Nonprofit Connectors

Directors & Officers Insurance

Directors & Officers Insurance (commonly referred to as D&O insurance), is often overlooked by nonprofits for the simple reason they are uncertain whether or not they really need D&O coverage. Read this article noting compelling reasons to protect your organization. This should reassure you that D&O insurance has significant value to even the smallest nonprofit organization.

When a person becomes a board member, she assumes a level of responsibility for the organization and thus exposes herself to claims for not managing the organization properly. Even if the case brought against a board is thrown out, the organization still bears the brunt of having to pay the legal fees. Legal expenses could be brutal for a small organization and could even put them right out of business.
In general, D&O insurance includes coverage of an officer or director in the discharge of his/her duties. This includes but is not limited to:

• Any actual or alleged act
• Misstatement or misleading statement,
• Neglect or breach of duty
• Omission and/or error

As with all insurance policies, read the policy carefully to ensure it includes all the necessary components for your organization. Here is a checklist of issues to review when looking to purchase D&O insurance.

What importance does the business plan have in grant funding?

The business plan is the foundation for what you are starting; it gives you direction as to where you are taking your organization and it gives you milestones to measure your progress. The other very important thing about a nonprofit organization’s business plan is that you can use it for grant review as well.

Included within your strategic planning section and your marketing plan are key items that will appeal to funders. Here is where you’ll talk about business growth and development. This will be essential information for grant makers to review. More than likely, they will be reviewing these sections of your business plan to determine your other means for establishing financial stability. Funders are looking for organizations that want a hand up to grow and invest in, not an organization that is looking for a hand out and total dependence.

How to determine salaries for your nonprofit

You’re ready to start your great nonprofit. You have visions of community leaders from blocks around knocking at your door asking to participate in your great project. You know who your board members will be, and it is looking good. You’ve started on your marketing plan. Now, you are sitting down to put your budget together, and you happen upon the line 17 on IRS form 1023 “Compensation of officers, directors, and trustees.” What you put in that little box could make the difference between a particular funder giving you money or not; so, choose wisely.

As you plan out your nonprofit business plan, you’ll probably find several areas where you would benefit from
staff presence. It is a known fact that salaries and benefits are the highest allocation in any business’s budget. However, I would caution you against starting your nonprofit with lots of staff members. Most nonprofits operate with the support of volunteers for the first few years. Also, it’s more appealing to funders that their financial contributions go directly to supporting the projects of the organization and not just to salaries.