Add the “C” in CEO

Presented by: Robert C. Harris, CAE The NonProfit Center

Tallahassee, FL April 1, 2006

Bob Harris, CAE

Adding the C to CEO

Tools and Insights to Empower theHighly Effective Chief Executive Officer

• The Importance of Associations

• Changing Roles and Responsibilities of the CEO

• The Staff – Volunteer Leader Distinction

• Efficiency & Effectiveness – Building Systems

• Avoiding Risks – Protecting the Association

Bob Harris, CAE 2

Preface

Build systems to administer the association while the staff focuses theirattention on the members and mission.

Do the crisis-of-the-day and on-the-job-training interfere with your systematic,thorough, approach to managing and leading the organization?

This seminar starts with a look at efficiencies and inefficiencies in the nonprofitorganization. It goes on to identify the risks that result from a lack of systems andinefficiency. The goal is to improve customer-member service and enhance boardconfidence in the organization.

The session provides a new business model for managing the organization ---identifying what is mandatory in nearly every nonprofit, as well as the primary andsecondary documents and systems to improve management.

After identifying the documents and systems, it recommends five manuals. Themanuals promote consistency, enhance board and staff training, and create a legacyfor an effective chief paid professional.

To help organizations assess their operations, the seminar provides the AssociationSelf-Audit Process manual. Conducting the internal operations assessment as a teamof staff is ideal cross training and a means to improve operations.

After the seminar, many of the references and documents can be found atwww.nonprofitcenter.com. Free documents include:

• Incoming Treasurers Guide – Template• Board Performance Evaluation Checklist• President’s Guide to Appointing Committees• Antitrust Avoidance Guide• Committee Chair Planning: Before, During

and After the Meeting• Installation Ceremony Scripts – 15 Samples• Board Commitment Forms – 14 Samples• Minute Taking Tips• Strategic Planning Process and Terms• Board Orientation – PowerPoint• Creating a Policy Manual• Sarbanes Oxley Model for Governance• UBIT Explained• Member Service Standards – Pledge

• Membership Value Statement – Sample• How to Influence Florida Government• Bylaws Hotspots• 400 Year History of Non Profits in North

America• Terminology of Non Profit Governance and

Management• Motion Making Form - Template• Emergency Management at Meetings – List• Association Disaster Survival Notebook• IRS Form 990 – Information Returns and

Public Records• Operating Framework for a Non Profit

Organization

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Preface .................................................................................................................................................2Rich History of Associations............................................................................................................4Unique Terminology of Associations ..............................................................................................6

Focus on Efficiency...........................................................................................................................10Let Systems Manage the Organization...........................................................................................11E-Myth Role Descriptions..............................................................................................................12Sarbanes Oxley and Nonprofit Governance...................................................................................13CEO Affirmation – Sarbanes Oxley...............................................................................................14Reasons to Conduct an Operations Audit ......................................................................................16Common Omissions and Oversights ..............................................................................................17Synchronization in the Organization..............................................................................................19

Operating Framework – Business Model.......................................................................................20Insurance Coverages ......................................................................................................................21Strategic Planning Template – 90 Days .........................................................................................22Power of a Consent Agenda ...........................................................................................................23Minutes Protect the Organization...................................................................................................24IRS Form 990 Disclosure ...............................................................................................................26Audit, Review or Compilation - Financial .....................................................................................28Financial Audit RFP.......................................................................................................................29Antitrust Compliance Program.......................................................................................................31Antitrust Policy ..............................................................................................................................32Concept of Apparent Authority......................................................................................................34Policy on Apparent Authority ........................................................................................................35Endorsed Benefits “Filter” .............................................................................................................36Record Retention............................................................................................................................38

Documentation and Manuals ..........................................................................................................39Six Operating Manuals...................................................................................................................39Disaster Survival Notebook ...........................................................................................................41Create a Leadership Orientation Manual .......................................................................................42Code of Conduct – Board - Sample ...............................................................................................43Principles of a Strategic Board.......................................................................................................44Procedures Manual Table of Contents – Sample ...........................................................................45Policy or Procedure? ......................................................................................................................47Creating a Policy Manual...............................................................................................................48Common Association Policies .......................................................................................................49

Appendix ...........................................................................................................................................50Reading and Resources ..................................................................................................................50About Bob Harris ...........................................................................................................................51

Samples, templates and tables are provided for illustrative purposes. You may find it easier to establish systems whentested samples are provided. Be sure to contact legal, accounting and insurance counsels as needed.

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Rich History of Associations

Much of the greatness of the USA is due to the influence of associations.

• There are 1.4 million nonprofit organizations in the US according to the IRS. Of those, about155,000 have the 501(c)(6) designation as “business league.”

• Of the 155,000 business leagues, it is estimated that 150,000 are associations and 5,000 to 7,000are chambers of commerce. About 1,000 new associations form each year.

• Chambers and associations have a rich history in America. They are older than the countryitself --- credited with serving communities, setting standards, providing services, offeringeducation and coordinating volunteer efforts.

1604 Order of Good Cheer founded in Nova Scotia, Canada; exists to this day.

1735 Oldest association of continuous existence founded by Benjamin Franklin – the AmericanPhilosophical Association.

1768 The New York State Chamber founded by 20 merchants.1773 The New Haven (CT) Chamber founded.

1774 Carpenters Hall – a guild of tradesmen – was used by the country’s founding fathers todraft the Declaration of Independence.

1776 Continental Congress adopts the Declaration of Independence.

1800 The Philadelphia Chamber founded.1830 –1835

Frenchman Alexis deTocqueville visits US to determine what makes America so great.Authors “Democracy in America” with many significant quotes about communities andassociations constantly forming to serve the needs of people:

“Americans of all ages, all conditions, all minds constantly unite. Not only do they havecommercial and industrial associations in which all take part, but they also have a thousandother kinds: religious, moral, futile, very general and very particular, immense and verysmall.” “Americans use associations to found seminaries, to build inns, to raise churches, todistribute books, to send missionaries … in this manner they create hospitals, prisons,schools.”

About America’s Women“If I were asked what singular factor do I attribute the prosperity and growing strength ofthe American people, I should reply it is the superiorityof their women.”

1800-1850 Chambers form in Mobile, AL; Cincinnati, OH; Houston, TX; Columbus, GA; Nashville,TN; and San Francisco, CA.

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Civil War Most associations were local until the Civil War years of 1860-1866. Railroads andindustry created new markets and the formation of many new trade associations.

1900 About 100 associations existed at the national level to influence federal and statelegislation, to create standards and to education members.

19081 Pres. Theodore Roosevelt recognizes the value of associations:“Every man owes part of his time and money to the business or industry to which he isengaged. No man has a moral right to withhold his support from an organization that isstriving to improve conditions within his sphere.”

1911 Pres. Howard Taft suggests the need for a central organization to represent the interests ofbusiness.

1912 US Chamber founded in response to the suggestion of Pres. Taft.

1914 National Association of Commercial Organization Secretaries founded, now known asthe American Chamber of Commerce Executives (ACCE).

1920 The American Trade Executives Association was founded, now known as the AmericanSociety of Association Executives (ASAE).

Institute for Organization Management founded by NACOS as the National School forBusiness Secretaries – starting as a two-week long program.

1925 Price fixing, territorial agreements and controls of supplies became the norm thus SupremeCourt upheld antitrust laws that competitors may not form agreements on prices, etc.

US Chamber building completed at 1615 H Street across from the White House onproperty formerly owned by statesman Daniel Webster.

1950 IRS reports there are 50,000 nonprofit organizations in U.S.

Congress mandates UBIT in 1950 to minimize unfair competition between taxable and taxexempt businesses.

1960s In mid-60s IRS notes dramatic jump in number of nonprofits to 250,000.

1980s IRS reports more than 1 million nonprofit organizations.

2004 Three new associations form every business day in America.

1 In 1899, the Commissioner of the US Patent Office proclaims, “Everything that can be invented has been invented,”recommending no further need for the patent office in America.

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Unique Terminology of Associations

Associations, chambers of commerce and other not-for-profit organizations have a language allthere own. Use this list of common nonprofit terms to orient new staff and volunteer leaders.

Accreditation - Recognition by an accrediting organization or agency that an organization meetscertain acceptable standards in its programs, services, and facilities. (The U.S. Chamber setsperformance standards for the accreditation of chambers of commerce.)

Association – A community of individuals or companies that collectively serve the interests of theirmembers that cannot be met effectively by individual action. Chambers of commerce andassociations both tend to be assigned the 501(c)(6) – business league – status by the IRS.

Audit Committee – An appointed group of volunteers responsible for overseeing annual financialaudit, presentation to the board and oversight.

CAE – Certified Association Executive, designated by the American Society of AssociationExecutives.

CCE – Certified Chamber Executive, designated by the American Chamber of CommerceExecutives.

Certification - The process of validating performance and/or compliance withthe requirements of established standards. (Refer to CCE by ACCE and CAEby ASAE.)

Chamber of Commerce - An organization of business people designed toadvance the interests of its members. There are three levels: national, state andlocal. Usually designated by the IRS as a “business league” and 501(c)(6).

Directors and Officers Insurance – D & O liability insurance coverage thatmay cover staff, board and volunteers as indicated in the policy.

Due Diligence – The expectation that a board member, and the board, exercises reasonable care andfollows the business judgment rule when making decisions.

Duty of Care - An expectation that a board member exercises reasonable care when makingdecisions.

