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Once Again! What Does Nonprofit Board Oversight Mean?

Once Again! What Does Nonprofit Board Oversight Mean?

By: Eugene Fram

Updated & Revised

I have a daily (7 days a week) subscription to Google Alerts on “Nonprofit Management” and “Nonprofit Governance.” Every week, three or four nonprofit case stories surface, in these listings, related to inadequate oversight by nonprofit boards of directors.  Many of the cases result six or seven figure dollar losses to the nonprofits. Following is my personal list of what reasonable board oversight means to attempt to help nonprofit boards of directors to avoid such losses. (more…)

What are the most productive types of relationships between board & staff?

What are the most productive types of relationships between board & staff?

By: Eugene Fram

In the 21st century, building transparency and trust are two critical elements for good governance. In nonprofit organizations, these elements take on additional importance because organizationally staff members may only be or two levels below the board. Consequently, nonprofit staffs are probably more attuned to board changes and directives than their counterparts in a business setting. With more frequent rotations of nonprofit board members, many staff members can feel insecure. They have observed some nonprofits at which new board members sometimes can quickly bring about detrimental changes–it is not unusual for community boards to limit vetting new board members to friends and family. (more…)

A Nonprofit Boards Must Focus On Its Organization’s Impacts

A Nonprofit Board Must Focus On Its Organization’s Impacts

By: Eugene Fram

“One of the key functions of a (nonprofit) board of directors is to oversee (not micromanage) the CEO, ensuring that (stakeholders) are getting the most from their investments.” * State and Federal compliance regulations have been developed to make certain that boards have an obligation to represent stakeholders. These include the community, donors, foundations and clients, but not the staff as some nonprofit boards have come to believe. The failure of nonprofit boards, as reported almost daily by one blog site, ** shows something is wrong.  (Also see: : http://amzn.to/1OUV8J9)  Following are some inherent problems. (more…)

Good News for Nonprofit Board Members & CEOs—

 

Good News for Nonprofit Board Members & CEOs—Examples For The Behvorial Sciences

By Eugene Fram

Behavioral economics, finance and marketing apparently are making significant strides in helping nonprofits to understand how to maximize their development efforts. Following are two studies that appear to have significant nonprofit interest.

(http://www.behaviouralinsights.co.uk/bx2015/rounding-up-the-latest-insights-from-behavioural-exchange-2016/)  (more…)

WHAT NONPROFIT BOARD MEMBERS AND MANAGERS DON’T KNOW CAN HURT THEM FINANCIALLY: IRS FORM 990 AND THE INTERMEDIATE SANCTIONS ACT

International Journal of Not-for-Profit Law / vol. 18, no. 1, February 2016 / 78
Article
WHAT NONPROFIT BOARD MEMBERS AND MANAGERS
DON’T KNOW CAN HURT THEM FINANCIALLY:
IRS FORM 990 AND THE INTERMEDIATE SANCTIONS ACT
EUGENE H. FRAM, ED.D1
Nonprofit 501(C)(3) charitable organizations and 501(C)(4) social welfare organizations
fall under two IRS regulations—the extended annual Form 990 and the Intermediate
Sanctions Act (Act). Form 990 requires answers to 38 corporate questions on corporate
governance operations. The Act covers prohibitions related to providing or seeking
excess benefits. Most board members know about the Form 990, but few know about its
board obligations; and few board members and managers know the Act exists. With the
IRS aggressively enforcing the Act to eliminate faux nonprofits, unwitting nonprofit
board directors and managers can become ensnared financially.
Two classes of nonprofit organizations, 501(C)(3) charitable organizations and 501(C)(4)
social welfare organizations, are covered by two IRS regulations not applicable to for-profit
corporations. One regulation requires the organization to file an IRS Form 990 each year, including
financial data plus answers to 38 questions related to corporate governance. Many board
members may be unaware of their obligations to be involved in preparation of the form each
year. If there were an audit involving the 38 board questions, further, board members might be
expected to know about any exceptions to be reported, such as conflicts of interest. For example,
any board member whose firm or employing firm has a business relationship with the nonprofit
must specify it as a conflict of interest on Form 990 and probably abstain from voting on related
issues. Also, if the report is late, the nonprofit must file an IRS form, and the board needs to be
advised of the situation.
If the organization ignores any of the requirements, it can lose its tax-exempt status—a
penalty already imposed on thousands of smaller nonprofits. In some instances, moreover, failure
to heed the requirements might leave nonprofit board members open to personal liability for
failing in their corporate duties for “due care.” (more…)

Do Business and Nonprofit Boards Have Common MOs?

Do Business and Nonprofit Boards Have Common MOs?

By: Eugene Fram

My blog posts in the past have frequently suggested that nonprofit boards can successfully adapt common practices used by for-profit boards. Gail McGovern, former senior business executive, now CEO of the American Red Cross posits that both types of boards innately borrow from each other’s operating traditions. * Following are my reactions to the major issues she raises: (more…)

Can A Nonprofit Organization Have A President/CEO & An Executive Director?

Can A Nonprofit Organization Have A President/CEO & An Executive Director?

By: Eugene H. Fram

Viewer Favorite Revised & Updated

Yes, if the organization has the following structure:

Board With A Volunteer Chairperson
President/CEO With Full Authority for Operations
Executive Director for Division A
Executive Director for Division B

However this structure can be confusing to persons in the nonprofit arena. The executive director should have final authority for all operational matters related to the organization, except those designated for the board in the bylaws. For example, pensions plan changes.

The big question is who carries the CEO title. Some nonprofits, in their early stages, have a volunteer, part-time, President/CEO and an operational Executive Director. This signifies the volunteer, representing the will of the board, can have final authority in all daily and policy issues. This is not a good structure because the CEO title might lead to the volunteer having liabilities that other board members don’t have. (more…)

Big Data Are Great—But Imperfect Metrics Work for Nonprofit Boards!

Big Data Are Great—But Imperfect Metrics Work for Nonprofit Boards!

By Eugene Fram

Nonprofit boards need to expand their evaluations of nonprofit managers and their organizations adding more behavioral impacts * to their evaluations.
For example it might be the number of volunteers that have been trained by the organizations. But boards must go to the next level in the 21st century.
In the case of volunteers, they must seek to understand the impacts on those trained. They need, for instance, to understand how well these volunteers are assisting clients and how they are representing the nonprofit to the clients. The training is a process, but their relationships with clients are impacts.

Qualitative data must be developed to the next level, and the average nonprofit CEO will argue that he/she doesn’t have the staff or expertise to develop impact data. Engaging an outside organization to complete a simple project can cost thousands of dollars. (more…)

Going For Impact–The Nonprofit Director’s Essential Guidebook: What to Know, Do and Not Do based on a veteran director’s ample field experience

Helps board members to lead wisely, effectively and efficiently.

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Onboarding the New Nonprofit CEO: Who’s In Charge?

Onboarding the New Nonprofit CEO: Who’s In Charge?id-100423604

By Eugene Fram                  Free Digital image

When the chair of the search committee announces that a new CEO has been selected, there is visible relief in the boardroom. After the stress of a waning—or even absent executive at the helm, directors tend to relax, engaging in a series of social events that provide a pleasant if superficial acquaintance with the new executive.

What actually lies ahead is much more serious and vital to the future of the organization. Call it orientation, acculturation or transitioning; it is the board’s responsibility to see that the CEO is grounded in every aspect of the organization. And that requires a plan that is carefully structured and may take a year to complete. Major responsibility for the plan and its implementation rests with the board chair and one or more senior board members. While there are may formats to achieve this goal, the best, in my opinion, is what has been described as a customized format.

Under a customized format the nonprofit board tailors a program that helps the new executive develop a solid base in the organization and an understanding of its unique climate and culture.
Biweekly meetings should be scheduled. However, both sides should be wary if the time required does not decrease considerably as the year progresses. The CEO will then operate more independently, perhaps even making modest mistakes from which he/s can easily recover. Those handling the orientation must take care to delegate responsibility incrementally, based on the CEO’s background and experiences. Every custom designed orientation program should include nine steps. Some must be taken in sequence, while other steps can proceed concurrently. (more…)