1. Role and Responsibilities of Nonprofit Board Members in Ohio Specially revised for the Center for Nonprofit Resources February 2014

2. Goals for Presentation  Cover legal roles and responsibilities of non-profit board members in Ohio.  Discuss recommendations for solid nonprofit board governance.  Focus on principles of board engagement/ involvement in governance.  Suggest strategies for increasing board engagement in governance.

3. Roles and Responsibilities  Nonprofits governed by Sections 1702 and 1716 Ohio Revised Code  Ohio Attorney General does monthly webinars: www.ohioattorneygeneral.gov  Ohio Attorney General Publication: Guide for Charity Board Members. Available as a free download Describes the four duties board members have under law (see following slides) Important information for every board orientation program Excellent material for ongoing board training

4. Duty of Care  Read and understand mission, vision, and governing documents.  Attend board and committee meetings.  Be informed and prepared to participate in decision-making and oversight.  Exercise same care as a prudent person would in the handling of their own affairs.

5. Duty of Loyalty  Be prepared to put organizational objectives above self-interest.  Establish and follow written policies concerning conflict of interest situations.  Disclose personal financial interests when needed/excuse yourself from voting.  Avoid entering into business relationships between board members and the organization.

6. Duty of Compliance  Understand and comply with governing documents, including bylaws and code of conduct.  Know and comply with state and federal laws governing non-profit organizations, including registration and reporting requirements.

7. Duty to Manage Accounts  Develop policies that assure the financial responsibility of the organization.  Keep accurate and complete records of income, expenses, investments, and minutes.  Develop budget as a blueprint for program plans and all organizational spending.  Develop fundraising goals and assist the organization in acquiring adequate resources.

8. And then there’s the IRS  IRS website – Charities & Nonprofits page provides a great deal of compliance information.  Regarding governance, the IRS does not have official requirements… but they do have guidelines. Find them in Part VI of the 990 form.  Individual boards may vary in the type of governance they adopt

9. IRS 990 Part VI Guidelines (Find more at IRS website)  Mission  Organizational Documents  Governing Body  Governance and Management Practices (next slide)  Financial Statements and Form 990  Transparency and Accountability

10. IRS Governance and Management Policies (The C4NPR online Resource Library has templates for many of these) Executive Compensation Conflict of Interest Investments Fundraising Board Minutes and Records Document Retention/Destruction Ethics and Whistleblower Policy

11. For More Information: Web-based Resources Ohio Attorney General www.ohioattorneygeneral.gov Ohio Secretary of State www.sos.state.oh.us Internal Revenue Service www.irs.govwww.irs.gov/Charities-&-Non-profits

12. Governance Best Practices There are many models of nonprofit board governance, and standards of practice evolve over the years. At Creative Option C, LLC we use and teach Governance as Leadership: Reframing the Work of Nonprofit Boards by Chait, Ryan and Taylor for BoardSource.

13. Modern Boards Operate in Three Modes Fiduciary Strategic Generative

14. Fiduciary Mode  Best understood, if not always embraced.  Fiscal “trusteeship” -- ensuring efficient and effective use of organizational resources.  Participation is securing resources.  Also included is the guarantee of quality programming.  Necessary but not sufficient.

15. Strategic Mode  The art of determining the best way to get from A to B.  Should be a nonstop pattern of thinking for boards and board members.  Common pitfalls of traditional strategic planning: Plan has no traction No strategies No real input Pace of change is slow Unforeseen outcomes

16. Generative Mode  Creative – Act of determining “A” and “B”  Making sense of facts and data, defining problems before solving them, and framing the key strategic questions.  Danger is that all information comes from staff – making board members less capable of assisting with the creative work of the organization and less effective than they could be at performing their fiduciary or strategic roles.

17. Strong CEOs WANT Strong Boards  The more people who are involved in thinking through an issue, the better the outcome will be – always.  You’ve recruited these people for their expertise – use it!  Tightly-controlled boards are less productive and engaged than those who are invited to contribute their best thinking – even when it’s messy for a bit.  Caution: strong and capable CEOs can spoil board members. If it is easier to rely on someone else - they will.

18. For more Information: Web-based Resources Center for Nonprofit Resources www.c4npr.org Board Source www.boardsource.org Blue Avocado www.blueavocado.org Guidestar www.Guidestar.org LinkedIn and Facebook: What groups do you belong to? Those connections are awesome!

