1.HOMELESS & HOUSINGCOALITION OF KENTUCKYTHE ESSENTIALS OF BOARD GOVERNANCEFran Whittenburg Alvis, BA, MSfalvis@hhck.org502-223-1834 ext. 1114

2. What is Governance?Governance means to steer; set direction 3. What is Board Governance?Nonprofit organizations are governed by avolunteer Board of Directors, who are the LegalGuardians of the Organization.They are granted the AUTHORITY to makedecision on behalf of the organization, and mustbe ACCOUNTABLE for organization performance. 4. Board authority is collective.Individual members have no authority.The President/Board Chair is the electedspokesperson for the Board. 5. Key Roles of the BoardDetermine and articulate the Mission and PurposeSet organizational direction (Strategic Planning)Provide oversight (Finances and Executive Director)Ensure adequate resources (Financial and Human)Enhance agencys public standing 6. Kentucky Statutory Standards of Conduct forOfficers and Directors In good faith On an informed basis In the best interests of the organization ordinary prudent person standard Reliance on committees and experts (KRS 273.215 and 273.229) 7. Board Responsibility to the Mission: Define the organization in both the present (whatwe do) and future (what results we want toachieve). Approve or affirm the mission. Approve or affirm the key goals that will result inmission accomplishment or vision actualization. Ensure that operating plans and strategies lead toattainment of these goals All other responsibilities flow from and dependon the fulfillment of the mission. 8. Board Responsibility to Leadership: Select and support the individual empowered to lead theorganization. Boards must reach consensus on the chiefexecutives job description and undertake a careful searchprocess to find the most qualified individual for theposition. Support the executive and review his or her performance.The board should ensure that the chief executive has themoral and professional support he or she needs to furtherthe goals of the organization. It is the responsibility of the executive to transform themission from concept to action and measurable outcomes. 9. Select the Executive DirectorBoards must reach consensus on the chief executives jobdescription and undertake a careful search process to findthe most qualified individual for the position.Support the executive and review his or her performanceThe board should ensure that the chief executive has themoral and professional support he or she needs to furtherthe goals of the organization. The chief executive, inpartnership with the entire board, should decide upon aperiodic evaluation of the chief executives performance. 10. Board Responsibility to Financial Health: Formulate policies regarding financial reportingand controls, control and reporting ofcontributions and donations, and financialauditing. Select independent auditor, review, and approveaudit report. Approve financial investments andfinancing choices. Monitor and appraiserevenues, expenditures, and cash position.Ensure compliance with board financial policies. 11. Ensure Adequate ResourcesOne of the boards foremost responsibilities is toprovide adequate resources for the organization tofulfill its mission. The board should work inpartnership with the chief executive anddevelopment staff, if any, to raise funds from thecommunity. 12. The board, in order to remain accountableto its donors, the public, and to safeguardits tax-exempt status, must assist indeveloping the annual budget and ensuringthat proper financial controls are in place. Accountability to the Public 13. Nonprofits and Sarbanes-Oxley Legislation passed in 2002 in response to a large number offor-profit scandals involving Enron, Arthur Anders, andothers. Extreme fraud, conflicts of interest onboards, unethical executive compensation practices, andimproper auditing led to the failure of these companies. In response, Sarbanes-Oxley set in place a number ofrequired processes for publically held corporations. 14. Two Aspects of Sarbanes-Oxley areespecially applicable to nonprofits:1. Strengthened whistleblower protection2. Retention of documents related tolawsuits 15. Board Responsibility to Operations: Formulate policies regardingpersonnel, facilities, maintenance, safety, financial controls, and other legal requirements. Approve all policies formulated by managementthat involve legal, regulatory, or external, issues. Appraise and audit operations to ensurecompliance with board operating policies. 16. Board Responsibility toOrganization and Development: Formulate policies regarding board member selectionand expectations, board member orientation, boarddevelopment, board committee assignments, boardplanning and performance evaluation. Approve by-laws and amendments. Select board members.Elect Board officers. Approve board committeeappointments, board work-plan and annual board budget. Develop a board information system to provide theinformation needed to carry out the boards oversight role.Appraise board performance. 17. Nonprofit BylawsOutline the Boards operationsLegally bindingUnique to each organizationShould be reviewed every few years 18. The boards role in this area is todetermine which programs are the mostconsistent with an organizationsmission, and to monitor theireffectiveness. Determine, monitor, and strengthen theorganizations programs and services 19. An organizations primary link to the community, includingconstituents, the public, and the media, is the boardClearly articulating the organizationsmission, accomplishments, and goals to the publicGarnering support from important members of thecommunity are important elements of a comprehensive publicrelations strategyUse social media such as facebook and twitter with filters ON Enhance the organizationspublic standing 20. Directors and Officers InsuranceFinancial AuditLegal AuditProcess for Determining Reasonable, Yet CompetitiveCompensation for the CEO/Executive DirectorPoliciesConflict of Interest Policy and Annual DisclosureWhistleblower PolicyDocument Retention PolicyProtecting the Organization 21. All Boards have a responsibility to articulate and make knowntheir needs in terms of member experience, skills, and manyother considerations that define a "balanced" boardcomposition. Boards must also orient new Board members to theirresponsibilities and the organizations history, needs, andchallenges. By evaluating its performance in fulfilling itsresponsibilities, the Board can recognize its achievements andreach consensus on which areas need to be improved.Recruit and orient new Board Membersand assess Board performance 22. Board EvaluationMission: Can each member quote the mission? Do you have an elevator speech? Is it reviewed annually?Meetings: Are board meetings productive? Agenda and reports distributed prior to themeeting in order to allow for full review? Board attendance policy in place and followed? Bulk of meeting spent on important issues? Board members actively engaged in the meeting? Is a standardized committee report form used? 23. (continued)Board Development: Board member and committee job descriptions? Board responsibility (governance) vs. managementresponsibility clearly understood? Matrix of strengths and needs for boardrecruitment? New board member orientation?Fund Development/Membership: Is there a written development/membership plan? Do all board members make a personalcontribution to the agency? 