The Nonprofit FAQ
| Are board officers the same as corporate officers |
| A person can be a corporate officer without being a board member, and a board member without being an officer. A person can also be a board officer without being a corporate officer (but presumably a person must be a board member to be a board officer). Some organizations use "officer-like" titles ("President", "Chair," etc.) for management positions. Other's don't and use managerial titles (like "Executive Director," and "Finance Director") for paid staff. (See http://www.nonprofits.org/npofaq/03/10.html) Board officers play roles in the functioning of the board -- most obviously, the board's chair chairs the meetings of the board. The risks of confusion are greater for some roles than for others. That's why the designation "and CEO" is often added to other titles; 'Chief Executive Officer' is useful because it designates the individual with the desk where 'the buck' finally comes to a stop. In contrast, the usual list of organizational leadership titles doesn't include a 'secretary' -- that's a role that fits with being responsible for the minutes of board meetings and other legal documents. In general the titles, roles and responsibilities of officers — whether corporate or board — are defined in the organization's articles of incorporation and bylaws. As these documents are prepared and later revised, the organization can choose almost any arrangement that makes sense to it. One person is usually permitted to serve as, and perform the duties of, several officers at the same time; but see below for descriptions of a couple of states where there are specific prohibitions on overlapping duties. Checking the relevant passages of the nonprofit corporation law of the state where the organization is incorporated would always be a good idea before setting things up or making changes. This issue was raised in the Nonprofit discussion group (see http://www.rain.org/mailman/listinfo/nonprofit) when someone asked whether it was appropriate for the treasurer not to be a member of the board of directors. How common is it for a small NPO to be structured so that the Treasurer of the organization is NOT on the Board of Directors (Executive Board/ Management team)? Quite a lot of discussion followed. Some highlights: Jane Garthson, Mills Garthson & Associates, Toronto, Canada, wrote: I don't think it is common yet, but I think there is a small trend and one well worth considering. If you read the descriptions of a Treasurer's role in many bylaws or other formal documents, you realize that most of the work being described is performed by staff, particularly once the staff size is large enough to support a CFO. The Treasurer ends up getting briefed by the CFO just before board meetings and AGMs so they can appear knowledgeable. The Board's actual financial role involves planning and oversight - even if the Treasurer in small organizations is doing everything from bank deposits to bookkeeping. The Treasurer is then volunteering in a staff role (been there, done that, several times). The Board planning committee can take lead on making sure the budgets align with the strategic plan. The board can give significant financial oversight and direction through an Audit and Investment Committee, where the Treasurer is a resource person rather than a voting member. Or in a small organization, the Board may have a general oversight committee that includes finances. Yes, I am quite aware that most boards still have committees named for staff functions and program areas instead of committees like Planning and Oversight, but I have reason to hope that boards are learning that board committees are supposed to help with board work, not staff work. However, check your bylaws and relevant laws to see if you still need to give some board member the title Treasurer for now. Channing Hillway, Ph.D., of Oak View, California, contributed these thoughts: Getting past whatever problem you may be having with the board in question may be solved by changing the designation of the current treasurer to bookkeeper who is responsible to a board member who becomes the treasurer. The bookkeeper would handle keeping the books, explain it to the board member treasurer, and the treasurer would submit his report -- monthly, quarterly, and annually -- to the board. It seems fairly important to me that the final approval of the money matters for the vast majority of nonprofits would rest with the board. Some nonprofits, where the board is there in support of some major projects in research, especially, would be more complex where there would be a project budget and a nonprofit budget. While the overall nonprofit budget would be in the hands of the board, the board would rely on project management people to provide them with reports that would be reflected in the treasurer's report, but the degree of complexity in multi-million dollar projects means that several layers of reporting and accountability would come into play. Small nonprofits have very little leeway in the matter. The board and the board member treasurer must be fully informed and review in meetings all aspects of the budget and treasurer's financial reporting so there is no question regarding the appropriate use of funds at all times. Alex F. Buiel II added: I think we're confusing Board members and Officers here. Corporate people are classified by the nonprofit corporate laws in the following manner:
Distinctions between these roles often become blurred for the small nonprofit corporation since one person can, and often does, simultaneously serve in more that one of these capacities. California (for example) requires you to have the following:
The required officer positions are President, Secretary and Treasurer. The Secretary and Treasurer may be the same person, but the President and Treasurer may not. And they all may or may not be Board members. No one is on the Board of Directors (or has a vote) unless the word "Director" is specifically part of their title. Putnam Barber added here: State laws differ on these sorts of questions. In Washington, for another example, the offices of President (or Chair) and Secretary may not be occupied by the same person (apparently in order to ensure that there are at least two separate individuals with the power to convene special meetings). There are also often complicated provisions contained in other statutes. One area of widely varying provisions is the question of whether a paid employee of the organization can also serve on the board of directors. Even if the nonprofit corporation laws are silent on this question, other laws or regulations may change the tax treatment of the organization, or limit the kinds of grants and contracts it can receive, depending on whether there are paid employees on the board (or how many such people there are on the board). There are also federal tax considerations. Officers and directors are "disqualified persons" and decisons about their compensation must meet "intermediate sanctions" standards. ("Intermediate Sanctions" is the name given to the power the IRS has to impose penalties for inappropriate transactions without employing the "ultimate sanction" of revoking the organization's tax-exempt status; see http://www.nonprofits.org/npofaq/18/13.html.) Lastly, many state laws prohibit loans to officers and directors of nonprofit corporations. When individuals are both managers and officers, the application of these laws can be troublesome. For example, when major hospitals and universities provide relocation loans to new senior staff (and then elect those staff members to positions as officers), they may end up violating, or appearing to violate, the prohibitions on loans to officers. Posted 7/8/04; paragraph of clarification about multiple roles added 3/25/08 -- PB |