Q&A #132 – Does every nonprofit committee need to have a charter?
Question: I serve on the Board of a nonprofit organization. The organization has several Board committees and advisory committees, but it does not appear that these committees have charters. Is every nonprofit committee required to have a charter?
Answer: All nonprofit committees should have documentation describing their purpose, authority, membership, and basic meeting and recordkeeping requirements. A committee “charter” is the most common term used to describe this document, which is also sometimes described less formally as the committee’s “job description.” What you call the document is less important than ensuring that there are records containing this essential information.
As a matter of law, there is generally not a specific requirement that a committee must have a charter. The importance of having a charter is mainly to ensure good governance practices. In short, a nonprofit organization’s committees will function more efficiently and effectively when everyone involved has a clear understanding of the committee’s purpose, goals, and “rules of the road.”
How and where this information is documented varies depending on the organization. While many organizations maintain separate charters for each committee, some organizations set forth the relevant information for their committees in the organization’s Bylaws. Other organizations maintain the equivalent of committee charters in a Board manual that includes the organization’s policies, procedures, governing documents, and other materials. And some organizations draft detailed Board resolutions for the formation and appointment of their committee and maintain these resolutions with the Board’s meeting minutes.
Regardless of the format chosen to document a committee, there are a few relevant considerations from a legal perspective. First, having clear records of a committee’s delegated authority is particularly important when the committee is given the authority to make decisions on behalf of the Board or exercise Board-delegated powers (typical examples might include the executive committee, audit committee, and finance committee). These types of “Board committees” raise unique legal issues because a Board member’s fiduciary duties are somewhat different when there is a valid delegation of Board power to a Board committee, so properly documenting this delegation of power and how the committee is appointed is crucial.
Second, Board committees are generally subject to more stringent formalities such as the obligation under state nonprofit corporation law to keep committee meeting minutes, a requirement the organization may wish to extend to all of its committees. The committee charter or an equivalent document is a good place to remind the committee of its recordkeeping obligations.
State nonprofit corporation law also typically restricts committees from having or exercising certain Board powers, such as electing Board members, amending the Articles of Incorporation or Bylaws, and approving the organization’s merger or dissolution. Clearly specifying a committee’s powers and authority shows compliance with these rules and helps to avoid potential controversies within the organization.
Planning Tip – When forming a new committee, consider using a minimalist approach to the committee charter or equivalent document. The charter should cover essential Board-approved matters such as the committee’s purpose and authority, while leaving space for the committee to develop their own set of “working rules.” Committees often function best when they have the flexibility to determine their own meeting schedules, agendas, and other work habits and customs.
There are many ways to document the formation and authority of a committee, and it does not necessarily have to be in a separate document that is labeled as the committee’s “charter.” However, the committee charter provides a good framework for thinking through and documenting a committee’s main purpose and core governance practices.
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Q&A #131 – Do nonprofit committees need to be listed in the Bylaws?
