4 Nonprofit Board Committees that all Well-Run Organizations Have

Regardless of the sector, maturity, or staff sophistication of the nonprofit organization, these four board committees are essential to the health of the organization and well-being of the board itself. Share this article with your board today and discuss how these four nonprofit board committees can help you do a better job providing oversight and support for your nonprofit. If your board lacks the expertise to support the activities outlined below, decide which board skills are needed, and start recruiting board members with these skills now.
Board Development Committee – This committee preserves the quality of your board’s future because it is responsible for determining what skills are required on the board, and for recruiting and orienting all new board members. While many boards have one-time orientation sessions, better boards continuously exposure their members to the work of the organization and the quality board governance they are trying to achieve. Along with the Board President, members of this committee communicate with your board members to ensure that they are making a productive contribution and they are satisfied with their board experience. The design, administration, and interpretation of your annual board self-evaluations is done by the Board Development Committee.

Finance Committee – The finance committee is often the most highly-functioning of all board committees. This committee supports the development of the annual expense budget, tracks the actual spending vs. budget, watches monthly cash flow, and interprets the overall financial health of the organization on behalf of the board. This committee supports the development of the longer-term strategic plan as well as next year’s annual plan. All of the financial policies of your organization should be reviewed by the finance committee prior to board approval. The Audit and Investment Subcommittees help round out the board’s involvement in the financial affairs of the organization.

Fundraising Committee – While the Executive Director is responsible for the organization’s fundraising, well-run organizations engage the support of the board in various part of their fundraising plan. This committee oversees the development of the Annual Fundraising Plan – and tracks the planned vs. actual results during the year. They encourage, train, and thank other board members for their involvement in the fundraising activities. They explore potential , new fundraising activities as part of the strategic planning process. Special Events Subcommittees can be established as part of this committee when appropriate.

Personnel Committee – Contrary to popular thinking, even small, young nonprofit organization need personnel (or human resource) expertise on their boards. Even if there is only one part-time employee working for your nonprofit, this committee helps make sure that all state and federal laws and regulations that affect employment are followed. This committee ensures that the wages you are paying are comparable to wages in other, similar organizations – and that each employee has a current job description, documented annual objectives, and yearly follow-up reviews that include training and career path planning. Employee Handbooks, Human Resource Policies, Staff Planning, Benefits Selection, Pension Considerations, and Vacation/Holiday Schedules for full-time and part-time employees are all within the responsibility of this committee.

Get the ball rolling by sharing this article with your fellow board members and your Executive Director.
If your board does not have a well-developed committee structure, start by assigning some board members to these committees now. If your board has committees but they’re not particularly effective, re-invigorate these four committees first. They are by far the most important to the effectiveness of your board and the success of your nonprofit.

Check out the booklets for each of these four committees at www.boardsthatexcel.com/the-market/

Personnel Committees Need More Involvement in Compensation Decisions

Posted on October 22, 2009 by  
Filed under Board Governance · Tagged: , , ,

Today, I attended an informative seminar here in Charlottesville put on by two McGuireWoods, LLP  partners: Jeffrey Capwell (Charlotte, NC) and Michele McKinnon (Richmond, VA) .  The seminar was excellent and I highly recommend nonprofit executives and board members attend these seminars if they possibly can.

During one portion of today’s session, they discussed the background for changes to the IRS Form 990 and the form’s new questions about the determination of compensation for nonprofit staff executives.    Because of these new questions on the IRS Form 990, your Personnel Committee may want to adjust its staff compensation decision-making and approval process.  Here’s some background:

1. The IRS thinks that a well-governed organization is more likely to be a tax-compliant organization.  Increasingly, the IRS is asking more governance-oriented questions in not only the IRS Form 990 but the IRS Form 1023 (application for tax exempt status).

2. There seems to be a trickle-down effect from the private sector.  The fall-out from situations like Enron, WorldCom, and Madoff in the private sector will eventually result in increased regulation in the nonprofit sector. 

3. Expect to see more enforcement and expectation of disclosure and transparency for executive compensation for tax exempt organizations.

In brief, the Personnel Committee should review the compensation of all newly-hired executives as well as revisit these executive salaries on an annual basis.  Specifically, the IRS is expecting nonprofits to be able to do the following:

1. Show the compensation you’re paying your executives is comparable to similar jobs in your market.  A salary survey of nonprofits that are of a similar size in your local geography is a good starting point.  Be sure that you have included all compensation:  both salary and benefits, current and deferred salary, pensions, severance, housing allowances, club memeberships, etc.

2. Justify the amount you pay executives is equal to the value you receive.  

3. Provide documentation showing your Personnel Committee has  discussed staff compensation.  The Personnel Committee  minutes should include the compensation survey that you have used, a discussion of the value you will be or are receiving from each executive, and any concerns or dissentions in the determination of the final compensation. 

4. Show that the Personnel Committee’s decisions have been reviewed by the entire board, have been discussed and understood, and have been entered into the minutes of the entire board.   Is is essential that this review with the entire board includes a description of the total compensation paid to your executives – so that all board members understand the total compensation package and contracts for current and future payouts with their executives.

5. Be sure no one in a position to hire or determine salary for an executive is related to that executive.

In summary – be sure that your Personnel Committee is doing a thorough job of reviewing the compensation of new and continuing executives, that they have documented their discussions and decisions along the way, and that they are reporting these details to the rest of your board.

Lastly, McGuireWoods offers a free e-mail news service that follows legislation and regulation on a variety of topics.  I highly recommend the “Nonprofit & Charitable Advisory” which you can sign up for at http://www.mcguirewoods.com/news-resources/email/