Developing a Board of Directors

June, 2007NC-DOC

Capacity Building Training

Agenda

• Welcome & Introduction• What is a BOD?• Duties & Responsibilities• Recruitment of BOD Members• Retaining BOD Members• Board Operations • Question & Answer

What is a BOD?• A corporation, whether for-profit or nonprofit, is required to have a governing Board of Directors.

The laws governing corporations require that a corporation ultimately is accountable to its owners (stockholders in the case of for-profits and the public with nonprofits). That accountability is accomplished by requiring that each corporation has a Board of Directors that represents the stockholders or the public.

• Members of a governing Board have certain legally required (fiduciary) duties, including duties of care, loyalty and obedience.

• The phrase "Board operations" often refers to the activities conducted between Board members and can include development and enactment of Board bylaws and other Board policies, recruitment of Board members, training and orientation of Board members, organizing Board committees, conducting Board meetings, conducting Board evaluations, etc.

• The phrase "governance" often refers to the Board's activities to oversee the purpose, plans and policies of the overall organization, such as establishing those overall plans and policies, supervision of the CEO, ensuring sufficient resources for the organization, ensuring compliance to rules and regulations, representing the organization to external stakeholders, etc. The nature of Board operations and governance depends on a variety of factors, including explicit or implicit use of any particular Board model, the desired degree of formality among Board members and the life-stage of the Board and organization.

• Governing Boards can have a variety of models (configurations and ways of working), for example, "working Boards" (hands-on, or administrative, where Board members might be fixing the fax one day and strategic planning the next), "collective" (where Board members and others in the organization usually do the same types of work -- it's often difficult to discern who the Board members actually are), or "policy" (where Board members attend mostly to top-level policies). All of these models are types of governing Boards.

Major Duties of BOD– Provide continuity for the organization by setting up a corporation or legal

existence, and to represent the organization's point of view through interpretation of its products and services, and advocacy for them

– Select and appoint a chief executive to whom responsibility for the administration of the organization is delegated, including: to review and evaluate his/her performance regularly on the basis of a specific job description, including executive relations with the board, leadership in the organization, in program planning and implementation, and in management of the organization and its personnel and to offer administrative guidance and determine whether to retain or dismiss the executive

– Govern the organization by broad policies and objectives, formulated and agreed upon by the chief executive and employees, including to assign priorities and ensure the organization's capacity to carry out programs by continually reviewing its work

– Acquire sufficient resources for the organization's operations and to finance the products and services adequately

– Account to the public for the products and services of the organization and expenditures of its funds, including: to provide for fiscal accountability, approve the budget, and formulate policies related to contracts from public or private resources and to accept responsibility for all conditions and policies attached to new, innovative, or experimental programs.

Responsibilities of BOD

• Major Responsibilities of Board of Directors– Determine the Organization's Mission and Purpose– Select the Executive– Support the Executive and Review His or Her

Performance– Ensure Effective Organizational Planning– Ensure Adequate Resources– Manage Resources Effectively– Determine and Monitor the Organization's Programs and

Services– Enhance the Organization's Public Image– Serve as a Court of Appeal– Assess Its Own Performance

Legal Responsibilities• File Form 990 with the IRS and the State Attorney General's Office, Charities Division on an annual basis if the organization has more than $25,000

a year in financial activity (purely religious organizations exempt).

• Have an audit completed if total organizational revenue exceeds $350,000 in a year; file with the charities division of the State Attorney General's Office.

• Report change of name, address, or amendments to the Articles of Incorporation to the Secretary of State and pay fee for such changes.

• Make Forms 990 and 1023 available to the public.

• Report any Unrelated Business Income (UBI) to the State Department of Revenue and the IRS, and send tax payments with form 990T.

• Withhold taxes from employees, and send withholding payments to the IRS and MN Department of Revenue.

• Comply with laws that affect all employers including: ADA, OSHA, FLSA, FICA, COBRA, Family Medical Leave Act.

• Report any lobbying activities on Form 990, and register as a lobbyist if required by the State Ethical Practices Board.

• Give receipts to donors for contributions above $250.

• Collect sales tax on items sold by your organization, unless you are selling tickets to performances as a performing arts organization.

• Get court approval for distribution of assets.

• If the organization conducts charitable gambling activities, register with the gambling board.

• If the organization owns real property, pay property taxes or obtain an exemption from the county where the property is located.

• If the organization sends bulk mail, pay regular bulk mail rate or obtain a nonprofit bulk mail permit.

