization is for the board to extend their terms, then they need to have the flexibility during this crisis to make those decisions. This is where boards may need to access the emergency powers that are outlined in most nonprofit corporation laws.
These emergency powers were created for nonprofits to have the ability to act in the best interests of the nonprofit in the case of war, natural disasters or other emergencies. The COVID-19 is a pandemic situation that to me, constitutes an emergency. So, the best approach to extending board member terms at this time would be for the board to virtually meet and discuss the option of extending board terms as you have done, and then vote on this decision. For significant changes to the board’s operations, even during times of emergency, it would be ideal for you to pass this with a super majority or 2/3 vote. You will also want to clearly state in your board meeting minutes why and how you voted to extend board terms and explain how this is in the best interests of the nonprofit and its mission.
Thank you for your question.
Finances and Investments
Questions from the BoardSource Network
Q: Our organization, like many others, has suddenly gone remote. With everyone working from home, we are in need of information on how we can maintain fiscal controls. We have multiple controls in place to ensure our donors funds are handled responsibly that require two or more people. Are there templates or best practices in remote work environments? How do we alter the procedure of two people opening the mail together?
A: Thank you so much for reaching out to BoardSource. And, this is a great question. Admittedly, not a question where I am the upmost expert but we do have a few ideas and we have a VP of Finance, Joan Payne, who IS an expert so I reached out to her for advice. The portion of this question dealing with dual person mail controls was also recently asked in the BoardSource Exchange, so that could also be a good place to find information, and see how other organizations are approaching fiscal controls as they become remote.
The first thing to note here is that anytime there is a disruption to normal business procedures, organizations need to evaluate current operating norms to decide how the crisis could impact internal controls. I think after this situation, a lot of us will be spending time updating policies and procedures to allow for a flexible work environment. Maintaining a bit of flexibility in our controls, while ensuring they maintain their proper functionality is key in disruptive times. That being said, Joan had several short term and long term suggestions…
Immediate/Very near future recommendations:
- Most important — reach out to your audit firm, as they are familiar with and will have documented the organization’s internal controls. The firm will likely be able to make recommendations for both the short term and long term.
- Obtain a current and accurate list of all anticipated grant payments and other accounts receivables. Have at least two people monitor this and make sure it maintained and current at all times and electronically accessible.
- Reach out to these organizations that owe you money and send them instructions on how to pay electronically via ACH or wire. If you don’t have those instructions reach out to your bank for them. It’s a fairly standard request.
- If organizations say they have already sent you a payment via check to your office, offer to pay any stop payment fees and ask them to pay via ACH/wire.
- DO NOT forward mail to any staff person’s home address.
- Utilize technology where possible to monitor internal control processes. This could be things such as shared spreadsheets for cash receipts or using a “Zoom” to open mail if one person goes to the office for the mail.
- Think about as many short-term creative strategies that will serve as bridges until we are on the other side of this.
- If the process for checks to have two signers is an internal organization process rather than required by the bank, use technology to document the second signer’s approval such as email/google doc/shared drives, etc.
- Contact your normal vendors and ask to start paying them via ACH, on their website, or by credit card.
- If your bank requires two signatures on checks, some alternatives are:
- Utilize the U.S. Postal system to send checks between the signers
- Contact the vendor and ask to pay using an electronic method (credit card, website, ACH)
- Contact the bank and ask for a temporary change to the signature rules.
All of these short-term suggestions include making and documenting a plan as to how to handle cash receipts, cash disbursements, and payroll, as well as close monitoring of the execution of the plan. This may require individuals who are not typically in these processes to become more involved on a short-term basis. Having multiple people have access to the tracking of the day-to-day finances is critical at this time.
Invest in accounts payable technology like Bill.com or Mineral Tree. These have fantastic internal control procedures already built in, which are customizable for all sizes of organizations. These systems typically take a few weeks to a month to set up, but the benefit is well worth the effort, not only from an internal control perspective but also an efficiency perspective.
Thank you for your question. These are difficult times for sure. As noted above, use this time as an opportunity to learn from what worked well and what needs improvement, in order to set your organization up to be able to handle a crisis like this in the future.
— Andy Davis
Q: Since COVID-19 first came to the US, our CEO has been closely monitoring the situation. Unfortunately, we have had to cancel a lot of events, which means that we are not bringing in much revenue and can’t afford to keep staff paying out staff for the long term. Is there any benefit to keeping staff on full time for only a few weeks or should we reduce overall hours? What is the role of the board, and how can we support the CEO?
A: This is a great question. The challenges you’re facing and the questions you’re asking are similar to what we’re hearing from nonprofits across the country. We know that decisions like this are extremely difficult to navigate. While there are no easy answers, here are some thoughts that might be helpful for your board and chief executive to consider together:
Think about what you want to do, and what you can afford to do. What kind of financial impact would there be if you kept were to keep on staff members?
