It is essential for all nonprofits, including startups, 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.
Governance is high level: strategy, oversight, accountability. Management is the day-to-day operations of a nonprofit.
Ideally, a nonprofit’s governance team is different from its management team, which is made up of paid or volunteer staff members. 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 as much as possible. 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 between a nonprofit’s mission and how it operates.
Organizations should also have Officers, typically chosen 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. 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 or Executive Director of the organization, keep in mind that these two roles are separate. Returning to an earlier point, the role of President is a matter of governance, while the role of CEO/ED is management.
The Secretary. The Secretary records and archives the minutes, or record of discussion and votes, of each meeting 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 is usually the officer who keeps board members’ contact information in order to inform them about upcoming meetings of the board.
The Treasurer. The Treasurer is the officer accountable for keeping accurate accounting records of the receipts and disbursements of the organization. This person is usually a signatory on all bank accounts, though he or she shouldn’t be the only signatory. 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 chosen from among the current roster of board members, there are no statutory guidelines or requirements that an individual from outside the board cannot be elected to be an officer for the organization. That is, assuming the officer roles described in the organization’s bylaws do not 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, which is prohibited in most states’ nonprofit corporate law.
There are no IRS guidelines in place to determine who is certified to be on a board; most any individual can become a board member. It is best practice to find individuals within the community who have the passion and experience that aligns with the nonprofit’s mission. In addition, you probably want to choose board members who have experience in overseeing business affairs at some level. These persons will be better prepared to advise your nonprofit, compared to those with no management experience.
There are no components of a nonprofit organization more critical than that of a Board of Directors. Your success depends on a board that is fully invested in seeing your mission accomplished. Choose your board members wisely!
Our next installment in this series will discuss the topic of inurement and conflict of interest with regard to board members.
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