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Governance for Nonprofit OrganizationsFrom Little Leagues to Big Universities
INTRODUCTION
Service as a director of a nonprofit organization can be invigorating and challenging, offering you the potential to use your expertise and leadership skills in support of the arts, education, health, religion, community service and numerous other good causes. But, how effective your service is and how personally satisfying depends a lot on the nature of the organization, how well run it is, and your own understanding of exactly why you’ve been asked to join the board. Whether you are considering joining a nonprofit board, or have already joined one, this booklet is designed to help you understand not only the implications of embarking on nonprofit board service, but also how good governance can make a significant difference to any organization. Nonprofits in the United States include a great variety of organizations formed under specific federal and state laws for certain non-commercial (i.e., not profit-oriented) purposes. These organizations are generally exempt from income and certain other taxes they might otherwise pay. The financial strength of each organization is typically dependent on donations or gifts, although some organizations may also receive fees for services provided, and/or earnings on endowments. Each organization will have a particular mission as its central focus (e.g., arts, health, religion, education, science), but the size and nature of organizations within this sector varies greatly, ranging from huge organizations with vast endowments which, at least in theory, would allow them to live on forever, to tiny organizations that are barely viable and must constantly worry about their own existence. The role of the governing body, or board, of nonprofit organizations also varies greatly. In some cases the board will be an operating board, that is, one that actually does most of the work of the organization with little or no paid staff assistance. In other cases, the board is a governing board, with general oversight responsibility and the day-to-day operations left to a professional paid staff. Understanding this difference can be critical to your enjoyment of board service and to your effectiveness as a director. As in the commercial sector, good governance has become an issue of increasing importance to nonprofits. Many nonprofits have learned that an effective, strong board can be critical to the successful pursuit of their mission. To their dismay, many have also learned that the opposite is true. Well-publicized failures in governance have not only threatened the trust people have in such organizations but, in some cases, even their very existence. Furthermore, the size and importance of nonprofits in the U.S. economy is leading state and federal governments and agencies to impose, or think about imposing, governance-related legislation and regulations on the nonprofit sector. Foundations and other funders of nonprofits also are considering governance practices in their grant-making processes. Being aware of legal requirements and governance best practices not only helps to reduce the risk of personal liability as a director, but can make the difference between an organization that is effective in accomplishing its mission and one that is not. The Society of Corporate Secretaries and Governance Professionals hopes this online publication will be a useful guide to issues that may confront you as a director of a nonprofit and assist you in making your board service truly effective.
Governance for Nonprofits - Home Page
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