The Board of Directors represents the membership of the organization. The board sets in place policies, procedures, values and long-term planning to meet the mission of the organization. The board does this through a governance structure or model. The structure a board decides to implement will dictate not only the policies of the organization but also such things as the relationship between staff and the board, and the role and use of committees.
While it is the board’s responsibility to determine the governance structure, activities of the organization are carried out by board members, staff, and committees. There is no single right structure for all non-profit organizations, and it may be necessary to change models over time. What can often dictate how a board chooses to govern is the experience of board members and staff, past experiences within an organization, how the organization wants to deliver its programs and services, and how the board views power and authority within the organization.
The activity provided at the end of this section takes boards through an exercise to help them decide which governance structure is best suited to their organization, but the United Way’s board development resource suggests boards look at these three questions when deciding on a governance model:
- Which decisions does the board want to make and which does it want to delegate?
- How much involvement does the board want to have in the operations of the organization?
- How will the reporting relationship between the board and the staff be defined and communicated?
Governance structures can be put into two basic categories—policy boards and administrative boards. Policy governing boards develop policy and hire an Executive Director to implement the policy whereas administrative governing boards play a more hands-on role in managing the organization with the support of committees and staff.
Within these two broad categories of governance, there are four common types of board models:
- Policy Board: Sometimes referred to as Management-Team Board, this model is commonly used in non-profit organizations. Several committees help carry out the activities of the organization, and the relationship between the board and staff is one of a partnership.
- Policy Governance Board: Sometimes referred to as a ‘Carver Board’ after founder John Carver, this model has a more formal structure. The board operates as a whole, using one voice and rarely works with committees. The Executive Director is given a very clear scope and role as well as limits about what she/he can undertake, and the main emphasis of the board is on policy development. For a more complete definition of the Policy Governance Board Model, visit www.carvergovernance.com/model.htm.
- Working Board: Directors on this type of board play a more hands-on role with some of the administrative functions of the organization such as public relations, financial management, program planning and personnel. It’s not uncommon for these boards to not have any staff.
- Collective Board: Sometimes known as a cooperative or coalition, a Collective Board also carries out many administrative functions of the organization. These boards are comprised of like-minded people that support a specific goal. Staff and directors operate together as a single entity. There is not usually an Executive Director, and often there is no voting as everyone works within a consensus model.
As stated before, no particular structure fits every organization but, Building on Strength: Improving Governance and Accountability in Canada’s Voluntary Sector states that organizations governed by a board should have at least three basic elements:
- A board capable of providing objective oversight
- An independent nominating committee to ensure the appropriate succession of the board
- An audit committee, whose primary responsibility is to report whether the organization is in compliance with the laws, rules, regulations and contracts that govern it
Nathan Garber, a renowned author of several books and articles on organizational governance, provides insight into other, lesser known types of boards such as Patron Boards and Advisory Boards. For more information on these types of boards and for help in deciding whether an organization should change its current governance model click here.
It is recommended that after selecting its governance structure, the board seeks training to understand the model and the roles of the board within that model. Ongoing training is also important as a refresher to board members and as orientation to new members.
Using the framework of the four detailed types of boards outlined above, the United Way provides an overview of the different functions carried out by each type of board.
Comparison of Board Models
(Source: United Way Canada)
The number and type of committees an organization has is often related to the governance structure it operates under. A policy-governance model tends to carry out work as a whole and has very few committees. Other types of boards may have several committees charged with carrying out the work of the organization.
There are generally three types of committees within an organization—standing, ad hoc and advisory.
Standing committees have specific areas of concern that they monitor, report on and provide advice about to the board on an ongoing basis. Examples of standing committees are:
- Executive Committee
- Personnel Committee
- Finance Committee
- Nominating Committee
- Fundraising Committee
A recent trend in non-profit organizations is having a Governance Committee. Sometimes this encompasses or replaces the Nominating Committee and its duties including reviewing bylaws, planning board development, and monitoring the board’s governance structure.
