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Non-profit GovernanceWhat It Is and What Is Expected
Erin McClarty
Roadmap
What is it?
Who is interested?
Why does it matter?
Who is responsible for it?
What is expected?
What does it look like or encompass?
Who is looking out for it?
What Is It? Used really broadly
Concepts, practices, procedures, expectations,
traditions.
How authority, oversight and responsibility for decisions
and operational acts are allocated
Practical Tips:
Governance cannot be a template.
Organizations must consider their story, origins, decision –
making, responsibilities, allocation and influences.
RoadmapWhat is it?
Who is interested?
Why does it matter?
Who is responsible for it?
What is expected?
What does it look like or encompass?
Who is looking out for it?
Who Is Interested? Donors
Watchdog Agencies
State and Federal Government
Heavy powers
Reciprocity
Grant-makers
RoadmapWhat is it?
Who is interested?
Why does it matter?
Who is responsible for it?
What is expected?
What does it look like or encompass?
Who is looking out for it?
Why Does It Matter? Nonprofits are a business, governance is a major issue
with businesses
Perception
Becoming the Gold Standard
Compliance
RoadmapWhat is it?
Who is interested?
Why does it matter?
Who is responsible for it?
What is expected?
What does it look like or encompass?
Who is looking out for it?
Who Is Responsible For It? Executive Director
Staff
Board
Interesting enough, most watchdog groups and the IRS
attribute the most responsibility for governance to the
Board.
RoadmapWhat is it?
Who is interested?
Why does it matter?
Who is responsible for it?
What is expected?
What does it look like or encompass?
Who is looking out for it?
What Is Expected? Organization
Mission Statement
Implementation and Review
Transparency and honest engagement in solicitiations
What Is Expected? Board
Disinterested board
Create ethics and compliance culture
Fiduciary Duties
Oversight of financial health, programming meets mission
and governance updated
What Is Expected? If not followed Board members can face personal
responsibility in form of:
Fines and imprisonment where the board fails to keep accurate books and records for three years and provide for inspection (Class B Misdemeanor)
Organization’s debts, liabilities and obligations unless a third party is misled into believing they are personally responsible.
Organization’s losses where a board member has not acted in good faith, ordinary care and in the best interests of the org. [Tex. Bus. Orgs. Code Se. 22.221]
Value of debt, obligations and liabilities not paid due to assets improperly distributed by board members
What Is Expected? Organization can suffer where basic expectations are
met
Felony by a high managerial agent or felonious conduct could result in termination of the org. [Tex. Bus. Orgs. Code Sec. 11.301]
As well as other Board Members
Darocy v. Abiltrup address when someone aids another in breaching their fiduciary duty
Aiding another Board Member that is breaching their duty can result in loosing protection under Sect. 22.221 of the Business Org. Code
What Is Expected? Practice tips:
The best way to protect board members against liability is….
Preparation
Ask questions and dissent when necessary
Utilize expertise
Defenses
Reliance on professional advice [Tex. Bus. Orgs. Code Sec. 22.226 and 22.228]
Texas Charitable Immunity law [CPRC Sec. 84.001]
Indemnities [Tex. Bus. Orgs Code Sec. 8.101]
Roadmap What is it?
Who is interested?
Why does it matter?
Who is responsible for it?
What is expected?
What does it look like or encompass?
Who is looking out for it?
What Does It Look Like? Policies
Processes
Documents
Structures
Culture
Policies More familiar policies
Conflicts of Interest
Whistle-blower
Document Retention and Destruction
Less familiar
Investment
Fundraising/Gift Acceptance
Joint Venture
Expense Reimbursement
Board/Donor Confidentiality
Processes Executive and Board Reviews
Compensation
Using comparability data
Board Meetings
Executive Sessions
Financial Reporting
Budgets and Audits
Spending controls
Regulatory report
Some states require updates or reports to be filed.
Documents Formation documents
Sets the basic organization structure; covers the basics
like name, purpose, members
Written mission statement
Bylaws
Rules of operation; more specific and detailed than the
formation documents. Covers basics others like meetings,
officers and committees.
Must avoid inconsistency between the two.
Documents Minutes
Structures Board
Governing Board
Size
Composition
Terms
Officers (Ex officio & Emeritus)
Performance
Committees
Honorary and Advisory Boards
Structures Practice tips:
Create terms but allow members to reapply.
RoadmapWhat is it?
Who is interested?
Why does it matter?
Who is responsible for it?
What is expected?
What does it look like or encompass?
Who is looking out for it?
Who Is Looking Out For It?
Takeaways Can’t template
Balance with the organization’s resources
Resources
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