• Comply with the terms of donations; promises made to donors are legally binding. Funds given for specific projects or programs need to be kept separate.

• Comply with State law regarding conflicts of interest.

• Make sure any professional fundraisers register with the State Attorney General's Office, Charities Division; file copy of contract.

• Obtain city permits for all cities in which the organization actively solicits door-to-door by paid solicitors.

• Record minutes of board and annual meeting.

Recruiting Board Members

Personal Characteristics

• Ability to: listen, analyze, think clearly and creatively, work well with people individually and in a group.

• Willing to: prepare for and attend board and committee meetings, ask questions, take responsibility and follow through on a given assignment, contribute personal and financial resources in a generous way according to circumstances, open doors in the community, evaluate oneself.

• Develop certain skills if you do not already possess them, such as to: cultivate and solicit funds, cultivate and recruit board members and other volunteers, read and understand financial statements, learn more about the substantive program area of the organization.

• Possess: honesty, sensitivity to and tolerance of differing views, a friendly, responsive, and patient approach, community-building skills, personal integrity, a developed sense of values, concern for your nonprofit's development, a sense of humor.

REAP BOD Members

• Review the organization’s mission and strategic plan and be able to describe it clearly and succinctly to prospective board members.

• Effective boards are made up of a broad spectrum of knowledge, experience, and interests.

• Assess current board strengths and gaps in expertise before shopping for new board members.

• Prepare to be on the look-out for potential board members on a continuing basis.

• Show diligence to orient the board member to his or her new duties.

Recruitment Tools

• History of organization • Mission/purpose• Philosophy• Methodology (the way the organization does its work)• Programs/Services• Management Structure• Staff and Volunteer Roles• Current BOD

Retaining Board Members

The Board Manual

• Preferred Features – The manual should be well planned

(include essential items but not be a repository for everything)

– The manual should be organized (clearly marked sections and a table of contents).

– The manual should have pockets to hold brochures and similar items.

– All materials should be dated. – The manual must be kept current. – It must be updateable and allow for

materials to be added and removed.

– The manual must be easy to use. – It should be of a reasonable size

and weight so it can be brought to meetings and used.

– The manual may be prepared by staff, but it should be done with input by and in consultation with officers and directors. Board members should regularly evaluate its usefulness and provide suggestions for improvement.

• Contents of Manual– names of board members, their

biographies, terms of office and a statement of their responsibilities;

– a list of committees and task forces, with their terms of reference, time frames and membership;

– a brief written history of the corporation and/or a fact sheet about the corporation;

– Articles of incorporation and bylaws; – mission and vision statements; – Strategic plan; – minutes from recent board meetings; – board policies (e.g., conflict of interest,

insurance coverage, expense reimbursement);

– the prior year’s annual report and audit report;

– current annual budget and latest financial statement;

– banking resolutions and investment policy; – current list of major funders or partners

and/or stakeholder map; – organizational chart and staff information; – annual calendar; and, – promotional material and Web site

information.

Board Evaluation

• Attend no less than 75% of regular Board Meetings.• Chair and/or serve on a standing committee or special project.• Make a personal and if possible business contribution to the organization’s

annual operating needs.• Participate in or attend most of the program activities involving the

operation.• Arrange for and/or make an organization presentation to a civic club, church

group, business associate, or group of friends.• Make at least five person-to-person visits to individuals, foundations,

businesses, or civic groups to request financial contribution for the organization.

• Invite and accompany a friend or associate to visit the facility.• Recommend a potential candidate for Board membership to the Board

Development Committee.• Secure a volunteer, in-kind service or material goods for the organization.• Review and consider your capacity and willingness to make a planned gift or

bequest to the organization.• Secure at least ten new donors for the organization.• Actively assist with the special events of the organization.

Board Operations

Board Leadership

• Chair:– Oversee board and executive

committee meetings – Serve as ex-officio member of all

committees – Work in partnership with the chief

executive to make sure board resolutions are carried out

– Call special meetings if necessary – Appoint all committee chairs and with

the chief executive, recommend who will serve on committees  

– Assist chief executive in preparing agenda for board meetings  

– Assist chief executive in conducting new board member orientation  

– Oversee searches for a new chief executive 

– Coordinate chief executive's annual performance evaluation  

– Work with the nominating committee to recruit new board members  

– Act as an alternate spokesperson for the organization  

– Periodically consult with board members on their roles and help them assess their performance

• Vice Chair:– Attend all board meetings

  – Serve on the executive

committee   – Carry out special

assignments as requested by the board chair  

– Understand the responsibilities of the board chair and be able to perform these duties in the chair's absence   

– Participate as a vital part

of the board leadership

Board Leadership

• Treasurer: – Maintain knowledge of the

organization and personal commitment to its goals and objectives  

– Understand financial accounting for nonprofit organizations

– Serve as financial officer of the organization and as chairperson of the finance committee.  