Duty of Loyalty – The expectation that a board member remains faithful and loyal to theorganization; avoiding conflicts of interest and personal agendas.

Duty of Obedience - An expectation that a board member remains obedient to the central purposesof the organization and respects all laws and legal regulations.

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Endorsement – A specific recommendation, actual or implied, that the organization has reviewedand recommends the program or service. (Similar to Affinity Program.)

Executive Committee – A subset of the board of directors charged with responsibilities betweenboard meetings; usually including the executive officers of the board.

Federated Structure – An organization structure where there is a central governing body and allsubgroups are closely related to central organization. Whereas a trade association representscompanies, and professional societies represent individuals, a federated organization generally hasother associations as its members.

Form 990 – The annual information report most nonprofits are required to submit to the IRS; apublic record. Organizations with gross receipts of less than $100,000 and total assets less than$25,000 at the end of the year may file a short-form Form 990 called Form 990-EZ. Exemptorganizations that generate unrelated business income (UBIT) must also file a federal income taxreturn (990T).

IRS 501(c)(3) - Organizations with an education, research, professional or philanthropic/charitablepurpose. They do not actively lobby on issues that affect their areas of concern (thoughinformative, educational briefings are permitted.)

IRS 501(c)(6) - Organizations include trade associations (those with companies or institutions asmembers) and individual membership organizations that provide benefits and services to theirmembers and are permitted to engage in lobbying activities.

Letter of Determination – An official notice from IRS stating that a nonprofit organization hasexempt status from paying federal income tax. (For IRS assistance in replacing a letter ofdetermination dial 877-829-5500.)

Membership Categories - Bylaws identify numerous membership categories, including regularmembers, associates, honorary, retired, student, lifetime, etc.

Associate – Affiliate Members- Suppliers to the organization’s primary members.

Regular Members – The primary members of an organization as identified in the bylaws ormission statement.

Member Attrition – The loss of members, usually expressed quantitatively as the “attrition rate.”

Member Retention – The retention or growth of membership usually expressed quantitatively asthe “retention rate.”

Minutes – The legal record of what occurred at an official meeting of the organization; applicableto the board as well as committees.

Mission Statement – A clear concise statement identifying what the organization is, whom itserves and what it offers.

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Nonprofit – Casual term for “not-for-profit” which tends to be a legal reference indicatingcorporate status.

Political Action Committee – PAC – An organization formed to raise and contribute money to thecampaigns or causes that the group believes promotes its best interests.

Professional Society – A not-for-profit voluntary membership organization representingindividuals with a common interests in a subject or a profession such as law, medicine, andaccounting. There are three types of professional societies: those representing common interestssuch as AARP; those representing a body of knowledge such as engineering, automotive, etc; andthose dedicated to a religious, charitable, public service or fraternal causes, such as the NationalCouncil on Aging, and the American Lung Association.

Public Records – Refers to the records associated with the IRS that are deemed to be public,including the annual federal tax return (990), application for exempt status andletter of determination.

Rules of Order – Used at meetings to advance the agenda and keep order. Aprotocol of motions, seconds, actions and hierarchy. Various forms includeRobert’s Rules of Order and Sturgis.

Quorum – Minimum number of people required at a meeting in order to conductbusiness; usually specified in the bylaws or by state corporate requirements.

Strategic Plan – A “roadmap” for the volunteers and staff to follow for a period of years; reviewedand updated annually. Includes mission, goals, strategies to achieve the goals, and accountability.

Subsidiary – An organization affiliated with the parent organization sharing similar leadership andstaff. For example, a political action committee (PAC), foundation, or for-profit corporation.

Trade Association - A not-for-profit voluntary membership organization that represents a group ofcompanies having a business or trade in common. Companies work together to accomplish goalsthat no single firm could achieve alone. Their activities include promoting business for the industry,encouraging ethical practices in the industry, setting standards, conducting research, cooperatingwith other organizations, offering education, trade shows and conventions.

Unrelated Business Income Tax – UBIT – Income considered by the IRS to be taxable becausethe nonprofit organization’s activities are deemed to be unrelated to the mission and goals of theassociation. The IRS considers activities that are unrelated to the organization’s primary business(mission) if it is regularly carried on, and is not substantially related to the furtherance of theexempt purpose of the organization.

Value Statement – A written statement of the beliefs, principles and ethics guiding theorganization.

Vision Statement – An ideal of where the organization desires to be in the future, especially if ithad unlimited resources. For example, “ABC organization will be the premier resource forindustry members and the public to best serve their needs for safety, profitability and opportunity.”

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Volunteer Immunity Act – Most states have volunteer protection statutes limiting the liability ofvolunteers (if the volunteer act within the scope of their duties, in good faith, and the injury is notcaused by the willful conduct of the volunteer.)

Volunteers – Agents of the corporation for whose acts the corporation may be liable. Volunteersare greatest asset of the nonprofit organization and the culture of the USA.

# # #

Note: Bob Harris, CAE, offers free management tools at www.nonprofitcenter.com. He can becontacted at bob@rchcae.com.

Terminology 2004.doc

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Focus on Efficiency

Entry into the Profession?

1% _________2% ________3% ________94% ___________

Professional Development Funding

• Less than ½ of 1% in average budget allocated for staff professionaldevelopment

• 20% staff turn-over in non-profit organizations• Professional development needs minimum of $500 - $1,000 year for new staff;

$1 – 2,000 year for specialists; and $2 – 5,000 year for CEO.

Major Time Wasters

1. Lack of Systems2. Interruptions3. Waiting for Answers4. Training5. Chaos

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Let Systems Manage the Organization

Is your organization a model of efficiency that could beduplicated? Can a new CEO walk into your office and knowhow to manage the association or chamber?

Several principles of “The E-Myth Revisited” apply to nonprofitorganizations. Note: The “E-Myth” references the“entrepreneurial myth.”

Too many business managers find themselves work in thebusiness instead of on the business. For nonprofit organizationsthat translates to “on the job” training and daily “crisismanagement.”

1. The organization should provide consistent value to members (beyond memberexpectations!)

2. The organization is a model of organizational excellence.

3. Recurring processes are identified and transformed into best-practices.

4. All systems are documented in manuals.

� Personnel Handwork, HR Manual, Employee Manual� Policy Manual� Procedures Manual� Board Leadership Manual� Style Guide� Emergency Manual

5. Member services and products are efficient, timely and uniform.

6. New staff with the minimal knowledge will be able to step into jobs that are welldocumented.

E-Myth Handout.doc

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E-Myth Role Descriptions

The Technician

• Likes to do stuff – like stuffing envelopes andproofing newsletters!

• Focused on the present – today’s jobs.• Handles everything• Minimal delegation.• Interested in how much they can do.

The Manager

• Builds systems and plans before delving into thework.

• Good at delegating (to staff, volunteers,consultants, etc.)

• Manages time and resources well.

The Entrepreneur

• Focused on the big picture; mission and vision.• Minimal hands on.• Builds a model organization.• Ensures the model can be duplicated as the pre-

eminent organization and/or chapters.

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Sarbanes Oxley and Nonprofit Governance

In 2002, Pres. Bush signed the American Corporate Accountability Act; known as“Sarbanes-Oxley.” The White Housedescribed it as the most far-reachingreform of American business practicesaffecting publicly traded companies.

Since its adoption, there is fall-outaffecting nonprofit organizations. InNew York the Attorney Generalproposed that it apply to nonprofits. InCalifornia, editorials suggest nonprofitsshould also have to comply. Nearly 20states have introduced legislation to apply its provisions to for-profit corporations.

Here are the law’s components that may impact associations, chambers and charities.Some nonprofit organizations are using the law as an operating benchmark orpreparing for compliance should it include other than publicly trade companies.

• Code of Conduct or Standards for Board ofDirectors

• Annual Affirmation by CEO that OrganizationOperates Effectively, without Risk or Secrets

• Financial Expert on the Board; Training theBoard to Recognize Risk

• Utilization of an Audit Committee for OversightPurposes

• Document Destruction Policy

While this does not include all of the law’s requirements, it is a start forunderstanding how it may be applied to nonprofit organizations.

Audit Committee

A committee (or equivalentbody) established by andamongst the board of directorsfor the purpose of overseeingthe accounting and financialreporting processes and auditsof the financial statements. Ifno such committee exists, theentire board of directors mayserve as audit committee.

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CEO Affirmation – Sarbanes Oxley

The Sarbanes Oxley Act recommends that corporate CEOs (executivedirectors) attest or affirm to their board of directors at least annually thatevery aspect of the organization is properly managed.

This might be done with a checklist (sample herein by ASAE2), by youraccountant at the time of completing a financial audit or information

return, or by using the Association Self-Audit Process manual.3 The following guides boththe audit committee and CEO in reviewing operations.

A. Review with Outside Auditor

___ The annual financial statements and related footnotes and financial information to be includedin the annual report to members.

___ The scope and general extent of the outside auditor’s annual audit. The committee’s reviewshould include an explanation from the outside auditors of the factors considered by the accountantsin determining the audit scope, including major risk factors.

____ The outside auditors should confirm to the committee that no limitations have been placed onthe scope or nature of their audit procedures.

____ Results of the audit of the financial statements and the related report therein and, if applicable,a report on changes during the year in accounting principles and their application.

____ Significant changes to the audit plan, if any, and any serious disputes or difficulties withmanagement encountered during the audit. Inquire about the cooperation received by the outsideauditors during their audit, including access to all requested records, data, and information.

