Name of Conference

Download Report

Transcript Name of Conference

Excellence in Governance for CAA Boards

2011 Texas Community Action Agency August 3, 2011

Anita Lichtblau, Esq.

Executive Director/General Counsel Community Action Program Legal Services (CAPLAW) www.caplaw.org

617.357.6915

This workshop is not intended as legal advice. Consult with a Texas attorney for advice on legal issues.

Agenda– Who, How, and What?

• Governance Trends • What law governs CAA boards?

• What are a CAA board’s duties?

• Head Start board requirements • IRS Form 990 • Areas to look at: – Board composition and selection – Certificate of Formation and bylaws – Board-executive director relationship – Board orientation and training – Board meetings – Board committees – Financial literacy and oversight – Governance and other policies © 2011 Community Action Program Legal Services, Inc.

Governance Trends

• More active, informed boards • Greater accountability and oversight over nonprofit • Due diligence in selecting board members • Transparency – Disclosure of financial info and policies on website • Panel on the Nonprofit Sector – Principles for Good Governance • Revised Form 990 • Head Start Reauthorization © 2011 Community Action Program Legal Services, Inc.

Grant Thornton 2009 National Nonprofit Board Governance Survey

73%  Formal process to review executive compensation  Whistleblower policy  Finance committee  Audit committee  Audit committee includes CPA  Auditor met with full board  Board or committee reviews IRS Form 990 84% 83% 65% 74% 38% 78% © 2011 Community Action Program Legal Services, Inc.

What Law Governs CAA Boards?

• Federal CSBG Act – Tripartite board provision – 42 U.S.C. § 9910 – OCS Information Memorandum 82 (IM 82) – guidance only, not binding; available on OCS website : http://www.acf.hhs.gov/programs/ocs/csbg/guidance/im82.html

• Texas CSBG Statute: Tex. Gov't Code §§ 2306.092 and 2306.097 • Texas CSBG regulations: 10 TAC §§ 5.1 – 5.22 and §§ 5.201– 5.217

• Private CAAs – Texas Business Organizations Code, Title 2, Chapter 22 • Public CAAs – delegation of authority from political subdivision • Head Start Act – 42 U.S.C. § 9801 et seq.

Who?

Tripartite Board Composition

• CSBG requires three sectors: – Exactly 1/3 public officials or their representatives – At least 1/3 low-income representatives – Balance from major groups or interests in the community served • Directors are to be chosen by grantee – Must use democratic selection process for low income directors • (42 U.S.C. § 9910; 10 T.A.C. §5.213) © 2011 Community Action Program Legal Services, Inc.

Public Official Directors

• Under federal law, no longer required to include or be chosen by “chief elected officials” – For private CAAs, best to specify in bylaws that CAA itself elects public official directors – but not to specify which ones – Texas – CAAs may permit governing officials of political jurisdiction to select and/or recommend officials for board – Texas – For public CAAs, public organization may select elected officials for board • If elected officials not available, may select appointed officials instead • Texas - Officials must either have general governmental responsibilities or responsibilities that require them to deal with poverty-related issues • (10 T.A.C. § 5.213 (d)) 8 © 2011 Community Action Program Legal Services, Inc.

Public Official Directors cont.

• CSBG Act says “holding office at time of selection” [to CAA Board] – OCS IM 82 recommends that public officials serve only while they are in office • Seat filled by official or her representative – Texas – Official may choose permanent representative to serve on board in either full-time capacity or in place of official when she is unable to attend – Representative must have full authority to act for public official at board meetings – Or, official may designate alternate – Only permanent representatives may be officers • (10 T.A.C. § 5.213 (d)) 9 © 2011 Community Action Program Legal Services, Inc.

Low-Income Directors – Private CAAs

• CSBG requires democratic selection to assure that they are representative of low-income people in service area • If chosen to represent a particular neighborhood, must live there • (42 U.S.C. § 9910; 10 T.A.C. § 5.213) © 2011 Community Action Program Legal Services, Inc.

