EMPOWERED IMPACTFUL REWARDING NONPROFIT BOARD SERVICE Avanti D
EMPOWERED , IMPACTFUL &REWARDING NONPROFIT BOARD SERVICE Avanti D. Bakane Sufyan Sohel
Board Training Objectives • Provide background on nonprofit boards; • Examine common nonprofit board pitfalls; • Review nonprofit board fiduciary duties; • Discuss board roles and responsibilities; • Consider benefits of board service; and • Q&A Session 2
Why do Non Profits have Boards? • Board of Directors Purpose – Governance » Protect the public’s and stakeholder’s interest » Carry out fiduciary responsibilities » Comply with legal and contractual requirements » Develop and monitor policies » Hold the CEO accountable – Support » Assist the organization to achieve its mission and goals by supporting the CEO » Ensure the organization has adequate resources » Lend special skills » Share contacts » Act as ambassadors 3
Background on Nonprofit Boards • The purpose of the nonprofit board is to govern the organization in order to: – Protect the public’s “assets” – Ensure the organization accomplishes its mission • Board work depends on stage in life cycle, typically includes: – Governance, strategy, fundraising – Partnering with staff (if any) to do aspects of the work of the organization, as needed 4
Background on Nonprofit Boards • Illinois law requires at least three members of the board (directors) • Board members should not be compensated for board service • Boards should be comprised of a majority of independent directors (not family, employees or business partners) • Officers of the board fulfill specialized roles, which should be described in the bylaws – Chair or President – Vice President (optional) – Secretary – Treasurer 5
Common Nonprofit Board Pitfalls Top 5 Mistakes Boards Make: 1. Failing to Understand Fiduciary Duties 2. Failing to Provide Effective Oversight (or Providing Deference to EC/Chair/Founder/ED) 3. Micromanaging Staff 4. Operating with Outdated, Inconsistent, Non- Compliant Governing Documents 5. Failure to Recruit Directors without Due Care and without Cultivating Board Diversity 6
Common Nonprofit Board Pitfalls • Personal Liability can be found when: – Loans to directors – Excess Benefits transactions (paying more than FMV) – Payroll Taxes – Distribution of Assets if insolvent – Personal Guarantees – Actions taken not in Good Faith or not in the best interests of the organization • Director Protections from Personal Liability – Business Judgment Rule – Immunity Statutes – Indemnification 7
Questions to ask: • Why does our organization exist? • What are our core values and philosophy? • What are our core competencies - how are we unique? • What benefit to the community do we offer? The Board is ultimately responsible for adherence to legal Standards and ethical norms. • Remember the Duties… – Care – Loyalty – Obedience 8
Nonprofit Board Fiduciary Duties • Duty of Care – The duty to make informed decisions in the best interest of the organization. – The standard is that of a person acting with the ordinary care and prudence used in the same circumstances. – Exercise good business judgment. 9
Nonprofit Board Fiduciary Duties • Duty of Loyalty – Act in good faith in the best interest of the organization with honesty and fairness – Always put the interest of the organization before self-interest – Most Conflicts of Interest arise from a breach of the duty of loyalty • Duty of Obedience – Duty to remain focused and faithful to the organization’s mission – Requires directors to understand assure compliance with laws that impact the organization – Requires understanding and following organization’s governing documents 10
Nonprofit Board Fiduciary Duties • Fiduciary duties are legal obligations of each director • Compliance is not difficult • The standard is not perfection but that of reasonably prudent person – Read the material you receive – Know the mission – Follow the bylaws – Participate in meetings – Voice dissent if you do not agree with something – Know when to hire a professional 11
Board Roles and Responsibilities - Stages Ideation A founder or founders has an idea and may do some activities without organizational or board structure 12 Formation Formalization Animation Imagination Founders establish an informal organizational structure and committee or board; they increase organizational activities and may begin to raise money The board includes founders and their close circle who establish a 501(c)(3); may use committees to help with organizational tasks and begin more formal fundraising An expanded, established board hires staff to do the operational work; engages in more sophisticated fundraising; and stops doing the dayto-day activities A strategic and wellgoverned board partners with a dynamic executive director and staff to use innovative fundraising, collaborative, and programmatic approaches