____ Ask the outside auditors if there have been any disagreements with staff that, if leftunresolved, would have caused them to issue a nonstandard report on the organization’s financialstatements.

____ Receive written communication from the outside auditors concerning their judgmentabout the quality of the staff’s accounting principles, and confirm that they concur withmanagement’s representation concerning audit adjustments.

____ Obtain annually from the outside auditors a letter regarding the adequacy of internal controls.

2 American Society of Association Executives; www.asaenet.org.

3 Association Self-Audit Process manual includes 150 questions covering every aspect of information and operations inthe not-for-profit organization. It is available from Bob Harris at www.nonprofitcenter.com or bob@rchcae.com.

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____ Meet with the executive director and the outside auditors to discuss any “material” or“serious” recommendations. The committee should review staff’s responses to the letter ofcomments and recommendations from the independent accountants and receive follow-up reportson action taken to resolve recommendations.

____ Inquire as to the independence of the outside auditors and obtain from the outside auditors (atleast annually) a formal written statement delineating all relationships between the outside auditorsand the organization.

____ Review significant accounting and reporting principles, practices, and procedures used by theorganization in preparing its financial statements.

____ Discuss with the outside auditors their judgments about the quality--not just theacceptability--of the organization’s accounting principles.

____ Private session with outside auditors.

B. Executive Director

____ Review with the audit committee and the outside auditors the methods used to establish andmonitor the organization’s policies with respect to unethical or illegal activities by organizationemployees that may have a material impact on the financial statements.

____ As part of the review of annual financial statements, receive an oral report (at least annually)from the organization’s general counsel regarding legal and regulatory matters that may have amaterial impact on financial statements.

C. Audit Committee

____ Recommend to the board the selection, retention, or termination of the organization’s outsideauditors.

____ Reassess the adequacy of the committee charter and recommend any proposed changes to theboard for approval.

____ Discuss with the outside auditors the quality of the organization’s financial and accountingpersonnel. Also, ask the executive director about the responsiveness of the independent accountantsto the organization’s needs.

____ Subject to the prior approval of the board, arrange for and monitor special investigations, asneeded.

____ Develop a policy and process for grievances associated with organizational financial practices.# # #

Credit: American Society of Association Executives and National Council of NonprofitAssociations with adaptation for use by Bob Harris, CAE. 8-04. Used for teaching purposes andsample only. Contact legal and accounting professionals for counsel.

Affirmation of CEO-Sarbanes 8-04.doc

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Reasons to Conduct an Operations Audit

1. Systems are the foundation for efficiency. The audit encourages development andenhancement of systems to save time and money.

2. It reminds the board what it takes to be a good CEO and staff. Helps directorsknow or recall all the responsibilities of staff and how much time and effortassociation administration requires.

3. Teaches the staff why the systems and information exists. Strengthens the staff sothat all understand the operations and to work as a team in serving the association.An excellent management tool.

4. Improves efficiency by checking to see if a system is in place, or has eroded, andwhat needs to be done to implement or improve the system. (Develop a workbookof “Best Practices” in your association.)

5. Allows benchmarks to be set as certain information is reviewed from year to year;has income decreased? is database growing? were new membership campaignsadded?

6. Reduces risk as documents that may expire (insurance, corporate report) or get lost

(IRS letter of determination, bylaws, articles) are checked. 7. Offers a fresh perspective as various persons review information and apply their

knowledge (or research) to making improvements. 8. Helps to prepare an internal document, or board report, of the strengths and

weaknesses in the association. 9. Improves overall confidence in the organization as people (staff and leadership)

learn why systems are in place and that they are working well. 10. Allows corrective actions to be taken should information be inadequate, lost or

incomplete. Staff can take action to correct shortcomings. 11. Builds a team as staff work together to conduct operations audit.

12. Avoid the costs of litigation, replacing documents, and wasted time.

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Common Omissions and OversightsA Top 10 List of Trouble Spots

1. Missing letter of determination. If you can’t find your original 501(c) letter ofdetermination, write to the IRS to request confirmation of your association’s taxstatus.

2. Insufficient antitrust avoidance programs. Associations are susceptible tocharges of violating antitrust laws through price fixing, restraint of trade, andboycotts. Protect yourself by creating and distributing an antitrust statement,recording evidence of an antitrust avoidance program in your minutes, andproviding an annual orientation to staff and leaders.

3. Confusion over 990 tax return requests. Many associations are startled to learnthat as tax-exempt organizations, upon request they’re required to provide copiesof the three most recent information returns, the exemption letter, and theapproved application with supporting documentation. Be prepared by creating anotebook containing the last three years’ tax returns with a page in front listingwho made the information request and when it was provided.

4. Scarce policies. To avoid having to search through years of minutes to determinethe origination and purpose of policies, develop a policy manual. If you alreadyhave one, update it, including streamlining operations and discarding obsoletepolicies.

5. Deficient financial reports. Distribute these reports monthly and perform outsidefinancial audits regularly. (Record in your minutes when the audit is presented.)Among other things, good reports can help head off such common problems asembezzlement and credit card abuse.

6. Empty operating manuals. Fewer than 10 percent of associations have operatingmanuals that document administrative procedures. Ensure consistent proceduresby developing a centralized manual that collects processes that are scatteredthroughout your office paperwork.

7. Improper sales tax procedures. Many associations ignore sales tax or collect itwithout being registered as a dealer—both of which are illegal. Or they may havea legitimate sales tax exemption but fail to renew it.

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8. Deficient orientation. You need a plan for annual board orientation and aleadership orientation manual.

9. Tedious minutes. The purpose of minutes is to protect your organization—notrecord conversations, rumors, or pending tasks. Make sure your minutes identifythe meeting, participants, start and finish times, and motions that were made,passed, tabled, or died. Give the elected secretary and staff guidelines for takinggood minutes, and ask an attorney to review yours prior to distribution.

10. Missing disclosures and disclaimers. Although many associations neglect it, theIRS requires certain notices to members. These include a statement that dues arenot deductible as a charitable contribution but may be used as a business expenseor notice of the budget percentage that is allocated to lobbying. Such noticesshould be printed on your invoices and membership applications and be availableon your Web site.

Omissions-ASAE2003.doc

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Synchronization: therelation that exists whenthings occur at the sametime.

Synchronization in the OrganizationA Board Tool

There are several key elements in a membership organization. For example, the needs of membersmust interface with the mission, which should align with committees.Other elements include goals, strategies and performance measures, forinstance.

The interaction of the elements requires synchronization.Synchronization is described as the relation that exists when things occur at the same time.

In this graphic, the community of members and stakeholders drives the organization. Thecombination of the mission, vision and values is both the leadership-staff promise and the marketingplatform.

Through strategic planning, goals are set. Resources and budget are influenced by the goals. Allgoals must fit within and support the mission, vision and values.

Strategies are created tocarry out the goals.Strategies should includeperformance measuresand accountability.

Committees and staffadvance the strategicgoals by carrying outprojects and activities.To avoid boardmanagement ofcommittees, recall theadage: committeesrecommend, boardapproves and volunteers-staff fulfill.

Finally, there is ongoingevaluation to be sure thecommunity of membersand stakeholders arebeing served and theelements are insynchronization.

# # #

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Articles of IncorporationBylawsFilings - Local, State, Fed'l.Federal ID NumberIRS NonProfit Application#IRS Letter of Determination#IRS Form 990 Tax Returns#

MandatoryDocuments

Mission, Vision, Value StatementsPersonnel Manual*Operations-Procedures Manual*Policy Manual*Leadership Manual - "Board Book"*Central File SystemSoftware LicensesInsurance CoveragesStrategic PlanChart of Accounts - BudgetAudit, Review or Compilation ReportRecord Retention SchedulePerformance Evaluation - CEO/StaffOrganizational Char(s)Minutes - Safeguarded (pdf)Antitrust Avoidance StatementAffiliations (Nat'l, Chapters)Endorsements, Affinity ProgramsBoard Pledge/Standards/Conduct

Primary(1) OperatiingDocuments

Style Guide*Treasurer's Guide*Installation SpeechDisaster Mgmt Plan(office & meetings)Staff Job DescriptionsBoard Job Descriptions-ExpectationsBusiness Plan - Program of Work (staff)Succession Plan - CEOCommittee Charges - GoalsCommittee Missions - PurposesSurvey ToolsAnnual ReportMembership Systems--Records, Dues, ID Cards, Applications, etcEmp. Emergency Contact/Passwords

Foundation 501(c)(3)Political Action Committee (PAC)For-Profit Corp.

Chapter Affiliation-Mgmt. DocumentsSponsor Opportunity MenuSubsidiary Agreement Documents

Secondary OperatingDocuments

Operating DocumentsSystems and Manuals

Operating Framework – Business Model

A framework promotes efficiency, systems, policies, risk management and development oftraining manuals. Systems remove uncertainty and discretion – promoting excellence inmember service while minimizing risk. Let systems drive the organization to free-up stafftime to focus on mission, goals, members and stakeholders.

Footnote 1 – Indication of primary and secondary refers to the order in which the documents arelikely to be created; it does not mean that secondary documents are less important than primary ormandatory documents. * Indicates recommended operating manuals. # Indicates public recorddocuments; IRS help-line 877 829 5500.

