Capacity Begins with Board Structure

1
Capacity Begins with Board Structure
Vernetta L. Walker, Esq. Director of Consulting
Contract Training Maryland Association of
Nonprofit Organizations 8720 Georgia Avenue,
Suite 303 Silver Spring, MD 20910 301-565-0505
ext. 24 www.mdnonprofit.org
2
Agenda

• What Distinguishes Nonprofits from For-Profits?
• The Role of the Governing Body
• Responsibilities of Board Members

3
What Distinguishes Nonprofits?
Your organizations is a mission-based business,
not a charity. For-profits chase profits
not-for-profits pursue their mission. But just
because you arent primarily motivated by profit
doesnt give you a license to be sloppy or to
ignore a good idea simply because it was
initially developed for the for-profit
sector. Mission-Based Management, Peter C.
Brinckerhoff, (2000)
4
High Expectation of Accountability, Integrity
5
Why We Care About Board Excellence
6
Generally, the public trusts charities,but the
depth of trust is weak.
7
The Board Provides Oversight
8
(No Transcript)
9
Key Roles of the Board

• Long short range planning to carry out mission
• Provide fiscal oversight
• Recruit, provide orientation development of
  board members

10
Key Roles of the Board

• Hire evaluate executive director
• Evaluate overall performance of the organization
• Establish policies (including Conflict of
  Interest)

11
Responsibilities of Board Members
12
Legal Ethical Responsibilities

• Attend and participate in Board meetings
• Stay informed about affairs of corporation
• Put interests of the organization first

13
Basic Duties

• CARE
• LOYALTY
• OBEDIENCE

14
Duty of Care/Fiduciary Duty

• use the same care that an ordinarily prudent
  person would exercise in a like position
• exercise reasonable care
• business judgment

15
Duty of Loyalty

• Faithfulness to the organization
• Undivided allegiance when making decisions
  affecting the organization
• Personal interests cannot come before the
  interests of the organization

16
Duty of Obedience

• Activities should remain consistent with central
  purposes of the organization

17
Liability, Immunity Risk of Getting Sued
18
Facts

• Corporate Shield Directors are not personally
  responsible for the debts of the corporation
• Statutory Immunity Directors are not personally
  liable for damages if the nonprofit maintains
  Directors and Officers liability insurance
  (except willful violation, malice, gross
  negligence Md. Courts Art. 5-406)

19
Directors may be liable for

• Nonpayment of payroll taxes and sales taxes
  (FICA, unemployment)
• Penalties for excess benefit transaction
• Penalties for late filing of Form 990 (10/day,
  max 5,000)
• Violations of Maryland Charitable Solicitations
  Act (register and disclose)

20
Conflict Policies

• Identify types of conduct or transactions that
  raise conflict of interest concerns
• Provide for immediate disclosure
• Require review and approval by disinterested
  members

21
Effective Fiscal Management

• Annual Budget (sets boundaries so you wont have
  to micro-manage)
• Interim Financial Statements (periodic check-in)
• Policies (should be reasonable)

22
We ought to use the best means we can to be well
informed of our duty. Thomas B. Reed
23
There is nothing in the universe that I fear, but
that I shall not know all my duty, or shall fail
to do it. Mary Lyon
24
Questions