Charity boards are the core group of people who guide, direct and run charitable, or nonprofit, organizations. They don't necessarily conduct fundraising duties or make the day-to-day decisions for the organization. But they're the ones who steer the charity's resources where they think they should go. In short, the charity board members may not be the foot soldiers, but they're the generals.
Charity boards are often stocked with prominent members of the community, and for good reason. Local pillars don't just lend an air of authority to an organization, they also contribute their individual expertise as well as a network of other people with skills and information. Board members like the work because it's an excellent way for them to become involved in the community.
A charity can't be founded without a charity board. That's because the board has oversight over paid employees and executives, and may even be in charge of hiring them. Board members are the organization's top resource for skills. For example, it might be a good idea to have an accountant on the board in case there are any accounting issues. A newspaper editor board member could use his or her media influence to spread word about the charity.
In this article, we'll take a look at how charity boards are formed, organized and what they do for a nonprofit organization. A solid, well-organized, well-oiled charity board leads to an effective and efficient charity organization. Learn more on the next page.
Setting Up a Charity Board
You've identified a need or a cause close to your heart and you've decided that the best way to address it is to start a charity (or a branch of an existing one). Fantastic. But in order to have a charity, you have to have a group of governors to oversee it -- a charity board. In fact, it's required by law that every nonprofit organization has one.
The good news is that the kind of people you'll need for advice and assistance to start up your charity are exactly the same kind of people you should have on the charity's board of directors. Their experience and expertise are what will make the nonprofit truly succeed. In fact, you should select this crew of people first before you go about starting up the organization.
- A fiscal sponsor or benefactor is needed to handle startup costs and fees of the organization. This "angel" of a financial backer is likely wealthy, and he or she can offer the nonprofit organization financial management and fundraising expertise.
- An attorney is needed to help you determine what paperwork your organization needs to file, where to file it and when to file it. Such documents include nonprofit incorporation (to indemnify you and the board against personal damages if the nonprofit goes under or gets sued), reports, filings, minutes, tax exemption status, fundraising licensure, obtaining the right to receive tax-deductible donations, and other things an experienced, institutionally experienced lawyer will know all about. He or she will also help draft the organization's bylaws.
- An accountant can advise on bookkeeping, record-keeping systems and proper management of donated funds.
- Local gadflys are assets. These people seem to know everybody. They can be anyone from a local celebrity to a newspaper editor to a small business owner. They're well-connected and they're generally successful people who can contribute real-world advice as well as status to your nonprofit.
- Someone with managerial and/or writing experience can help craft a mission statement, used to lay out your charity's specific purpose, and a strategic plan, which is how the charity will execute that mission statement.
- Look for other individuals who would benefit your individual charity's specific purpose: A homeless advocate for a homeless charity; school administrators for a children's afterschool program; librarians for a literacy program, and so on.
Responsibilities of Charity Boards
The primary responsibility of the board is to govern in the charity's best interest. It provides oversight and direction to a charity's paid staff. The board must also support the executives of the charity by providing regular and solid feedback. In other words, the board and the staff must always be on the same page (the mission statement outlines that page). And the board needs to provide the resources the executives need to run the organization on a day-to-day basis. They do this by generating and allocating funds.
As such, it's the board's responsibility to make sure the charity stays financially solvent -- that it pays its bills on time and follows through with promised pledges, for example. The board may conduct regular reviews of the budget as well as make any financial management policies or adjustments to those policies.
Moreso, the board must ensure that the charity is always compliant with state, federal, and other laws, especially fundraising, tax and nonprofit-specific laws. The board is ultimately responsible for the charity's performance; it merely delegates the execution of tasks to executives, which then answer to the board in the same way the leaders of a corporation have to answer to a board of directors or major stockholders.
Oftentimes, a charity board is responsible for generating fundraising ideas and determining how to execute them. The board is the financial and organizational brains, and its duty is to come up with creative ways to generate revenue, or, at the very least, to responsibly contract with professional fundraising organizations and then aggressively oversee their involvement with the charity.
Essentially, the board tries to anticipate, avoid or eliminate problems that are costly or legally entangling, so that the charity may pursue its philanthrophic goals uninterrupted.
Read on to see how charity boards are organized.
Organization of Charity Boards
The charity board keeps order. It steers the organization in the direction of the mission statement, sets the strategic plan, sets goals and provides the resources to send the charity on its way. The founder of a charity assembles the charity board to help start and construct the nonprofit, even writing articles of incorporation, bylaws and determining the manner in which future board members will join. Organizationally, the board also hires staff from executives on down the line (so it's wise to have somebody with HR or hiring experience on the board).
One of the most important organizational tasks the board must take care of -- even when it's still just an "informal advisory committee" -- is to actually incorporate the charity as a nonprofit organization. This establishes it as a separate, legal organization, which exists separately from its founders and board, so it may continue in the event the founder or board members leave the organization. Incorporated status also protects all parties from any kind of personal liability, financial or legal.
One more thing: The number of members on your board is a legally binding figure. Check with state laws to find out minimums and maximums. (In some places, it's as low as one or even two.)
Related HowStuffWorks Articles
- Caplinger, Dan. "Give Back to Your Community." The Motley Fool. (March 23, 2010) http://www.fool.com/investing/general/2006/10/23/give-back-to-your-community.aspx
- Cordray, Richard. "Guide for Charity Board Members." Ohio Attorney General. (March 23, 2010)http://www.ohioattorneygeneral.gov/GuideforCharityBoardMembers
- Cox, Mike. "Charity Board Members: Their Obligations." Office of the Attorney General of the State of Michigan. (March 23, 2010)http://www.michigan.gov/ag/0,1607,7-164-17334_18095-44603--,00.html
- Fidelity Private Foundation Services. "Foundation Administration: Choosing Private Foundation Board Members." (March 23, 2010) https://www.fidelityprivatefoundations.com/resources_foundadmin_choosing.html
- Joyce, Amy, "Personal Payoff: Corporate Types Help Themselves by Helping Nonprofits." Washington Post. (March 23, 2010)http://www.washingtonpost.com/wp-dyn/content/article/2006/11/19/AR2006111900788.html
- McNamara, Carter. "Starting a Nonprofit Organization." Free Management Library. (March 23, 2010)http://managementhelp.org/strt_org/strt_np/strt_np.htm
- Minnesota Council of Nonprofits. "How to Start a Nonprofit." (March 23, 2010) http://mncn.org/info_start.htm
- Takagi, Gene. "Are Charity Boards Ready for Tough Times Ahead?" Nonprofit Law Blog. (March 23, 2010)http://www.nonprofitlawblog.com/home/2009/11/are-charity-boards-ready-for-tough-times-ahead.html
- Takagi, Gene. "More on Charity Boards and Tough Times." Nonprofit Law Blog. (March 23, 2010)http://www.nonprofitlawblog.com/home/2009/11/more-on-charity-boards-and-tough-times.html