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Insurance Coverages

General Liability CoverageThis is typically the "core" coverage for a nonprofit. The most common occurrence covered by thepolicy is "slip and fall." Depending on the extent of the general liability coverage purchased,commercial general liability insurance may provide coverage for a wide range of negligent acts,which result in bodily injury, personal injury, advertising injury or property damage to a third party.It does not cover damage to property under your control.

Directors and Officers Liability CoverageThe key distinction with directors and officers liability is that it is intended to cover wrongful actsthat are "intentional" as opposed to "negligent." This is because directors and officers insurance isdesigned to cover actions and decisions of the board of directors. These actions may be in error andwrong, but they are, nonetheless, "intentional" acts. Most other types of insurance do not cover"intentional" acts. Among the items a good directors and officers policy should include is broadcoverage for all types of employment related actions, including wrongful termination, harassment,discrimination, failure to hire, etc. It should also pay defense costs as they are incurred, not on areimbursement basis.

Employee Dishonesty – Fidelity BondThis covers loss resulting directly from one or more fraudulent or dishonest acts committed by anemployee whether acting alone or in collusion with others. Losses due to employee dishonesty aredifferent from other losses making it difficult to determine the amount of insurance to carry. Lossof unrecorded assets could result from the following activities: theft from a cash register; pocketingmoney for which a receipt has not been given; padding of expense accounts; overcharging of feesfor services; and walking off with assets.

Liquor Liability CoverageDepending on the extent of the liquor liability coverage form, this insurance may apply to claimsresulting from selling, serving, or furnishing alcoholic beverages. "Host liquor liability" coverage isprovided in most commercial general liability coverage forms, and some nonprofits buy stand aloneliquor liability coverage when the argument can be made that they are in the business of selling,serving, or furnishing alcoholic beverages. The need for liquor liability coverage is frequentlymisunderstood, and an insurance broker can be of assistance to determine if the coverage is neededor not.

Meeting Cancellation CoverageCovers the loss of revenue or expenses due to a cancellation, curtailment, postponement orabandonment of an event due to civil disturbance, strike, weather or fire, for example. It may covermoving to an alternative location, postponing or abandoning an event. Policy may cover the extraexpense of the normal costs to conduct the event in order to continue the normal operations of theshow or meeting.

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Determine Need for PlanSelect Date - TimeframeSelect Site - RetreatSelect FacilitatorCapacity Analysis*

Select ParticipantsConduct SWOT - SurveyAnalyze Survey ResultsPossible Task Force Appt'd

Before(Pre-Planning)Phase I - 60 Days

Set the Scene - PurposeReport on Input FindingsReview Previous GoalsAffirm Mission StatementAffirm VisionAffirm Core ValuesDiscuss - Set GoalsDevelop StrategiesSet Action Steps

During(On-Site)

Phase II - 1/2 - 2 Days

Circulate DraftAdopt OfficiallyPromote ResultsAppoint Plan ChampionInclude on Agendas

BudgetCommitteesStaff Business-Action PlanMarketing-Membership Plans

Integrate

After(Post-Planning)Phase III - 30 Days

Strategic Planning Process(90 Days Start to Finish)

Strategic Planning Template – 90 Days

Bob Harris, CAE 23

Power of a Consent AgendaConsent Agendas

The consent agenda is a tool used to streamline meeting procedures by collecting routine,non-controversial items into a group whereby all are passed with a single motion and vote. Thismethod has grown in popularity in recent years and there are many variations on the theme to meetspecific needs. In some meetings, the actual items to be placed on each consent agenda are selectedby policy. In others, an agenda committee chooses the consent items.

The presiding officer announces the items on the consent agenda, asks if any item should beremoved, then declares the consent agenda adopted unless there's objection. Commonly, no debateis allowed on the consent agenda or on any item included in it. In some organizations, the motionfor adoption must receive unanimous approval.

Consent items may be read by title only in the body of a single consent agenda resolution.However, any director can have an item removed from the consent agenda for separateconsideration. The remainder of the consent agenda can be voted on, omitting the challenged items.

Association Policy to Use Consent Agendas

The chairman, in consultation with the board of directors, may place items on the consentagenda. By using a consent agenda, the board has consented to the consideration of certain items asa group under one motion. Should a consent agenda be used, an appropriate amount of discussiontime will be allowed to review any item upon request.

Consent items are those which usually do not require discussion or explanation prior toboard action, are non-controversial and/or similar in content, or are those items which have alreadybeen discussed and/or explained and do not require further discussion or explanation. Such agendaitems might include ministerial tasks such as, but not limited to, the approval of the agenda,approval of previous minutes, approval of bills, approval of reports, etc. These items might alsoinclude similar groups of decisions such as, but not limited to, approval of staff contracts, approvalof minutes, finances and reports.

An individual director for consideration may remove items from the consent agenda by atimely request of the chairman. A request is timely if made prior to the vote on the consent agenda.The request does not require a second or a vote by the board. An item removed from the consentagenda will then be discussed and acted on separately immediately following the consideration ofthe consent agenda.

Consent agenda items are approved en masse by one vote of the board. The consent agendaitems shall be separately recorded in the minutes.

Consent Agenda.doc

Bob Harris, CAE 24

Minutes Protect the Organization

The purpose of taking minutes is to protect the organization and the people whoparticipate in the meeting. The minutes are not intended to be a record of discussions,nor serve as a newsletter for the organization. Recent court decisions support this.

In the case, Multimedia Publishing of NC v. Henderson County, the court noted, "thepurpose of minutes is to provide a record of the actions taken by a board and evidencethat the actions were taken according to proper procedures. If no action is taken, nominutes (other than a record that the meeting occurred) are necessary."

In another case, Maready v. City of Winston-Salem, the court wrote, "generally, theminutes should contain mainly a record of what was done at the meeting, not whatwas said by the members. Their purpose is to reflect matters suchas motions made, the movant, points of order, and appeals - not toshow discussion or absence of action." This decision highlightswhat association counsel frequently emphasize when advisingassociation executives regarding minutes - they should be kept asbrief as possible, and should only reflect action taken at the meeting.

These guidelines will help volunteers and staff members take minutes that willprotect the organization.

• Accurate minutes should be kept for all official meetings, including committeeand chapter meetings.

• Minutes should be a record of what was considered and accomplished at ameeting, not a record of conversations, reports and work assignments. Theyshould not include sidebar conversations, if they occur.

• Minutes should indicate the place, date and time of the meeting and the names ofall participants at the meeting, including persons arriving late or leaving early,guests and staff.

• The ultimate legal importance of meeting minutes can be substantial if antitrust,tax, advocacy or other legal issues are raised in litigation or some other context.(In several antitrust cases, recollections by those who attended meetings weredisregarded in the face of the official minutes.) Include a statement in the minutesabout distribution of financial reports and approval or corrections to prior minutes.

Bob Harris, CAE 25

• From time to time, minutes may contain self-serving statements to protect theorganization, for example, “An antitrust avoidance statement was read anddistributed to the board.” This is to the advantage of the organization.

• Drafts of minutes, notes and audio or video recordings should NOT be retained inthe organization’s files once the minutes are approved. The chief elected officerand staff must be sure they are discarded. The organization should have a policyabout who may create audio and video recordings.

• Distribute minutes within a reasonable time following the meeting to those whoattended, those who were supposed to be at the meeting and then safeguard themin the permanent files of the organization. If you distribute minutes electronically,be sure your bylaws and corporate laws permit this.

Consider asking legal counsel to review minutes before they are distributed to becertain no liability is created for the association.

# # # Note: Robert C. Harris, CAE, offers board orientation and strategic planning. Contact him at

bob@RCHCAE.com or 850/570-6000.

MINUTES

Bob Harris, CAE 26

IRS Form 990 Disclosure(Excerpts from IRS Website)

What tax documents are affected by the regulations?

The tax documents are the exempt organization's exemption application and its threemost recently filed annual information returns.

What does the new law require the tax-exempt organization to do?In response to a written or in-person request by an individual at the principal officeof the organization, and if such organization regularly maintains one or more regionalor district offices having three or more employees, at each such regional or districtoffice, a copy of the covered tax documents shall be provided to the requester. If therequest for copies is made in person, therequest will generally be honored on the day ofthe request; if the request is written, then theorganization usually has thirty days to respond.(A request that is faxed, e-mailed or sent byprivate courier is considered a written request.)

The organization may charge reasonablecopying costs and the actual cost of postagebefore providing the copies. The IRS considers$1.00 for the first page and 15 cents forsubsequent pages to be reasonable. The organization must provide timely notice ofthe approximate cost and acceptable form of payment, which must include cash andmoney order (in the case of an in-person request) and certified check, money order,and personal check or credit card, in the case of a written request.

Are tax-exempt organizations required to disclose the names or addresses of itscontributors?

No. The regulations specifically exclude the name and address of any contributor tothe organization from the definition of discloseable documents.

Is there a convenient exception to the requirement to provide copies?A tax-exempt organization does not have to comply with individual requests forcopies if it makes the documents widely available as described in the regulations.This can be done by posting the documents on a readily accessible World Wide Website, either its own or on a database of exempt organization documents maintained byanother organization, provided the documents are posted in a format that meets thecriteria set forth in the regulations. In general, the format must exactly reproduce theimage of the original document and allow an Internet user to access, download, viewand print the posted document without the payment of a fee. One format that

Bob Harris, CAE 27

currently meets the criteria is Portable Document Format (.pdf). An organization thatmakes its documents widely available in this manner, must advise requesters how theforms may be accessed. (Editor’s Note: www.guidestar.com).

