All records, books, and annual reports of the financial activity of
the corporation must be kept at the principal office for at least
three years after the closing of the fiscal year and must be available
to the public for inspection and copying during normal business
hours.
Additional Guidelines for Maximum Board Effectiveness
It is recommended that the board actively and enthusiastically help
the executive director to raise and manage the organization's funds.
The extent of the agency's ultimate success and effectiveness will
be a direct reflection of the board's level of involvement in fund
raising, resource management, public relations, and leadership development.
It is recommended that the board encourage board members to be donors
at a level that is appropriate to their situation. Soliciting contributions
from board members should be done by another board member, usually
the Chair of the Board, or the Event Chair.
It is recommended that the board develop a board attendance procedure
stating that if a board member misses two meetings without prior
notice, the board chair calls the member to see if there is a problem
that can be addressed before it becomes a serious issue. Consider
putting a board attendance sheet in the monthly board packet. Some
agencies are reluctant to adopt a board attendance policy because
they want prestigious people on the board who cannot or will not
attend board meetings. However, their lack of attendance and participation
can often be demoralizing to other board members. Regular attendance
from board members is paramount if the nonprofit is to achieve agency
goals. Consider putting those who can help the nonprofit but will
not be able to attend regularly on an Advisory Board or Project
Committee. In this way, the nonprofit can have prestigious people
on the letterhead and call on them, and at the same time require
the attendance and participation that is so important from board
members.
It is recommended that the attendance rules be emphasized in board
orientation and that board rules be rigidly enforced. Develop a
table that shows each board member and his/her attendance. This
table should be updated and shared at each board meeting. The table
will also be helpful in writing grants that want to see an active
and involved board of directors.
It is recommended that Boards appoint board committees and use them.
No board member will stay involved if he or she does not have meaningful
work. A board that uses committees is giving each board member hands
on work. It is also a way to work effectively since not every decision
needs to come to the entire board. Also, decisions and policies
that are presented to the board are more complete because of the
work done by the committee before the entire board is asked for
a final decision. Committees to consider include:
Executive Committee. Some agencies have Executive Committee meetings a week
to ten days before the board meeting to discuss important issues
with the Executive Director and other staff and to set the board
agenda. This committee is comprised of board officers and or committee
chairs and can be especially helpful as the organization grows.
Finance Committee. This committee oversees the financial operations of
the nonprofit and performs detailed reviews of the nonprofit's
financial activities and budgeting process. The committee reports
and makes recommendations to the full board of directors. The
Board Treasurer should chair the Finance Committee.
Nominating or Board Development Committee. This group carefully analyzes
the needs of the agency, works to involve and recruit volunteers
who can help achieve agency goals, and helps plan the annual board
orientation and any other special board trainings or retreats.
Because it represents the future of the nonprofit, the Nominating
Committee is perhaps the most important committee of the board.
Personnel Committee. This committee can be a useful resource to the Executive
Director and has the responsibility of evaluating the Executive
Director on a regular basis. It also serves as a screening committee
when hiring a new Executive Director and gives constant support
and feedback to the Executive Director. It is recommended that
employment attorneys or human resource professionals be appointed
to this committee.
Fund Raising Committee. A Fund Raising Committee is essential for organizing
multiple fund raising activities or events. Although all board
members should be involved in fund raising, it is recommended
that board members who are closely involved with fund raising
events or projects be appointed to this committee.
Special Project or Event Committees. These committees allow the agency
to involve people who are not able or willing to become board
members, but who will lend their expertise, connections, name,
and support to a project or event. It is recommended that the
nonprofit retain ultimate control and responsibility for the project.
Although some people will not lend their name to a project in which they
have no involvement, Advisory Boards are a good way to gain community
credibility. It is recommended that if nonprofits have an Advisory
Board, they provide at least an annual meeting where the Advisory
Board, board of directors and supporters can be introduced and hear
the year's major accomplishments. Put them on the mailing list,
send them personalized quarterly update letters, and ask board members
to stay in touch with them. Remember that involvement leads to giving.
It is recommended that the board consider convening annual focus groups
to get input on important issues. For example, a focus group of
homeless people who received services could be very helpful in discussing
program development.
Contributions to Effective Board Organization
It is recommended that the Board Chair and the Executive Director:
Develop and distribute an annual schedule of meetings so that all members
can plan to attend.
Send a board packet to each board member five to seven days in advance
of each meeting. Board packets should include:
Meeting agenda developed by the Board Chair and the Executive Director or
the Executive Committee that indicates the person who will make
each report.
Minutes from the last meeting.
Executive Director's report on the past months' activities and "the state
of the agency."
Back-up information needed for discussion or votes to be taken, and
Current financial statements and reports.
Assume the board packet has been read and do not use the board meeting
to report on minor matters.
Keep board and committee meetings pleasant, productive, and well-focused.
Stimulate the broadest possible participation while also keeping
discussions on track. If an item creates a long discussion, consider
sending it back to committee for a report at the next meeting
or completing the other business and coming back to it.
Ask each board member to serve on at least one committee. This way
each member will be invested in outcomes and members will get
to know each other.
Acknowledge members' accomplishments and contributions in a variety of ways,
such as newsletters, at meetings, and in the minutes.
Encourage board members to develop guidelines for ethical communication.
Expect all staff members to be present at all board meetings unless they
are excused. All staff who has direct responsibilities should
report on his or her area. In other words, program staff should
report directly on his or her area of programming. The financial
operations staff should report on financial matters. This helps
break down the barrier between the board and the staff in a healthy
way.
Board Members' Legal Liabilities
Although most boards focus on their responsibilities, it is important that
all board members remain aware of their legal liabilities. Board
members are fiduciaries and have fiduciary responsibilities to the
nonprofit. A fiduciary is defined as a person, association, or corporation
that has a duty to act for another in a specified area. That means
that board members are legally responsible for the management and
control of the organization.
This does not mean that board members should constantly worry about their
liability. Liability laws for errors of judgment protect board members
of nonprofits as long as he or she acts responsibly, in good faith,
and with the best interests of the corporation foremost.
The most common violations of fiduciary duties are:
Failure to follow fundamental management principles. This happens when
a decision is made that a prudent person would not make if provided
the same information. It occurs when a board:
Does not develop plans or budgets.
Does not read staff reports to see if there are problems.
Does not pay attention to problems raised in reports.
Does not demand a reasonable standard of reporting and control.
Ignores repeated warnings from staff, volunteers, or outside experts.
Does not attend meetings.
Operating the nonprofit in a way that benefits the board members directly.
This is known as self-dealing, or inurement of benefit. There
should be a strong conflict of interest policy in place and enforced.
Here are some ways to avoid liability:
All board members should take their responsibility seriously. They
should attend meetings, read materials and be ready to ask questions.
All policies and by laws should be read and understood. What is most
important is that every action of the nonprofit should fall within
the scope of the nonprofit's mission.
Board members must always be informed of the organization's internal
functions.
Policies should be set only after all the facts are carefully reviewed.
Never make decisions in a vacuum; demand documentation.
Financial statements should be read in detail. Formats should be readable
and comprehensible.
Every organization should have a long-range strategic plan (three to
five years).
Board members should know the state laws regulating nonprofit organizations.
