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PRINCIPLES OF NONPROFIT GOVERNANCE

Nonprofit governance is linked with several basic principles that are inherent to the nature and purpose of nonprofit organizations:

Independence and commitment: Nonprofit organizations must have a committed board of directors that is independent in thinking and decision making.

- Fairness and equity for stakeholders: Boards of directors must ensure that all stakeholders are treated in a fair and equitable manner.

- Accountability to the public: Nonprofit organizations are publicly supported entities. Therefore, they are accountable to both internal (members, beneficiaries, employees, volunteers) and external stakeholders (donors, local communities, suppliers, creditors, policy makers, regulating agencies).

- Transparency: Nonprofit organizations must disclose information about the roles of stakeholders in their operations, the outcomes related to such operations, and the financial statements that clarify the use of financial resources received from the public (e.g., donations, grants, endowments, etc).

- Ethical conduct: Board members of nonprofit organizations should be community members and citizens of high ethical standards. Further, a nonprofit organization must develop and enforce a code of ethical conduct, especially with respect to financial management, service delivery, and all operations and activities performed by board members, managers, staff, or volunteers.

GOVERNANCE AND BOARD OF DIRECTORS

Governance is more about the structures and process of decision making than the decision itself. Successful organizations maintain a governance system that enables them to make informed decisions when addressing their most complex problems or issues. A sustainable governance system is more likely to foster a sustainable organization. The role of the board of directors is to ensure that a nonprofit organization is run, managed, and properly led with the ultimate aim to protect the interests of its constituencies. In other words, the board has a responsibility to hold managers and leaders accountable for their actions and their performance. The metrics for such an endeavor reside in the existence of vision and mission statements that set the purpose of a particular nonprofit organization. The vision and mission must be translated into action plans, policies, programs, projects, and services that are carried out by management and staff. Legal obligations of the board of directors (Box 3.3) include, but are not limited to:

1. Fiduciary duty: Board members of nonprofit organizations have a fiduciary duty to be trustworthy by acting in the best interests of their constituencies.

2. Duty of loyalty and fair dealing: The duty of loyalty and fair dealing requires that a board member put organizational interests ahead of his/her own personal interests. In other words, board members should not use their position to gain personal advantages or make personal profits.

3. Duty of care: Board members are expected to carry out the business of a nonprofit organization with the reasonable care of any prudent individual.

4. Duty of supervision and accountability: Directors should exercise their oversight responsibilities with a high level of effectiveness. Effective oversight starts with the adoption of policies of ethics and accountability that set standards of behaviors for board members, the executive director, and managers. Ethics and accountability policies should also include standards for disclosure, financial reporting and internal control. Further, the duty of supervision and accountability empowers the board of directors to

- Develop and approve strategic plans, including vision, mission, organizational mandates, goals and objectives, and core strategic areas

- Establish, review, and approve organizational budgets

- Approve major or significant financial transactions

- Review auditing and accounting policies and practices

- Establish benchmarks to measure organizational performance

- Set executive compensations

- Contribute to fund-raising, advocacy, and collaborations or partnerships for organizational growth and financial sustainability

BOX 3.3 SAMPLE OF BOARD ROLES AND RESPONSIBILITIES FORM

SAMPLE OF BOARD ROLES AND RESPONSIBILITIES FORM

Together, with other members of the Hope and Dream, Inc. Board of Directors, you are legally, financially, and ethically accountable for all activities of this organization. You are in a position of public trust and are a trustee of the organization. While serving on this board, it is assumed and expected that you will:

- Know and support the organization's vision, mission, core values, guiding principles, position statements, policies, goals, and programs.

- Routinely promote all of the above to your family, friends, community contacts, and professional associates.

- Treat the affairs of HOPE AND DREAM as you would your own.

- Act in ways that will not likely be perceived as a conflict of interest with the organization or as self-serving.

- Keep confidential information confidential; sign an annual pledge.

- Expand knowledge about this organization, childhood and family empowerment, and board responsibilities through orientation, "hands-on" participation, and ongoing education.

- Offer your talents, personal and financial resources, and/or expertise regularly and generously to benefit the organization.

- Have a personal and dedicated commitment to promote a better environment for children and families.

- You are expected to contribute significantly to the well-being of the organization.

- Specific expectations are that you will:

- Attend board meetings regularly (at least four of the six full board meetings per year).

- Attend HOPE AND DREAM annual Conference in February, and attend as many other educational events as possible.

- Be able to contribute an average of 15 hours per month.

- Read and understand the minutes and financial reports of and for the board meeting, as well as other information provided to you.

- Actively serve on at least one committee, attending meetings regularly, reading minutes and reports, and actively participating in activities of the committee.

- Hold a personally paid annual membership of three hundred dollars ($300) or more in the organization.

- Participate directly and actively in all fund-raising efforts, personally or financially.

- Provide and promote public relations for the organization in your community and with personal and business contacts (arrange at least one Speakers Bureau presentation).

- Be responsible for getting five new donors or members each year (individual or organizational).

- Share board and donor prospects and make personal visits with staff or another board member.

In addition, the HOPE AND DREAM Board of Directors' organizational responsibilities include:

GOVERNANCE AND EXECUTIVE DIRECTOR SELECTION/EVALUATION

1. Board membership: recruitment, orientation, education, and development of board leadership.

2. Selection and evaluation of chief executive officer (CEO) who, in turn, becomes the organization's manager. The chief executive makes day-to-day and standard management and marketing decisions without interference. Individual board members will support the CEO with consulting skills when asked or deemed necessary.

3. Assure that the organization meets the needs of stakeholders and customers.

Finance

1. Identify and obtain the financial resources necessary to support the mission in the short and long term.

2. Ensure financial accountability, including an annual audit by a reputable certified public accountant.

3. Play an active role in marketing services, lobbying, fund-raising, and other revenue generation. Individual board members represent one of three sectors: civic, corporate, or professional in fields related to child, family, and community services. They will support the nonprofit with their personal resources and involvement. Corporate board members will bring additional financial support (value of $1,500 or more from their employers). Civic board members will actively work to develop partnerships and collaborations with their communities.

Professional board members will work to increase direct utilization of the organization's programs and services.

4. Provide ongoing public relations to increase funding and general support opportunities. (Board members are always emissaries of the organization in the community.)

Planning

1. Set and review mission, philosophy, and strategic and/or long-term goals. 2. Create a written plan for the long-term future of the organization.

Organizational Operations

1. Assure appropriate and adequate administrative and support systems are in place.

2. Assure board operations are appropriate and adequate.

3. Assure organizational structure is appropriate and adequate.

4. Assure that board members and organization meet all applicable legal requirements.

5. Set policies for the chief executive to implement and achieve.

6. Assure that the organization has the critical capabilities needed to achieve its goals and objectives.

ACKNOWLEDGMENT

My signature indicates that I have read and understood my responsibilities as member of HOPE AND DREAM board of directors and I will do my best to contribute to the mission and vision of the organization.

Print Name Signature/Date

SEEN AND APPROVED BY:

President /Date

 
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