If an organization makes it documents "widely available" must it make the documentsavailable for public inspection?

Yes. Making documents widely available satisfies the requirement to provide copiesof the documents. This requirement is separate from the requirement to make thedocuments available for public inspection. There is no exception (similar to thewidely available exception) from the requirement to make documents available forpublic inspection.

What are the penalties for failure to comply with the disclosure requirements, and whomust pay them?

Responsible persons of a tax-exempt organization who fail to provide the documentsas required may be subject to a penalty of $20 per day for as long as the failurecontinues. There is a maximum penalty of $10,000 for each failure to provide a copyof an annual information return. There is no maximum penalty for the failure toprovide a copy of an exemption application.

# # #

If you cannot find your IRS Letter of Determination or Exemption Application:The organization may contact the IRS Customer Account Services at (877) 829-5500 (toll-free number). The call center is open 8:00am to 6:30pm Eastern Time. Or write InternalRevenue Service, TE/GE Division, Customer Service, P.O. Box 2508, Cincinnati, OH45201.Note: For additional information, call your legal and accounting professionals. To find thisinformation on the IRS Website, visit www. IRS.gov. This document is not intended toserve as legal or accounting advice. Excerpted from the IRS Website.

Bob Harris, CAE 28

Audit, Review or Compilation - Financial

Nonprofit organizations should undergo an annual financial review to protect volunteer leaders andstaff. There are three levels of financial audits. The more intense level – an audit – isrecommended annually, although many organizations have saved money by alternating between anaudit and a review from year to year.

The selection of the type of audit and auditors should be made by the board and carefullyreflected in the minutes. It should also be a policy of the organization and not left to thediscretion of incoming board chairs or the CEO.

AUDIT

Examination of an organization’s accounting books and records

by an independent certified public accountant for the purpose of

expressing an AUDIT OPINION. The auditor must follow a

relatively rigid set of guidelines, generally accepted auditing

standards (GAAS), and will examine source documents to

substantiate their legitimacy.

REVIEW

Performing inquiry and analytical procedures that provide the

accountant with a reasonable basis for expressing limited assurance that there are no material

modifications that should be made to the financial statements in order for them to be in conformity

with generally accepted accounting principles (GAAP)

COMPILATION

Information resented in the form of financial statement information that is the representation of

management without undertaking to express any assurance on the statements. It is a cursory review

of an organization’s financial operations.

AUDIT COMMITTEE

A subset of the board of directors, or an appointed body, responsible for dealing with the internal

and external auditors.

Be sure to contact accounting and legal counsel for further input.

An audit may include:• method of

accounting;• internal control;• reports;• investments;• insurance;• compensation;• restricted funds;• inventories; and• tax compliance.

Bob Harris, CAE 29

Financial Audit RFP

We are seeking proposals for the financial statement audits of the ______Association, Inc. and the________Foundation, Inc. for the year ended June 30, 20XX. The financial statements consist ofconsolidated and unconsolidated statements of financial position, statements of activities andchange in net assets, and statements of cash flows.

Proposals are due no later than _______, 20XX. Please direct two copies of the proposal to:[Address]

Association is a not-for-profit national trade association representing companies and individualswho provide ____________. The Foundation is also organized as a nonprofit entity whose purposeis to promote and enhance ____ through charitable programs. Both organizations are exempt fromincome taxes: the association under Section 501 c (6) and the Foundation under Section 501 c (3) ofthe Internal Revenue Code.

A Political Action Committee (PAC) was organized to promote political awareness and support for____ issues. The PAC has been active in the past year.

We are seeking a qualified CPA firm with nonprofit industry expertise to:1. Audit our financial statements for the year end June 30, 2000, with an option on the

subsequent two years.2. Prepare a management letter.3. Prepare all necessary state and federal tax filings, including 990 and 990-T.4. Be available to answer questions and address other issues throughout the year.

The audit conducted should be done in accordance with generally accepted auditing standards andshould include tests of the accounting records and other procedures considered necessary to enablean unqualified opinion that the financial statements are fairly stated, in all material respects, inconformity with generally accepted accounting principles. If an opinion is other that unqualified,we would require a thorough discussion with you in advance of the opinion issuance.

The proposal should include the following information:1. Describe your firm’s nonprofit industry experience/expertise. Also include size of firm,

location of offices, other areas in which the firm specializes, and relevant professionalmemberships and affiliations. Indicate location of office where job will be staffed.

2. Explain your approach to staffing audits and ensuring continuity. Provide informationon the senior professionals who would staff our engagement, including relatedexperience of the primary contact for our audit. Include resumes for all seniorprofessionals.

3. Detail steps of the engagement, noting stages that would involve our personnel.4. Detail areas in which you consider your firm qualified to consult. Association is a

growing organization and may have instances in the future where we will need a CPA’sadvice in a number of different areas.

5. Provide a breakdown of fees on a yearly basis for the audit, tax preparation, andconsulting issues for the year end June 30, 2000, 2001, and 2002. Also provide aschedule of hourly rates for auxiliary services.

Bob Harris, CAE 30

6. List contact information for at least three contacts in organizations similar to our own.Also provide a list of major nonprofit clients.

7. Describe your commitment to quality assurance and provide a copy of your most recentpeer evaluation.

Should you have questions regarding this RFP, please contact _________ to arrange a time todiscuss your questions. The following schedule outlines relevant dates in our schedule for selectingan audit firm:

Proposals due.Proposals will be reviewed and interviews will be scheduled.Interviews of finalistsFinal decision to be made. All firms interviewed will be notified of decision.

EVALUATION PROCESS

Proposals will be evaluated using the following point system:

50 points: Nonprofit Expertise:Percentage of time spent auditing nonprofit clientsRecommendation of current clientsTraining in nonprofit issuesCollective years of experience of service team on nonprofit engagements

25 points: Meets additional needs of organization

25 points: Fees

We appreciate your time in preparing a proposal for the services described above and believe thatthe significant terms of our request have been included herein. We are enclosing a copy of the auditreports, as they were prepared for the year ended ___. Thank you in advance for the opportunity.

Sincerely,

[Name]AUDIT RFP.doc

Bob Harris, CAE 31

Antitrust: Laws designed to preserve the freeenterprise of the open marketplace by making illegalcertain private conspiracies and combinationsformed to minimize competition. Most violations ofantitrust laws in the real estate business involveeither price-fixing (brokers conspiring to set fixedcompensation rates) or allocation of customers ormarkets (brokers agreeing to limit their areas oftrade or dealing to certain areas or properties).

Antitrust Compliance Program

Organizations can minimize their risk of violating antitrust laws with these steps.

1. An antitrust policy statement should be included in the association’s documents, used at boardmeetings and discussed at an annual leadership orientation.

2. At least annually the leadership should receive a copy of the antitrust policy statement; have itsigned and dated. The association and/or the individuals should keep a copy.

3. Leadership orientation should include areview of topics that should not bediscussed at association meetings. Thesetopics may include membership expulsionand denial of services, setting prices,defining territories, boycotting a supplier,setting standards, inventorying andcollecting data, and other issues particularto the trade or profession.

4. Minutes should be drafted so as not to include comments that may lead to antitrust violations;and then reviewed before they are distributed and approved.

5. Publications of the association should be monitored for items that may be perceived or actualantitrust violations. Writers, contributors and staff should be able to recognize items that maytrigger antitrust concerns.

6. Membership standards of acceptance and delivery of services should be consistent. Anydeviation from consistent delivery of services, or expulsion from membership, should beconsidered for antitrust implications.

7. At meetings, agendas should be carefully set and followed to avoid side bar discussions ofpotential antitrust violations.

8. The leadership and staff should be prepared to detach themselves from any discussion or actionsthat may be an antitrust violation.

9. Legal counsel should be involved in reviewing documents such as minutes and codes ofstandards, where antitrust violations could occur.

Antitrust Compliance Program

Bob Harris, CAE 32

Antitrust PolicySample Association Statement

IntroductionThe XYZ Association is a not-for-profit organization. The association is not organized and may notplay any role in the competitive decisions of its members, nor in any way restrict competitionamong members or potential members. Rather it serves as a forum for a free and open discussion ofdiverse opinions without in any way attempting to encourage or sanction any particular businesspractice.

The Association provides a forum for exchange of ideas in a variety of settings including its annualmeeting, educational programs, committee meetings, and Board meetings. The Board of Directorsrecognizes the possibility that the Association and its activities could be viewed by some as anopportunity for anti-competitive conduct. Therefore, this statement supports the policy ofcompetition served by the antitrust laws and to communicate the Association's uncompromisingpolicy to comply strictly in all respects with those laws.

While recognizing the importance of the principle of competition served by the antitrust laws, theAssociation also recognizes the severity of the potential penalties that might be imposed on not onlythe Association but its members as well in the event that certain conduct is found to violate theantitrust laws. Should the Association or its members be involved in any violation of federal/stateantitrust laws, such violation can involve both civil and criminal penalties that may includeimprisonment for up to 3 years as well as fines up to $350,000 for individuals and up to$10,000,000 for the Association plus attorney fees. In addition, damage claims awarded to privateparties in a civil suit are tripled for antitrust violations. Given the severity of such penalties, theBoard intends to take all necessary and proper measures to ensure that violations of the antitrustlaws do not occur.