Low-Income Directors – Public CAAs

• Must be representative of low-income individuals and families in service area • Must live in service area • Must be able to participate actively in development, planning, implementation and evaluation of CSBG programs • (10 T.A.C. § 5.213 and § 5.213) 11 © 2011 Community Action Program Legal Services, Inc.

Do They Need to Be Low-Income Themselves?

• Should represent current low-income residents, but don’t need to be low-income themselves – CAA BEST PRACTICE: Have at least some low income directors who are or were low-income themselves © 2011 Community Action Program Legal Services, Inc.

Democratic Selection

• Broad array of processes available, e.g.: – Nominations and elections by ballot in neighborhood or entire community – Selection at open community meeting to which poor are invited – Elected by or designated from elected leaders of predominantly low-income groups (e.g. Head Start Policy Council, neighborhood ass’n, public housing tenants’ ass’n, community health center board ) – Selected by boards of neighborhood-based groups who themselves are selected by residents • Selection process must be documented to show democratic process © 2011 Community Action Program Legal Services, Inc.

Democratic Selection cont.

• Should not be chosen simply by CAA board or nominating committee • Should not be staff of another low-income service provider picked by CAA board or nominating committee or by executive director of other organization © 2011 Community Action Program Legal Services, Inc.

Democratic Selection cont.

• Bylaws may, but do not need to, describe democratic selection procedure – If not described in bylaws, selection procedure should be described in a separate document referred to in the bylaws and approved by the board © 2011 Community Action Program Legal Services, Inc.

Private Sector

• Officials or members of business, industry, labor, religious, welfare, education, law enforcement, or other major groups and interests in community served – May include both private and public sector groups and interests • CAA may select representatives from organizations or individuals – If choosing reps from organizations, board has more flexibility if bylaws don’t specify which organizations • (42 U.S.C. § 9910; 10 T.A.C. § 5.213) © 2010 Community Action Program Legal Services, Inc.

Residence Requirement

• Texas CSBG regulation: – All board members must live in CSBG service area (unless waiver given by state) – Board members should be selected to provide representation for all geographic areas in service area – But can give greater representation to areas with greater poverty population • (10 T.A.C. §5.216(d)) 17 © 2011 Community Action Program Legal Services, Inc.

Head Start Rules

• Board of directors must include: – At least 1 member with fiscal mgmt or accounting background and expertise – At least 1 member who is a licensed attorney familiar with issues that come before the board – At least 1 member with early childhood education background and expertise – First two are best practices for all CAAs • (42 U.S.C. § 9837) 18 © 2011 Community Action Program Legal Services, Inc.

Head Start Rules, cont.

• If people with such expertise aren’t available to serve on board – • Non-board members with those qualifications may work directly with board on those issues instead • Non-board members with those qualifications may work directly with board on those issues instead – Issue – Paid or pro bono? © 2011 Community Action Program Legal Services, Inc.

Head Start Rules, cont.

• Additional governing body members – Must reflect “community served,” including current or former Head Start parents – Must be selected "for their expertise in education, business administration, or community affairs" • Exceptions to board composition requirements for public grantees © 2011 Community Action Program Legal Services, Inc.

Head Start Rules, cont.

• No financial conflict of interest – Board members may not have financial conflict of interest with grantee or delegate agency and may not receive compensation for serving on board or for providing services to grantee • Board members and immediate family members may not be employed by grantee or delegate agency • Board must operate independently of grantee staff • See OHS Policy Clarifications OHS–PC–E–027 and OHS –PC–E–029 available at http://eclkc.ohs.acf.hhs.gov/hslc (click “Regulations and Policies” drop down menu, under “Policy Clarifications”) 21 © 2011 Community Action Program Legal Services, Inc.

Head Start Rules, cont.