Boards are responsible for thinking long-term about what’s best for the organization’s mission and purpose, but that doesn’t mean that it should ignore the realities of the short term. Applying a long-term lens and then thinking through what that should mean for the short term is an important board role. Boards can support the CEO in their decision making by asking difficult questions.
If we’re unable to keep on full-time staff members for the long term, what is the chief executive’s recommendation on how best to approach the current staff situation?
This really depends on your organization’s circumstances, and ultimately, what the CEO thinks is best. There may be options, that while difficult, could be more beneficial to your employees in the long run. Ensure you understand local and state unemployment law or consider engaging with an employment lawyer to decide what would be in the best interest of the staff and the organization
We recognize that this might not answer all your questions, but we hope it provides some helpful context for your deliberation. We wish you the very best as you navigate these difficult times.
– Lindsay Tallman
Q: Our board has been discussing the impact this public health crisis is going to have on our revenue. We think it will be significantly reduced and we are worried about how we will be able to fulfill the programs that are still vital and pay the staff we need to implement these programs. Are we allowed to redistribute restricted grants to overhead or other programs than the program it was intended to fund?
A: Many nonprofits are in the same situation of trying to figure out which programs we can continue and how we will make up for lost revenues for the services and programs we are not allowed to deliver during this time of physical distancing and social solidarity — a term coined on NPQ’s #covidtownhall. While I am lifted by the creativity that is being used to deliver our own programs in innovative and creative ways, I am also worried about the nonprofits whose programs cannot be turned into virtual programming. As a sector, we should be asking ourselves: What are we to do when the funding for some of our key programs are restricted?
The simple answer might just be to reach out to our funders (whether private or government) and ask them if we can distribute the restricted grant differently. Whether or not it will be approved depends on a few factors: the individual funder, their thinking in this moment, and their relationship to your organization and its programs. You and your board can prepare for those discussions together before making this request by discussing how moving these restricted funds to the most critical financial needs of your organization will help your nonprofit meet your core purpose and even be more relevant than ever to your community in the short term and in the long term. As a sector, this is our chance to think about how we can pivot in times of crisis and deliver our programs and meet our communities’ needs in the most effective way. This is our opportunity to break old habits and move away from programming that isn’t aligned with who we are anymore. The board, as a governing body, can help us think through what do we truly need to do to meet our stakeholders’ needs from staff who design and implement these programs to the people who use and benefit from our nonprofits. A number of foundations are pledging to end business as usual and do what they can to support their nonprofit partners. Now is the time to work with your funders to decide how in partnership you can help your community. You may also want to check out these resources from Grantspace about what grantseekers can do during the COVID-19 crisis.
Q: I’ve seen a bunch of articles about how to build reserves and why they’re important but very little on the protocol for when it is time to utilize our reserves. I would assume it’s not just when an organization is low on cash, right?
A: Thank you for your question. It’s a good one. And, if I had a nickel for how many times I’ve heard someone over the last two weeks say, “Well, reserves are for a rainy day and it doesn’t get much rainier than this” I’d probably have three nickels.
The truth is, the reason you probably haven’t seen any guidelines on when or how to use reserves is because, at least where I’ve looked, there aren’t many. As noted, they generally should be used for an emergency or some sort of special purpose as opposed to any regular, on-going operations. Here is a great article from our friends at Propel Nonprofits that speaks to that.
Our current situation has given us a tremendous challenge in terms of evaluating reserves — not only because this crisis was unexpected and we couldn’t plan for it but also because, at least at this moment, we have no idea how long it will last. So, when thinking about using reserves, it is really smart to think about in the context of this uncertainty. I know you already are, but we have to make decisions about the usefulness of these reserves. Will they be used as a way to fund a short term deficit? Or, a new project that will create longer term revenue? This may be the best way to think of them, because I don’t know how realistic it is to think they will be able to be a bridge for the duration of this pandemic and the longer term financial impact on the organization.
Because of that uncertainty, it is important to understand what your current run rate is so you have an understanding of what your expenses extrapolated into the future means for your organization. You can find more on that in this piece from the incredibly smart folks at Nonprofit Finance Fund. Not only does having this information help you understand how long you can last, but it also keeps you from leaving yourselves with so few reserves that the organization would be dangerously fragile in the post-pandemic context. And, while I know this is a difficult conversation to have, organizations need to be careful not to spend every dollar that they have (whether in bank accounts or reserves) without understanding what their “close down” costs would be if things didn’t turn around economically. Said differently, if organizations use reserves to fund operations until they literally spend their last dollar, they will not only go out of business, but they will be leaving debts and obligations and making it impossible to give their employees a soft(er) landing via advance notice and/or severance. And you can avoid a truly terrible scenario, which is to leave staff members unpaid for work done. For more on this issue, check out this archived article from Blue Avocado.