24. (continued)Management Oversight: CEO/ED evaluated annually? Annual compensation analysis? Succession plan? Policies reviewed and approved? Difference between management oversight(governance) vs. management responsibilityclearly understood?Strategic Planning: Does the plan exist? Is the plan relevant/current; support the mission? 25. Individual BoardMember Responsibilities Attend all board and committee meetings and functions, suchas special events Be informed about the organizations mission, services,policies, and programs Review agenda and supporting materials prior to board andcommittee meetings Serve on committees and offer to take on special assignments Make a personal financial contribution to the organization 26. (continued) Inform others about the organization (Ambassador) Suggest possible nominees to the Board who can makesignificant contributions to the work of the board and theorganization Keep up-to-date on developments in the organizations field Follow conflict of interest and confidentiality policies Refrain from making special requests of the staff Assist the Board in carrying out its fiduciary responsibilities,such as reviewing the organizations monthly, quarterly and/orannual financial statements, and approving the annual budget. 27. COMMITTEES1. Establish committees when issues are too complexand/or numerous to be handled by the entire board.2. For ongoing, major activities, establish standingcommittees; for short-term activities, establish ad hoccommittees that cease when the activities are completed.Standing committees should be included in the by-laws.3. Committees recommend policy for approval by theentire board. 28. (continued)4. Committees make full use of board members expertise, time andcommitment, and ensure diversity of opinions on the board.5. They do not supplant responsibility of each board member; theyoperate at the board level and not the staff level.6. Committees may meet monthly (this is typical to neworganizations, with working boards), every two months, or every threemonths; if meetings are not held monthly, attempt to have committeesmeet during the months between full board meetings.7. Minutes should be recorded for all board meetings and for ExecutiveCommittee meetings if the Bylaws indicate the Executive Committeecan make decisions in place of the board when needed. 29. Developing Committees1. Ensure the committee has a specific set of tasks toaddress, and ensure board members understand thecommittees charge2. Have at least two board members on each committee3. No board member should be on more than twocommittees4. At each board meeting, have each committee chair reportthe committees work since the past board meeting5. Consider having non-board volunteers as members of thecommittee (common practice for nonprofits) 30. (continued)6. Consider having a relevant staff member as a member ofthe committee (but not the chair of the board)7. Committee chairs are often appointed by the boardchair; consider asking committees members for a volunteerto chair the committee9. The chief executive should serve as ex officio to theboard and any relevant committees (some organizationsmight consider placing the chief executive as a member ofthe board, including voting rights -- this decision shouldbe made very carefully) 31. Standing CommitteesBoard Development - Ensure effective board processes, structuresand roles, including retreat planning, committee development, andboard evaluation; sometimes includes role of nominatingcommittee, such as keeping list of potential boardmembers, orientation and training.Executive - Oversee operations of the board; often acts on behalf ofthe board during on-demand activities that occur betweenmeetings, and these acts are later presented for full board review;comprised of board chair, other officers and/or committee chairs (orsometimes just the officers, although this might be too small); oftenperforms evaluation of chief executive 32. Finance - Oversees development of the budget; ensures accuratetracking/monitoring/accountability for funds; ensures adequatefinancial controls; often led by the board treasurer; reviews majorgrants and associated termsFundraising - Oversees development and implementation of theFundraising Plan; identifies and solicits funds from external sources ofsupport, working with the Development Officer if available;sometimes called Development CommitteeMarketing - Oversees development and implementation of theMarketing Plan, including identifying potential markets, theirneeds, how to meet those needs with products/services/programs, andhow to promote/sell the programs (social media plays a huge role here) 33. Personnel - Guides development, review and authorization ofpersonnel policies and procedures; sometimes leads evaluation of thechief Executive; sometimes assists chief executive with leadership andmanagement matters. CAUTION: Not to be confused with managingpersonnel.Public Relations - Represents the organization to the community;enhances the organizations image, including communications withthe press. Often, this role is assigned to the CEO/Executive Director. 34. Ad Hoc Committees exist for a specificpurpose and when the task is complete, theycease to exist. Examples include: Audit Committee Nominating Committee Executive Search Committee Research/Evaluation Committee Special Event Committee 35. Governance vs. Management The larger the organization is, the easier it is todefine the boundaries between the board and staff. Governance determines the WHAT, creates theVision Management determines the HOW 36. Discussion:What conflicts have you seen inyour organization?How have you resolved conflicts? 37. Glossary of Governance Terms Compliance: Acting within the rules /responsibilities Delegate: Give a task or authority to someone else Diligence: Being careful and persistent, showing care and effort Fiduciary: Looking after for someone else, "acting in the bestinterest of" the organization Integrity: Honest and ethical behavior Monitor: Check if something is done or not done, how well it isgoing Prescribe: Detailed instruction Stewardship: Looking after and keeping in good shape for the futureof the organization and its owners. (Sometimes referred to as "actingas trustee".) Viability: Can operate financially and can do the jobs required 38. Resources Act Council of Social Service, Inc., www.actcoss.org.au Board Source, Building Effective NonprofitBoards, www.boardsource.org Cullinane Law Group, www.cullinanelaw.com Governance Matters for EffectiveNonprofits, www.governancematters.org Great Boards for Small Groups, by Andy Robinson Kentucky Nonprofit Network (for examples/sample forms andpolicies), www.knn.org New:Helping Nonprofits Make a Diffference, http://new.org 39. QUESTIONS?