• Public Head Start grantees: – If person holds public position as result of public election or political appointment; and – Position carries with it concurrent appointment to serve as member of a Head Start grantee board; – That person may serve on grantee board even if: • s/he receives compensation for serving on Board or providing services to Head Start grantee; or • s/he or immediate family member works for grantee or delegate agency • But grantee must report conflict to HHS © 2011 Community Action Program Legal Services, Inc.

Board Selection Procedure

• Create board development/governance committee to oversee selection process • Require applications – Applicants sign certification re no disbarment or convictions of certain offenses and conflicts of interest policy • Determine skills and background needed • Use spreadsheet to track fulfillment of requirements • Full board elects directors once chosen through appropriate selection process • Unless bylaws specify otherwise,

ex officio

Petitions for Board Representation

• Low-income individuals, community organization, religious organization or representative of low-income individuals that considers its organization, or low-income individuals, to be underrepresented on the CAA board may petition for representation • CAAs must establish procedures for petition • (42 U.S.C. § 9908(b)(10)) © 2011 Community Action Program Legal Services, Inc.

Board Size

• Neither federal CSBG Act nor TX CSBG regs address board size • TX corporate law requires at least 3 directors – (TX BUS ORG § 22.204) • Factors to consider © 2010 Community Action Program Legal Services, Inc.

Term Limits

• Nonprofit CAAs – If bylaws don’t specify term, director holds office until next annual election of directors – (TX BUS ORG § 22.208) • Public CAAs – Specified in delegation from public body or bylaws © 2010 Community Action Program Legal Services, Inc.

Term Limits

• Specify board members’ terms in bylaws – Board members from each sector should have specific term • May provide for staggered terms • Different sectors may have different length terms © 2010 Community Action Program Legal Services, Inc.

Term Limits

• Texas CSBG regs: – Board may establish term limits in bylaws (10 T.A.C. § 5.215 (a)) • Since federal CSBG Act does not address term limits, CAA board members may serve for any number of successive terms – Individual CAAs may decide to have term limits – Some CAAs permit board members who have reached their term limits to re-join the board after a break (e.g., 1 year) © 2010 Community Action Program Legal Services, Inc.

Vacancies

• Should be filled as soon as reasonably possible • May not have 25% or more of public or low income seats vacant for more than 90 days • CAAs must report monthly to TDHCA number of board vacancies • (10 T.A.C. § 5.215(b)(1)) © 2011 Community Action Program Legal Services, Inc.

Removal of Directors

• CAA BEST PRACTICE: Include strong removal provisions in bylaws – Permit board to remove any director (including public officials) • With or without cause?

• Examples of cause: false certification on board application, unexcused absences from a certain number of board meetings, failure to comply with CAA policies, taking actions against the best interests of the CAA, incapacity • (TX BUS ORG § 22.211) 30 © 2011 Community Action Program Legal Services, Inc.

How Does the Board Carry Out Its Duties?

Voting Issues

• Alternates permitted (Texas CSBG regs) – If low-income and private sector organizations have alternates, should select or be designated at same time as regular board member • Votes by email or phone polling not allowed • Quorum – The lesser of: – Majority of number of directors set by bylaws or certificate of formation; or; – Any number, not less than three, set as a quorum by the certificate of formation or bylaws.

Alternates

• Alternates permitted, but… – Alternates not permitted to hold officer positions on board – If low-income and private sector organizations have alternates, should select or be designated at same time as regular board member (10 T.A.C. § 5.213 (d)(1)(B)(ii)) – Although proxy voting is permitted by TX nonprofit corporations law, it is prohibited by Texas Open Meetings Act (See Tex. Govt. Code. Ann. Ch. 551 ; see also Tex. Att’y Gen. LO 94-028 (1994); Op. Tex. Att’y Gen. No. JM-903 (1988)) 33 © 2010 Community Action Program Legal Services, Inc.