Provide Strategic Direction • Define or Update Mission – Who benefits? – What is the benefit? – What is the broader change? • Assist in collection and analysis of SWOT (Strengths, Weaknesses, Opportunities & Threats)Data • Help Assess Current Reality, Desired Reality, and gap analysis • Serve on Capacity Building or Strategic Planning Committees to develop Objectives, Goals, Strategies, Action Plans, and Implementation • Revise consistently with major revisions every three years 13
Recruit, Evaluate & Support Executive Director • Recruit ED when needed • Evaluate ED performance annually • Board and ED have a critical and challenging relationship – ED often has more knowledge than the directors but must run the programs in accordance with their direction – Directors are volunteers • ED is conduit between staff and board – ED must provide information about programs, progress and challenges to board. – ED reports good and bad to board • ED and Board President – Full but uneven partnership in developing direction and policies 14
Board member relationship with staff… • Board member micromanagement of staff can lead to conflict and confusion regarding roles and responsibilities: – A board member requests staff to enroll their child in a program without following protocol. – Board members regularly edit basic communications and documents when this is part of the staff’s job description. – Focusing board meetings and decision making on tasks and activities that are the responsibility of staff. 15
Monitor Programs • Determine high level programmatic approach – Who programs are designed to serve – What programs should do for that population – How much programs should cost – Strategic positioning • Request and review program summaries/dashboard – Program Outcomes – Program Income – Program Costs – Cost/Successful Output • Learn program success stories 16
Fundraise • Personal financial contributions – Every board member should make a donation of some size – Board may have a requirement: • • • Pre-determined amount Percentage of personal income Percentage of organizational budget Collective goal based on need Give-or-get policy Top 3 • Annual campaign: board and staff partnership – Fund Raising Realities Every Board Member Must Face: A 1 -Hour Crash Course on Raising Major Gifts for Nonprofit Organizations, David Lansdowne, Emerson & Church, 2007 • Funder relations: board and staff partnership • Special Events • Others? 17
Manage Finances • Manage overall financial approach • Understand Financial Statements – Statement of Financial Position (balance sheet, assets to liabilities) – Statement of Activities (operations budget, revenue to expenses) – Cash Flow – Budget comparisons, YTD, etc. • Participate in Budgeting Process and Approve Annual Budget • Ensure Adequate Financial Controls 18
Develop and Organize the Board Develop the Board through Recruitment and Orientation: • Provide candidates for board recruitment • Help with board orientation • Assist in planning board training • Participate in board self-assessments and interviews • Support initiatives to improve governance • Develop board member expectations list • Bring suggestions for improvements 19
Develop and Organize the Board through Efficient Board Meetings • Information Flow – Provide critical information to board at least 5 days prior to meeting – Packet includes: agenda (consent agenda if used), reports, minutes, committee reports, financial statements, budget comparison. • Responsibility for Successful Board Meetings – President and ED work together, equally responsible – Set Agenda, Follow Agenda – Encourage Open Discussion, all viewpoints respected – Expect that each Director is prepared for the meeting • See www. thelawproject. org > Resources > Nonprofit Resources, “Introduction to Nonprofit Board Meetings” Handbook 20
Cultivate Relationships The staff can work with the board to develop a public relations and collaborations strategy to hone messaging for and develop relationships with: • Nonprofits providing similar services; • Nonprofits providing different services to the same clients; • Government, schools, businesses, and religious institutions; • Funders, donors, and sponsors; • Parent organizations and affiliates; • Media; • Community leaders; • Others? 21
