Understanding What Do Board of Directors Do

Board Member Roles and Responsibilities continued

Board Member Roles and Responsibilities

GENERAL DUTIES OF A BOARD OF DIRECTORS

Basic Responsibilities of Nonprofit Boards

1. Determine the organization's mission and purpose. It is the Board’s responsibility to create and review a statement of mission and purpose that articulates the organization's goals, means, and primary constituents served.

1. Select the chief executive. Boards must reach consensus on the chief executive's responsibilities and undertake a careful search to find the most qualified individual for the position.

1. Provide proper financial oversight (“fiduciary responsibility”). The Board must assist in developing the annual budget and ensuring that proper financial controls are in place.

1. Ensure adequate resources. One of the Board’s foremost responsibilities is to provide adequate resources for the organization to fulfill its mission.

1. Ensure legal and ethical integrity and maintain accountability. The Board is ultimately responsible for ensuring adherence to legal standards and ethical norms.

1. Ensure effective organizational planning. Boards must actively participate in an overall planning process and assist in implementing and monitoring the plan's goals.

1. Recruit and orient new Board members and assess Board performance. All Boards have a responsibility to articulate prerequisites for candidates, orient new members, and periodically and comprehensively evaluate its own performance.

1. Enhance the organization's public standing. The Board should clearly articulate the organization's mission, accomplishments, and goals to the public and garner support from the community.

1. Determine, monitor, and strengthen the organization's programs and services. The Board’s responsibility is to determine which programs are consistent with the organization's mission and to monitor their effectiveness.

1. Support the chief executive and assess his or her performance. The Board should ensure that the chief executive has the moral and professional support he or she needs to further the goals of the organization.

1. Assess its own performance regularly.

BOARD MEMBER RESPONSIBILITIES

What Makes A Successful Board Member?

A Board member's success is determined not only by her business skills and experience, but by her personality traits, or character. In his book "Welcome to the Board," [@1995, Jossey-Bass Inc. Publishers] author Fisher Howe identifies several characteristics of successful, happy Board members:

• They are honest
• They are enthusiastic
• They keep an open mind
• They are team players
• They tackle complex problems with relish
• They take an orderly approach to decision making
• They are competent
• They have a sense of humor

Personality traits in "problem" Board members may include:

• Obsession with a single issue
• Always taking the "contrarian" view--just for show
• Expounding on strongly held opinions that are rarely backed up by fact or research
• "Board hopping" - or sitting on many Boards, but serving none well

What are the responsibilities of individual Board members?

• Attend all Board and committee meetings and functions, such as special events
• Be informed about the organization's mission, services, policies, and programs
• Review agenda and supporting materials prior to Board and committee meetings
• Serve on committees or task forces and offer to take on special assignments
• Make a personal financial contribution to the organization
• Inform others about the organization
• Suggest possible nominees to the Board who can make significant contributions to the work of the Board and the organization
• Keep up-to-date on developments in the organization's 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 organization's annual financial statements

GENERAL DUTIES OF OFFICERS

President:

• Represent the organization to outside entities
• Have general active management of the business of the corporation
• Preside at meetings of the general membership
• Serve as ex-officio member of all committees
• See that orders and resolutions of the Board are carried into effect
• Sign and deliver in the name of the corporation deeds, mortgages, bonds, contracts or other instruments pertaining to the business of the corporation, except in cases in which the authority to sign and deliver is required by law to be exercised by another person or is expressly delegated by the articles or bylaws or by the Board to another officer or agent of the corporation
• Perform other duties prescribed by the Board
• Implement and monitor long-term planning process and organizational goals
• Form ad hoc committees and task forces
• Appoint all committee and task force members
  Oversee Board and executive committee meetings
• Work in partnership with the chief executive to make sure Board resolutions are carried out
• Call special meetings if necessary
• Assist chief executive in preparing agenda for Board meetings
• Assist chief executive in conducting new Board member orientation
• Oversee searches for a new chief executive
• Coordinate chief executive's annual performance evaluation
• Chair the nominating committee to recruit new Board members
• Act as an alternate spokesperson for the organization
• Periodically consult with Board members on their roles and help them assess their performance
• Work to oversee and monitor long-term planning and organizational goals

President-elect:

•Performs such duties as identified in the bylaws or assigned by the President.

•Serves in the absence of the President

•Automatically succeeds to the Presidency.

•May monitor progress for Strategic Plan.

