Governance

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					         Governance




         SCOTT S. FINTZEN
          GAIDO & FINTZEN
30 NORTH LASALLE STREET, SUITE 3010
      CHICAGO, ILLINOIS 60602
           (312)-346-7855
Why do we care about good
      governance?

  GOOD GOVERNANCE = GOOD STEWARDSHIP

    WE LIVE IN A CHANGING WORLD WITH
         INCREASED EXPECTATIONS

              MATTHEW 10:16
 BEHOLD, I SEND YOU FORTH AS SHEEP IN THE
 MIDST OF WOLVES: BE YE THEREFORE WISE AS
     SERPENTS, AND HARMLESS AS DOVES
Raison d'être

 501(c)(3): Organized and operated exclusively for
 religious, educational, scientific or other charitable
 purposes
    No private inurement
    No intervention in a political campaign
    No substantial part of activities may be attempting to influence
     legislation

 Articles of Incorporation


 ELCA Model Constitution for Congregations
    Chapter 4 – Statement of Purpose
How are decisions made and implemented?

 Bylaws (i.e., Constitution)
   Members

   Directors

   Officers

   Staff



 Understand your governing documents
                 Fiduciary Duties

 Duty of Care


 Duty of Loyalty


 Duty of Obedience
                       Best Practices

 Panel on the Nonprofit Sector:


    Principles of Good Governance and Ethical Practice: A Guide
     for Charities and Foundations

    33 Principles

    Available for free at www.independentsector.org under the
     “Strengthen Accountability Tab”
                               Best Practices

 IRS:
   www.stayexempt.org
         Existing Organizations – Tax Exempt Status

     Tax Guide for Churches and Religious Organizations
         Tax-exempt status
         Jeopardizing Tax-Exempt Status
         Unrelated Business Income Tax
         Employment Tax
         Special Rules for Compensation and Ministers
         Payment of Employee Business Expenses
         Record Keeping Requirements
         Charitable Contributions – Substantiation and Disclosure Rules

     Available for free at www.irs.gov
                            Best Practices

 Congregation Council
   Size
        Not too small, not too large, just right

    Composition
      Assess needs (e.g., accountant, lawyer, program experience,
       constituent representation, member representation)
      Recruiting and screening
      Term limits – see C12.02
      Staggered terms – new perspective and institutional memory
                      Best Practices

 Annual director, officer and committee member
 orientation
    Exempt Purpose
    Governing Documents
    Roles and Responsibilities
    Volunteer Expectations
    Key Policies and Procedures: (Budget, Finance and
     Audit/Review)
    Key Ministries
    Principles of Good Governance
    Tax Guide for Churches and Religious Organizations
    www.stayexempt.org
                  Best Practices

 Year-end review of programs and finances
 Annual goal setting
 Annual budget
 Interim financial reports
 Year-end financial reports and audits/reviews
 Policy Reviews and Recommendations
 Contract Authority
 Banking resolutions
 Annual Congregation Council self-assessment
                     Best Practices

 Meetings:
   Robert’s Rules of Order

   Chair

   Agenda and meeting packets in advance

   Resolutions for major action items

   Minutes – not transcripts
                        Best Practices

 Conflict of Interest Policy
     What is a conflict of interest policy?
       Mathew 6:24: No one can serve two masters; for
        either he will hate the one and love the other, or else he
        will be loyal to the one and despise the other.

     To whom does it apply?
       Officers
       Directors
       Committee Members
       Employees
                         Best Practices

 Conflict of Interest Policy
   Elements
      Definitions
      Procedures
      Records and minutes
      Annual Statements
      Periodic Review

    Benefits
      Protects the congregation
      Protects directors, officers, and employees

    Free Example: IRS Form 1023 Instructions Appendix A
                     Best Practices

 Whistleblower Protection Policy
   Elements
     Prohibit whistleblower retaliation
     Process for receiving complaints
       Confidential and anonymous complaints
     Process for investigating complaints of waste, fraud,
      and abuse
     Process for dissemination of results of investigation
     Publish policy
     Train directors, officers, and employees regarding same
                   Best Practices

 Record Retention Policy
  Establish   a written document management
   policy:
   Retention
   Organization
   Destruction
  Destruction stops in the event of civil or criminal
   investigation or litigation
                        Best Practices

 No Private Inurement
   Prohibition applies to all exempt organizations

   Loss of exemption

 Excess benefit transactions
   Intermediate sanctions

   501(c)(3)
     25% of excess benefit
     200% of excess benefit if not repaid
     10% of excess benefit for organizational managers
                      Best Practices

 Compensation Policy

    Must be Reasonable

    IRS Rebuttable Presumption Procedure
      Independent directors
      Comparability data (like, like, like)
      Document decision

    Compensation Committee Option

    See, “Rebuttable Presumption Procedure Is Key To Easy
     Intermediate Sanctions Compliance”, Steven T. Miller,
     Director Exempt Organizations, IRS
                Best Practices

 Committees vs. Advisory Committees
  What    is a committee?
  What can a committee do?

  What can’t a committee do?

  If it is not a committee what is it?

   Advisory body
   Provides advice, but may not act
  See 805 ILCS 105/108.40
                    Best Practices

 Independent Director
  Definition:
    Director
    Receives no compensation, fees, or other benefits from
     the exempt organization
    Free from any other relationship that would interfere
     with exercise of independent judgment
  IRS Form 990 Instructions - Glossary

  Principles of Good Governance: Principle 12
                Best Practices

 Nominating Committee
  C13.02– Nominating Committee
  Purpose
   Recruiting
   Screening
   Establishing expectations
   Transmitting nominations
  Composition
   Independent directors; others
   Cannot vote on own nomination
                    Best Practices

 Audit and Finance Committee
   Budget development
   Interim financial reports

   Audit oversight

 Governance Committee
   Orientation

   Conflicts of Interest

   Periodic review of governing documents and governance
    policies and procedures
 Compensation Committee
Governance

THE END

				
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