You may need a thought partner here. This is absolutely an appropriate conversation for the chief executive to be having with the board. This will make sure that everyone is on the same page in the overall approach to making it through this crisis, but it’s also important because many organizations have reserve policies that require board approval for any use of reserves. I know these are scary times. And these can be scary conversations. But, it is always better to have the right knowledge and be prepared for how to handle any situation that may come, instead of fearing the possible consequences of not taking action earlier.
Q: Our nonprofit board has asked if we can use our capital campaign funds for operating expenses during this COVID-19 crisis. Do we need to ask the donors, and do we need special documentation or would a phone call suffice?
A: I’d guess many nonprofits find themselves in the middle or end of a capital campaign right now and are wondering if they can use those funds to keep their nonprofit running instead of opening a new facility. The short answer is, it depends.
During our Facebook Live event with Gene Takagi, he answered this question. Gene shared that if the capital campaign funds were restricted by a donor, then that restriction remains even during this COVID-19 crisis. You will need to contact the funder to see if they are willing to lift the restriction and allow you to use the funds for operating costs. Hopefully, most donors will be understanding and lift the restrictions, since it’s not the best time to put up a new facility when your existing facility may go under. If the donor made a restriction, you should always follow their instruction and wishes. You shouldn’t decide to ignore your donor’s wishes for both legal and public relations reasons. It’s really important that you preserve their trust even in these extraordinary times.
Gene also shared that if funds are designated as capital campaign funds by the board, then, legally speaking, they are not truly restricted funds, they are board restricted funds, meaning you can shift the intention of those funds. If that is something you are considering, the board should discuss this and have a vote that is recorded in the minutes. This will communicate how that decision was considered and voted upon
Now that we’ve established that restricted funds by a donor (rather than by the board) will require you to reach out to a donor and ask them to release the restriction, to answer your question about whether a phone call is enough or if you need special documentation, Gene shared that strict legal compliance would require that you have a formal contract that includes a signature with agreement to release the restriction. It’s probably a good idea to create a short (1-2 paragraph) form that includes gratitude for their donation and asks if they would lift the restriction and give permission for the funds to be used for operating costs. This could also include a place for an electronic signature. If needed, you can say that your accountant or lawyer require more documentation. You will want to keep the form simple and easy for your donor to use and to verify the email is from the donor for security reasons. The level of documentation may also depend on the size of the donation. I’m not giving legal advice here, but with a very small donation you may feel a phone call is all that’s necessary, but a much larger donation would definitely warrant a document with a signature from the CEO or higher level program officer to make it as formalized as possible.
I hope this information is helpful and I’d recommend watching the recorded Facebook Live even with Gene Takagi, as he answers a number of legal and funding related questions.
Crisis Communications and Planning
Remote Workers and Telecommuting Practices for Nonprofits (National Council of Nonprofits)
If You Are Afraid, Lead (Social Velocity)
Questions from the BoardSource Network
Q: As COVID-19 continues to spread and affect our communities, and more information emerges, how do you factor that into your communications planning and decide which resources are the best or most “neutral” to share with your community?
A: Thank you for reaching out to BoardSource with your question regarding best practices for sharing resources with your community. In truth, no one can predict what the next day, week or month is going to look like, or the information that is going to be released. But the board, in partnership with the CEO, should be continuously monitoring the situation and assessing any potential risks that might arise as the COVID-19 issue evolves. These are challenging times, and it is important for the board and staff to come together and develop a plan that will help the organization weather this crisis. When deciding what information to share, think about what information your organization wants to share, and choose the resources that are most relevant to what you do, or could affect the community you serve the most.
Everyone is getting inundated with resources on COVID-19. Take the time to determine which resources are most relevant for your community and share those. In terms of best practices in selecting resources and remaining neutral, you should share information that comes from reputable sources like the WHO or the CDC for updates regarding health. Likewise, make sure that the resources you find are not full of misinformation that could cause alarm. Right now your community needs you to be a leader in providing support and calm during the storm. Choose the resources from trusted organizations and institutions that you have referenced in the past. This will also help your organization continue to build the trust that your organization has developed over the years and truly help your community navigate this difficult time.
Q: I am the executive director of a small community foundation. Like many other nonprofits, we have had to move quickly in the past week due to the evolving COVID-19 crisis. We have a business continuity plan, but it is vague in certain areas and doesn’t reflect the steps we should be taking during a crisis. Do you have any resources or templates that can help?
