It is essential for startup nonprofits to have a strong organizational structure. This structure is built through the board of directors. But what exactly is a board of directors and what role does a board play within a nonprofit?
The board of directors is the governing body of a nonprofit. Individuals who sit on the board are responsible for overseeing the organization’s activities. Board members meet periodically to discuss and vote on the affairs of the organization. At a minimum, an annual meeting must occur with all board members present. Additional meetings are likely to take place throughout the year so board members can discuss and make other necessary decisions. Board memberships are not set up to be permanent positions; most organizations have terms set up for board members, which typically fall between two and five years.
Ideally, a nonprofit’s governance is different from its management (paid staff). While many small nonprofits (especially those in the startup phase) have board members serving in management positions, the ultimate goal is to have board members separate from paid staff members. The board of directors, as a governing body, should focus on the organization’s mission, strategy, and goals. Staff members are responsible for the implementation of the mission. Having dual-capacity board members can often lead to problems (which will be discussed in detail in our next article) between a nonprofit’s mission and how it operates.
Organizations also have officers, typically from among the board members, who are given a higher level of responsibility compared to other board members. Initial officers are elected by the board; this vote usually takes place during the organization’s first meeting. Much like board members, officers usually serve terms. Typically, a nonprofit has three officers serving the role of President, Secretary, and Treasurer. Officer roles and their terms should be specifically defined in the organization’s bylaws.
The President heads up the board and supervises all of the business and affairs of the board. While the President can also serve as the CEO of the organization, keep in mind that these two roles are separate; an individual cannot be compensated to hold an officer position.
The Secretary keeps the minutes of the board of directors. Additionally, the Secretary is responsible for keeping track of the organization’s activities to make sure the actions of the organization are in accordance to the organization’s Bylaws. The Secretary usually keeps track of the board members’ contact information in order to inform the board about meetings and updates on the organization.
The Treasurer keeps account of the receipts and disbursements in the organization’s books. Additionally the Treasurer is responsible for keeping track of the organization’s financial condition. This is an important role because it keeps the other officers and board members informed about the financials.
Though officers are typically board members, there are no guidelines or requirements that suggest an organization cannot elect an individual outside the board to be an officer for the organization (unless the officer roles described in the organization’s bylaws state otherwise). It is possible for an individual to hold two separate offices, with the exception that the President cannot also serve as the Secretary.
It is best practice to find individuals within the community who have passions and experience that aligns with the nonprofit’s mission. There are no IRS guidelines in place to determine who is certified to be on a board; any individual can become a board member. There are guidelines, however, that help public charities avoid inurement.
The next installment of this topic discusses inurement, along with other conflicts of interest in regards to nonprofit board members. Click here to view Part II.