Board Secretary/ Treasurer

• Attend all Board meetings
• Serve on the Executive Committee
• Maintain all Board records and ensure their accuracy and safety
• Review Board minutes
• Assume responsibilities of the chair in the absence of the Board chair, chair-elect, and vice chair
• Provide notice of meetings of the Board and/or of a committee when such notice is required

• Maintain knowledge of the organization and personal commitment to its goals and objectives
• Understand financial accounting for nonprofit organizations
• Serve as financial officer of the organization and as chairperson of the finance committee.
• Manage, with the finance committee, the Board’s review of and action related to the Board’s financial responsibilities.
• Work with the chief executive and the chief financial officer to ensure that appropriate financial reports are made available to the Board on a timely basis.
• Assist the chief executive or the chief financial officer in preparing the annual budget and presenting the budget to the Board for approval.
• Review the annual audit and answers Board members' questions about the audit.

• Keep accurate financial records for the corporation
• Deposit money, drafts, and checks in the name of and to the credit of the corporation in the banks and depositories designated by the Board
• Endorse for deposit notes, checks, and drafts received by the corporation as ordered by the Board, making proper vouchers for the deposit
• Disburse corporate funds and issue checks and drafts in the name of the corporation as ordered by the Board
• Upon request, provide the president and the Board an account of transactions by the treasurer and of the financial condition of the corporation
• Perform other duties prescribed by the Boardor by the president

LEGAL RESPONSIBILITIES OF NON-PROFIT BOARDS

(STATE OF NEW MEXICO)

Trustees and directors of a charitable organization, whether or not the organization is formally incorporated as a nonprofit corporation, have specific legal duties to the organization. The primary duties are:

• the duty of care
• the duty of loyalty
• the duty to manage accounts
• the duty of compliance

THE DUTY OF CARE

The duty of care requires active participation in the charity's affairs by attending Board meetings and meetings of committees on which the trustee or director serves. Each Board member must stay informed to determine if the Board’s policies are being followed and to understand how the charity is functioning.

Boards may establish committees having the authority of the Board and may rely on information, opinions, or reports of these committees as the basis for a formal Board action. However, the committees remain subject to the direction and control of the Board. As a result, individual Board members are responsible for the work of the committees.

The duty of care must be discharged diligently and in good faith. Board members must act with knowledge and after deliberation, and should carefully establish policy and regularly oversee its implementation and administration by a competent staff.

Unfortunately, some Board members simply don't do their jobs. Board members who are regularly absent from meetings, are inactive, or who fail to conduct adequate research prior to making decisions, have breached their duty of care. Neither the individual Board member nor the charity benefits from this kind of "service."

Board members must conduct themselves with the level of care, skill, and diligence exercised by "prudent persons" in the handling of their own affairs. Generally, a Board member who knows the facts, analyzes the probable result of an action, exercises sound judgment, and keeps reasonable records, acts prudently and fulfills this important duty of care.

The following are specific actions Board members should take to ensure that their duty of care is being fulfilled:

Minutes of Meetings
Written minutes need to be taken at every Board meeting and every committee meeting. The minutes should accurately reflect the actions taken at the meeting. The minutes should be approved at a regular meeting of the Board and maintained as a record of the Board’s actions.

Board Actions
A director who is present at a meeting when an action is approved by the entire Board is presumed to have agreed to the action unless the director objects to the meeting because it was not lawfully called or convened and doesn't participate in the meeting, or unless the director votes against the action or is prohibited from voting on the action because of a conflict of interest.

Books and Records
A director needs to have general knowledge of the books and records of the organization and its general operation. The organization's articles of incorporation, bylaws, accounting records, voting agreements, minutes, and list of voting members must be made available to members and directors who wish to inspect them for a proper purpose.

Accurate Record Keeping
A director needs to be familiar with the content of the books and records to ensure that the organization's records and accounts are accurate. This may mean the director must take steps to require regular audits by an independent certified public accountant. Charitable organizations with total revenue of $500,000 or more are required to be audited by an independent certified public accountant. At the very least, the director needs to be aware of what the financial records disclose and take appropriate action to make sure there are proper internal controls.

THE DUTY OF LOYALTY

The duty of complete and undivided loyalty requires that the interest of the charity and, as a consequence, the interest of the public, take precedence over the Board member's personal interests. A trustee must, loyally and without self-interest, further the charitable objectives of the organization by acting fairly and in the best interest of the charity.

Trustees may breach the duty of loyalty when they engage, directly or indirectly, in transactions between themselves as trustees and themselves as individuals or with family members or businesses in which they hold an interest. Board members should not engage in any transaction that is adverse to the charity, engage in any competing enterprise to the detriment of the charity, divert an organizational opportunity for personal gain, or derive any kind of secret profit or other advantage in dealing with or on behalf of the charity. Caution should be exercised in entering into any business relationship between the organization and a Board member, and should be avoided entirely unless the Board determines that the transaction is clearly in the charity's best interest.