Standing committees are more common within boards with an administrative/policy model and usually include one or more board members on the committee, along with staff support. While policy-governance boards rarely have standing committees, they often still have a nominating committee responsible for recruiting new board members.
Ad hoc committees are formed by boards for time-limited, specific purposes. When the purpose or goal of the committee has been accomplished, the committee disbands. One example would be a committee struck to organize a conference or fundraising event.
Similar to ad hoc committees, advisory committees are often put in place to deal with specific, time-limited issues. They may be charged with researching, investigating or monitoring an issue and then providing informed advice to the board. Organizations that receive funding to carry out research and development projects often have advisory committees attached to the project, sometimes at the insistence of the funder. Advisory committees may be established to bring together experts who can provide particular advice on specific matters of interest to the ED or board.
Boards sometimes make the mistake of establishing committees that may not be needed or keeping committees going after they have outlived their need. Before establishing an ad hoc committee a board should determine whether the work may be better done by the board as a whole, by staff or by an individual board member. Similarly, boards should evaluate the work of standing committees on a regular basis to ensure the committee still has a purpose and is working effectively.
The United Way suggests that every committee have:
- A purpose that complements and works within its governance model
- Terms of reference
- A chairperson
- Active members (look beyond the board to recruit other volunteers for committees)
- Staff support
- A reporting procedure and protocol
- An evaluation procedure
Every organization should have its own bylaws. An organization that is not incorporated may refer to its governing documents as a constitution rather than bylaws. A constitution provides an overview of the organization’s purpose, mission and objectives. It often provides the framework for the Letters Patent required when an organization applies for incorporation status.
An incorporated organization must have bylaws that comply with the requirements of incorporation legislation. The bylaws are literally the laws that enable organizations to carry out their activities effectively and efficiently. Boards that do not review their bylaws may sometimes find themselves working against them, therefore putting the organization at risk. Bylaws can only be amended by a board of directors, and changes must be approved by the general membership (however this is defined).
It is often difficult to find samples and templates for developing bylaws as they are unique to each individual organization. Good sources of templates are from other like-minded non-profit organizations. For example, literacy organizations may want to seek out examples from other literacy organizations.
The standard framework for bylaws however, is fairly generic and should include:
- The organization’s purpose
- A description of the membership
- A description of the board composition and governance structure
- Location of head office
- Terms of office for board members
- Number of meetings held by the board, including Annual General Meetings
- Special meetings and in-camera meetings
- The number and a brief description of any standing committees and the process for appointing a committee chairperson
- Description, title and responsibilities of Executive Directors (if applicable)
- The election and voting process
- Details about quorum
- Filling board vacancies
- Removal of directors
- Senior staff positions
- Making amendments to bylaws
- Required reports and legal filings
- Charitable status
- Details about fiscal year
- Bank accounts, financial obligations, funders
- Conflict of interest
- Disbanding the organization and disbursement of funds and capital assets
Policies and procedures in essence are the instructions for how an organization and its board and staff adhere to its governance structure, governing documents and regulations. The policy tells an organization what to do, and the procedure tells how to do it. Each policy should have a procedure, and together these documents will direct board and staff on making decisions and working within certain limitations.
The first step, and often the hard work, is in the development of policies and procedures. Fortunately, once a template is established it’s easier to develop new policies as they arise. The governance model of an organization will dictate how the development of policies and procedures unfolds, but often the development of policies falls to the board and the development of procedures to the Executive Director.
It is the board’s responsibility to develop, monitor and amend policies as well as to ensure that decisions are made and actions are taken that comply with policies and follow proper procedures. Regular review and revision of policies is good practice and is often conducted by a committee for board discussion and approval.
CLO and Literacy Link South Central (LLSC) have each developed comprehensive manuals on policies and procedures for adult literacy organizations. Their resources not only include templates for policies and procedures in generic organizational categories like financial management, human resources, administration, marketing and volunteer management, but also include templates specific to literacy service delivery such as information and referral, service planning and case management. CLO’s policies guides are available from our website, and LLSC’s are here.