A: These are difficult and uncertain times and we recognize that planning can be hard, especially with so many unknowns. Business continuity plans (BCPs) are an essential part of an overall risk management strategy and are extremely helpful in allowing the organization to remain operational during a crisis. Ideally, a BCP covers all aspects of operations, and involves input from most personnel, depending on the size of the organization. This type of planning helps ensure staff safety and should address how critical functions will be managed if staff are required to telework. According to the Nonprofit Risk Management Center the four building blocks of a BCP are:
- A communications plan including who you are reaching out to, how you do so, and what you say
- A list of the most essential things your organization needs to keep doing as you weather this storm (these can be as simple as processing payroll or moving to a remote workers policy).
- Identifying which programs and services you simply can’t continue during this period. Within the context of COVID-19, ask yourself which programs could put your community at risk.
- Finally, an understanding of and plan for how you will resume normal business.
These building blocks are the beginning, but you can read more about BCPs through the Nonprofit Risk Management Center. The Emergency Network of Los Angeles has also created this fantastic and comprehensive planning guide, which is a great resource for long-term planning and includes information on conducting a business impact analysis.
In terms of emergency and disaster planning, the Nonprofit Center of Northeast Florida has compiled a list of great resources that can help you create a response plan for dealing with and planning for disasters. The CDC has also released a resource that provides guidance for businesses and employers on how to plan, prepare, and respond to COVID-19.
Thank you for the work you are doing and the measures you’re taking to support your community. Remember, you are not alone.
Q: Hi, your Q&A about creating a business continuity plan (BCP) made me go back and look at our plan that really only focused on technology. I promised I’d collect a number of templates to share with my board. Do you have any additional templates? I really liked the one from the Nonprofit Risk Management Center but could use some more.
A: First, don’t beat yourself up about not having a thorough BCP in place. It’s not too late to create one now. These times are a good reminder for a lot of us where we may want to have certain policies and practices in place. As we’ve discussed in this space before, BCPs are a crucial part of an overall risk management strategy and are helpful in allowing the organization to remain operating during a crisis.
I’ve come across a few new resources on BCPs for you. You may wish to check out, VolunteerPro’s article on nonprofit emergency plans, and here is the Nonprofit Risk Management Center article on BCPs that you mentioned. It lays out four steps for creating a BCP including: reaching out to all of your stakeholders, making a short “must do” list and do it, shuttering and scaling back, and planning around resuming operations.
You may also want to check out Nonprofit New York’s business continuity and disaster recovery plan template that they have temporarily made free to everyone. While the chief executive is the one leading the business continuity planning, the board can contribute by reviewing the plan and engaging in scenario planning with the chief executive in the process of creating the plan. Developing a BCP for the organization is the type of leadership that our nonprofits need right now.
Q: I’m a board chair of a small nonprofit and I am working with the chief executive on a telework policy for our staff. Just wondering if you had any advice for us?
A: Thank you for reaching out to BoardSource with your governance question regarding teleworking policies. We recognize that this is a challenging time, and know all of us working at nonprofits are trying to figure out what’s best for our organizations and staff.
As CEOs begin to develop this policy, they should be considering whether the organization has systems and technology in place that will allow business to continue, staff to have access to necessary files, and a platform for efficient communication. When organizations become remote quickly, it can be difficult for staff. To help make the transition easier, consider:
- Utilizing videoconferencing technology for meetings and weekly check-ins
- Setting expectations with staff members
- Training managers on how best to lead virtually
- What technology or programs make the most sense for your organization
- How you can support staff who may also have children at home
You might find this resource on moving to a remote worker’s policy helpful. Within the context of the COVID-19 crisis, NOBL Academy created this great resource about the implications of going remote overnight, which covers the policies and systems that be most beneficial as a nonprofit makes this transition. This teleworking policy template may also assist your organization in drafting its own.
Remember, as you work in partnership with the CEO, he or she is ultimately responsible for decisions related to staff, including moving to a teleworking policy. The board, however, should understand the teleworking policy and provide any necessary feedback.
We hope you find these resources helpful.
Q: Board member here. What can I do to make sure I have the most relevant talking points for my organization? What should be included?
A: Board members should always have the information they need in order to have an informed conversation about their organization — this is especially true during a crisis. And yet, during a crisis, everything changes. What you would have said about your organization a month, a week, or even a day ago may suddenly be outdated. It’s important that the board chair and CEO keep the rest of the board informed about any key decisions so that you and your fellow board members can speak knowledgeably about your organization. This means ensuring the board has the information it needs to be productive in meetings and keeping your board members informed between meetings. However, the board must speak with one voice, as it is only an authority as a collective body. As the COVID-19 situation develops, the board needs to be aware of things like programming cancelations, a remote workers’ policy, health and safety precautions for staff and stakeholders, and funding and financial changes and how to discuss them outside of the boardroom. Board members also need to know who serves as the official spokesperson for the organization, so that they can direct questions to that person if necessary.
