Assessing and Building Board Capacity

1. Assessing and Building Board Capacity National Association for State Community Services Programs October 19, 2005 Kay Sohl, Executive Director Technical Assistance for Community Services

2. Nonprofit Basics • State law controls nonprofit incorporation and expectations of board members • IRS regulations create additional requirements for 501 ( c) (3) “charitable” organizations • Some funding contracts create additional board requirements

3. What are the most important roles of nonprofit boards?

4. Key Board Roles • Set mission and direction • Oversight • Liaison with the community • Assure availability of funds needed to fulfill mission

5. Set Mission • Annual plan/ Strategic Plan • Budget decisions – no money/no mission • Approval to accept funding • Power to amend the Articles of Incorporation

6. Oversight • Select and evaluate Executive Director • Monitor financial position through regular financial statements • Monitor program accomplishments • Set and monitor compliance with employment, fiscal, risk management policies

7. Liaison with the Community • Bring views of the community into board decisions • Spread good news of organizational activities and achievements • Provide leadership when there is bad news – fraud, noncompliance, disasters

8. Adequate Funding • Approve funding strategy • If strategy involves individual contributions, make personal contribution and help with fund raising

9. Governing Authority • Board is ultimate decision maker for the nonprofit • State laws hold board members accountable for assuring that the nonprofit uses resources solely for its mission

10. Key Board Duties • Duty of Care • Duty of Loyalty

11. Legal Liability of Board Members • State by state variations • Determined by the courts • In most states, only GROSS negligence results in liability for individual board members

12. Examples of Personal Liability for Board Members • Failure to protect assets • Wrongful termination of the executive director • Unpaid payroll taxes

13. “Traditional” Board Composition • Attorney, accountant, banker • Wealthy individuals • Civic leaders

14. Community Action Boards • 1/3 low income individuals (or those deeply involved in low income communities) • 1/3 elected officials or their appointees • 1/3 business or community representatives

15. Board Trends • Board members confront severe time pressures • Few board members aspire to leadership roles • Most board members prefer time-limited, concrete tasks

16. IRS Hot Buttons for Boards • Conflict of Interest • Excess Benefit Transactions • Political activity

17. Community Action Board Challenges • Active participation by low income members • Full board understanding of complex financial information and challenges • Members appointed by elected officials may have limited engagement

18. More Community Action Challenges • Government dollars declining for many • Government dollars are still so large they dwarf private fund raising • Foundations, individuals, and board members may see gifts as inconsequential in comparison to government funding

19. More challenges • Low income board members who also receive services face conflict of interest challenges • Tight budgets may reduce staff time available to provide support to the board.

20. Board Effectiveness Indicators • Board actively involved in setting priorities • Board decisions reflect active understanding of financial condition • Board members advocate for the agency regularly • Board accepts responsibility for assuring adequate funding

21. Board /Executive Director Relationship • Board conducts meaningful annual evaluation of the Executive Director • Evaluation includes identification of goals for coming year and analysis of achievement of previous goals • Board seeks outside input into evaluation

22. Board/E.D. Relationship • Board chair meets regularly with Executive Director • Board chair/executive committee is informed of significant challenges, compliance issues, etc. • Board chair/exec committee play active role in setting board agendas

23. Board Committees • Powers of committees limited by state law- board committees have at least 1 board member on them • Board may create and dissolve committees • Time-limited task forces may be more effective

24. Board Relationship to Advisory Committees • Board retains governing authority and responsibility • May delegate responsibility for certain decisions • HeadStart Policy Councils given specific role through funding agreements- does not limit board responsibility and potential liability

25. Board Capacity Building • Role clarification • Improve meeting effectiveness • Leadership development • Improve understanding of financial position and key financial decisions • Strategic planning – set direction for programs, funding, infrastructure

26. Board Performance Measurement • Board sets goals for its own activity • Board identifies progress indicators • Board monitors progress indicators quarterly

27. Supporting Board Capacity Building • Fund facilitation of Board planning retreats • Fund adequate staff support for the Board • Help Board leaders meet leaders from other similar nonprofit boards

28. Monitoring Board Progress • Baseline interview with Board leaders • Review Board minutes – note action items • Review Board financial reports • Review Board evaluation of Executive Director

29. Baseline Interviews • Board Chair and Executive Committee • Executive Director • Low Income members of the Board

30. Baseline Questions • Role of the Board • Primary uses of Board time • Critical choices Board is addressing • Goals for Board capacity building

31. Observe a Board Meeting • Organization of agenda and use of time • Board Chair familiarity with key issues • Involvement of low income members • Clarity of decision making

32. Greater Need for Effective Boards • Greater financial challenges • More public concern • Leadership transition period

33. Next Steps • One immediate change to improve your support for effective boards • One long term change to explore