10 step plan for nonprofit board member compliance training
Economic and social shifts significantly impact how mission-driven organisations operate. As governance practices advance and laws evolve, it’s crucial for boards to see compliance training as dynamic rather than static. To stay relevant, your board’s understanding of compliance must evolve in step with these changes.
In addition, when vetting board member candidates, your nominating and recruiting committee should focus on good governance and compliance. While this seems straightforward, the quick-changing landscape that charities and nonprofits operate in complicates things, necessitating a fresh approach to compliance training for both current and future board members.
With that in mind, we’ve put together a 10-step plan for board member compliance training as a guide for your board.
What is compliance?
First, let’s define compliance. Simply put, compliance refers to the regulatory and legal requirements that governments and other regulatory bodies impose on organisations. Every board member has an individual and collective responsibility to ensure that the nonprofit they govern is in compliance with the laws and regulations that govern their entity.
10 steps for board member compliance training
1. Review the mission, vision, objectives, and goals
Mission statements guide your charity or nonprofit’s work. The vision, objectives, and goals are in keeping with the mission. Best practices for good governance suggest that boards review their mission statements periodically in light of social, economic, and community changes. A review of the mission statement will inform your board about whether the mission is still relevant and whether it’s time to revise it to meet the current needs of the people or groups your charity or nonprofit serves.
2. Compliance with the oversight of executive director responsibilities
Volunteer boards have a fiduciary responsibility to ensure effective leadership at all times. Any or all of the following topics are appropriate topics for board member education in this area:
- Recruiting top leadership talent
- Succession planning for the executive director
- Emergency executive director planning
- Roles and responsibilities of the executive director
- Setting up an appropriate executive director compensation plan
- Developing a job description for the executive director
- Conducting an annual evaluation for the executive director
3. Developing a board member handbook
More goes into a mission-driven board’s work than you can cover in an orientation. Your board member handbook serves as a guide for your charity or nonprofit’s organisation and operations. Here’s a list of some things to include in your board handbook:
- Articles of Incorporation and other charter documents
- Revenue statements granting charity status
- Copy of the strategic plan
- Mission, vision, and values statements
- Bylaws and resolutions
- Codes and policies
- Attendance policy
- A guide for board and executive director evaluations
- Roles, responsibilities, and job descriptions of board, officers, and executives
- Annual budget
- Most recent financial and audit statements
4. Annual self-evaluations
The performance of volunteer boards has been under a greater degree of scrutiny than in the past. It’s essential for boards to be transparent and accountable. As part of your compliance training, board members should be educated in these specific areas of self-evaluations:
- The importance of conducting self-evaluations
- How to conduct them
- How to evaluate them
- How to implement positive changes in light of the results
5. Qualifications for tax-exempt status
It’s not safe to assume that your charity or nonprofit meets the guidelines for a tax-exempt organisation. Prior board members may have missed something, or circumstances may have changed. It’s crucial that the current board catches mistakes and oversights.
6. Ensuring financial stability
It’s every board member’s fiduciary responsibility to ensure the organisation has adequate financial resources. Compliance training in this area could include:
- Reviewing internal financial controls (two signatories on checks, controlled access to accounts, etc.)
- Ensuring there are checks and balances on financial accounts
- Oversight of financial reports
- Ensuring appropriate and reasonable safeguards for financial assets
- Ensuring that the organisation has access to adequate financial resources
- Following best practices for fundraising and grantmaking
7. Building a competent board
Your board should develop a pipeline of quality talent to ensure that the board can fill vacant board seats at the earliest possible time. Your board self-evaluations will give you clues as to the ideal combination of characteristics (backgrounds, area of expertise, experience, demographics) that your board needs for effective oversight.
8. Ensuring legal and ethical integrity
Your organisation’s reputation is of the utmost importance. Your values statement guides how your board, leaders, employees, and volunteers should act. Compliance training should include education on how to establish a code of ethics (it may also be called a statement of values or code of conduct). Your code of conduct should incorporate a commitment to values such as honesty, integrity, equity, transparency, and confidentiality.
9. Establishing practices that encourage transparency and accountability.
To earn the trust of donors and the public, charities and nonprofits need to be willing to share information about their financial condition and other important matters with the media and supporters as necessary. Accountability measures generally fall under the executive director’s responsibility. The board’s role in this area is in oversight. Boards fulfill their responsibility by ensuring the organisation has the appropriate policies and procedures in place and that they’re being followed.
10. Understanding best practices for policies and procedures
At a minimum, your board should have the following policies in place:
- Conflict of interest
- Whistleblower
- Discrimination
- Code of conduct
- Records retention and destruction
Compliance training should incorporate education about why each of these policies is important and what they need to do to keep them updated.
As you can see, many things fall under the umbrella of compliance. BoardEffect is a valuable tool for addressing every area. It offers you a secure platform with granular permissions to support all your board activities. With BoardEffect, your board members have access to all documents, reports, minutes and agendas.
In summary, your board is a vital link between your organisation and its donors and stakeholders. They are your primary ambassadors and advocates. A comprehensive compliance training program will prepare them to be proactive and forward thinking.
