Legal Center for Nonprofits, Inc.
412 County Street
New Bedford, MA 02740
We are located inside the Inter-Church Council house.
- Photo by Linnea R. Michel 2017
Small or new nonprofits, once formed and tax-exempt status received, must move assertively into their missions, but once the flurry of formation activity is passed, what next? The sticking point for many new boards of directors is how to start that forward momentum.
One way to do it is with some structured planning that the board can undertake in its regular meeting. A planning process can help the board come together around its work, developing a shared understanding of its reason for being, building priorities and a team orientation, fostering communication. Most importantly, the planning process will result in active steps that will move the organization forward–its “To-do List”.
The board may have developed a mission statement during its formation, but more is needed to direct the work of the organization. Boards should also establish a vision–what the future will look like if the nonprofit succeeds in its mission–and values statements that will guide the work going forward. These can be developed with some directed brainstorming.
With Vision, Mission, and Values statements in place, the board can begin to create its Action Plan. The Action Plan is built around Goals and Objectives, which, if achieved, will bring about the Vision.
Formatting the Action Plan in to a checklist and revisiting it at every meeting, helps the board stay on track. Calendarizing an annual review of the plan ensures that action steps are carried out.
Committed boards can carry out this work themselves, but sometimes an outside facilitator can help the board see its way more clearly.
Want to learn more? Contact us, or attend our October 12 program!
Thursday, October 12 at 6:00 pm
presented by Tom Butero
One of the primary responsibilities of nonprofit boards of directors is to plan for the nonprofit’s future. Tom Butero will give you essential tools to help your nonprofit become a planning organization–one that looks ahead strategically and develops an action plan to take it to the next level. $10/pp
Presented at the Legal Center for Nonprofits, 412 County Street (inside Inter-Church Council house), New Bedford, MA
Call (508) 264-5996 or email Linnea@LegalCenterforNonprofits.org
Without an effective board of directors, it is virtually impossible for a nonprofit to sustainably and successfully carry out its mission. But what does an effective board look like?
An effective board of directors is:
Well-informed and prepared.
- Directors seek and obtain sufficient information on the issues; consult experts as needed; receive training on governance and on the specific area of the nonprofit’s mission.
- Are thoughtfully prepared, in collaboration with the executive (if any).
- Include detailed action items, with proposed motions where appropriate.
- Are strategic rather than operational; that is, the action items do not deal with day-to-day operations, but with long- & short-term goals, programmatic outcomes and impact, and policy development; action items are high-level, impacting the entire organization.
- Make use of consent agenda to dispose of routine matters.
- Delivered at least a week in advance of meeting.
- Agenda Packets include:
- Minutes of the prior meeting;
- Financial reports, such as cash flow;
- Committee reports;
- Background information and other materials related to agenda items.
- Directors attend board and committee meetings fully prepared to discuss the agenda items before them; that is, the contents of the agenda packet have been read and digested thoroughly before the meeting.
- Directors understand and embrace their fiduciary duties to the nonprofit.
- Directors embrace their oversight role—know the organization, understand its programs, and analyze its effectiveness.
Actively involved, meeting regularly and as often as needed to guide and oversee the nonprofit, with meetings focused on deliberation and strategic action.
- Regular meetings occur monthly or at least bimonthly. Larger boards may meet quarterly, using committees effectively between board meetings.
- Attendance is well in excess of quorum at each meeting.
- All officers are in attendance at each meeting.
- President/Chair manages the meeting, ensuring everyone speaks & expresses opinions, insights, ideas. The President/Chair should not dominate the discussion (in some organizations, the person presiding is required to remain neutral), but should encourage fair and balanced discussion.
- No one is reading materials for the first time during the meeting; the minutes are not read during the meeting; no regurgitating of committee work. No wallowing in the details!
- Thorough discussion of issues takes place, with all views and perspectives brought forward; additional information sought as needed.
- Directors listen to each other, instead of talking at each other.
- Every meeting includes substantive discussion followed by motions.
- Some type of protocol for the conduct of meetings is helpful and may be developed by the board for its own use. (Robert’s Rules of Order is not required, and because of its complexity, is not recommended for most boards.)