Alternates

Certificate of Formation and Bylaws

• CAA BEST PRACTICE: Review certificate of formation (for private CAAs) and bylaws at least once every 3 years • Purpose statement should be in certificate of formation for private CAAs – Neither it nor mission statement needed in private CAA bylaws • Bylaws – see CAPLAW Bylaws Toolkit for main issues CAA bylaws usually address (not all topics apply to public CAA bylaws) – Info on ordering at www.caplaw.org

Quorum

• Specify quorum requirement in bylaws • State specifically needed fraction of voting directors then in office – Most nonprofits use majority of directors in office as quorum © 2011 Community Action Program Legal Services, Inc.

Board Meetings

• How often does board meet?

– Texas CSBG regs: • Once per calendar quarter and at least 5 times/year – (10 T.A.C. § 5.217(a)) • Notice must be given to board members 5 days in advance of meeting • Any problems meeting quorum requirements?

• Sanctions for failure to attend?

• Who sets agendas – board chair/executive committee and ED or just ED/management?

• Are minutes of previous meeting, committee reports, financial information etc. distributed before the meeting?

Board Meetings, cont.

• Any problems meeting quorum requirements?

• Sanctions for failure to attend?

• Who sets agendas – board chair/executive committee and ED or just ED/management?

• Are minutes of previous meeting, committee reports, financial information etc. distributed before meeting • What happens at board meetings–just reporting by committees or staff or discussion of critical issues for board decision ?

• How active are board members? Read materials in advance? Informed? Ask questions?

Open Meetings Act

• Under Texas law, CAAs are subject to Open Meetings Act (and Public Information Act) • In general, board meetings must be open to the public, except for authorized executive sessions • Public must be given notice of time, place, subject matter of meetings • (Tex. Gov’t. Code. Ann. Ch. 551) © 2011 Community Action Program Legal Services, Inc.

Open Meetings: Executive Session

• Consultation with attorney re pending or contemplated litigation, settlement matters or other matters requiring confidentiality • Certain discussions re real estate, negotiated contracts, prospective gifts or donations • Certain employment matters • Final action must be in open meeting © 2011 Community Action Program Legal Services, Inc.

Minutes: Texas CSBG Regulation

• Minutes must be taken of all open meetings – Record of members present by category – Items presented to board for action – Votes on all motions • Distribute minutes of previous meeting before next meeting • Available to public upon request • ( Tex. Gov’t. Code. Ann. 551.021) © 2011 Community Action Program Legal Services, Inc.

Board Committees

• Do committees specified in bylaws and board resolutions reflect CAA’s current operations?

• Were committees created as provided in by-laws?

• What authority do committees have?

• How often do committees meet?

• What do they do? Written descriptions?

• Several important committees: – Executive committee (depending on board size) – Finance/audit committee – Governance/board development committee 42 © 2011 Community Action Program Legal Services, Inc.

Committees, cont.

• Texas law: – If committee is given full authority of board, it must be designated by resolution approved by a majority of directors in office • (TX BUS ORG § 22.218) – If not given such authority, may be designated by majority of quorum at meeting or by president authorized by such resolution • (TX BUS ORG § 22.219) 43 © 2011 Community Action Program Legal Services, Inc.

Committees, cont.

• Use committee charters to set out responsibilities • Require that committees reflect tripartite board structure?

• How often do committees meet?

• What do they do? Written descriptions?

Finance/Audit Committee Functions

• Select auditor • Meet with auditor to determine audit plan • Review audit report directly with auditor • Ensure corrective action taken • Address conflicts of interest and whistleblower complaints © 2011 Community Action Program Legal Services, Inc.

Governance/Develop. Committee Functions

• Develop and periodically review key organizational governance policies, including conflict of interest and whistleblower policies • Periodically review bylaws and other governing documents • Implement selection process for recruiting new board members, consistent with CSBG Act tripartite board selection requirements © 2011 Community Action Program Legal Services, Inc.