Policy4

To ensure that the Association and its members comply with antitrust laws, the following principleswill be observed:

• The association or any committee, section, chapter, or activity of the Association shall not beused for the purpose of bringing about or attempting to bring about any understanding oragreement, written or oral, formal or informal, expressed or implied, among two or moremembers or other competitors with regard to prices or terms and conditions of contracts forservices or products. Therefore, discussions and exchanges of information about such topicswill not be permitted at Association meetings or other activities.

• There will be no discussions discouraging or withholding patronage or services from, orencouraging exclusive dealing with any supplier or purchaser or group of suppliers orpurchasers of products or services, any actual or potential competitor or group of actualpotential competitors, or any private or governmental entity.

4 Contact legal counsel to insure you are using an antitrust statement that properly covers the activities and structure ofyour specific organization. This is provided as an example only and was adapted with permission from an association.

Bob Harris, CAE 33

• There will be no discussions about allocating or dividing geographic or service markets orcustomers.

• There will be no discussions about restricting, limiting, prohibiting, or sanctioning advertisingor solicitation that is not false, misleading, deceptive, or directly competitive with Associationproducts or services.

• There will be no discussions about discouraging entry into or competition in any segment of themarketplace.

• There will be no discussions about whether the practices of any member, actual or potentialcompetitor, or other person are unethical or anti-competitive, unless the discussions orcomplaints follow the prescribed due process provisions of the Association's bylaws.

• Certain activities of the Association and its members are deemed protected from antitrust lawsunder the First Amendment right to petition government. The antitrust exemption for theseactivities, referred to as the Noerr-Pennington Doctrine, protects ethical and proper actions ordiscussions by members designed to influence: 1) legislation at the national, state, or local level;2) regulatory or policy-making activities (as opposed to commercial activities) of agovernmental body; or 3) decisions of judicial bodies. However, the exemption does not protectactions designed to cover-up anticompetitive conduct.

• Speakers at committees, educational meetings, or other business meetings of the Associationshall be informed that they must comply with the Association's antitrust policy in thepreparation and the presentation of their remarks. Meetings will follow a written agendaapproved in advance by the Association or its legal counsel.

• Meetings will follow a written agenda. Minutes will be prepared after the meeting to provide aconcise summary of important matters discussed and actions taken or conclusions reached.

At informal discussions at the site of any Association meeting all participants are expected toobserve the same standards of personal conduct as are required of the Association in its compliance.

It is recommended that Association volunteer read, date and retain a copy of this statement for theirpersonal files.

Bob Harris, CAE 34

The Supreme Courtestablished the principleof “apparent authority” inthe 1982 Hydrolevel case.The court said associationvolunteers or staff couldbind an association toantitrust liability based ontheir actions or assertions,even if those assertionsare not authorized by theassociation and do notbenefit the association.

The authority of an agentas it appears to others,regardless of any limit tothe agent's authorityagreed between principaland agent; to bedistinguished from actualauthority. Also known as`ostensible authority'.

Concept of Apparent Authority

Officers and directors of the board have authority to perform necessary duties in themanagement of corporate affairs subject to control by the Board of Directors. Specificpowers are ordinarily granted to the officers through the bylaws or by resolution, describingthe way the corporation is to be operated and managed.Ordinarily, the bylaws will set out the duties of thepresident and other officers. Nevertheless, under certaincircumstances, acts performed by officers may bind acorporation even in the absence of express authority.(This could include actions by committees and chaptersof the organization.)

Actual AuthorityActual authority is the authority a reasonable person inthe officer’s position would ordinarily believe and expectto have been conferred upon him/her by the corporation.Actual authority may be expressly granted to officers inthe bylaws, by resolutions of the Board or by agreementby the Board to similar actions in the past. Associatedwith actual authority is implied authority; the authority todo acts that are necessary and incidental to the exercise of authority expressly granted.

Apparent AuthorityApparent authority is the authority that third parties reasonably believe an officer canexercise even though it may not have been actually granted. It arises where the corporationknowingly permits the officer to exercise an authority or represents, knowingly ornegligently, that the officer has such authority. Acts committed with apparent authority areordinarily binding on the corporation. Apparent authority may arise by virtue of the natureof the office held by the officer- e.g., the president of the corporation would generally havethe power to hire an executive secretary.

Authority of the PresidentThe Board president acts as the corporation’s generalmanager, handling the day-to-day operations of thebusiness. The president and board, through authority ofthe bylaws, delegate management to staff. In almost everystate, the president has the power to bind the corporation.These include transactions that arise in the ‘usual andordinary course of business’- normal operationsconstituting the regular business of the corporation, butnot in extraordinary transactions (e.g., sale of all or mostof the corporate assets, mergers, dissolution, etc.).

Bob Harris, CAE 35

Authority of Executive OfficersIn general, the vice-president acts in the absence of the president, but may be assignedspecial duties and responsibilities. The treasurer is ordinarily responsible for the financialrecords or the corporation and handles corporate funds. The secretary is in charge ofcorporate books and records (minutes, resolutions, etc.) and may be charged with issuingand transferring stock.

Policy on Apparent Authority

This policy statement provides guidance concerning who is authorized to make public statements onbehalf of or as a representative of the association and the manner in which such public statementsshould be handled. It also provides guidance as to the distribution of documents or otherinformation from the association by the board.It shall be the policy of the association any communications on behalf of theassociation shall be official, at the direction of the president, board or staff. Nostatements shall be made, either verbal or written, that conflict with the position orpolicy of the association. Leadership should understand, that by virtue of theirposition, that statements may be perceived by the public as official and on behalf ofthe association. To control official communications, stationary and business cardsshall be for the use of the elected president and staff only. Members of the board,committees or chapters may not use association stationary. Staff will prepare letterssent on behalf of the organization with a copy remaining in the office. Exceptionsmay be made to the policy so long as the purpose of the letter is made known andapproved by the board in advance; if the exception is approved, a copy of theoutgoing letter shall be provided to staff within 24 hours of dissemination, forpermanent file retention.

Note: Consult legal counsel prior to adopting policy. Sample provided for illustrative purposesonly.

APPARENT AUTHROITY.doc

Bob Harris, CAE 36

Endorsed Benefits “Filter”

With the desire to increase non-dues revenue and to offer new programs and services to members,many organizations endorse or recommend programs offered by a third party vendor.

In recent years, organizations have found that scrutiny and liability exist in makingrecommendations. For example, will it impact tax exempt status by receiving payments from afor-profit entity? Will income result in unrelated business income tax? What will the membersthink?

An organization should have both a policy and process in place before undertaking endorsements.Consider adopting an endorsed benefits filter from among these 20 questions.

Does the recommended program or service fit within our mission statement?

How will our vendor members – affiliates, suppliers – feel about an endorsement that competeswith their offerings?

How will the endorsement impact other related entities, such as chapters or a national affiliate?

What economic and intrinsic value will an endorsed program have for our organization? For ourmembers? Will non-members have access to it?

Will it be an exclusive endorsement (just one vendor) or can similar firms seek our endorsementfor the same product or service?

Should we give notice to the membership that we are about to consider a particular endorsement(inviting them to recommend additional firms?)

Should our policy and process for endorsements be made known to our membership?

Is the company being considered already a member of our organization? For how many years?Is membership a requirement for consideration?

What is the image and reputation of the vendor? Can a background check be undertaken?

Will our organization have editorial control over all advertising, marketing, and mailings,including the envelope in which offerings are mailed?

Should the company(s) being considered be required to submit a standardized application so theboard can compare offerings? Should the application for consideration require a submissionfee to determine commitment to the process?

Once endorsed, how do we ensure the vendor does not offer a better program to a competitiveorganization?

Bob Harris, CAE 37

Upon endorsement, who will write up the written agreement? Do we have accounting and legalcounsel ready to review it to minimize risks?

Will the agreement have a clause to hold our organization harmless from any damages? Can werequire the vendor to provide insurance?

How will we ensure the agreement does not make our nonprofit organization appear to be anagent for their for-profit organization? (We should not call it a joint venture or partnership indescribing the program; any income should be for royalties and not for services provided to thefor-profit company.)

What performance standards can we include in an agreement to measure effectiveness andgrowth of the program? What if the endorsed party and their agents do not meet the standards?

Will the agreement terminate after a year, with an opportunity for review and renewal? (Willthe board, committee or staff monitor and review performance?)

If our organization is receiving a royalty or benefit for the endorsement, should that be disclosedto members?

How long should we keep the records used to make a decision on the endorsement? How longis our liability after an endorsement expires?

Can we protect or copyright aspects of the program so that its success can be offered to otherorganizations through our organization?

The 20 questions may help in developing a policy and a process for undertaking endorsements. Besure to include legal and accounting counsel in the process.

# # #

Bob Harris, CAE 38

Record Retention

Contact your accountant and/or attorney for recommended record retentionapplication to your association, taking into consideration local, state and federal lawsas well as your organization’s needs.

Adopt the retention record as a policy so that the board does not have to handleregular questions about what to save and toss.

Description RetentionPeriod

(Partial Listing) # of YearsAdvertising Rates, Slicks, InformationAntitrust Record (Last presented on ____)AwardsBackgrounder/Fact SheetBenefits InformationBoard List/LabelsBylaws/Articles of IncorporationCalendars of EventsCall for PapersCareer InformationChapter InformationCommitteesCon’t. Educ. InformationConventionCorporate DocumentsCredit Bureau ReportElections/NominationsFinancial ReportsFundraisingHotel HistoriesInsuranceIRS - Letter of DeterminationIRS CorrespondenceJob Description

Bob Harris, CAE 39

Usage in Associations

Policy Manual – 80%Personnel – 70%Leader Orientation – 65%Business Affairs – 20%Style Guide – 10%Operations – 5%

Documentation and ManualsSix Operating Manuals

Operating manuals guide the association. Manuals promote consistent member-quality-service andreduce the opportunity for “winging-it” along the way. They have significant value to volunteerleaders, staff, and especially new employees. An executive director without manuals should set agoal to leave a legacy of well-documented operations. Here are six common association manuals.