Active in the nonprofit’s behalf outside meetings.
- Directors exploit their networks to advantage the nonprofit, offering access to influencers and opportunities that will help the nonprofit carry out its mission.
- Directors actively & affirmatively represent the nonprofit to the larger community.
- Directors own the process of identifying, recruiting, and orienting new board members, to ensure that the board possesses needed skills, knowledge, and abilities, and appropriately reflects its community.
In partnership with staff and key volunteers; directors:
- Plan for the organization’s future.
- Lead in resourcing the organization—fundraising & other revenue streams.
- Address programmatic impact and outcomes.
- Recognize policy issues and develop policy for the organization, leaving procedural details to staff.
- Use committees and staff effectively, accomplishing essential information-gathering, analysis, and recommendation development in committees.
- Understand the distinction between board work and staff work.
- Supervise the executive director.
How does your nonprofit board of directors measure up?
Do you know what your organization’s bylaws say about quorum? If you know where your bylaws are, it may be a good idea to check!
“Quorum” means the minimum number of people that must be present for a body to transact business. Generally at the beginning of every board of directors meeting, the secretary takes attendance and determines whether a quorum is present, according to the terms of the organization’s bylaws.
The bylaws may specify, for example, that quorum is the “number of directors present at any meeting” or the quorum may be set at a specific number.
Massachusetts statute states that the quorum for a nonprofit board of directors is “a majority of the directors then in office”, unless the bylaws specify a different number. Where the bylaws specify the quorum, the bylaws govern. If the bylaws do not specify the requirement for quorum, then the Massachusetts statute serves as the default—“a majority of the directors then in office” is the quorum.
It’s essential to remember the context for this issue of quorum. Boards have oversight of their nonprofits; and boards can only act collectively and only in the presence of a quorum. The entire board should be making the decisions that will impact the nonprofit, and this responsibility may not be left to the few. Indeed, in organizations with executive committees, the board still must assert its oversight over the acts of the executive committee, through review and ratification. Charities must serve a public interest, and if the body actually doing the governing is too small, private interests may easily take over.
Occasionally failing to meet quorum requirements is not a problem. But remember that failing to meet quorum means that no business can be transacted, so even occasionally lacking quorum can cause substantial problems, should the agenda call for a key business decision.
Failing to meet quorum, if it happens frequently, is symptomatic of deeper problems. Sometimes boards respond to this problem by amending their bylaws to allow for a smaller quorum. This is not necessarily the best solution, since it can result in the organization being run by a small clique, leading to further disengagement of the other directors. In the same way, making the board of directors itself smaller may not be the best solution either. Depending on the organization’s work, a larger board may be the only way to ensure adequate oversight of the nonprofit (for more on board size, read this post). Nor is the creation of or defaulting to, an executive committee the solution, for the same reason. The best strategy is to grapple with the real problem—why board members have become disengaged.
The quorum rule also applies to members’ meetings—that is, meetings of individuals who are legal voting members of the organization. This body of members is in effect another level of governance hierarchy, and some different rules apply to them, and again, this a matter of state law.
Quorum is a concept directors of nonprofits must understand. It’s also one of those concepts that is often overlooked or ignored when things are proceeding smoothly but which can upset the organizational applecart when there are bumps in the road.
This is another question I’m often asked in the early stages, as a nonprofit board is coming together, and the answer this time is, “It depends, but probably.”
A primary responsibility of a nonprofit board of directors is assessing and managing the nonprofit’s risk. Risk is anything that threatens the nonprofit’s mission and stability; that is, what can go wrong? Risk ranges from financial (will we have enough money do what we need to do? Where will the money come from? What if the money doesn’t come in at all?) to mission implementation (Can we hire enough good people? We work children—what might go wrong?) to potential crises and catastrophes (We just rented space—what if someone falls? What if there’s a hurricane/tornado/earthquake?) A thorough risk assessment methodically asks all these questions about all aspects of the nonprofit’s operations.
As a nonprofit is starting, the board can begin to look at the bigger picture of the nonprofit’s risk. What risks does this nonprofit face right now? A year from now? The nonprofit will need a plan to manage its risk, and insurance is just one part of that plan. In this initial stage, it may be impossible to assess all the nonprofit’s risks, since risk will change over time as the nonprofit adds or changes programs; accordingly, a risk management plan will change over time as well.