– Manage, with the finance committee, the board's review of and action related to the board's financial responsibilities.  

– Work with the chief executive and the chief financial officer to ensure that appropriate financial reports are made available to the board on a timely basis.  

– Assist the chief executive or the chief financial officer in preparing the annual budget and presenting the budget to the board for approval.  

– Review the annual audit and answers board members' questions about the audit.

• Secretary:– Attend all board meetings

  – Serve on the executive

committee   – Maintain all board records

and ensure their accuracy and safety

– Review board minutes  – Assume responsibilities of

the chair in the absence of the board chair, chair-elect, and vice chair  

– Provide notice of meetings of the board and/or of a committee when such notice is required

Board Committees

• Establish committees when it is apparent that issues are too complex and/or numerous to be handled by the entire board.

• For ongoing, major activities establish standing committees; for short-term activities, establish ad hoc committees that cease when the activities are completed. Standing committees should be included in the by-laws.

• Committees recommend policy for approval by the entire board.

• Committees make full use of board members' expertise, time and commitment, and ensure diversity of opinions on the board.

• They do not supplant responsibility of each board member; they operate at the board level and not the staff level.

• Committees may meet monthly (this is typical to new organizations, with working boards), every two months, or every three months; if meetings are not held monthly, attempt to have committees meet during the months between full board meetings.

• Minutes should be recorded for all board meetings and for Executive Committee meetings if the By-Laws indicate the Executive Committee can make decisions in place of the board when needed.

Board Committees

• Ensure the committee has a specific charge or set of tasks to address, and ensure board members understand the committee's charge

• Have at least two board members on each committee, preferably three, but do not have a member on more than two committees

• In each board meeting, have each committee chair report the committee's work since the past board meeting

• Consider having non-board volunteers as members of the committee

• Consider having a relevant staff member as a member of the committee as well

• Committee chairs are often appointed by the board chair; consider asking committees members for a volunteer for committee chair

• If committee work is regularly effective and the executive committee has a strong relationship with the chief executive, consider having board meetings every other month and committee meetings between the board meeting

• The chief executive should service ex officio to the board and any relevant committees

Standing CommitteesPotential Standing

CommitteesTheir Typical Roles

Board Development

Ensure effective board processes, structures and roles, including retreat planning, committee development, and board evaluation; sometimes includes role of nominating committee, such as keeping list of potential board members, orientation and training

Evaluation Ensures sound evaluation of products/services/programs, including,

e.g., outcomes, goals, data, analysis and resulting adjustments

Executive

Oversee operations of the board; often acts on behalf of the board during on-demand activities that occur between meetings, and these acts are later presented for full board review; comprised of board chair, other officers and/or committee chairs (or sometimes just the officers, although this might be too small); often performs evaluation of chief executive

Finance

Oversees development of the budget; ensures accurate tracking/monitoring/accountability for funds; ensures adequate financial controls; often led by the board treasurer; reviews major grants and associated terms

Fundraising

Oversees development and implementation of the Fundraising Plan; identifies and solicits funds from external sources of support, working with the Development Officer if available; sometimes called Development Committee

Marketing

Oversees development and implementation of the Marketing Plan, including identifying potential markets, their needs, how to meet those needs with products/services/programs, and how to promote/sell the programs

Personnel

Guides development, review and authorization of personnel policies and procedures; sometimes leads evaluation of the chief Executive; sometimes assists chief executive with leadership and management matters

Ad Hoc Committees

Audit Plans and supports audit of a major functions, e.g., finances, programs or

organization

CampaignPlans and coordinates major fundraising event; sometimes a subcommittee of

the Fundraising Committee

Ethics Develops and applies guidelines for ensuring ethical behavior and resolving

ethical conflicts

Events (or Programs) Plans and coordinates major events, such as fundraising (nonprofits), team-

building or planning; sometimes a subcommittee of the Fundraising Committee

Nominations Identifies needed board member skills, suggests potential members and orients

new members; sometimes a subcommittee of the Board Development Committee

Research Conducts specific research and/or data gathering to make decisions about a

current major function in the organization

Questions & Answers