At this time, the board chair and chief executive (or other board members delegated by this team), should develop a set of talking points for your board members. Each board member can then make these talking points their own. They will connect to these points differently and adjust for different audiences.
In this time of COVID-19, you might reframe past talking points to reflect what your board is doing now, and how that is different than what it has done in the past.
- What drove you to serve on this board, and how are you connected to the mission? (Why is this organization all the more essential during this pandemic or how is it supporting other organizations or individuals that are critical to this time?)
- Why should someone give to your organization? (Why is giving to your organization so important during this pandemic?)
- What does your organization do? Think about how your organization has adapted your programs and services to be reflective of the current needs of the community.
- With whom does your organization work? Who are its customers and clients? How are they affected by COVID-19, and why do they need your support?
You may also need to talk with board members about how they will engage with social media at this time to ensure that you have a consistent yet personal message.
We know that things are hard, and it can be especially difficult to always have the most recent and up to date information, which is why open communication between the board and CEO is so necessary. As the COVID-19 situation rapidly evolves, continue thinking through the questions above and reflect on how you might talk about your organization.
Fundraising and Philanthropy
Funding for coronavirus (COVID-19) (Candid)
Questions from the BoardSource Network
Q: Should the board actively participate in fundraising activities during this time? We want to be sensitive to the COVID-19 situation, and would like some guidance on if/how we should approach fundraising.
A: Thank you for this question. This is a good one — one which a lot of nonprofits are struggling with right now. We recognize that these are difficult and uncertain times, and each of us is trying to decide what makes the most sense for our organizations. But I want to reassure you — the work you do matters. Right now, fundraising might seem impossible, especially as large events are canceled and social interactions are discouraged. But fundraising isn’t just about asking for donations, it’s also about cultivating and maintaining relationships. With so many unknowns, especially the future of the economy and fundraising, this is the time to start thinking about what the board can do now. So yes, to answer your question, you should still fundraise but that might look a little different, because fundraising isn’t just about asking for donations.
As a whole, the board’s role in fundraising includes the responsibility to ensure the organization has the resources it needs to fulfill its mission and goals. However, each person serving on the board is also responsible for several additional things individually, such as making a personally significant donation, being involved in fundraising strategies or tasks as needed, and acting as an ambassador for the organization. Penelope Burke wrote this fantastic blog post on fundraising during a crisis, in which she argues that this is the time for organizations to build trust with their donors. Boards can do by:
- Acknowledging that COVID-19 affects everyone, including donors
- Offering sincere gratitude for any gift
- Having board members and the CEO reach out to donors with whom they have influence — this can be done by virtual introduction or over email
In the last few weeks, organizations and individuals across the nonprofit sector have been providing tips on how to keep fundraising efforts from stalling during COVID-19, and what fundraising activities organizations can do from home. As we move into another week of self-isolation and remote working, boards should consider these fundraising options:
- Check in with your donors — see how they are doing and ask if they need anything from you
- Practice stewardship — send thank you notes or emails thanking all past donors for their support and letting them know exactly how their donation impacted the organization
- Consider hosting virtual events like online auctions — this can be adapted to each individual nonprofits’ needs, but should try to create an intimate setting for donors to gather virtually
- Use social media — even if your cause is not directly related to COVID-19, you can still share stories about why your organization and community are so important
- Direct donors to your giving page by highlighting a story or mission moment
- Acknowledge donors either via social media, a blog post, or video
- Keep your community as updated as possible — this includes your donors
Remember, everyone is going through the same crisis. You are not alone. As we think about how COVID-19 will impact our fundraising goals and budgets. To weather this storm, we want to make lasting relationships with donors, and must be thoughtful in how we reach out.
Q: Our organization receives membership fees for use of community recreation facilities, however our facilities have had to close due to COVID-19. Can the unused portion of membership fees be donated by the member instead of being issued a refund? Is this deductible as a charitable contribution under IRS rules?
A: Thank you for reaching out to BoardSource with your question. I am sure that many organizations are asking themselves similar questions. I reached out to our VP of finance, Joan Payne, who said if the member was to donate this unused portion of their membership fees, there would have to be written communication between the parties that the intention of the member is to donate these funds to the organization with no expectation of services or use of the facilities. So, the answer is most likely yes, but you should consult with your CPA and/or attorney to make sure you have the appropriate documentation and language that will allow for the funds to be a treated as a donation under the IRS rules. Check out these resources from the IRS that offer information on charitable contributions: https://www.irs.gov/taxtopics/tc506
Chief Executive Support
Other Helpful Resources
Tough Times Call for Tough Action (SeaChange Capital Partners)
Questions from the BoardSource Network
Q: I’m an executive director and I’m really struggling. I know everyone is trying to whether the storm, but I’m finding it difficult to get assistance/feedback from my board and board members. How can I be supportive of them as volunteers, and give them the time they need, while also moving forward with supporting my organization and the community it serves?
