1. Governance Issues
Learning Objectives
Identify the legal responsibilities of Board members
Explain the duties of Board members, as identified in the State’s Nonprofit Corporation Act
Describe the financial information that Board members need to govern
List some of development tasks that can be included in a Board orientation program
Convery 2013

2. Legal Responsibilities of Board Members
Duties of:
Care – be informed and familiar with the organization’s finances and activities, participate regularly, act in “good faith”, use the “degree of diligence, care and skill” that a prudent person would.
Loyalty – place the interests of the organization before your personal interests; disclose any conflicts of interest
Obedience – insure that the organization fulfills its purposes and organization’s resources are dedicated to its mission.
Convery 2013

3. Responsibilities of Nonprofit Boards
Monitor that the organization is following its tax-exempt purpose and mission
Select the Executive Director and evaluate his or her performance
Approve the annual budget
Monitor that the NPO has adequate resources to meet its goals
Engage the external auditors
Monitor the effectiveness and efficiency of the NPO
Promote the organization and enhance its public image
Set the “tone at the top” related to ethical standards and accountability
Set performance standards for the board and self-assess its own performance
Set policies (e.g., compensation, investment, conflicts of interest, whistleblower)
Review the annual IRS Form 990
Convery 2013

4. Financial Responsibilities of the Board
FINANCIAL QUESTIONS
Do we have a sound financial plan?
Do we have enough cash?
Are our reserves satisfactory?
Are our major expenses in line?
Are we meeting our budget?
Are our expenditures appropriate?
Are we insured appropriately against risks?
Are we meeting the guidelines and requirements set by our funders and the IRS?
Convery 2013

5. Traps Boards Should Avoid (CH 4 Nonprofit Accounting Manual from Michigan Nonprofit Association )
Ineffectually scrutinizing the overall enterprise
Failing to monitor key indicators
Failing to pay sufficient attention to whether the organization’s financial resources are being effectively spent on programs
Being too trusting of staff who handle money
Lacking strong external checks on financial reporting
Emphasizing executive compensation at the expense of other employees
Failing to “bid out” the sale of organizational assets
Failing to scrutinizing outside service contracts
Spending funds restricted by time or purpose
Mixing charitable and business interests
Convery 2013

6. Responsibility of Board Treasurers
maintain custody of corporate funds and securities
keep full and accurate records of all receipts and disbursements
deposit money and valuables in designated depositories
authorize disbursements
Convery 2013

7. Responsibilities of Audit Committees
Nominate the public accounting firm that will conduct the annual external audit
Participate in the process of setting the scope of internal and external audits
Invite direct audit communications on major problems encountered during the course of internal and external audits
Review a draft of the audited annual financial statements
Convery 2013

8. Tasks for a New Board Member
Understand the purpose of the organization
Read the articles of incorporation – find the mission statement, compare it to the purpose statement in the Form 1023 Application for Tax-Exempt Status
Read the most recent audited financial statements and accompanying management letters
Make sure the organization has complied with state regulations
Review the minutes to Board meetings for the past year
Convery 2013