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Board Roles 4 16 2010
- 1. Legal Compliance, Public Disclosure 1. A charitable organization should have a formally adopted, written code of ethics with which all of its directors or trustees, staff, and volunteers are familiar and to which they adhere.
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- Puts down on paper expectations for how volunteers, staff and board should act upon your values. Not required by law Not just doing things right, doing the right thing Have we articulated the values that drive our organization? Do you have a written code of ethics? Staff could research models and compare to values and figure out what is relevant – if it’s a priority for you
- You have one - What is it? Do you know what it says? Can you find it when you need it? Conflicts can come up in supervising family – or when two different organizations (in which you are a member) request money from the same funder On 990 Form Include in all new board orientations Examples of when a conflict of interest has had a detrimental impact on another organization NOA – award of funds to Guy was a member of two boards – one organization gave out grants, one organization applied for grants – he didn’t declare a conflict of interest – before the conflict was discovered, he benefited personally as a participant in the recipient organization’s program – once discovered, he paid the recipient organization for the Declare conflict, don’t participate in discussion, don’t vote
- Required by Sarbanes – Oxley 990 Asks if you Have one – you said no Why? Confidential process for complaints or reports of suspicious, illegal or unethical conduct Retaliation against whistleblowers can be a criminal offense Having a policy can help deter unacceptable acts – less likely to do something wrong if there’s a good way to rat you out Policy must take any complaint seriously and investigate it What does retaliation mean? – Fired, demoted, suspended, harrassed, not considered for promotion, any other kind of discrimination Even if claims are unfounded, organization may not reprimand the employee as long as employee has reasonable belief or suspicion that fraud occurred Staff could research examples of policies and draft policy for board approval
- This applies to document retention and destruction Know where documents are, know how long you must keep records if they are specified – by a grantor, by law Policies should cover both electronic and physical records If you are under investigation or you have potential for being under investigation, make sure you destroy your records In 990 – ought to have a policy Do you have one? If you want to adopt policy it could be researched by staff
- Do you have adequate insurance? Periodic review – where do you have insurance? – assess amount of coverage? – Children – keep them in a safe environment - do you have appropriate policies and procedures for staff/volunteers that interact with children Checks and balances to protect against fraud and embezzlement
- Transparency equates with Trust Being able to differentiate between what must be public, what should be public, what must be kept confidential Posting 990 on website is a good way to share financial information Website can be used as depository for organizational info – cost effective, useful – budget, policies, program outcomes, annual report An annual report can be as short as one page
- How do you decide when to meet? Do you have committees and are they performing? Could look at by-laws..
- Diverse boards lead to better decision-making – having board members with expertise in budgeting and financial management is important. Relationship between board composition and ability to secure funding – if nobody has fundraising experience, then you have a board weakness What steps can you take to fill board positions with people that provide diversity Do you allow board members to participate in meetings electronically? When you recruit members, do you consider these factors
- Legal and compliance issues – written annual performance protects organization if there are disagreements/disputes about employment Excessive compensation is a red flag Is full board involved and informed in performance evaluation?
- The separation of roles is part of your by-laws Segregation of accounting duties?
- How do you orient board members? Do they know personal liability for being on board and protection provided? Have adequate information to make decisions? Exercise individual responsibility for participating in meetings?
- Before renewing term, board member should assess their performance How often do you think this should be done?
- Pros and cons of term limit discussion What safeguards are in place to ensure a full board of engaged members Do you evaluate and remove members that aren’t fulfilling responsibilities? How do you keep board members that go off the board engaged in programs and services? Recruitment of board members through volunteer activities – Fishtrap example Community members move from non-voting role and can participate in decisions
- What makes sense as timetable for review? Who’s responsible for reminding board to review? If you change by-laws or articles of incorporation, you must inform the IRS, and state if you change articles of incorporation – easiest to do as attachment to 990 If you want to make changes, you need to change governing documents.
- Board needs to review strategic plan and determine if budget provides adequate financial and human resources to accomplish your goals When you review budget, you need to think about how that’s impacting mission and programs Are you getting adequate information about the effectiveness of your programs in meeting your mission Are beneficiaries engaged
- Quarterly statement review – minimum standard CPA should report to board, not staff – board, finance committee or audit committee How do you know whether you need to have an audit or not? 500,000 of federal funds
- Budget is financial strategic plan Fiduciary responsibility requires board to adopt budget and regularly review financial statements Decisions on levels of reserves or endowment and investment of funds should be done by the board Relevant comparisons – budget to actual, this year to last year Risk assessment – anticipated/significant changes to revenue Has the board established a cash reserve amount – board action if cash falls below X Laws regarding investment of funds
- Considered to be a bad practice Have you ever made a loan to an officer? If bylaws don’t prohibit it, should you consider changing bylaws
- Watch dog groups say you should spend 65% of revenue on programs What do you think you should shoot for All costs, including staff time and overhead, should be included when assessing program costs Budget needs to show fund-raising revenue and fund-raising expense – are you spending money on fund-raising that’s not carrying its weight
- Do you have a reimbursement policy? Do you have an organization-owned vehicle? Compare travel policy to similar orgs? Clear, easy to follow guidelines are important
- If role is conducting business for organization as member of committee/volunteer – then appropriate Otherwise expenses paid are considered compensation Policy on when they should be reimbursed Hit from IRS if you aren’t reporting reimbursement as compensation
- Donor bill of rights Materials subject to review process – don’t have one person write and distribute pieces without review – Keep it truthful
- If donor gives you something that says what it is for, it’s legally binding Donor intent should be clearly documented If you don’t agree with the donor conditions, don’t accept the donation How do you track donor intent? Example – if we can’t utilize money in manner for which they received them and we can’t do so, what is your responsibility to go back to donors? Renegotiate or refund – get back to donors quickly Museum example foundations questioned
- Receipts for fund-raising dinner, can’t include value of dinner IRS example – Donor assesses value of gift in personal tax filing Charity must provide fair market value for anything it provides in return for the gift (written statement not required) Dinner – FMV is $25, ticket is $50, donor’s responsibility to only claim 25 as tax deduction If more than $75 – org provides written statement that gives estimate of value and excess amount that can be deducted Obligated to provide written acknowledgement for gifts of $250 or more
- Do you have one? Especially important for non-cash gifts Does anyone know of a problem encountered by acceptance of gifts? If donor imposes too many restrictions, gift may not be deductable. IRS 990 asks whether orgs have gift acceptance policy that requrires review of nonstandard gifts such as property not readily marketable
- Do you use external fundraisers – including grantwriters? Penalties for excessive compensation can apply to fundraisers Compensation should be based on performance and time and effort expended Example – grant writer hired to raise 80k – one org application takes 5 hours, one takes 20 hours – if paid 10%, 5 hour application overpaid. Can’t pay out of grant
- Do you offer donors the option of being anonymous? Do you share lists with the public? Do you allow donors to opt out of future fund-raising requests? Must include certain donor information on 990, but that information is still considered to be confidential Do all board members understand that donor information should be kept confidential, unless donor seeks recognition?
- Lots of ways for board to participate in fundraising Stuffing envelopes Identify names of potential donors Direct asks Volunteer at events