A: Thank you for reaching out to BoardSource. I hear you – this is hard. These are very difficult and uncertain times for all, and remember, you are not in this alone. The first thing you want to do is get your board chair (or another prominent board member) engaged. You need a partner on the board that can help communicate the needs of the organization. Someone to remind board members that they have a specific fiduciary duty — the duty of care — to support the organization, especially in times of crisis.
Another thing that might be helpful is to, in partnership with the chair, make very specific, actionable asks of the board when you see that there is someone who can help with something and/or when you need a specific action from the board as a whole. When people are stretched, specificity and action-ability really matter. For more information, which out our blog post on the board’s role in times of crisis.
Q. During this COVID-19 crisis my very engaged community foundation board members are emailing and FaceTiming me (I’m the CEO) constantly with resources they’ve read, potential grantees we should be funding, requests for updates on our financial projections, etc. How can I keep my board engaged and still have time to do my job?
A: I can imagine you are getting pulled in many directions right now. As the CEO of a community foundation, you are the frontlines of making sure nonprofits are funded to do the critical work your community needs. It’s great that your board members are excited and want to help the organization, but it sounds like even with the best of intentions, they are adding to the stress and could be veering into micromanagement — something that can accidentally happen in times like this. Right now though, we need boards to be a calm, supportive body for the CEO. During this crisis, we may also need to them to hang up their board hat and help out as volunteers for the organization. When we need board members to engage as volunteers, we need to be very clear that this is the role they are playing and that it is a time limited task.
Our board chair, Cathy Trower and our president and CEO, Anne Wallestad just shared their perspectives on how boards can be most supportive of their CEOs at this time of crisis in a Facebook Live interview. Cathy made the point (11:30 mark) that now is the time for board chairs to use their leadership role to keep the rest of the board informed and steer them away from interrogating or micromanaging the CEO. Board chairs can do this by asking the CEO what specific tasks that board members could do to be the most helpful. The board chair can then communicate this to the full board.
So I would encourage you to reach out to your board chair and share with them what you need from the board. If you don’t currently have this kind of open dialogue, now is the time to build that type of relationship and discuss how you want to communicate with the board chair and the rest of the board. It’s also a great opportunity for both of you to find out how you are each doing personally and share how the staff is experiencing this crisis. It can be very lonely for chief executives at the best of times, but it is probably even more so now when there are so many unknowns and tough decisions to be made about how to keep our nonprofits and communities safe. A strong, supportive partnership between the board and the CEO is essential right now. I’ve also included some resources for foundations below:
Council on Foundations: https://www.cof.org/news/external-resources-responding-covid-19
Council of Michigan Foundations: (includes Q&As related to how community foundations are helping their grantees during the COVID-19 crisis) https://www.michiganfoundations.org/covid-19-resource-central
National Center for Family Philanthropy: https://www.ncfp.org/collection/covid-19-coronavirus-resources/
Grantmakers for Effective Organizations: https://www.geofunders.org/about-us/perspectives/137
COVID-19 Legislation (CARES Act, PPP, Relief Funds/Resources)
Nonprofit legal expert Gene Takagi joined BoardSource to discuss many of the legal challenges facing nonprofits as a result of the COVID-19 pandemic, including the CARES Act
Paycheck Protection Program (PPP) Application Form (U.S. Department of the Treasury)
Paycheck Protection Program (PPP) Information Sheet (U.S. Department of the Treasury)
Loans Available for Nonprofits in the CARES Act (Public Law 116-136) National Council of Nonprofits
CARES Act: How to Apply for Nonprofit Relief Funds (Independent Sector)
Coronavirus Aid, Relief, and Economic Security Act CARES Act (Pub. L. 116-136) (National Council of Nonprofits)
Coronavirus and COVID-19 Funds (Giving Compass)
Nonprofit Relief Task Force (We the Action)
Crisis Funding and Debt: What Organizations Need to Know (Nonprofit Finance Fund)
Funding for coronavirus (COVID-19) (Candid)
Questions from the BoardSource Network
Q: Hello! We are looking for more information about the PPP and EIDL loan programs. We are wondering what the implications for this would be for our nonprofit if the loan does not get forgiven. Thank you for your help!