Fidelity Bond Coverage

• Texas regs require that fidelity bond coverage include all persons authorized to sign or counter sign checks or to disburse sizable amounts of cash – Don’t have to bond persons who carry petty cash (less than $250) • (10 T.A.C. § 5.7) 47 © 2011 Community Action Program Legal Services, Inc.

Board Orientation and Training

• Does CAA have an orientation process for new board members?

– Could include mentoring by existing board members • Does CAA give board members a board handbook?

• Does CAA provide regular training for board members?

What are the Board’s Duties?

• Duties/Powers of Board • Public CAA Role • Development, Planning, Implementation and Evaluation of Program • Board/Executive Director Relationship • Financial Oversight • Governance and other policies • Conflict of Interest • Whistleblowers • 501(c)(3) Status © 2011 Community Action Program Legal Services, Inc.

Powers of CAA Boards

• For private CAAs, board’s powers set by state corporate law – Texas Business Organizations Code §22.201: The affairs of a corporation shall be managed by a board of directors.

• For public CAAs, tripartite boards’ powers depend on authority delegated to it by political subdivision – Do not need to be merely advisory boards © 2011 Community Action Program Legal Services, Inc.

Duties of Private CAA Boards

• Directors have “fiduciary” duties under Texas nonprofit law: carry out duties in good faith, with ordinary care, and in manner s/he reasonably believes to be in best interest of corporation – Duty of care in governing CAA • Be reasonably informed • Participate in decisions, reasonably inquire about matters coming before the board • Do so in good faith and with the care of a prudent person in similar circumstances – Duty of loyalty • Act in the CAA’s best interests, not own or someone else’s • (TX BUS ORG § 22.221) © 2011 Community Action Program Legal Services, Inc.

Federal CSBG Act and Texas CSBG Regulation

• Tripartite board administers CAA’s CSBG program – Except for public CAAs in cases where state specifies another mechanism that assures decision-making and participation by low-income individuals • Board fully participates in program’s development, planning, implementation and evaluation • (42 U.S.C. §9910; 10 T.A.C. § 5.213(a)) 52 © 2011 Community Action Program Legal Services, Inc.

Board Powers: Texas CSBG Regulation

• Private CAAs: – Responsible for abiding by terms of contracts – Determine CAA policies to assure accountability for public funding • Public CAAs: – Determined by governing officials of political subdivision • Advisory board or governing board • But must be given authority required by federal CSBG Act to administer CSBG program and participate actively in development, planning, implementation, and evaluation of programs © 2011 Community Action Program Legal Services, Inc.

Mission and Strategic Direction

• Understand purposes statement in certification formation and, if one exists, separate mission statement – Note: new IRS Form 990 asks re: mission statement • Review existing and proposed activities and transactions against mission • Be sure assets used to further mission • Establish overall strategic direction • Ensure mission and strategic direction are being followed 54 © 2011 Community Action Program Legal Services, Inc.

CSBG Duties – Development

• Clarifying mission – In-house panel of “experts” on community needs, resources and opportunities – Consistent with certificate of formation • Or amend certificate – Mission statement • Determine whether it still fits • Create good public “soundbite” © 2011 Community Action Program Legal Services, Inc.

CSBG Duties – Development

• Needs assessment – Participate actively in ensuring completion of Community Needs Assessment and in reviewing assessment results to ensure responsiveness to any identified gaps in services – Source of information/insight on conditions in community – Create outreach and communication strategies within each sector – Gov’t- or privately-sponsored studies, assessments of local economic, social, educational and other conditions 56 © 2011 Community Action Program Legal Services, Inc.

CSBG Duties – Planning

• Active participation in development and ongoing implementation and evaluation of CAA’s Community Action Plan • Long-range strategic planning – Identify broad goals – Mobilize programs and activities within and outside CAA – Establish and maintain procedures for gathering and presenting info on goals and results © 2011 Community Action Program Legal Services, Inc.