Once the nonprofit’s risks are identified, the board can begin to pinpoint ways of addressing these risks. A variety of approaches are available–not everything requires insurance. Indeed, some risks are not even insurable.
Insurable risks include loss of assets, injury, interruption of service, litigation. Uninsurable risks include loss of audience or membership, loss of funding, social or scientific changes that eliminate the need for a service (e.g., March of Dimes), increased competition.
Some risks can be mitigated through preventative measures. Safety procedures are a good example—ensuring fire extinguishers are handy; eradicating trip hazards.
Once the board has assessed its risk, it must also assess the nonprofit’s tolerance for risk. In other words, does the nonprofit have the capacity to deal with a risk should it occur? For example, can it pay for the costs of storm damage? Can it afford to deal with a lawsuit? With these assessments, the board can begin to develop a plan to address risk, using mitigation as much as possible and practicable, developing an emergency fund, and purchasing insurance. At this point, consultation with an insurance agent knowledgeable about nonprofit organizations will be most helpful.
This is often one of the first questions I am asked by clients who are forming nonprofit organizations. I usually begin my response with the typical lawyer answer, “It depends.”
The board of directors (board members are properly called “directors”) by law holds all the authority of the nonprofit corporation. Individual directors have a fiduciary relationship with the nonprofit—they are bound at all times to uphold the best interests of the nonprofit. The board must oversee all the activities of the nonprofit, develop the nonprofit’s strategic direction, set policy, and generally lead the organization as it carries out its mission. This is a lot of responsibility.
Independence of directors is essential—independence of thought, as well as independence in the sense of freedom from direct or indirect conflicts of interest. For this reason, best practice requires all directors to be independent of each other—that is, unrelated as to family or business relationships.
Initially, to form the nonprofit, three directors are sufficient. In fact, in Massachusetts, one person is sufficient to form a nonprofit corporation, but this is not recommended for a nonprofit that plans to seek tax-exempt status. But to actually move the nonprofit assertively into its mission, more will be required. Moreover, if the first three directors are the founder plus a colleague and a family member (often the case at initial start-up) for example, additional directors should be added to offset these relationships. To concentrate the power of the nonprofit in one or two or three individuals who, because of their relationships, effectively constitute a voting block, subjects the nonprofit too strongly to their private interests. Charities, as the IRS has pointed out, must serve a public interest—not a private interest.
The next consideration is the size and scope of the nonprofit. A new nonprofit with one primary activity and no staff can manage satisfactorily with five directors, for example. A large, established nonprofit with staff and a range of programs, strong fundraising and multiple funding streams, and a board that is fully engaged in strategic planning, will need many more board members—perhaps 12-15 at least, possibly more.
Another key consideration is the need of the board for a variety of skills, experience, and contacts, and for a generally diverse make-up. Boards should reflect a range of skillsets, experience, and preferably multiple and different networks of contacts that can be used to the benefit of the nonprofit. For some nonprofits, a board that is representative of its community is crucial. Does every board need directors who are accountants and lawyers? No. But some financial savvy is essential, along with analytical ability, networks of contacts, and subject matter expertise. If the nonprofit’s board is only three individuals, is all that likely to be covered?
Boards of directors are not static. A board is never finished, set, complete. Boards are more like living organisms—they are born at the time of corporate formation, they grow and develop; they change over time. Indeed, a nonprofit whose board is unchanged many years after formation is likely stagnant, stuck, unable to move forward.
So how many board members does a nonprofit need? The short answer is, “Enough to get the job done.”
Wednesday, April 13, 6:00 – 8:00 pm
Do you have a great idea that will help your community? Maybe it should be a nonprofit! We’ll discuss the difference between nonprofits & for-profits, some preliminary considerations before you take action, and an overview of the steps in the process of getting a nonprofit up and running, with a quick look at getting tax-exempt status. Join us at the Legal Center for Nonprofits, located inside the Inter-Church Council House at 412 County Street, New Bedford, MA. Cost to attend is $10 per person. Pre-registration is recommended. Call (508) 264-5996 or email to Linnea@LegalCenterforNonprofits.org for more information or to pre-register.
