Learning Objectives

1. Learning Objectives • Identify the legal responsibilities of Board members • Explain the duties of Board members, as identified in the State’s Nonprofit Corporation Act • Describe the financial information that Board members need to govern • List some of development tasks that can be included in a Board orientation program Convery 2013

2. Legal Responsibilities of Board Members Duties of: • Care – be informed and familiar with the organization’s finances and activities, participate regularly, act in “good faith”, use the “degree of diligence, care and skill” that a prudent person would. • Loyalty – place the interests of the organization before your personal interests; disclose any conflicts of interest • Obedience – insure that the organization fulfills its purposes and organization’s resources are dedicated to its mission. Convery 2013

3. Responsibilities of Nonprofit Boards • Monitor that the organization is following its tax-exempt purpose and mission • Select the Executive Director and evaluate his or her performance • Approve the annual budget • Monitor that the NPO has adequate resources to meet its goals • Engage the external auditors • Monitor the effectiveness and efficiency of the NPO • Promote the organization and enhance its public image • Set the “tone at the top” related to ethical standards and accountability • Set performance standards for the board and self-assess its own performance • Set policies (e.g., compensation, investment, conflicts of interest, whistleblower) • Review the annual IRS Form 990 Convery 2013

4. Financial Responsibilities of the Board FINANCIAL QUESTIONS • Do we have a sound financial plan? • Do we have enough cash? • Are our reserves satisfactory? • Are our major expenses in line? • Are we meeting our budget? • Are our expenditures appropriate? • Are we insured appropriately against risks? • Are we meeting the guidelines and requirements set by our funders and the IRS? Convery 2013

5. Traps Boards Should Avoid(CH 4 Nonprofit Accounting Manual from Michigan Nonprofit Association ) • Ineffectually scrutinizing the overall enterprise • Failing to monitor key indicators • Failing to pay sufficient attention to whether the organization’s financial resources are being effectively spent on programs • Being too trusting of staff who handle money • Lacking strong external checks on financial reporting • Emphasizing executive compensation at the expense of other employees • Failing to “bid out” the sale of organizational assets • Failing to scrutinizing outside service contracts • Spending funds restricted by time or purpose • Mixing charitable and business interests Convery 2013

6. Responsibility of Board Treasurers • maintain custody of corporate funds and securities • keep full and accurate records of all receipts and disbursements • deposit money and valuables in designated depositories • authorize disbursements Convery 2013

7. Responsibilities of Audit Committees • Nominate the public accounting firm that will conduct the annual external audit • Participate in the process of setting the scope of internal and external audits • Invite direct audit communications on major problems encountered during the course of internal and external audits • Review a draft of the audited annual financial statements Convery 2013

8. Tasks for a New Board Member • Understand the purpose of the organization • Read the articles of incorporation – find the mission statement, compare it to the purpose statement in the Form 1023 Application for Tax-Exempt Status • Read the most recent audited financial statements and accompanying management letters • Make sure the organization has complied with state regulations • Review the minutes to Board meetings for the past year Convery 2013