CSBG Duties – Planning

• Annual planning – Identify what CAA hopes to accomplish each year – Help CAA establish performance expectations – qualitative and quantitative – Work with CAA staff to establish milestones used to track progress during year – Identify ways to strengthen operations © 2011 Community Action Program Legal Services, Inc.

CSBG Duties – Implementation

• Stay informed of CAA programs and activities throughout the year – Track progress toward milestones; ensure that CAA adjusts performance as necessary to meet milestones • Receive financial information – budgets etc. – and monitor CAA’s finances; work with fiscal staff to ensure finances are on track • Oversee compliance with funding source rules • Be involved in preparing for and responding to monitoring by funding sources 59 © 2011 Community Action Program Legal Services, Inc.

CSBG Duties – Evaluation

• Obtain information on results of CAA’s programs and activities – Actual changes or improvements in clients and community • Compare outcomes with performance expectations developed during planning process • Oversee data gathering for ROMA and similar evaluation tools for other grants – Participate actively in identification and evaluation of ROMA Performance Outcomes used in measuring CAA’s effectiveness in achieving 6 ROMA goals – ROMA = Results Orientated Management and Accountability © 2011 Community Action Program Legal Services, Inc.

Specific Board Member Duties Under Texas CSBG Regulations

• Attend board and committee meetings regularly; • Be familiar with certificate of formation, sources of funding, agency goals and programs, federal and state CSBG statutes; • Carefully review materials provided to the board; • Make decisions based on sufficient information; • Ensure proper fiscal controls and legal compliance systems are in place; • • Know about major actions taken by CAA; (10 T.A.C. § 5.216) 61 © 2011 Community Action Program Legal Services, Inc.

Specific Board Member Duties Under Texas CSBG Regulations, cont.

– Receive regular reports including: • Review and approve all funding requests (including budgets); – Certification of board approval of CSBG budget form – (10 T.A.C. § 5.207(a)) • Review reports on organization's financial situation; • Regular reports on progress of goals specified in performance statement or program proposal; • Regular reports addressing rate of expenditures compared to budget; • Modifications to fiscal and management policies and procedures; and • (10 T.A.C. § 5.216(b)(7)) 62 © 2011 Community Action Program Legal Services, Inc.

Specific Board Member Duties Under Texas CSBG Regulations, cont.

• Updated information on community conditions that affect programs and services – Board certification that public hearing conducted on proposed use of funds – (10 T.A.C. § 5.210(d)) • CAA must ensure that services are rendered reasonably and equitably. – Services rendered must reflect poverty population ratios in the service area and should be distributed proportionately based on the poverty population within a county – (10 T.A.C. § 5.207(c)) © 2011 Community Action Program Legal Services, Inc.

Specific Board Duties Under Texas CSBG Regulations, cont.

• Board members accept responsibility to assure that CAA continues to: – Assess and respond to causes and conditions of poverty in their community; – Achieve anticipated family and community outcomes; and – Remain administratively and fiscally sound • (10 T.A.C. § 5.216(c)) © 2011 Community Action Program Legal Services, Inc.

CAA Duties Under Texas CSBG Regulations, cont.

Board-Executive Director Relationship

• Board sets mission and policy, executive director and management staff implement policy • Generally, board supervises only one employee: the executive director –

Board hires, evaluates, sets compensation for and (if necessary) terminates ED

– ED hires staff in accordance with personnel policies set by board (and may consult with board) – Staff generally communicate with board through ED – ED meets regularly with board chair/executive committee – Board provides a balance of support and accountability for ED 66 © 2011 Community Action Program Legal Services, Inc.

Financial Oversight

• Board responsible for overseeing CAA’s finances – Ensure accurate and current financial records maintained in accordance with GAAP – Regular review, discussion and votes on financial statements and other financial info – e.g., annual audit, Form 990 • Income and Expense Statements • Cash Flow Statements • Balance Sheets © 2011 Community Action Program Legal Services, Inc.