A: This is a great question — in uncertain times like these, it’s important to understand all the implications of taking on a loan. To begin with, the Paycheck Protection Program (PPP) loan can be used for payroll costs, including benefits, interest on mortgage obligations, rent, and utilities. The Treasury Department has created this fact sheet, which explains what is considered payroll costs. It also covers who is qualified, where you can apply, and what documents you will need. According to this fact sheet, PPP loans can be forgiven if a nonprofit:
- Uses the loan to cover payroll costs, and most mortgage interest, rent, and utility costs over the eight-week period after the loan is made
- Maintains employee and compensation levels
The fact sheet also says that because of the high demand for loans, in order for the loan to be forgiven, only about 25% of the loan proceeds can be used for non-payroll expenses. If you used the loan to cover anything other than what is mentioned above, then you will be required to pay back part of the loan. Additionally, you will be required to repay part of the loan if you:
- Reduce the amount of full-time staff you have on the payroll
- Cut wages by more than 25% for any employee that makes less than $100,000
- Cut staff between February 15 – April 26, and those individuals have not been hired back by June 30, 2020.
If you do end up having to repay part of the loan, it will have a 1% fixed interest rate. The Treasury department has also put together this FAQ document, which you might find helpful.
The Economic Injury Disaster Loan (EIDL) is a little different. Right now, this low-interest loan is available to small businesses and nonprofit 501(c)3s, and like the PPP loan, it can be used to cover payroll costs, in addition to fixed debts and other costs the nonprofit is unable to cover. The interest rate for the loan is 2.75% for nonprofits, and the first payment is due in 12 months. The NEO Law Group has a great page that summarizes the EIDL and the PPP. This website can also provide more insight on whether or not this loan can be forgiven. As the COVID-19 pandemic continues, more information is coming out, and I would recommend monitoring the SBA website for more information. Finally, this fact sheet can probably answer many of the follow up questions you might have.
In your question, you asked about the implications of taking out these loans. I would recommend thinking critically about whether or not your nonprofit is able to take on this type of debt and which loan is best for your organization. Right now, it seems like you can apply for and use both loans; however, the proceeds from each must cover different expenses. While there is the possibility that the PPP loan will be forgiven, you can’t count on it and would have to follow the guidelines. There is also no certainty that the EIDL will be forgiven. I would recommend thinking deeply about whether or not your nonprofit can take on a loan payment of any size. In terms of taking on a loan, consider:
- Do you already have debts or deficits, and what would it mean if you could not repay this loan?
- When will the organization be able to offer programming again, or have any type of revenue?
- The long term — if you are taking on a loan to cover payroll costs, will you be able to continue these costs after the eight weeks?
- Does your board support this decision? Why or why not?
- The organizations projected cash flow — I know it is hard to project with everything being so uncertain, but do you have a system in place for tracking it?
Finally, this a decision that only your organization can make. We are not a legal or financial institution, and you should continue to research and read about the CARES Act and both of these loan options. We cannot offer any recommendations, and would also suggest reaching out to your lawyer and accountant to discuss the possible implications for your nonprofit.
Q: I heard the Paycheck Protection Program (PPP) loan application was opening on April 3. What do I need to know? Where can I find help on who is eligible, how the loans can be used, what documentation we will need, and where to find the application?
A: Thank you for reaching out. This is a great question, and one that I’m sure many organizations are thinking about as well. The application opened on April 3. There is a limited amount of funds, and you will want to apply as soon as you can. The PPP loan can be used to pay staff and operating costs for two months — this includes full-time and part-time staff. It is possible to secure full loan forgiveness under certain circumstances, which you can read more about in the resources below. To be in the best place possible for submitting your application, we encourage you to:
- Read as much as you can about the CARES Act and the PPP loan. I would recommend looking over this resource from the National Council of Nonprofits, as it gives a good overview of the PPP loan and its requirements. This includes what the loan can be used for and what qualifies as payroll costs. The NCP has also released this helpful webinar that covers what the federal relief bills mean for nonprofits.
- Find out if you are eligible for the loan. To apply for the PPP loan, you must have been in operation on 2/15/2020 and had paid employees and/or paid independent contractors. This loan is available for charitable nonprofits or 501(c)3s with 500 or fewer employees — depending on the degree of control of the parent, this number must include employees of affiliated nonprofits.
- Compile the list of documents you will need for the application. Independent Sector has compiled this list of documents you will need to apply for the loan.
- Reach out to the bank with whom you already have a relationship. Loans will be processed through your local financial institution. The SBA website has put together this list of approved lenders.
- Submit your application. You can find the application here.
