Nov 182008

Dr. Earl R. Smith II
Managing Partner, The Federal Circle

Non-profits corporations are often the governance model used to address community-based problems. Non-profit boards are often composed of community leaders with a common goal of eradicating issues affecting the quality of life in their community. Boards of directors of these organizations serve as supporters, fundraisers, officers and staff members of these critical organizations. Boards of directors of non-profits must find ways to establish missions, map strategies, demonstrate fiduciary compliance, and provide oversight for the organization with a goal of supplying the maximum funds to carrying out the organization’s mission.

Boards of directors of non-profits act as supporters by bringing clout to the organization, and by overseeing the activities of the organization. The directors must also provide sound governance to protect the assets of the organization and credibility of the board of directors.

The leadership of community-based organizations is usually civic and business leaders working together to address issues important to their community. These organizations often address hunger, poverty or education and in some cases leadership development for the community.

Non-profits are often governed entirely by volunteers with no paid staff. Board members serve the function of staff members and as corporate management. They provide skills such as accounting, legal, and administrative and establish controls to ensure compliance with regulations and good governance practices. With no paid staff, the board must provide the arms and legs to carry out the mission it establishes for itself.

Non-profit boards must also provide governance for the organization. Good governance has the goal of protecting the organization and its ability to carry out its mission. The board of directors must select a CEO or Executive Director and other officers from among the board to perform the tasks of operating the organization. The CEO and other officers must be willing to devote a great deal of personal time to the organization. The board must establish policies of oversight to ensure the donors and other stakeholders have confidence in the integrity of the board and the CEO. The more transparent the organization’s fiscal activities are the more confidence donors will have in the organization. One practice is to establish an audit committee to oversee all corporate finance activities. The directors with delegated authority to sign checks or other financial instruments should not serve on the audit Committee.

Non-profits boards must also plan to achieve its goals. Strategic planning is the responsibility of the board of directors. Non-profit boards performing the task of staff members often fail to plan; electing to execute the same strategy as past boards. A lack of fresh ideas causes board members to loose their excitement for the organization. Boards of directors must conduct assessments to determine the level of effectiveness of programs. One of the most challenging assessments is the evaluation of the performance of the CEO. This is especially difficult when the CEO is volunteering to perform the role.

Non-profit boards choosing new directors must provide an orientation package for new members. These organizations operate in the same challenging business environment as for-profit corporations. New directors must learn to be both governors of the organization and staff members. Directors must be able to fill both roles effectively.

Non-profits must establish effective succession committees to search out capable people willing to volunteer time and talents. The high burn out rate among volunteers requires boards to maintain a list of potential new directors. The new directors must be able to bring influence and sound governance reputations to the board to assist in carrying out the fundraising activities of the nonprofit.

Non-profit boards have some limitations in self-governance. However, dedicated volunteers make this governance model work in many communities.

© Dr. Earl R. Smith II


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