Developing a Board of Directors - Building Wealth for Formerly

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					   Developing a
 Board of Directors

        June, 2007
Capacity Building Training

•   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
   – 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                            •   Contents of Manual
     – The manual should be well planned               – names of board members, their biographies,
        (include essential items but not be a             terms of office and a statement of their
        repository for everything)                        responsibilities;
     – The manual should be organized                  – a list of committees and task forces, with
                                                          their terms of reference, time frames and
        (clearly marked sections and a table of           membership;
        contents).                                     – a brief written history of the corporation
     – The manual should have pockets to                  and/or a fact sheet about the corporation;
        hold brochures and similar items.              – Articles of incorporation and bylaws;
     – All materials should be dated.                  – mission and vision statements;
     – The manual must be kept current.                – Strategic plan;
                                                       – minutes from recent board meetings;
     – It must be updateable and allow for
        materials to be added and removed.             – board policies (e.g., conflict of interest,
                                                          insurance coverage, expense
     – The manual must be easy to use.                    reimbursement);
     – It should be of a reasonable size and           – the prior year’s annual report and audit
        weight so it can be brought to                    report;
        meetings and used.                             – current annual budget and latest financial
     – The manual may be prepared by staff,            – banking resolutions and investment policy;
        but it should be done with input by and
                                                       – current list of major funders or partners
        in consultation with officers and                 and/or stakeholder map;
        directors. Board members should                – organizational chart and staff information;
        regularly evaluate its usefulness and
                                                       – annual calendar; and,
        provide suggestions for improvement.
                                                       – promotional material and Web site
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
•   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             •   Vice Chair:
        committee meetings
     – Serve as ex-officio member of all            – Attend all board meetings
     – Work in partnership with the chief           – Serve on the executive
        executive to make sure board                  committee
        resolutions are carried out
     – Call special meetings if necessary           – Carry out special assignments
     – Appoint all committee chairs and with          as requested by the board
        the chief executive, recommend who
        will serve on committees                      chair
     – Assist chief executive in preparing          – Understand the responsibilities
        agenda for board meetings
     – Assist chief executive in conducting           of the board chair and be able
        new board member orientation                  to perform these duties in the
     – Oversee searches for a new chief
        executive                                     chair's absence
     – Coordinate chief executive's annual          – Participate as a vital part of
        performance evaluation
     – Work with the nominating committee
        to recruit new board members                  the board leadership
     – Act as an alternate spokesperson for
        the organization
     – Periodically consult with board
        members on their roles and help them
        assess their performance
Board Leadership

• Secretary:                         •   Treasurer:
                                          – Maintain knowledge of the organization
   – Attend all board meetings               and personal commitment to its goals
                                             and objectives
   – Serve on the executive               – Understand financial accounting for
     committee                               nonprofit organizations
   – Maintain all board records           – Serve as financial officer of the
                                             organization and as chairperson of the
     and ensure their accuracy               finance committee.
     and safety                           – Manage, with the finance committee,
                                             the board's review of and action
   – Review board minutes                    related to the board's financial
   – Assume responsibilities of           – Work with the chief executive and the
     the chair in the absence of             chief financial officer to ensure that
     the board chair, chair-elect,           appropriate financial reports are made
                                             available to the board on a timely
     and vice chair                          basis.
   – Provide notice of meetings           – Assist the chief executive or the chief
                                             financial officer in preparing the annual
     of the board and/or of a                budget and presenting the budget to
     committee when such                     the board for approval.
     notice is required                   – Review the annual audit and answers
                                             board members' questions about the
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
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
Standing Committees
 Potential Standing Committees                               Their Typical Roles
                                 Ensure effective board processes, structures and roles, including retreat
                                     planning, committee development, and board evaluation; sometimes
Board Development
                                     includes role of nominating committee, such as keeping list of potential
                                     board members, orientation and training
                                 Ensures sound evaluation of products/services/programs, including, e.g.,
                                     outcomes, goals, data, analysis and resulting adjustments
                                 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
Executive                            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
                                 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
                                 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
                                 Oversees development and implementation of the Marketing Plan, including
Marketing                            identifying potential markets, their needs, how to meet those needs with
                                     products/services/programs, and how to promote/sell the programs
                                 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
Ad Hoc Committees

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

                       Plans 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

                       Plans and coordinates major events, such as fundraising (nonprofits), team-building or
Events (or Programs)
                            planning; sometimes a subcommittee of the Fundraising Committee

                       Identifies needed board member skills, suggests potential members and orients new
                            members; sometimes a subcommittee of the Board Development Committee

                       Conducts specific research and/or data gathering to make decisions about a current major
                           function in the organization
Questions & Answers