A Year In the Life of the Board of Directors
“We don’t have Board meetings. We have the same Board meeting over and over and over again.”
Many board members can identify with this sentiment. It often feels like the board is spinning its wheels, listening to the same reports and discussing the same issues. Too often directors feel they are not adding any value to the nonprofit, and the board is not serving a critical function for the organization.
But that shouldn’t be the case. A well-run board adds real value to an organization, and is critical in times of crisis.
The first step in developing a strong board is to develop a work plan for the board, so it knows what its responsibilities are, and how it should work with management to achieve them. There are certain basic functions every board should carry out, and a logical time of the year at which to undertake the task. There are other functions that are on-going, and should be examined at every meeting. If you divide the year into four quarters, a typical year in the life of the board of directors would look as follows:
First Quarter:
- Orient new board members;
- Review and refine the board’s work plan for coming year;
- Ensure that all board members review conflict-of-interest policy and complete conflict of interest disclosure forms;
- Appoint members to board committees; and
- Monitor and update the organization’s risk management plan.
Second Quarter:
- Supervise independent financial audit for prior fiscal year;
- Oversee program audit and evaluation;
- Ensure IRS and other government filings are properly reviewed and made;
- Review the performance of the CEO and set compensation for CEO; and
- Work with CEO to set compensation for other members of senior management.
Third Quarter:
- Monitor and update the organization’s strategic plan in order to develop organizational work plan for the coming year;
- Finalize independent audit and file IRS Form 990;
- Develop funding plan for next fiscal year before determining next year’s budget and work plan;
- Conduct board self-assessment: Is the board completing its work efficiently and effectively;
- Are board members engaged; and
- Are committees working properly?
Fourth Quarter:
- Select an independent auditor for the next year’s financial audit;
- Approve annual budget and organizational work plan for coming fiscal year;
- Recruit and elect new board members based on board self-assessment; and
- Elect new officers (if necessary).
In addition, the board must monitor the nonprofit’s financial performance on an on-going basis. It is critical that the board respond quickly if the nonprofit’s fundraising is significantly below budget. The board and management may need to delay purchases or hiring staff, reduce its work force, or cancel contracts. Financial shortfalls rarely correct themselves, and a board that is closely monitoring the health of an organization, and acting promptly if shortfalls arise will help create a sustainable organization.
Also, the board needs to address long range tasks relating to the governance of the organization. While these actions do not take place every year, they should be part of the regular life cycle of the board.
1. Strategic Review - Every three to five years, the board, in partnership with senior management, should lead the organization in an in-depth review of the strategic direction of the organization to ensure the organization’s future sustainability and growth. The strategic review process should use the organization’s mission statement as its starting point, determining whether the organization’s activities remain consistent with its mission and whether they meet the needs of stakeholders. The board should also examine whether existing programs are still effective in carrying out the organization’s mission, or whether it needs to shift its focus to meet current and future stakeholder needs. Finally, the board should evaluate whether resources are available to assist in better meeting the needs of its stakeholders or expanding its services.
2. Review Policies and Procedures - Good governance policies, while not required by the IRS, play an important role in ensuring the organization’s financial health by promoting a culture of accountability that safeguards against future problems. These policies should be reviewed and updated every three to five years. Key policies include a conflict-of-interest policy to guard against self-dealing transactions; a document retention and destruction policy to protect against loss or inadvertent destruction of documents; a code of ethics to establish conduct guidelines for the board, management, staff, and volunteers; an anti-harassment policy to ensure that the organization is maintaining an appropriate workplace; and a whistleblower policy that protects staff, clients and volunteers who report unethical or unlawful practices within an organization.
3. Review and Update Bylaws - A nonprofit’s bylaws, which provides the internal rules and governance structure of the organization, are one of its most important documents. Well-crafted bylaws lie at the heart of a well-governed organization, and regular review of this key document will strengthen the board and the organization. A review of the bylaws every three to five years is essential to ensuring that the bylaws are in legal compliance with applicable state and federal statutes, particularly if those statutes change. Additionally, directors should review and refamiliarize themselves with the bylaws to ensure they are in fact following the required procedures, and reaffirm those procedures are sound and promote the best governance practices. Regular review of the bylaws also provides an opportunity to educate board members about their responsibilities as directors, their legal duties, the standard of care they are required to exercise, and permissible delegation of duties.
By systematically addressing basic issues in a timely fashion, the board will have time to undertake the tasks that are important, but not part of its day-to-day responsibilities.