Financial Oversight, cont.

– Review and approve CAA’s annual budget and monitor performance against it during year – Approve grant proposals and budgets – Make decisions on major financial transactions – Establish fiscal policies and internal controls and ensure they are being followed – Texas law – Board must annually approve financial report and make available to public • Statement of support, revenue and expenses and changes in fund balances • Statement of functional expenses • Balance sheet • (TX BUS ORG § 22.352) 68 © 2011 Community Action Program Legal Services, Inc.

Financial Oversight, cont.

• CAA BEST PRACTICES: – Include one or more financial experts on board – Ensure that other directors are financially literate – Establish audit committee or another committee to perform functions of audit committee – include financial expert(s) © 2011 Community Action Program Legal Services, Inc.

Internal Controls

• Extend beyond fiscal policies and procedures – involve management, program and administrative functions • OCS Information Memo 112 – COSO framework • Summary available at http://www.coso.org/IC IntegratedFramework-summary.htm

– GAO standards for internal control in the federal government http://www.gao.gov/special.pubs/ai00021p.pdf

Internal Controls

• COSO framework – Control environment – Risk assessment – Control activities – Information & effective communication – Monitoring • Sample internal control review checklist for CAAs – in handouts and available online at: http://www.caplaw.org/StimulusPackage/documents/InternalControls ReviewChecklist2.pdf

Governance and Other Policies

• CAA BEST PRACTICE: Adopt and implement: – Conflict of interest policy – Whistleblower policy • Complaint resolution policy required for H.S. grantees – Record retention policy – Travel Policy (required by Texas law) • Must follow either federal or state travel regulations • (10 T.A.C. § 5.9) • Regular board review of other policies and how they are implemented – e.g., personnel policy, financial policies and procedures, procurement policy, internet and computer use etc.

Conflicts of Interest

• • Board member may not participate in selection, award or administration of subcontract supported by CSBG funds if: – Board member – Member of his or immediate family – Board member’s partner; or – Any organization that employs or is about to employ any of above, – Has a financial interest in firm or person selected to perform a subcontract (10 T.A.C. § 5.214 (d)) © 2010 Community Action Program Legal Services, Inc.

Conflicts of Interest

• No compensation to board members for board service, except reimbursement for board expenses – (10 T.A.C. § 5.214 (c)) • No CAA or TDHCA employees on CAA board – (10 T.A.C. § 5.214 (d)(4)) © 2010 Community Action Program Legal Services, Inc.

Conflicts of Interest

• No loans to nonprofit board members – (TX BUS ORG § 22.225) • TX CSBG Contract (and federal grants regs): – Must have written standards of conduct governing the performance of employees engaged in the award and administration of contracts – Employees, officers, and agents may not accept gifts, gratuities, or anything of value from any existing or potential subcontractors – No employee, officer, or agent of subrecipient shall participate in the selection, award, or administration of a contract supported by federal funds if a real or apparent conflict of interest would be involved 75 © 2010 Community Action Program Legal Services, Inc.

Conflict of Interest Basic Principles

• Disclose all existing or potential financial or other interests in transactions with CAA • Interested person does not participate in discussion, vote, or other decision on transaction • Determination, based on comparables or other independent information, that transaction is in best interest of CAA • Document process 76 © 2010 Community Action Program Legal Services, Inc.

Conflict of Interest Policy Implementation

• Who is subject to policy?

– Board members – Top management – Staff who make procurement decisions?

• Complete form with specific questions • Sign policy and certify to disclosure on annual basis • Process for reviewing forms and addressing conflicts © 2010 Community Action Program Legal Services, Inc.

