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WORKSHOP
Legal and Ethical
Requirements of Nonprofit
Boards Building Better Boards
May 17, 2013
2:45 pm - 4:00pm
Diana Kern, Vice President
www.new.org © 2007-10 NEW (Nonprofit Enterprise at Work, Inc.), a 501(c)(3) nonprofit organization
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AGENDA
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1. Introduction to the Nonprofit
Landscape
2. Duties of a Nonprofit Board Member
3. The Work of the Board
4. High Performing Boards
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WHY SERVE ON A BOARD?
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Help an organization achieve its mission
Leverage existing or develop new management skills
Broaden your personal and professional networks
Demonstrate a commitment to your community
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THE NONPROFIT SECTOR
5 Source: The Independent Sector Website, 2012
More than 1.6 million nonprofits in the US
More than 13.5 million paid employees
More than 63.4 million volunteers
Three quarters of all nonprofits have annual expenses under $500,000
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•47,000 nonprofits in Michigan
•15,000 nonprofits in Southeast
Michigan
• 440,000 nonprofit employees
• Generate nearly $108 billion
per year in total economic
activity
• Nonprofit employment has
grown by 1.3% per year since
the recession
NONPROFIT LANDSCAPE
Source: Michigan Nonprofit Association 2009
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Why Do Board’s Exist?
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Gatekeepers of the Mission
• Program
• Financial
• Legal
• Stakeholders
Sustainability
Legacy
Trust - Empower – CEO Relationship
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STANDARDS OF CONDUCT
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“Board members need to
come prepared, rise to the
occasion, work diligently
as a group, and expect to be
intellectually taxed by complex
and consequential questions.”
Chait, Richard P., William P. Ryan and Barbara E. Taylor. Governance as
Leadership: Reframing the Work of Nonprofit Boards. BoardSource, 2005. P 180.
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REGULATORY ACTIVITY
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Federal and state legislation demands greater accountability in all sectors
Sarbanes – Oxley Act of 2002 (SOX)
Enhanced enforcement by the IRS
• Over 272,000 nonprofits lost their tax-exempt status in 2011
Senate Finance Committee hearings
• Panel on the Nonprofit Sector
Source: The Independent Sector Website, 2012
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STANDARDS OF CONDUCT (DUTIES)…
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Duty of Care
Duty of Loyalty
Duty of Obedience
Duty of Confidentiality
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PROTECTION AGAINST LIABILITY
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Prudent and careful oversight
Indemnification policy in bylaws
Director and Officer (D&O) Liability Insurance
Personal liability insurance (e.g., umbrella policy)
Transparency – Open Meetings
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THE WORK OF THE BOARD
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Board Operations
Strategic Planning
Resource Development
Oversight
Ambassadorship
Ethical Work & Best
Practices
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Board Members Skills
WORK WEALTH
WISDOM Which of
these do you offer?
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THE WORK OF THE BOARD
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Board Operations
Composition & Recruitment
Orientation & Education
Structure Effectiveness & Evaluation
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ORIENTATION AND EDUCATION
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Orientation
• Best if use a self-guided orientation checklist
• Educate, inform, clarify role and inspire!
• 90-day window
Educating the Board
• Provide reports on program and mission achievement
• External education on board roles and trends
• “How-to” topics, like fundraising, understanding financials, etc.
• Conduct regular assessments to determine board performance
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EFFECTIVE MEETINGS
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Efficiency
Attendance Strong
facilitation
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17 Source: BoardSource Nonprofit Governance Index 2012
56% Fundraising
38%
27%
23%
23%
79%
Finance/Audit
Governance/Nominating
Program
Marketing/Communications/PR
Planning/Strategic Planning
Executive
77% of boards have
written charters for committees
BOARD COMMITTEES
45%
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BOARD COMMITTEES
S • Specific
M • Measurable
A • Attainable
R • Realistic
T • Timely
Organize the work of the board
May be ad hoc or standing committees
• Non board members can serve on non-governing committees
Develop SMART goals for committees annually
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THE WORK OF THE BOARD
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Strategic Planning
Provides focus and establishes priorities
Maps out a path for program and resource development
Opens opportunities for innovation
Requested by funders and adds legitimacy
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STRATEGIC FILTER: MISSION
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The reason nonprofit boards exist is to ensure that the organization’s mission is achieved
The mission should be the primary focus when transacting board business
• Program development
• Financial priorities
• Strategic planning
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STRATEGIC SCREEN
1. Does this program or service fit our mission?
2. How will we pay for it on a sustained basis?
3. Who will benefit?
4. How will we measure its effectiveness?
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THE WORK OF THE BOARD
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Resource Development
Financial
Physical Human
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THE WORK OF THE BOARD
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Oversight
Financial
Legal
Program
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FINANCIAL OVERSIGHT
Setting up and monitoring key financial indicators
Ensuring adequate control mechanisms
Approving the budget
Overseeing the organization’s legal obligations
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What to Expect from your Organization
Periodic financial reports
Internal/interim statements
Annual Budgets
Variance analysis – actual to budget
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THE WORK OF THE BOARD
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Ambassadorship
Advocate for mission
Enhance public standing of organization
Speak as a unit
Develop marketing plan and brand
Maintain crisis management plan
See page
21,
Nonprofit
Board
Resources
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THANK YOU FOR PARTICIPATING!
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•Diana Kern
Phone: 734-998-0160
www.new.org
We thank our BoardConnect
funding partners: