A presentation I did not too long ago on nonprofit governance.

1. Non-profit Governance
What It Is and What Is Expected
Erin McClarty

2. Roadmap
What is it?
 Who is interested?
 Why does it matter?
 Who is responsible for it?
 What is expected?
 What does it look like or encompass?
 Who is looking out for it?

3. What Is It?
 Used really broadly
 Concepts, practices, procedures, expectations,
traditions.
 How authority, oversight and responsibility for decisions
and operational acts are allocated
 Practical Tips:
 Governance cannot be a template.
 Organizations must consider their story, origins, decision –
making, responsibilities, allocation and influences.

4. Roadmap
 What is it?
Who is interested?
 Why does it matter?
 Who is responsible for it?
 What is expected?
 What does it look like or encompass?
 Who is looking out for it?

5. Who Is Interested?
 Donors
 Watchdog Agencies
 State and Federal Government
 Heavy powers
 Reciprocity
 Grant-makers

6. Roadmap
 What is it?
 Who is interested?
Why does it matter?
 Who is responsible for it?
 What is expected?
 What does it look like or encompass?
 Who is looking out for it?

7. Why Does It Matter?
 Nonprofits are a business, governance is a major issue
with businesses
 Perception
 Becoming the Gold Standard
 Compliance

8. Roadmap
 What is it?
 Who is interested?
 Why does it matter?
Who is responsible for it?
 What is expected?
 What does it look like or encompass?
 Who is looking out for it?

9. Who Is Responsible For It?
 Executive Director
 Staff
 Board
 Interesting enough, most watchdog groups and the IRS
attribute the most responsibility for governance to the
Board.

10. Roadmap
 What is it?
 Who is interested?
 Why does it matter?
 Who is responsible for it?
What is expected?
 What does it look like or encompass?
 Who is looking out for it?

11. What Is Expected?
 Organization
 Mission Statement
 Implementation and Review
 Transparency and honest engagement in solicitiations

12. What Is Expected?
 Board
 Disinterested board
 Create ethics and compliance culture
 Fiduciary Duties
 Oversight of financial health, programming meets mission
and governance updated

13. What Is Expected?
 If not followed Board members can face personal
responsibility in form of:
 Fines and imprisonment where the board fails to keep accurate
books and records for three years and provide for inspection
(Class B Misdemeanor)
 Organization’s debts, liabilities and obligations unless a third
party is misled into believing they are personally responsible.
 Organization’s losses where a board member has not acted in
good faith, ordinary care and in the best interests of the org.
[Tex. Bus. Orgs. Code Se. 22.221]
 Value of debt, obligations and liabilities not paid due to assets
improperly distributed by board members

14. What Is Expected?
 Organization can suffer where basic expectations are
met
 Felony by a high managerial agent or felonious conduct
could result in termination of the org. [Tex. Bus. Orgs.
Code Sec. 11.301]
 As well as other Board Members
 Darocy v. Abiltrup address when someone aids another in
breaching their fiduciary duty
 Aiding another Board Member that is breaching their duty
can result in loosing protection under Sect. 22.221 of the
Business Org. Code

15. What Is Expected?
 Practice tips:
 The best way to protect board members against liability
is….
 Preparation
 Ask questions and dissent when necessary
 Utilize expertise
 Defenses
 Reliance on professional advice [Tex. Bus. Orgs. Code
Sec. 22.226 and 22.228]
 Texas Charitable Immunity law [CPRC Sec. 84.001]
 Indemnities [Tex. Bus. Orgs Code Sec. 8.101]

16. Roadmap
 What is it?
 Who is interested?
 Why does it matter?
 Who is responsible for it?
 What is expected?
What does it look like or
encompass?
 Who is looking out for it?

17. What Does It Look Like?
 Policies
 Processes
 Documents
 Structures
 Culture

18. Policies
 More familiar policies
 Conflicts of Interest
 Whistle-blower
 Document Retention and Destruction
 Less familiar
 Investment
 Fundraising/Gift Acceptance
 Joint Venture
 Expense Reimbursement
 Board/Donor Confidentiality

19. Processes
 Executive and Board Reviews
 Compensation
 Using comparability data
 Board Meetings
 Executive Sessions
 Financial Reporting
 Budgets and Audits
 Spending controls
 Regulatory report
 Some states require updates or reports to be filed.

20. Documents
 Formation documents
 Sets the basic organization structure; covers the basics
like name, purpose, members
 Written mission statement
 Bylaws
 Rules of operation; more specific and detailed than the
formation documents. Covers basics others like meetings,
officers and committees.
 Must avoid inconsistency between the two.

21. Documents
 Minutes

22. Structures
 Board
 Governing Board
 Size
 Composition
 Terms
 Officers (Ex officio & Emeritus)
 Performance
 Committees
 Honorary and Advisory Boards

23. Structures
 Practice tips:
 Create terms but allow members to reapply.

24. Roadmap
 What is it?
 Who is interested?
 Why does it matter?
 Who is responsible for it?
 What is expected?
 What does it look like or encompass?
Who is looking out for it?

25. Who Is Looking Out For It?

26. Takeaways
 Can’t template
 Balance with the organization’s resources

27. Resources