Whistleblower Policy

• Several whistleblower laws in Texas that protect whistleblowers from retaliation from their employers under certain circumstances • The Texas Whistleblower Act protects public employees who report violations of the law by employing agency – (TEX. GOV’T CODE Ann. § 554.001) • Federal laws also provides protection for whistleblowers in some circumstances under those acts: – Americans with Disabilities Act; – Comprehensive Environmental Response; – Compensation and Liability Act; – Fair Labor Standards Act; – Family Medical Leave Act; and – Occupation Safety and Health Act. © 2011 Community Action Program Legal Services, Inc.

Why Have a Whistleblower Policy?

What to Include in Whistleblower Policy

• Purposes • Intended audience(s) • Matters covered by the policy • Reporting concerns • Confidentiality or anonymity • Sample whistleblower policy from Texas C-Bar: – http://texascbar.org/legal_library/nonprofit_management/sample _documents.html

Additional CAA Board Responsibilities

• Ensure compliance with federal, and applicable state and local, laws and regs – Withholding taxes, for example • Ensure compliance with program rules and terms and conditions • Appropriate legal counsel • Legal Liability Audit © 2011 Community Action Program Legal Services, Inc.

Ensure Maintenance of 501(c)(3) Tax Exempt Status

• Activities further exempt purposes – Charitable or educational • No private inurement • No participation in political elections • Limited legislative lobbying • Limited unrelated business activity © 2011 Community Action Program Legal Services, Inc.

More Board Roles

• Setting and updating CAA mission – Consistent with certificate of formation • Or amend Articles – Mission statement – Determine whether it still fits – Create good public “soundbite” © 2011 Community Action Program Legal Services, Inc.

More Board Roles, cont.

• Public outreach and advocacy – Work with staff to educate community know about CAA and its programs – Identify issues of significance to low-income community – Advocate on issues of importance to CAA and its clients – Comply with lobbying and political activity rules – Speak on behalf of CAA only as authorized by board © 2011 Community Action Program Legal Services, Inc.

More Board Roles, cont.

• Fundraising – Private sector board members – Think about fundraising capability in selecting private sector members – Encourage financial contributions, according to financial capability, and/or participating in fundraising efforts – Designate a board member or committee to work with staff 85 © 2011 Community Action Program Legal Services, Inc.

Head Start Grantees: Board Responsibilities

• Select delegate agencies and their service areas • Establish procedures and criteria for recruitment, selection and enrollment of children • Review and approve all major policies of CAA, including: – Annual self-assessment • Develop selection procedures for policy council members • Where appropriate, establish advisory committees to oversee responsibilities re: program governance and improvement • Establish and update standards of conduct © 2011 Community Action Program Legal Services, Inc.

Head Start Grantees: Board Responsibilities, cont.

• Approve personnel policies and procedures, including those for hiring, evaluation, compensation, and termination of executive director, Head Start director, HR director, and CFO • Establish procedures and guidelines for accessing and collecting information required to be presented to board and policy council • Board and policy council must receive: – Monthly program info summaries – Program enrollment reports – Monthly reports of USDA meals and snacks – Annual self-assessment – Communication and guidance from HHS © 2011 Community Action Program Legal Services, Inc.

Resources: Texas C-Bar Nonprofit Legal Toolkit

• Extraordinarily helpful legal toolkit developed for nonprofits existing under Texas law • • Provides overview of state and federal law affecting a nonprofit’s day to day operations http://www.texascbar.org/content/legal_library/pu bs/downloads/NonProfitLegalToolkit2011.pdf

Resources: For More Information

• Visit www.caplaw.org

Call CAPLAW at (617) 357-6915 • See Governance Resources attachment • CAPLAW Financial and Governance toolkits: – http://www.caplaw.org/toolkits/governanceonlinetoolkit.html

• CAPLAW CSBG Training Module: – http://www.caplaw.org/trainingmodules/csbg/csbgtrainingmod ule.htm

• Texas Association of Nonprofit Organizations – www.tano.org