The Personnel Manual details, formalizes and communicates theorganization's policies regarding its employees. The manual coversitems such as sick leave, vacation time, issuance of office keys,overtime, dress code, sexual harassment, credit cards, and filinghandling complaints. Personnel manuals must reflect state and federallaws and should be prepared by a labor-law specialist and/or attorney.Do NOT incorporate the personnel manual with any other manual.

The Operations Manual is a way of insuring consistent delivery of services, quality control, andstandardized procedures, while reducing risk. It reduces staff discretion and risk. Also known as a“best-practices manual,” it describes what the organization believes is the best way of conductingevery aspect of its operations. It documents literally every activity through bulleted or enumeratedlists. A successful manual reflects the rationale and character of the organization. A new executivedirector, and staff, quickly understands the purpose and value of the established processes. Oneway to create the operations manual is by creating a table of contents of all major responsibilities(guided by job descriptions and the annual calendar). Ask staff members to document theirprocesses in a consistent format (template) for adding to the manual. Within months the operatingmanual will be assembled and serve as the most valued document in the organization.

The Policy Manual describes the purpose and objectives of specific operations, activities, services,governance and staff issues. For instance, a policy developed on e-mail usage or document recordretention. Policies are transcribed from the motions adopted by the board and recorded in theminutes. Unlike a personnel manual, it focuses on the organizationand less on employees. If no policy manual exists, take the last fiveyears of minutes, highlight the motions that read as policies, create atable of contents, add the policies, and then present the manual to theboard for adoption. (Try not to refer to a “Policy and Procedures”manual --- procedures are the result of policy implementation andare more specific or detailed in describing processes.)

The Leadership Orientation Manual is used as a resource andtraining program for volunteers. It is distributed at the annual board orientation. Sections mayinclude history, bylaws, strategic plan, committees, org-structure, responsibilities, staffing andcalendars, for example. The manual is an excellent resource for new staff members. Manyassociations forego a printed leadership binder by placing the contents in a Virtual Board Manualin a protected website location.)

Bob Harris, CAE 40

The Accounting Manual deals specifically with fiscal activities, detailing topics such as check-signing authority, petty cash, reimbursements, and investment policy. It guides the business affairsstaff. Also consider creating a shorter Treasurer’s Guideexplaining fiscal policies and naming the accountant, banker,insurance agent, investor, attorney, etc.

The Style Guide brands and positions the organization byindicating the proper use of the association name, logo, colors, tag-lines, acronyms and key words indigenous to the association.Usually six to ten pages. Also good to share with printer, graphic artist and new staff.

Note: Bob Harris, CAE, conducts strategic planning, board orientation and staff training. Freeassociation resources available at nonprofitcenter.com. Contact him at bob@rchcae.com or850/750-6000. He is author of the Association Self-Auditng Manual to inventory operations,improve performance and reduce risk.

Six Operating Manuals - 2003.doc

Bob Harris, CAE 41

Disaster Survival Notebook

It makes all of us uncomfortable knowing that many of our Gulf Coast association colleagues haveexperienced flooding or destroyed offices. Rita and Katrina prove a point --- disasters occur everyday. Whether it is a flood, fire, earthquake, tornado, broken water pipe, ordeath, there is a way to minimize the delay in restoring operations.

The Red Notebook on the Shelf

Create a single notebook that houses the critical documents for yourorganization. Teach staff to grab the notebook when a disaster appearsimminent. Keep copies of the same notebook at the executive director’shome and a copy with the CPA.

By protecting the key operating documents, such as the IRS Letter of Determination, bylaws, andfinancial statement, it will be possible to relocate and rely on those documents to get up andrunning. Without them, you will spend months trying to restore and replace them.

The notebook contains copies of critical documents:

• Articles of Incorporation• Bylaws• Sales Tax License and/or Exemption• Current Rosters of Board and Staff• Policy Manual• Insurance Policies• IRS Information Returns for 3 Years (Form 990)*• IRS Letter of Determination• IRS Application for Exemption (Form 1023 or 1024)• Current Budget and Financial Statement• Back Up Disc to Computers or List of Members• Software License Copies• List of Passwords - optional

* The notebook can double as the source for staff responding to public record requests.

# # #

Bob Harris, CAE 42

Create a Leadership Orientation ManualWhat to Include in Your Organization’ “Board Book”

A leadership manual should be designed as a training tool and used as a resource throughoutthe year. It should be presented to the board of directors soon after the election andinstallation. It has the best impact when it is presented concurrently with a leadership-training seminar. In many associations, it is passed on from director to director with notesincluded from the previous year.

General Information• History, Fact Sheet or Profile of the Association.• Mission Statement.• Articles of Incorporation (corporate charter)• Bylaws• Strategic or Operational Plan• Organizational Charts• Biography of Staff Members, Executive Director• Annual Calendar of Activities, Meetings, Deadlines

Board Information• Roster of Board Names, Phones, Addresses, Preferred Contact, etc.• Description of Board Member Responsibilities• Committee Descriptions• Description of Applicable Insurance

Finances and Fundraising• Annual Budget• Current Financial Statement• Most Recent Audit Report

Other Information• Membership Brochure• Annual Report• Selected Press releases and Articles• Promotional Materials (brochures, newsletters, etc.)• Resource Sheet (key contacts - regulators, CPA, Counsel, allied organizations, etc.)• Recent Board and Committee Minutes• Board Member Information Forms

Bob Harris, CAE 43

Code of Conduct – Board - Sample

Introduction

Members of the board of directors and staff carry certain duties and responsibilities for the wellbeing of the organization. The Code of Conduct outlines some of those duties and responsibilitiesin accordance with governing documents5.

Confidentiality

Board members and staff will have access to information, that if revealed to outsiders, couldbe damaging or sensitive to other members or staff, harmful to the best interests of theorganization, or even create legal liability. Information provided to the board and staff mayconcern personnel, financial, contractual, membership or legal matters. It will often beconfidential and is intended for use in decision making and governance. Information shallbe held in the strictest of confidence and shall not be divulged to any outside party,including other members, without authorization of the board chair or organization executivedirector.

Conflicts of Interest

Board members and staff members owe a high fiduciary duty to the organization. Thus, noboard or staff member shall maintain any business enterprise or other activity that directlyconflicts with the interests of the organization. Staff members shall not solicit members forany reason that is not directly related to official business.

Violations

Violations of the Code of Conduct may result in disciplinary action in accordance with thegoverning documents. Discipline may include removal of a board member from office ortermination of a staff member.

Acknowledgement of Receipt

I acknowledge that I have received and read a copy of the Code of Conduct and that I amresponsible for compliance.

___________________________ ___________________Signature Date

Code of Conduct Sample.doc

5 Governing documents include articles of incorporation, bylaws, policy manual, etc. Please address questions to theorganization’s board chair and/or executive director.

Bob Harris, CAE 44

Principles of a Strategic Board1. Clear mission6, vision and values statements guide leaders and staff.

2. The strategic plan is the driving force for agendas, board discussions and thefocus of successive leaders.

3. The goals and strategies are translated into a more precise (tactical) business oraction plan by staff.

4. Performance measures are the basis for gauging progress.

5. The chief elected officer charges committees with work from the plan. Committeeshave access to the board through a director or staff liaison if they are chaired byother than board members. The board of directors does not do committee work atthe board table.

6. When non-strategic discussions arise, a member of the board or staff isempowered to query the relevance of the discussion.

7. Board members remain responsible to each other – taking pride in their follow-through andachievements while serving in the leadership role.

8. The strategic plan is revisited annually, and updated every three to five years.Strategic Governance Principles 9-05.doc

6 Statement of purpose.

Bob Harris, CAE 45

Procedures Manual Table of Contents – Sample

Contents Page #

ADVERTISINGANNUAL CALENDARSANNUAL MEETING PROCEDURES

EXHIBITOR PROSPECTUSHOTEL CONTRACTSHOTEL RFP FORMSMARKETING TIMELINESMASTER MEETING GUIDEBOOKSMEETING PACKING CHECKLISTPROGRAMSREGISTRATION BROCHURE

ANNUAL REPORTSANTITRUSTARTICLE SUBMISSION INFORMATION FOR AUTHORSASSOCIATION “ANNUAL CHECK-UP” PROCEDURESAWARDSBOARD MEETING PROCEDURESBROADCAST FAX DIRECTORIESBUDGETING CONTRACTED STAFF TIMEBUDGET PROCEDURESBYLAWS/ARTICLES OF INCORPORATIONCLIENT CONTRACTSCOMMITTEESCOMMUNICATIONS PROCEDURESCONSULTANT CONTRACTSCONTINUING EDUCATION SEARCH FORMCORRESPONDENCEDATABASE PROCEDURES/DATABASE FIELDS TEMPLATEDUTIES OF OFFICERSELECTIONSFACSIMILE COVER SHEETSFILING AND STORAGE SYSTEMFINANCIAL STATEMENTSGUIDELINES FOR SPONSORSHIP OF PROGRAMSINSTALLATION SCRIPT FOR NEW BOARDSINSURANCEINVESTMENT POLICYISSUE POSITION STATEMENTSJOB PLACEMENT/CAREERS SERVICEKEY CONTACT PROGRAMSKEY WORD SEARCHESLAWS, RULES AND INFORMATION HANDBOOKS (REIMBURSEMENT PROCEDURES,STATEMENTS FROM MEDICAID, MEDICARE, ETC.)