Right now, we cannot offer guidance on what is considered payroll costs — different attorneys are reading the application differently. We would recommend contacting your lawyer, if you intend to use the funds to pay individual contractors. Individual contractors themselves can choose to apply for a PPP loan for themselves as well, and will be able to submit an application on April 10. For more information on how to apply, click here. We The Action and their Nonprofit Relief Task Force is also standing by to advise organizations on how to apply, click here for more information.
Q: I’m a board member for a community theater organization. Do you know of any places that nonprofits like us can do research on how to access relief funds?”
A: Thank you for reaching out to BoardSource during this difficult time. This is a great question, and one that has been on our minds since the CARES act was signed into law last Friday. In terms of arts organizations, as stated in the legislation, there is $75 million that is intended to assist nonprofit arts organizations.
The National Endowment for the Humanities will also be provided with $75 million to assist the humanities. Details around the application are still being finalized, and you should keep checking the National Endowment for the Art’s (NEA) website for updates. The act also states that 40 percent of funding will be directed to state and regional arts agencies. If you have not already done so, consider checking your regional and state arts organizations on the NEA website. I know that is not a perfect answer, but in the meantime, I’d recommend researching as much as you can about what the CARES act means for the arts sector and how the arts sector as a whole is responding to COVID-19. Below are a few resources that might be worth checking out:
- What the $2 Trillion Stimulus Means for the Arts, Struggling to Stay Afloat
- Metropolitan Museum Launches #CongressSaveCulture Campaign
- U.S. Movie Theater Owners Applaud Senate Passage of Relief Package
- Up-to-date news and resources for the arts and culture field by Americans for the Arts
While you wait for information from the National Endowment for the Arts and your state and regional arts organizations, consider looking at the Candid’s web page that has a continually updated list of funds that were established in response to COVID-19. Also, you may wish to access this great list that focuses on grants and resources for artists and the art sector. GrantSpace by Candid also created this web page that provides links to emergency financial resources.
For others who may be reading this and want to know what the CARES act means for non-arts related nonprofit organizations, this helpful piece by the Nonprofit Times — and this one by the National Council of Nonprofits — is a good place to start.
Thank you for your question.
Q: Our nonprofit has never taken on any debt, but with the current crisis, we are evaluating all options, including some of the federal assistance programs under the CARES legislation. Our board members want to understand what their individual legal or financial liability would be if our 501(c)3 takes on debt and then subsequently defaults on that debt in the future (not planning on defaulting, but the board wants to understand all possible scenarios). I know you can’t give me legal advice but, we are hoping you can give us some insight into personal liability of board members if each their duty of care, but the organization still became insolvent and was unable to repay its debts.
A: Thank you for your question. Nonprofits are forced to deal with many difficult decisions during a crisis, like taking on a loan in order for the organization to continue operating and serving its community. You might have been the first to ask us, but please know that you are not the only one contemplating this question.
While the CEO and staff are responsible for the day-to-day operations of the organization, it is the board who is ultimately responsible for governing the organization and is legally accountable for its actions. However, if you are incorporated as a 501(c)3, you have limited liability protection. This means, that if the board does its due diligence and acts in compliance with its legal duties of care, loyalty, and obedience, then the individual assets of board members are protected. You can also add protection for the board and executives by purchasing directors and officer’s liability insurance.
This does not mean however that board members are never at risk for being held liable. Nonprofit Accounting Basics and The Balance have both provided great overviews of when board members can be held liable:
- If the organization fails to pay federal payroll taxes that are owed
- If a board member themselves, guarantees a loan or other debt for the nonprofit and then defaults on that loan or debt
- If a board member engages in a conflict of interest, and directly benefits from a transaction, then they will be subject to excise taxes, which you can read more about at Nonprofit Accounting Basics
- If a board member engages in fraudulent activities
As noted earlier, board members may be protected if they show they have fulfilled the duty of care, loyalty, and obedience. They can do this by:
- Exercising reasonable care when they make a decision as a steward of the organization
- Not using information obtained as a member for personal gain, and acting in the best interests of the organization
- Obeying the law and the organization’s internal rules and regulations
As you mentioned, we are not able to give specific legal advice, but we urge you to consider reaching out to your nonprofit’s lawyer for more information. These are challenging times, and it’s great to hear that you and your board are exploring many different options and engaging in scenario planning to navigate this crisis.
Share Your Story
No organization is alone in facing the challenges of COVID-19. All nonprofits address changing environments in their own way, and we want to hear how your organization and board are responding. We’d like to share your stories of success and innovation to celebrate resourcefulness while also providing a path for other leaders to follow.
If you are interested in participating, please share your story using the form linked below. We will post as many as we are able, so please check back soon for more information. Our hope is that this collection of stories can spark different thinking and serve as an uplifting reminder of the incredible work the nonprofit sector does every day.