<aside> What’s this about? Maintaining a healthy board involves legal requirements as well as following best practices (e.g. establishing areas of responsibility and diversifying skill sets).
What do I need to do? Comply with legal requirements, notably by having at least one board meeting each year.
Contents
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Further reading
Improving the Effectiveness of Board of Directors of Nonprofit.pdf
Templates
Organizations should have at least one annual meeting during the year.
However, we’d recommend this be more frequent e.g. quarterly.
Establishing strong communication between the leadership and the board is essential for maintaining a healthy board. We’d also therefore recommend sharing quarterly reports with the board to ensure they have visibility on the organization’s updates and activities.
The agenda for a board meeting should cover the election, addition, or removal of board members; a review of the executive director; a review of the nonprofit’s financials, activities, and programs; and updates or changes to the bylaws.
Not all decisions require a board meeting; many decisions can be made with a thumbs-up from your board over email if you write it into your bylaws.
Board training and development is another means of maintaining a healthy board.
You can facilitate this by routinely running a skills audit to identify if there are any skills gaps on the board (e.g if your board is missing a Treasurer with charity finance skills).
A conflict of interest occurs when a board member's obligation to further the organization’s goals or charitable purpose is at odds with their own personal or financial interest, potentially influencing and altering their judgment of the organization.
So, one of the most important policies that must be adopted and put into practice is a conflict of interest policy for board members and personnel.
If conflicts are not managed, they may result in significant penalties and intermediate sanctions against the person involved and the organization itself. Mismanaged interest and lack of policy create an environment of mistrust, eventually leading to a culture of disengagement and suspicion. Additionally, you risk damaging the reputation, credibility, and standing of the nonprofit and all the members connected to it, not just the person involved in the conflict.
There are two categories of conflict to look out for:
In the US, tax-exempt nonprofits are required to disclose in their IRS Form 990 whether they have a conflict of interest policy and what processes are in place to identify and manage conflicts of interest.
In addition, Form 1023 requires you to disclose a conflict of interest policy. Some states also have specific laws regarding these policies. For example, New York encourages boards to have a process for members to disclose potential conflicts of interest annually. You can check how a conflict of interest is defined in each state here.
The IRS may label someone as a “disqualified person” if they can exercise substantial influence over the affairs of the nonprofit during a period of 5 years. The involvement encompasses other people related to this person, including family members.