By Stephen G. Donshik
Originally published Feb. 2013
I have been approached to clarify who has the responsibility for governance and accountability in the nonprofit organization. What are the functions of a board of directors, a board of governors, or a board of trustees? What is the difference between the bodies, given that the terms are often used interchangeably? What role does an advisory board or professional advisory committee have within the organization? What is the relationship between the board of directors and the advisory board? These are a few of the questions that have been posed to me over the last month.
The answers to the first two questions are easy. For all intents and purposes, the role and functions of a board of directors, governors, or trustees are the same for nonprofit organizations. The terms are interchangeable, and their use may reflect the style or the culture of the organization more than anything else. These bodies are responsible for setting the policies guiding voluntary organizations, for maintaining fiduciary responsibility for fiscal and legal oversight, and for ensuring the financial sustainability of the nonprofits.
Every board of directors establishes its own way of working, including the committees that function on a regular basis. The “rules and regulations” guiding the day-to-day operations are generally spelled out in the by-laws of the nonprofit. This document describes the names, purposes, and number of members of the standing committees and provides guidelines for their operation so they can perform their duties in the governance process. To ensure that the governance policies continue to be relevant for the functions of the organizations, the document also includes a definition of the process that is employed to amend or change the by-laws themselves.
The more involved and active the members of the board of directors are, the more invested they will be in exercising the appropriate oversight and ensuring the sustainability of the organization. When there is a clear definition of the role of the board, then there is a greater chance the members are not only knowledgeable about the organization but also have defined roles in fulfilling their responsibilities as board members. When there is alignment between the purpose and function of the board and the members’ assigned role, then there is a greater chance that the nonprofit will be a healthy organization able to achieve its purposes and effectively implement its services.
One of the most important board committees is the finance or budget committee. In general it is responsible for developing an annual budget within the context of multi-year fiscal planning. To fulfill this role, it develops a financial plan that monitors the agency’s financial situation every month or two months. The members then compare the monthly income and expenses to the structure of the annual budget.
It is important for the committee to be aware of any unanticipated expenses or income. Being continually apprised of this information enables the finance committee to adjust the proposed budget in response to the actual financial situation – enabling it to deal not only with the present situation but also to consider what needs to be done to ensure the agency’s continual financial sustainability.
In addition to the agency’s financial situation, another area that requires continual oversight by the board of directors concerns legal decisions taken by the organization. An essential board role is to provide social sanction to the community that the nonprofit organization is functioning in accordance with the highest level of accounting and legal standards. By adhering to these standards the board will not only be fulfilling its ethical and legal responsibilities but will also make it easier for the agency to raise needed support from donors who will feel confident about the agency’s standing in the community.
The final two questions raised earlier concern the role of the advisory board/committee and its relationship with the board of directors. An advisory board/committee does exactly what its name implies: It advises. An organization may look to a group of volunteers who are prepared to share their expertise without assuming responsibility for the services provided by the nonprofit and invite them to serve on such a committee. The advisory committee or board does not have the ability to make decisions, and its role is limited to sharing the members’ knowledge and perspective on the services offered by the nonprofit.
For example, a Jewish day school may create a professional advisory committee composed of educational experts to provide additional guidance in terms of the school’s curriculum. Its role is very different from that of the education committee of the school’s board of directors. The key difference lies in accountability. The advisory committee’s role is to share its members’ expertise, but it is not accountable for the school’s decision to implement their opinions. In contrast, the educational committee of the board of directors is responsible for developing the policies guiding the educational program of the day school, and after the board of directors endorses those policies, that committee is accountable for how they are being implemented in the school.
Of course, if a school continues to reject the advice offered by an advisory committee then the experts might decide to stop volunteering their time because they then seem to have no influence on the school’s educational policies. Thus, organizations have to seriously consider if and when it is appropriate for them to recruit the services of an advisory committee.
It is essential for the agency leaders who are responsible for recruiting members of the boards of directors and advisory committees to be clear about the purposes of those bodies. Those recruited must also have an understanding of what their responsibilities are and what the organization is expecting from their volunteer involvement. When the expectations of the organization and those of the members of both boards of directors and advisory bodies are aligned, then those groups will be able to fulfill their purposes and their members will feel their volunteer time is being used appropriately. Ultimately, the community and the organization will benefit from this effective and efficient utilization of volunteers.
Stephen G. Donshik, D.S.W., is a retired lecturer at the Hebrew University’s Rothberg International School and occasional contributor to eJewishPhilanthropy.com.