By Annmarie Novotney, senior audit manager, Blue & Co.
A strong board of directors will oversee implementation of strategic objectives for the organization, but also has ultimate responsibility and liability. Building a strong board is challenging, yet crucial to setting the right tone for success of your organization.
Have you assessed your organization’s overall governance model recently? Generally, it’s best practice to review governance policies regularly but at least every three to five years. For newer organizations, this time period may be shorter as circumstances and strategic positioning may change more frequently.
As you review your organization’s governance model, consider the following:
Board size: The IRS generally requires a minimum of three board members but does not have requirements on term limits. Many organizations have at least five members, with an average throughout our client base of 15. As you consider what board size is right for you, also consider if term limits are appropriate. If your review determines changes to board structure need to be made, be sure to amend your organization’s bylaws (for maximum board members and term limits).
Type of board: You may also consider whether your board is a working board or a governing board. Working boards have members that are heavily involved in the implementation of the mission, and often perform duties that paid staff would perform. Governing boards have a big-picture focus and work to delegate tasks to staff in an effort to govern the strategic mission, not implement it directly.
Skillsets needed: A diverse and skilled board of directors can serve its organization more effectively. In all areas, ensure that you are focused on nonprofit (NFP) expertise. Attorneys and accounting professionals are especially important in this regard as nonprofits are unique in many ways. Some examples of areas include:
- Financial – This expert would be able to provide guidance on the creation of a budget, financial statements, and accounting policies and procedures, and insurance considerations.
- Legal – As there are many requirements for a nonprofit organization, a legal expert can ensure the board stays up to date on all compliance requirements and provides guidance on any legal matters that may arise.
- Marketing – Ensuring your organization is well-known throughout the community can provide significant growth opportunities for recognition and future funding. An expert in marketing can help accomplish this.
- Technology – A technology expert can ensure the organization is doing its best to protect its assets and information from cybersecurity threats. Cybersecurity threats continue to plague NFP organizations of all sizes, so having an expert here could keep the organization up-to-date on security options and policy ideas.
- Fundraising – An expert in fundraising is a must for any NFP board. This person should not only have connections in the community, but also know how and be willing to ask for donations in an effective manner.
- Program/Industry– Having a board member familiar with your programs, or with industry knowledge that could assist in growing or expanding current programs, can be an asset to review plans for future programming within your organization. He or she can review and identify red flags in planning, as well as provide realistic expectations on how quickly a program can be started or expanded.
Board committees: Board committees are also an important part of a Board of Directors. The size and responsibilities of committees vary greatly between organizations based on their needs. For some committees, it may be best to have a committee chair, responsible for communicating decisions to the board and ensuring the committee remains focused on its goal. The following are suggested committees, but should be tailored to your current needs and long-term goals:
- Executive – This group acts on behalf of the entire board as the steering committee and prioritizes agendas. They also manage urgent matters between meetings.
- Finance – These individuals take on an expanded role of the financial expert mentioned above. Preparing or assisting with the budgeting process, reviewing internal financial statements, and presenting these items to the Board would be included in the responsibilities of the finance committee. This committee can also provide insight on whether goals are achievable based on the financial performance of the organization.
- Audit – If an audit becomes necessary for the organization, having an audit committee can ensure it is clear who is responsible for staying current on financial requirements, chooses the audit firm, ensures there is no conflict of interest and has a clear understanding of the audit results.
- Fundraising/program – This committee is focused on driving and monitoring the organization’s fundraising performance and can also track the effectiveness of specific programs to determine if any changes need to be made.
- Governance/nominating – This group determines the requirements and qualifications of board members, nominates them, and ensures they receive proper training. This committee also drives board expectations and performs regular self-assessments of the board.
Annmarie Novotney is an audit senior manager in Blue & Co.’s Carmel, Indiana office. She’s been with the firm for over nine years and works exclusively with nonprofits, specializing in assurance and consulting services.
If you are considering a review of your governance policies, or if you have questions or need guidance on how to incorporate these suggestions, please contact Annmarie Novotney (firstname.lastname@example.org) or your local Blue & Co. advisor.