Manage Risk There are several areas that can leave an organization exposed to risk, including: • Organization and Governance, • Intellectual Property and Information Technology, • Human Resources, • Exempt Status, • Real Property, • Personal Property, and • Required filings 22
Board Roles and Management/Staff Roles 23 Board Role Shared with Staff • Approve strategic direction • Recruit, evaluate, and support the Executive Director/CEO • Manage organizational financial strategy • Continually develop and organize the board • Manage organizational risks by creating effective policies and risk management strategy • Create and implement strategic plan • Financial management • Monitor programs (at a high level) • Fundraise • Cultivate external relationships • Support volunteer development • Manage organizational risk tactically
Board Roles and Responsibilities Scope and Delegation • Outside of board’s scope (within executive director’s scope): – Hiring of all staff after executive director (usually) – Operations, program management, volunteer management, etc. – Preparation of financial statements, program summaries, grants, etc. • Delegable to outside experts who have been properly vetted under the duty of care: – Accountants, Audit firm, Counsel, Strategic Planning consultant, etc. • Delegable to board committees: – Data collection – Analysis – Recommendation development • Non-delegable: – Final decision-making on policy, financial management, and strategy 24
Benefits of Nonprofit Board Services Scope and Delegation • Relationship and network development • Professional branding • Contribution of strengths for social good and satisfaction • Mitigation or development of areas of weakness • Level of comfort with high level, ethical decision-making • Important skills practice: – Emotional intelligence – Strategic planning – Financial analysis – Sales • Others? 25
You are the organization. . The Board should [be able to] clearly articulate the organization's mission, accomplishments, and goals to the public and garner support from the community. In 30 seconds or less can you answer: – Why is your work so important? – What is unique about what you do? – Why are you passionate about it? 26
Be the Ambassador: • Make an annual financial contribution to the organization • Nail down your “elevator speech” • Take advantage of learning and training opportunities • Keep the organization at the forefront of your mind • Listen for opportunities and make connections (follow-through) • Be present at events • Share your personal experience and motivations • Open doors and create opportunities for the organization to promote its mission and impact to potential donors 27
The 10 Basic Board Roles & Responsibilities • 1. Determine Mission and Purpose, and Advocate for Them • 2. Select the Chief Executive • 3. Support and Evaluate the Chief Executive • 4. Ensure Effective Planning • 5. Monitor and Strengthen Programs and Services • 6. Ensure Adequate Financial Resources • 7. Protect Assets and Provide Proper Financial Oversight • 8. Build a Competent Board • 9. Ensure Legal and Ethical Integrity • 10. Enhance the Organization’s Public Standing 28
Q & A Session Questions? 29
Speaker Biography Sufyan Sohel, Deputy Director & Counsel CHICAGO 17 N State St. Suite 1500 Chicago, IL 60602 Sufyan is CAIR-Chicago’s Deputy Director & General Counsel overseeing the organization’s programs, advocacy efforts, finances, and strategic initiatives. He speaks frequently on issues of social justice, civil rights, and Islamophobia, and has helped lead global rule of law initiatives on combating gender violence and hate targeted at marginalized communities. He is a trained mediator & a children’s hospital magician, and consults on several diversity and capacity building initiatives throughout Chicago. Contact Sufyan: 312. 212. 1520 or ssohel@cair. com 30
Speaker Biography Avanti D. Bakane, Partner Practices Commercial Litigation Consumer Protection Litigation Privacy, Data & Cybersecurity CHICAGO One North Franklin Suite 800 Chicago, IL 60606 As a lawyer by day and travel blogger by night, Avanti has global perspective that allows for understanding of diverse viewpoints and the value of her clients’ time. Publicly traded and smaller companies alike retain Avanti in areas such as complex class action, antitrust, breach of contract, and general commercial litigation with a focus upon consumer class action defense. Her practice also includes representing businesses and creative professionals in software and ecommerce development, data privacy, data loss, licensing, and copyright infringement disputes. Contact Ms. Bakane: 312. 619. 4922 or abakane@grsm. com 31
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