A non-profit organization carries out activities that benefit the community and has individual members who do not gain a profit from the work of the organization. Some boards may be confused by the term ‘non-profit’, thinking this means the organization cannot make money nor have surpluses or reserve funds at the end of the fiscal year. As long as the surplus or reserve is used to carry out the programs and services of the organization and not for the personal gain of members or staff, it is acceptable (and actually encouraged) for a non-profit organization to have a ‘profit’. (Source: Duties and Responsibilities of Directors of Non-Profit Organizations. Canadian Society of Association Executives)
It is not mandatory for a non-profit organization to become incorporated or to apply to be a registered charity. These are separate and distinct processes that create certain benefits and responsibilities for organizations that choose to do so.
Incorporation is the process of creating a legal entity that has an independent existence, separate and distinct from that of its members. Members sitting on a board of an unincorporated organization are considered the ‘owners’ of the organization and are therefore liable for the assets, funds and debts of the organization. (For more information see the section of this module on Boards and Risk Management). (please link to the appropriate section)
An organization must be incorporated to be eligible to receive government funding. For example, the Ministry of Training, Colleges and Universities requires agencies that apply for Literacy and Basic Skills funding to be incorporated. As well, the Ontario Trillium Foundation and many other funders require organizations that apply for funding to be incorporated. Most foundations also require organizations seeking funding to be registered charities.
An incorporated organization is required to file regular reports and comply with certain regulations or risk losing its corporation status. Most organizations in Canada can apply for corporation status through the appropriate ministry of their provincial government. In Ontario, applications must be filed with ServiceOntario. For detailed information, be sure to consult the Not-For-Profit Incorporator’s Handbook. Some organizations, depending on their mission, are required to apply for federal incorporation.
Ontario organizations interested in becoming incorporated or learning more about incorporation maintenance are also encouraged to review the Guide to the Not-for-Profit Corporations Act to find information on the new act that will come into effect no earlier than January 2014.
In order to issue a receipt for donations suitable for income tax purposes, an organization must be a registered charity. Most foundations require organizations seeking funding to be registered charities.
The Canada Revenue Agency (CRA) has information and forms related to becoming a registered federal charity. Again, there are reporting and compliance procedures required for charities, but many organizations see the advantage in being able to accept charitable donations. A charity can provide donors with an income tax receipt, often an incentive for donors. It’s not mandatory that an organization be incorporated before becoming a charity, but it does often make the process easier.
The CRA website provides sample ‘purposes’, or objects, suitable for organizations to include as part of their governance documents, which are needed when applying to become a registered charity. Click here to learn more about becoming a federal charity.
The help sheet below from Nathan Garber & Associates will help you identify where you agree and disagree on the areas of authority of the board and Executive Director. It lists a number of activities that must be undertaken in a successful organization. Add any activities that are specific to your organization; then use the form to guide your discussion and clarify your expectations of the board/ED relationship. The result will be the basis for a governance structure tailored to your own organization.
At a board meeting:
- Hand out the sheet to all board members and the ED.
- Allow about 15 minutes for each person to mark in which column the decision or activity belongs.
- Compile the answers on a master sheet, showing how many responses were put in each column.
- Review the distribution of answers, noting the items on which
- there is consensus
- there is a diversity of opinion
- the consensus of the board is different from the response of the ED
Discuss the items in categories b and c until you reach an agreement among the board and between the board and ED (Executive Director).
- Seven Pillars of Democratic Governance by Mel Gill. Synergy Associates. Charity Channel, May 2009.
- Policy Governance.com: The Authoritative Website for the Carver Policy Governance® Model.
- Governance Check-Up help sheet from Nathan Garber & Associates to help organizations assess whether their current governance model is working well.
- Association Management: Perspectives, Practices and Procedures for the Management of Non-Profit Organizations. Herb Perry and Robert Kelly. Big Bay Publishing (1988).
- Volunteer Management Policies. Steve McCurley (1990), part of the Volunteer Management Series.
- Management Assistance Program for Nonprofits has created a resource website that contains on-demand webinars and resources on the topic of governance.