Boards and Governance

Boards and Governance Recruiting and developing the board of directors

General Requirements • According to Indiana state code, each non-profit organization in the state must have a board of directors comprised of a minimum of three members. • Board members should be talented, connected, interested members of the community that provide a broad range of expertise and community representation. • Employees and their family members should not serve as board members. • The founding board will develop and change over the course of a non-profit’s existence. Office of Faith-Based and Community Initiatives

Structure The only limitation for the size of a board of directors in Indiana is the requirement of a minimum of three members. The size of the board may exceed fifty members, depending on the size of the organization it is governing and the number of tasks set out before it. As a general rule, most non-profit organizations have a board of 6-18 members. Office of Faith-Based and Community Initiatives

Recruitment New organizations should focus on two areas of expertise when recruiting board members: resource development and managerial oversight. For this reason, recruitment of board members should be done in two stages: • Stage one: Recruit members that have access to wealth and/or have fund-raising skills • Stage two: Fill out the rest of the board with members who have skills and experience in the following areas: financial, legal, accounting, management, etc. It may also be helpful to target members with links to certain professions, geographic representations, community segments, and personal backgrounds. Office of Faith-Based and Community Initiatives

Term Limits The average term limit for a non-profit board member tends to be between two and six years. It is recommended that members’ tenures are staggered so that new members are brought in periodically, keeping the board stocked with experienced members and fresh points of view. A board member should serve no more than two consecutive terms, and take a hiatus of one year before he or she is re-appointed to the board. A board member who is on hiatus may serve on committees or as advisers to the board. Office of Faith-Based and Community Initiatives

Role of Founder The founder of an organization usually becomes either the Chief Executive Officer or the chairman of the board. The founder may oversee the selection of the CEO and the board members according to his or her vision. The role of the founder is subject to change if the organization’s mission changes. Office of Faith-Based and Community Initiatives

Committees • The purpose of committees within the board of directors is to have a small group that will focus on one issue according to the members’ areas of expertise and to make recommendations to the full board on that particular issue. Office of Faith-Based and Community Initiatives

Committees, continued According to Indiana law, there must be a minimum of two members on each board committee. Ideally, each board member will serve on one or two committees. Not all committee members must be on the board of directors. Examples of non-board members that may serve on committees include: • Staff members • Potential board members • Former board members, including those on hiatus Office of Faith-Based and Community Initiatives

Committees, continued Examples of common board committees include: • Executive: Effectively operates between meetings and represents the full board with any emergency decisions. This is the only committee that may act on behalf of the board, within boundaries defined in the bylaws; however, in most instances, the executive committee brings forth all decisions for approval by the full board. Office of Faith-Based and Community Initiatives

Committees, continued • Nominating: Identifies, cultivates, and nominates potential board members. Assesses the composition of the current board, determines needs, and recruits and screens potential board members. Also, the nominating committee appoints ad hoc members to committees to work on specific issues. • Finance: Recommends financial policies and monitors staff members’ financial reports. • Audit: Oversees the annual financial audit of the organization. • Development: Provides leadership in fund-raising and resource development, and works with staff on the organization’s fund-raising plan. Office of Faith-Based and Community Initiatives

Committees, continued • Strategic Planning: Provides board’s role in the organization’s long-term planning. • Facilities: Focuses on the organization’s buildings and grounds and physical plant management. • Personnel/HR: Advises the CEO on personnel policy issues. • Other miscellaneous committees: Marketing, Public Affairs, Program, Education Finally, ad hoc committees may be periodically formed to address short-term problems that may come up. Office of Faith-Based and Community Initiatives

Meetings A typical non-profit board meets nine to twelve times per year, depending on the amount of work that must be done. The board’s yearly meetings should be scheduled one year in advance. If the board is especially large, the whole group may seldom meet, with individual committees doing the majority of the work. The following policies regarding board meetings should be covered in the organization’s bylaws: • Board member attendance policy • Constitution of quorum (the minimum number of members that must be present at any given board meeting) Office of Faith-Based and Community Initiatives

Record-Keeping Thorough minutes should be maintained for every board meeting and kept on file throughout the life of the organization, along with the following documents: • Articles of Incorporation • Bylaws • Tax-exempt letter Office of Faith-Based and Community Initiatives

Legal Matters Responsibilities of the Board The following are the generally accepted responsibilities of every board member: • Duty of Care: Responsibility as a steward of the organization • Duty of Loyalty: Standard of faithfulness and allegiance to the organization. A board member must always act in the best interest of the organization and not for his or her own personal gain • Duty of Obedience: Faithfulness to the organization’s mission Office of Faith-Based and Community Initiatives

Legal Matters, continued Board Liability • It is not necessary for every non-profit to have a lawyer on retainer, but it is recommended that someone with legal expertise is available for advice. It is common to have at least one lawyer on the board of directors for this reason. • Directors’ and Officers’ Insurance policies can be purchased in order to cover possible liabilities. Office of Faith-Based and Community Initiatives

Assessment and Development The board of directors should continuously be assessed in order to benefit from future board development. The board may assess itself according to what skills are already in place, and what skills are necessary for the direction the organization is taking. What skills are necessary to achieve the future goals of the organization? A plan for recruitment can then be developed based on the assessment of the current state of the board. Office of Faith-Based and Community Initiatives

Final Note This resource provides only a brief overview of board requirements and information regarding governance. For more on this topic, consult the resources listed on the following page. Office of Faith-Based and Community Initiatives

Additional Resources • “Board and Staff Responsibilities” http://www.managementhelp.org/boards/brdvsstf.htm • “Free Complete Toolkit for Boards” http://www.managementhelp.org/boards/boards.htm • “Governance of Charitable Organizations and Related Topics” http://www.irs.gov/charities/article/0,,id=178221,00.html • “Governance Matters: Nonprofit Governance Indicator Guide” http://governance1.web132.discountasp.net/web/NGIG/index.aspx • “Board Basics” http://www.idealist.org/if/i/en/faq/526-245/3-1 • “Indiana Code 23-17-12: Board of Directors” http://www.in.gov/legislative/ic/code/title23/ar17/ch12.html Information was also gathered from: • BoardSource eBook: Starting a Nonprofit Organization. Office of Faith-Based and Community Initiatives

Boards and Governance