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Examples of actual challenges
As noted in my last blog post, nonprofits need competent boards. When they don't have that, bad things happen. Real-world examples show how competence gaps affect nonprofits of all sizes.
Small nonprofit faces trying times
A community arts organization collapsed after its board replaced a seasoned executive director with an untested for-profit leader, without understanding the skills required to lead a nonprofit. The board reportedly lacked the sector knowledge to foresee risks or provide effective oversight. Lacking nonprofit management experience, the new executive reportedly made a series of strategic missteps (from unrealistic fundraising plans to alienating key staff). Within a year, finances and programs deteriorated, and the organization closed. This illustrates how a single poorly informed decision can be fatal in smaller nonprofits. Boards must ensure they collectively understand the nonprofit context or seek outside help before making such pivotal moves.
Mid-sized nonprofit faces the music
In 2023, Capital Public Radio in Sacramento faced a severe financial crisis after years of mismanagement. An audit revealed unchecked expansion spending and weak financial controls. Observers noted that CapRadio’s governance and financial oversight systems failed to catch warning signs. The consequences included lost jobs, cancelled programs, damaged community trust, and the loss of an independent board. Most board members eventually resigned, and the organization underwent major governance reforms.
Large nonprofit learns size doesn't matter
Even very large, well-resourced nonprofits can suffer from board competence gaps, often with highly public consequences. Such was the case when the NRA demonstrated how board inaction and lack of financial oversight enabled extensive misuse of funds. The NRA’s governance failures came to light in a 2020–2024 legal battle, where investigations revealed that top executives were engaging in egregious misuse of funds (luxury personal expenses, self-dealing contracts, and more) while the board failed to intervene. The legal action resulted in executive removals, reputational damage, and potential external monitoring. This case highlights that even large, well-resourced nonprofits are vulnerable when boards fail to exercise competent oversight.
Across these examples, common pitfalls include weak financial acumen, failure to heed expert advice, and excessive deference to executives. So what should your board do to avoid these pitfalls? I will address that in my next post.