Being on the board of directors requires a lot of responsibility, and that especially holds true as the end of 2016 approaches. There are several requirements that the board should address at year-end to ensure that the non-profit is running efficiently and effectively. Follow our road map to determine if you are on the right path!
The board of directors is responsible for the overall direction and management of the organization and is the governing body of the non-profit. At year-end, it is important to ensure that you prepare for the upcoming year as well as wind up the activities of the current year.
Who has the map?
Many state laws require that the board of directors meet at least once a year. Typically, the Articles of Incorporation establish the number of meetings required for the specific organization, which may be monthly, quarterly, etc. However, state laws require at least one meeting be held annually.
Are we there yet?
It is very important to meet with the finance committee in order to get an update on how the forecast for the year compared to the actual performance. This would be the time to review the financial statements to determine if it includes all large items/decisions that the board approved. The review of the past year should focus on the accomplishments and successes, as well as the failures the organization may have encountered. It is important to build on the previous accomplishments and learn from the failures. Goals for the upcoming year should be established and should include both financial and strategic objectives for the organization. A budget should be agreed upon to help meet the financial goals and a review of the mission statement can help the board set its strategic goals.
Who’s driving this thing?
At the annual board meeting, the board should discuss and elect the directors for the upcoming year. Many boards set term lengths and require the directors to be re-elected every few years. Additionally, the board should review the size, structure, and independence of the board. Independence is especially important to ensure that the organization does not engage in any self-dealings with disqualified persons. Dealings with disqualified persons can result in heavy tax penalties and even the loss of the organization’s tax-exempt status. Additionally, compensation of the executive officers should be discussed to determine whether any increases were earned. A compensation study may be necessary to ensure that higher pay levels are within the accepted practice.
Look out for speed traps!
The board should also review the current policies of the organization and renew if needed. For example, a conflict of interest policy that is revisited annually would mitigate the risk of the organization engaging in activities with disqualified persons.
The board of directors has a lot of responsibilities throughout the year, not only at year-end. This article only summarizes a few of the more important year-end tasks. For more advice or questions on what the board should be doing or focusing on, feel free to contact your L&B professional and we will be happy to assist.