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VIDEO Q&A for Subscribers: July 2024 [SUBSCRIBERS-ONLY]
Ben and Mike answer questions from subscribers about the definition of cash basis accounting and its consequences, implications of Board term holdover language and legal remedies to hold organizations accountable for not following their Bylaws, the benefits of tracking volunteer hours and what this means for an organization’s Form 990 and financial statements.
Q&A #164 – What happens if all Board member terms have expired?
It is unlikely that a nonprofit organization’s entire Board of Directors would be nullified due to a failure to hold elections, since most state nonprofit corporation statutes provide that Board service generally continues past the expiration of the Board member’s term until the Board member’s successor is elected and takes office. In the unlikely event that an organization truly has few or no Board members left to take action, there are often other mechanisms available under state law to reconstitute the Board or petition a court to appoint a legal representative.
VIDEO Q&A for Subscribers: June 2024 [SUBSCRIBERS-ONLY]
Ben and Mike answer questions from subscribers about the responsibility of a Board of Directors to fill vacancies and how vacancy appointments count towards term limits, the Board's responsibilities regarding the use of large unexpected gifts and bequests, whether Board service can be reported as an in-kind contribution, and the distinction between policies and procedures that apply to Board and the staff.
The Importance of Keeping Records of Board and Officer Terms [SUBSCRIBERS-ONLY]
Corporate recordkeeping is an area where nonprofit organizations often fall short of best practices. One common pitfall is the failure to maintain a list of the current Board member and Officer terms of office with precise start and end dates. This oversight seems small but can have very significant consequences, especially when an internal dispute arises.
Five Nonprofit Bylaws Issues That Are Often Overlooked
All nonprofit organizations should regularly review and assess their Bylaws to ensure this key governing document complies with the law and is optimally aligned with the organization’s governance needs and operational practices. The following are five common Bylaws oversights to look for when doing your organization’s next Bylaws review.
Q&A #136 – Is good cause required to remove a nonprofit Board member?
A nonprofit organization’s Bylaws generally determine whether “cause” is required to remove a Board member and, if so, what type of conduct or inaction constitutes cause for removal. The applicable state nonprofit corporation statute may have some rules and guidelines related to the removal of directors, but these laws usually defer to the organization’s Articles of Incorporation and Bylaws, so checking your own governing documents is always the first step.
Q&A #119 – Are officers of a nonprofit required to be Board members?
Whether the officers of a nonprofit organization are required to be Board members is determined by the organization’s Bylaws. Many organizations specify in their Bylaws that officer positions such as the President, Secretary, Treasurer must be filled by Board members (hence the common but potentially misleading term “Board Officer”). However, it is also common to have Bylaws that allow officers to be appointed from outside of the Board such as from senior management staff positions.
Q&A #115 – Are nonprofit Board members required to be U.S. residents?
There is no requirement under the federal tax laws governing United States 501(c)(3) and other tax-exempt organizations that Board members be U.S. residents or U.S. citizens. Similarly, I am not aware of any state nonprofit corporation statute that imposes such a requirement. However, since the organization will be based in the U.S., it would be prudent to have at least some Board members and officers who maintain a permanent residence in the U.S. to deal with operational and compliance matters.
Q&A #107 – Should a majority of a nonprofit’s Board members be independent?
While it is not necessarily a bad thing to have some non-independent members on the Board of Directors of a nonprofit organization, it is important for both perception and governance reasons to ensure that a majority of the Board members are “independent” as defined in Part I, Line 4 and Part VI, Line 1b of the Form 990.
Q&A #93 – Are term limited Board members ever eligible to rejoin the Board?
The question of whether Board members are eligible to rejoin the Board after a period of time has lapsed is one of the most important issues that should be addressed in the Bylaws of any nonprofit that has term limits for its Board of Directors. If the Bylaws are truly silent to this issue and do not specify when term limited Board members become eligible to serve again, then the Bylaws should probably be interpreted as not allowing these Board members to rejoin. Amending the Bylaws to clarify this issue would be advisable.
Q&A #92 – Are nonprofit Boards required to have term limits?
Generally, there is no legal requirement for a nonprofit Board to have term limits. While it is true that some state nonprofit corporation statutes limit the number of years in a single Board term, there is typically no limit on the number of times a Board term may be renewed through re-election (unless specified in the Articles of Incorporation or Bylaws).
Q&A #91 – Does the Past President have voting rights on a nonprofit Board of Directors?
The question of whether the Past President has voting rights on a nonprofit organization’s Board of Directors does not have one universal answer, and ultimately depends on the organization’s Articles of Incorporation and Bylaws. If these documents truly do not address the issue and there is nothing in the Articles or Bylaws connecting the Past President position to a seat on the Board, then the Past President will not have voting rights on the Board.
Q&A #90 – What happens if a Board member’s term expires and no successor is elected?
The status of Board members whose terms have expired depends on the organization’s Bylaws and the applicable state nonprofit corporation statute. The law in many states is that unless the organization’s Articles of Incorporation or Bylaws provide otherwise, Directors continue to serve past the expiration of their term until a successor is elected and takes office. This often applies to Officer positions as well.
Recruiting and Using Finance Volunteers in Governance Roles [SUBSCRIBERS-ONLY]
Finance should always have a seat at the leadership table within a nonprofit organization. There is an embedded financial impact in all Board and management decisions. To ensure the delicate balancing act of mission vs. financial health is kept front and center, make thoughtful positioning of volunteers with financial experience a priority when finding and seating your Board of Directors and various committees.
Q&A #34 – What does it mean to have ex officio Board members?
The term “ex officio” is widely misunderstood and misapplied in the nonprofit community. Many people understand “ex officio” to be synonymous with “non-voting,” but this is not accurate. “Ex officio” is a Latin term that basically means “by virtue of office or position.” This means that “ex officio” Board members get a seat on the Board automatically because they hold some other specific position. “Ex officio” does not mean “non-voting.” While ex officio Board members often serve in a non-voting role, this is not the case by definition.