Bob Harris, CAE 46

LEGISLATIVE DAY PROGRAMSLEGISLATIVE INFLUENCE PROGRAMLIAISON ACTIVITIES (LOCAL, STATE AND FEDERAL)MAILING LISTS AND LABELSMEMBERSHIP APPLICATIONSMEMBERSHIP BENEFITS PROGRAMSMEMBER CONTACT FORMMEMBERSHIP DIRECTORIESMEMBERSHIP RETENTION PROCEDURESMEMBERSHIP SURVEYSMINUTESNEW MEMBER PACKETSNEWSLETTERSPOLICIES AND/OR PROCEDURES MANUALSPAC/GRASSROOTS FUND RAISING PROCEDURESPERFORMANCE EVALUATIONS (EMPLOYEES AND MANAGEMENT)PRESS RELEASESPROGRESS REPORTS/ACTION MEMOSPUBLIC SHELVINGREIMBURSEMENT POLICYSOURCES OF NON-DUES REVENUESPECIAL SERVICESSTANDARDS OF OPERATIONSTRATEGIC PLANNING SYSTEM/TEMPLATESTABLE TENT NAME CARDSTIMESLIPS GUIDELINES AND TIPSTRAINING PROGRAMS

STRATEGIC PLANNING PROGRAMBOARD LEADERSHIP TRAINING PROGRAMMEMBERSHIP SERVICE TRAINING PROGRAMMEMBERSHIP RECRUITMENT/RETENTION TRAINING PROGRAM“TOTAL QUALITY SYSTEMS” TRAINING PROGRAM

TRANSITION PROCEDURESUNIFORM CHART OF ACCOUNTSUSE OF LOGO TO PROMOTE ASSOCIATION AND QUALITYVALUATION FORM FOR PRICING MANAGEMENT SERVICESWORLD WIDE WEB SITE CONSIDERATIONS

OperationsManual Table of Contents.doc

Bob Harris, CAE 47

Staff DrivenPolicy

Boardreviews andapprovespolicies fororganization.

Policiesrecorded asmotions inthe minutes.

Transcribe policiesinto manual.

Update policymanual after eachboard meeting orannually.

Review or sunsetold policies.

Developadministrativeprocedures tosupport newpolicies.

Record proceduresin an operationsmanual.

Board DrivenPolicy Policy Manual

Operations Manual

Policy or Procedure?

You often hear the phrase “policies and procedures.” The similar terms confuse volunteersand staff. Consider their source, purpose and retention of each to understand theirdifferences.

Formulating Policies

Policies are developed by the board and recorded in the minutes. Examples include policies oncheck signing, reserve funds, investments, diversity, document retention, and endorsements.

Though board driven, sometimes a CEO sees a need for a policy and drafts it for review, adoptionand inclusion in the minutes. For example, the CEO may suggest an investment policy based oncareful research.

Policies are catalogued in a Policy Manual. For an effective manual, add a table of contents (i.e.finances, education, governance, and meetings) and the date each policy was adopted or amended.Without a manual, one has to search years of minutes to find a policy somebody thinks wasadopted. A policy manual should be used in board orientation.

Differentiating Procedures

Procedures are administrative, a way todocument staff responsibilities --- they haveminimal interest to the board. For example,the steps for processing a new member aremanaged by staff and should be documented tobe consistent and effective.

Procedures may be a result of policies. A boardpolicy on the chairman’s use of a corporate creditcard will create procedures for submitting receiptson forms and reimbursement timeframes.

Use an Operations Manual to store procedures. All staff should document responsibilities. If nomanual exists, have the staff create an outline or table of contents of the responsibilities needingdocumentation (and assign deadlines.) The manual will serve to train staff, reduce interruptions,minimize risks, and promote consistent member service. An operations manual is the foundation ofstaff orientation.

Volunteers and staff will recognize the difference in polices and procedures applicable to governingand managing, when the terms are used separately.

Bob Harris, CAE 48

Categories• Awards & Scholarships• Board of Directors• Bylaws• Calendar• Chapters• Committees• Education• Finances• Government Affairs• Meetings &

Conventions• Membership• Publications• Reimbursements

Creating a Policy Manual

Creating an association policy manual does not have to be an overwhelming task for thestaff. If no record of policies exists, try this method for creating the manual.

Determine the major categories in which to segment your policies. Categories mightinclude finances, board of directors, meetings, membership, etc. Refer to the more inclusivelisting below.

Make copies of the meeting minutes for the past five years and bind them. Find a volunteer(often a retired past officer with good recall, or the current elected secretary) who is willingto read or scan the minutes.

They should look for motions that translate into anassociation policy. For instance, “A motion was passedto distribute the financial reports on a monthly basis,”would be a policy. A motion referring to the site of thenext annual meeting, for example, would not translateinto a policy.

Use a highlighter and a pen. Highlight every motion thatreads as a policy. In the margin, indicate what categorythe policy fits within.

Give the binder of minutes to a typist and explain thatonly the highlighted phrases are to be typed, and thenorganized (cut and paste) by the categories indicated inthe margins. Have the document returned for finalediting by the association CEO or executive officers, rephrasing policies that are unclear,eliminating outdated or redundant policies.

Bob Harris, CAE 49

Common Association Policies

E-Mail - Internet PolicyInternet UsageE-MailDownloading Software

Apparent AuthorityCredit Card UsageInvestment PolicyFinancial AuditRecord RetentionLegal AuditDistribution of Meeting MinutesCEO Performance EvaluationConsent AgendaStrategic Processes

Long Range PlanStrategic GovernanceLogo UsageAntitrust AvoidanceLiquor Liability – HospitalitySuites

Hospitality SuitesSexual HarassmentFinancial ReserveInsurance Coverages

General Liability InsuranceDirectors and Officers

Liability (D & O)

Fiduciary BondConvention Cancellation

InsuranceEndorsements and AffinityProgramsCommittees

Strategic GoalsCommittee LiaisonsAuthorityCommittee Original Works

Travel ProtocolStaff TravelNotification of Travel

Diversity - InclusivityListservs and Bulletin BoardsBoard Member OrientationConfidentiality

Copyright©Code of ConductPrivacy and Refunds

Member InformationRefund Policy

Whistleblower ClauseExecutive Sessions

Bob Harris, CAE 50

AppendixReading and Resources

Why Association Directors Get Sued (Single copies free.)Hugh Webster @ Webster, Chamberlain, Bean – Ste. 10001747 Pennsylvania AvenueWashington, DC 20006

The A-B-C’s of Parliamentary ProcedureChanning L. Bete Co., Inc. - www.channing-bete.com800/628-7733

The Perfect BoardCal Clemons, CAE, CMP – www.clemonsmgmt.com

Policies & Procedures in Association Management – A Benchmarking Guide(three volume set)American Society of Association Executives - www.asaenet.org

Model Accounting and Financial Procedures Handbook for Not-for ProfitOrganizationsBy Ed McMillan, CPA - www.asaenet.org

Board Responsibilities – Laminated Color Tip Sheetwww.nonprofitcenter.com -bob@rchcae.com

Operating Ratio Report for Associationswww.asaenet.org

“The Association Self-Audit Manual”“How to be the Association /Chamber CEO”“Building an Association Management Company”“How to Write a Policy Manual”www.nonprofitcenter.combob@rchcae.com

Guidebook for Directors of Nonprofit CorporationsCommittee on Nonprofit Corporations – American Bar Associationhttp://www.mwe.com/index.cfm/fuseaction/media.prdetail/object_id/5947D474-84B0-4CA8-9DC6-81872BB79FA3

READINGThe E-Myth Revisited by Michael GerberBowling Alone by Robert PutnamGood to Great by Jim CollinsGiuliani on Leadership by Rudy Giuliani

Bob Harris, CAE 51

About Bob Harris

There are 1.4 million nonprofit organizations in the US – includingassociations, chambers and foundations. Bob has studied thousands ofthem to develop best practices for more effective management.

His career started in Washington, DC, working with PresidentialClassroom and then he moved to Tallahassee, Florida to build anassociation management company. He is author of Building an Assoc.Mgmt. Company and other books.

He teaches association management for Tallahassee Community Collegeand is on the faculty for the US Chamber of Commerce.

He developed a framework for evaluating nonprofit organizations andconducts operating reviews for ASAE. The Association Self-AuditingProcess® has been used by 10,000 organizations.

He has received the awards of lifetime achievement, ASAE’s All-StarAward, and both the executive and the supplier of the year. He hasworked for Hyatt Hotels of Florida for 20+ years.

Because of his commitment to sharing tips and templates, he’s beendubbed the Martha Stewart of association management.

His free website has hundreds of pages of management tips and templates.

Bob’s career passions are demonstrated in two ideals:

• Promoting the impact of nonprofit organizations in America.• Sharing the tools for helping and boards excel.

Bob Harris, CAE - Bio 2003.doc

Bob@rchcae.comDesk: 850/561-1234Cell: 850/570-6000