Nonprofit boards of directors are responsible for risk management in their organizations. Larger nonprofits may have staff to carry out the risk management function, but for most small nonprofits, this falls to the board of directors, with the assistance of the executive director if there is one.
What is risk?
At its simplest, “risk” means “the possibility or chance of loss, danger or injury”. Risk generally involves harm of some type along with uncertainty. To manage risk, the board must identify:
- What can go wrong?
- Can it be prevented?
- Can we insure against it?
Some sources of risk include:
- Program, such as providing professional, such as counseling or child care, or other services, classes (art, music, cooking), etc.
- Accidents, slip-and-fall, motor vehicles; transporting students, etc.
- Acts and omissions, such as failure to warn of a danger, defamation, failing to perform an act or service, etc.
- Breaches of duty, particularly with regard to board members’ fiduciary duties.
- Employment, such as discrimination, wrongful discharge, other personnel actions. (Most claims against nonprofits derive from employment matters.)
- Finances, such as mishandling or misappropriation of funds.
- People, volunteers, clients, contractors, the public, etc.
- Disasters, natural or otherwise.
Insurable risks include:
- Loss of assets
- Interruption of service
Unininsurable risks include:
- Loss of audience or membership.
- Loss of funding, such as cuts to state budget, or termination of a grant.
- Social or scientific changes that eliminate the need for a service (e.g., March of Dimes).
- Increased competition.
A key component of every nonprofit’s risk management program is insurance. Join us for a presentation by Jeffrey Pelletier, Commercial Account Executive with the Sylvia Group, as he explains the particular insurance needs of nonprofits on Wednesday, February 24, at 6:00 pm, at the Legal Center for Nonprofits, located inside the Inter-Church Council House at 412 County Street, New Bedford, MA. Cost to attend is $10 per person. Pre-registration is recommended. Call (508) 264-5996 or email to Linnea@LegalCenterforNonprofits.org for more information or to pre-register.
Does your Board of Directors need a refresher on tax-exempt/nonprofit topics like fiduciary duties, the role & responsibilities of boards, best practices for board meetings, or another topic of particular interest to your nonprofit organization?
Contact us for more information about affordable customized trainings for your board delivered at your location.
Board Meeting Basics
November 18, 6:00-7:30 pm
“Are all nonprofit boards like this?”
“Is our board typical?”
“Is this how a nonprofit board is supposed to run?”
“What about Robert’s Rules?”
Find out about best practices for boards of directors of small nonprofits at the next program of the Legal Center for Nonprofits, Board Meeting Basics, on Wednesday evening, November 18, at 6:00 pm.
Admission is $10 per person, payable at the door. Off-street parking is available. The Legal Center for Nonprofits is located inside the Inter-Church Council House, 412 County St, New Bedford. Call (508) 264-5996 or email Linnea@LegalCenterforNonprofits.org for more information or to preregister.
Wednesday, November 4 at 6:00-8:00 pm
Lee Blake and Kristen Sarkarati will offer their Top 10 Tips to maximize your fundraising results as we head into the end-of-the-year fundraising season. Find out how to get the best return on your fundraising strategies for this year’s Giving Tuesday (December 1), polish your Annual Appeal to make it better than ever, plus more ideas to capitalize on the generous spirit of the fast-approaching holiday season.
Lee Blake is well known for her work with many local nonprofit organizations, including the New Bedford Historical Society and the New Bedford Education Foundation. She is an experienced board member and grant-writer. Kristen Sarkarati is the owner of Blue Skies Consulting, specializing in fundraising and communications, where she has crafted dozens of highly successful annual appeals over the years for a variety of non-profit organizations. Both are members of the Board of Directors of the Legal Center for Nonprofits, Inc.
Admission is $10 per person. Program takes place at the Legal Center for Nonprofits, Inc., 412 County Street, New Bedford, MA, located inside the Inter-Church Council house. Off-street parking is available. Pre-registration is encouraged as space is limited. For more information or to pre-register, call (508) 264-5996 or email Linnea@LegalCenterforNonprofits.org.