19. Board Engagement Board member disengagement is a symptom of lack of opportunity to meaningfully and easily participate in furthering an organization’s good works.

20. Just what should board members be engaged in? Governance  Planning – strategic and otherwise  Policy  Evaluation Advocacy Financial health and sustainability  Budgeting and oversight  Fundraising

21. And what should board members avoid becoming engaged in?  Day to day operations Individual spending decisions within adopted budget Individual personnel decisions taken by CEO in accordance with adopted policies Individual program decisions – once the board decides what is to be accomplished, they should leave the “how” to staff  Criticizing organization publicly  “Parking Lot” Meetings  Representing organization (unless specifically authorized)

22. Planning  Strategic Planning Mission Vision Values Goals (long-term and short-term) Action items: who will do what? Timelines Budget  Succession Planning  Annual Fund Planning  Program Planning

23. Policy  Board Governance Policies (Bylaws/Code of Regulations, etc.)  Financial Management Policies (internal controls, reporting, audit, debt tolerance, etc.)  Personnel/Volunteer Policies  Communications Policies  Customer Service Policies

24. Evaluation  Program Evaluation Related to Board-Established Goals Key Indicators/Outcome measures  CEO Evaluation Related to Board-Established Goals  Board Evaluation How are we doing as a group?

25. Financial Sustainability  Participation in annual budget process is critical.  Fiduciary obligations cannot be escaped – the existence on a board treasurer or crackerjack staff person does not remove “duty to manage accounts” from anyone on board.  If a board adopts a budget that relies on fundraising… they have an obligation to participate in the fundraising.

26. Getting from Here to There Danger! People are always sensitive about being told their baby is ugly.

27. Change Management Increasing board engagement is an exercise in change management… Here are author John Kotter’s Eight Principles for Change: Increase urgency Build the guiding coalition Get the vision right Communicate for buy-in Empower action Create short-term wins Keep at it Make change stick

28. Separate Ends and Means  An effectively-operating board is not an end in and of itself, but rather a means for achieving some end.  What is the purpose? What could we achieve with more board involvement? What is our mission?  See change management principle #1 (increase urgency.)

29. Special Considerations  Working board vs. policy board: Are board members expected to participate in program activities?  Does the board have committees? Are board members expected to serve?  A young board may yet have no inherent governance culture – good time to set high expectations for board engagement.  More established boards, or those where founders are still present, have more in- grained culture – harder to change.

30. Strategy 1: Find a Board Ally or Partner  Board Chair/CEO relationship is critical.  Personnel Committee Chair.  Governance Committee Chair.  Any member who surfaces a concern to you.  Must have a high level of trust.  Follow their lead!

31. Strategy 2: Conduct a Board Self-Evaluation  Several tools exist. Group Individual Board Member  Provides “speaking” opportunity for board members who are ordinarily quiet in meetings.  Allows board members to self- identify and therefore own or buy-in to problems.

32. Strategy 3: Invest time in Recruitment and Orientation  Make sure each board prospect knows what you value about them.  Recruit people who are self-motivated.  Board member position description. Spell out expectations.  Provide new board members with Materials (minutes, financials, policies, etc.) Time to introduce themselves Space to ask questions

33. Strategy 4: Form a Governance Committee  It’s not just about “nominations” anymore.  Good role for vice president.  Responsible for board development activities, including orientation, annual retreat, ongoing training and mentoring.  Conducts assessments, communications with board members about their board experiences.  Reports to chair, executive director, and/or board about emerging issues.

34. Strategy 5: Conduct Strategic Planning  Include “institutional” goals related to board, staffing, space, budget, etc.  Include action plan outlining who is responsible for what by when.  When identifying champions, try not to say “board.” That gives each one an opportunity to wait for others to do it.  Create legitimate opportunity for full- board participation. Predetermining the outcome and guiding others to the “right” conclusion will backfire!

35. Strategy 6: End Rubberstamping  Board members who actually have a role in deciding the priorities for using resources (i.e. planning and budgeting) are easier to engage in governance – and in fundraising.  Take time to make sure all board members are truly comfortable with the financials… if they don’t understand or like your monthly statements change the statements!  It’s more important to have a good discussion than to end the meeting on time (really)  Include board members between meetings – take them to lunch, seek their advice, and listen!

36. Hire a Consultant! Cathy Allen Creative Option C, LLC cathy@creativeoptionc.com 419-732-1770 www.creativeoptionc.com