“An effective spirit on a board is one that attracts its members, makes them want to work with one another, and gives them a sense of pride and satisfaction in the program and the board itself.”
– Cyril Houle
Your not-for-profit organization is important and your mission is vital. So are the people and constituents you serve. Knowing that, the selection of your board members and the maintenance of your committee should be, too.
Creating a carefully crafted board.
Attracting qualified board members is key to housing and maintaining a board that is not only established, but also well-rounded and strategic. It is vital to not only select board and committee constituents based upon specific areas of expertise, but it is also crucial to select those you know will make a great addition and impact, and will thoughtfully uphold the mission of your organization openly and honestly.
Selecting a wide scope of backgrounds is key in the creation of a dynamically crafted board. This ultimately helps to ensure the absence of any possible shortcomings. Financial advisors, accountants, CFOs, CEOs, lawyers, educators, and those with strategic partnerships are great places to begin. Just as every not-for-profit is different, essentially so will the board members you choose. Remember, having a diverse group at your meeting table is imperative because it sheds new light—and most importantly new perspectives—to any idea, any obstacle, any goal.
Document, document, document.
While it’s not only necessary to foster an occupational variety on a not-for-profit board, a focus to keep each governing body or committee accountable is important, too. In order to do so, a written system of internal controls is widely needed throughout the organization. This structural blueprint of sorts should be reviewed annually and used to help guide the organization in making overarching decisions that will affect its future. In addition, a conflicts of interest document should be in place and enforced. It is wise to review this document on a regular basis and make revisions together as a board when needed to ensure everyone remains consistent. Doing so will inadvertently help to create a culture of accountability and compliance. Furthermore, consistent meeting minutes should also be tracked that record meeting attendees, topics covered, decisions made, as well as any open action items.
The deal with the dough.
Along with written documentation, careful attention needs to be given to how the organization manages money. From filing taxes, to generating revenue, to limitations on payroll, and everything in between should be examined and closely monitored on a continual basis. According to our friends at Withum: Advisory, Tax and Audit Services based out of Irvine, California, here are five of their top key fiscal elements to bear in mind when dealing with your 501(c)(3):
- Significant transactions and contracts carry additional risk and should have an ancillary layer of review outside of the Executive Director, namely, by a governing body member, and contractual obligations may require full board approval.
- Revenue generated from activities that are outside of the organization’s charitable mission may be subject to income tax. Performing too many unrelated tasks could lead to loss of tax exemption. The governing body should verify that management or a third-party consultant is evaluating each revenue stream for potential UBI issues.
- Non-filing of the 990 tax return for three consecutive years will lead to loss of tax-exempt status. The governing body is required to be a part of the review and filing process as well as for overall compliance with the filing requirement. The 990 is also a great marketing tool, therefore, governing body involvement is key.
- Compliance with all federal, state and local laws, including tax liability (payroll, income, etc.), is required and governing body members can be held liable personally for lack of compliance. The governing body should verify management is handling these matters.
- Executive compensation must meet the IRS criteria of “rebuttable presumption of reasonableness,” which means there must exist a formal process to determine and evaluate officer compensation – the process must be written and based on an analysis of comparable data. This documentation generally occurs at the governing body level and should be done annually.
When looking to nurture and cultivate any organization, it is important to grow, layer-by-layer, with insightful thought and careful scrutiny all the while noting that board member selection is key, documentation is imperative, and knowing that every cause has an effect when it comes to the treatment of money. Needless to say, maintaining a not-for-profit board is hard work. But, as we all know, the hard work does indeed pay off.
Source: 13 Tips for a Resilient Not-for-Profit Board | Withum (August 31, 2015)
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