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Nonprofit Governance

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Nonprofit Governance Basics
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Nonprofit Governance

  1. 1. Non-profit Governance What It Is and What Is Expected Erin McClarty
  2. 2. Roadmap What is it?  Who is interested?  Why does it matter?  Who is responsible for it?  What is expected?  What does it look like or encompass?  Who is looking out for it?
  3. 3. What Is It?  Used really broadly  Concepts, practices, procedures, expectations, traditions.  How authority, oversight and responsibility for decisions and operational acts are allocated  Practical Tips:  Governance cannot be a template.  Organizations must consider their story, origins, decision – making, responsibilities, allocation and influences.
  4. 4. Roadmap  What is it? Who is interested?  Why does it matter?  Who is responsible for it?  What is expected?  What does it look like or encompass?  Who is looking out for it?
  5. 5. Who Is Interested?  Donors  Watchdog Agencies  State and Federal Government  Heavy powers  Reciprocity  Grant-makers
  6. 6. Roadmap  What is it?  Who is interested? Why does it matter?  Who is responsible for it?  What is expected?  What does it look like or encompass?  Who is looking out for it?
  7. 7. Why Does It Matter?  Nonprofits are a business, governance is a major issue with businesses  Perception  Becoming the Gold Standard  Compliance
  8. 8. Roadmap  What is it?  Who is interested?  Why does it matter? Who is responsible for it?  What is expected?  What does it look like or encompass?  Who is looking out for it?
  9. 9. Who Is Responsible For It?  Executive Director  Staff  Board  Interesting enough, most watchdog groups and the IRS attribute the most responsibility for governance to the Board.
  10. 10. Roadmap  What is it?  Who is interested?  Why does it matter?  Who is responsible for it? What is expected?  What does it look like or encompass?  Who is looking out for it?
  11. 11. What Is Expected?  Organization  Mission Statement  Implementation and Review  Transparency and honest engagement in solicitiations
  12. 12. What Is Expected?  Board  Disinterested board  Create ethics and compliance culture  Fiduciary Duties  Oversight of financial health, programming meets mission and governance updated
  13. 13. What Is Expected?  If not followed Board members can face personal responsibility in form of:  Fines and imprisonment where the board fails to keep accurate books and records for three years and provide for inspection (Class B Misdemeanor)  Organization’s debts, liabilities and obligations unless a third party is misled into believing they are personally responsible.  Organization’s losses where a board member has not acted in good faith, ordinary care and in the best interests of the org. [Tex. Bus. Orgs. Code Se. 22.221]  Value of debt, obligations and liabilities not paid due to assets improperly distributed by board members
  14. 14. What Is Expected?  Organization can suffer where basic expectations are met  Felony by a high managerial agent or felonious conduct could result in termination of the org. [Tex. Bus. Orgs. Code Sec. 11.301]  As well as other Board Members  Darocy v. Abiltrup address when someone aids another in breaching their fiduciary duty  Aiding another Board Member that is breaching their duty can result in loosing protection under Sect. 22.221 of the Business Org. Code
  15. 15. What Is Expected?  Practice tips:  The best way to protect board members against liability is….  Preparation  Ask questions and dissent when necessary  Utilize expertise  Defenses  Reliance on professional advice [Tex. Bus. Orgs. Code Sec. 22.226 and 22.228]  Texas Charitable Immunity law [CPRC Sec. 84.001]  Indemnities [Tex. Bus. Orgs Code Sec. 8.101]
  16. 16. Roadmap  What is it?  Who is interested?  Why does it matter?  Who is responsible for it?  What is expected? What does it look like or encompass?  Who is looking out for it?
  17. 17. What Does It Look Like?  Policies  Processes  Documents  Structures  Culture
  18. 18. Policies  More familiar policies  Conflicts of Interest  Whistle-blower  Document Retention and Destruction  Less familiar  Investment  Fundraising/Gift Acceptance  Joint Venture  Expense Reimbursement  Board/Donor Confidentiality
  19. 19. Processes  Executive and Board Reviews  Compensation  Using comparability data  Board Meetings  Executive Sessions  Financial Reporting  Budgets and Audits  Spending controls  Regulatory report  Some states require updates or reports to be filed.
  20. 20. Documents  Formation documents  Sets the basic organization structure; covers the basics like name, purpose, members  Written mission statement  Bylaws  Rules of operation; more specific and detailed than the formation documents. Covers basics others like meetings, officers and committees.  Must avoid inconsistency between the two.
  21. 21. Documents  Minutes
  22. 22. Structures  Board  Governing Board  Size  Composition  Terms  Officers (Ex officio & Emeritus)  Performance  Committees  Honorary and Advisory Boards
  23. 23. Structures  Practice tips:  Create terms but allow members to reapply.
  24. 24. Roadmap  What is it?  Who is interested?  Why does it matter?  Who is responsible for it?  What is expected?  What does it look like or encompass? Who is looking out for it?
  25. 25. Who Is Looking Out For It?
  26. 26. Takeaways  Can’t template  Balance with the organization’s resources
  27. 27. Resources

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