The following are specific actions Board members should take to ensure that their duty of loyalty is being fulfilled:

• Always put the interest of the charity first
• Establish a written conflict of interest policy, which should include procedures for written disclosures from Board members concerning any business dealings with the charity
• Disclose his or her financial interest whenever the charity proposes to enter into a business relationship with the Board member, a member of his or her family, or a business in which the Board member holds an interest. The Board member should not vote on the transaction or participate in any debate on the merits of the transaction
• Refrain from diverting a business opportunity available to the charity for his or her own gain
• If at all possible, avoid transactions involving potential conflicts of interest and self-dealing situations

THE DUTY TO MANAGE ACCOUNTS

Board members are responsible for assuring the financial accountability of the charity.

Procedures need to be established to keep the organization fiscally sound and ensure that it operates in a fiscally responsible manner. Care must be taken to use any restricted funds properly. Trustees need to oversee the executive director and determine that the charity's purposes are fulfilled without waste. Preparation of a budget is important to provide clear directions for spending and translating program and management goals of the Board into financial projections.

The organization needs to be able to demonstrate the wise use of its funds. Accurate records of all income, expenditures, transactions and activities must be maintained. Accurate minutes of Board meetings should be taken in order to demonstrate Board approval of certain expenditures and investments and to show that informed decisions were made with regard to these transactions. The following are specific actions that Board members should take to ensure that their duty to manage accounts is being fulfilled:

• Keep accurate records of income, investments, expenditures and transactions, and accurate minutes of Board meetings
• Develop annual budgets that provide clear direction for spending at all levels of activities. The budget should be a blueprint of the Board’s program plans
• Establish appropriate internal accounting systems, including a system of checks and balances. No one person should retain total control over finances
• Prudently invest and reinvest assets
• Assist the organization in acquiring resources for its programs. Develop fundraising goals and policies. Make certain that fundraising appeals are presented honestly and fairly, and monitor the performance of fundraising professionals
• Shop around for the best values in goods and services through comparisons and informed bidding processes. This process should also be applied to contracts entered into with fundraising professionals

THE DUTY OF COMPLIANCE

Board members have a duty to be faithful to the organization's purposes and comply with the charity's governing documents. They are also under a duty to be familiar with the laws that apply to the charity and to comply with those state and federal laws that relate to the charity and its business operations.

The following are specific actions Board members should take to ensure that their duty of compliance is being fulfilled:

• Familiarize themselves with and follow the provisions of the charity's articles of incorporation, constitution, by-laws, or other governing documents
• Familiarize themselves with state and federal laws relating to nonprofit entities, fundraising, and tax related issues
• Comply with state and federal registration and reporting requirements, which may include filings with the New Mexico Attorney General, the New Mexico Public Regulation Commission, the New Mexico Taxation and Revenue Department, and the Internal Revenue Service.

LEGAL PROTECTION FOR DIRECTORS AND THE ORGANIZATION

General Considerations:

• Directors cannot abdicate their responsibility to be in charge and to direct
• Directors must make certain the organization is operating within a legal framework
• Directors have a legal responsibility for the protection of all assets
• Directors must validate all major contracts by giving and recording formal approval
• Directors must attend most Board meetings, not just on occasion. Absence from a Board meeting does not release the director from responsibility for decisions made. A pattern of absence may indeed be presumed to increase an individual's liability because she/he cannot demonstrate a serious dedication to the obligations of the position.
• There is no absolute protection against someone bringing suit against you (note: NANOS has Board and Directors Liability Insurance and has legal counsel)
• Conscientious performance is the standard. The best defense is a good offense: strive hard to do everything right and be able to show that you tried hard; then you are much more likely to be OK.
• Remember: The assumption in the law is not necessarily that you must make the correct decision, but that you must make the decision correctly. (It helps greatly to be able to show that the Board made serious consideration of an action before the action was taken. Board minutes should reflect this care taken.) It is not a crime to be wrong, but did you ask the right questions and respond as another reasonable individual would in that situation? Board members are more at risk for taking no action than for taking the wrong action for the right reasons.
• While you have the right to rely on information supplied to you in due form, and on the accuracy and integrity of others (particularly in areas of special competence) you must use reasonable judgment in this area, too.
• If it smells fishy, find out where it has been swimming -- and how long it has been dead.

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