Corporate Status
A non-profit organization may be an un-incorporated association of members or it may be incorpoarted under a provincial or federal statue.
Example The Kenora Association for Community Living is incorpoarted under The Ontario Corpoartions Act. The objects for which the organization was incorporateted and for whcich it may be operated are found in a document called the letters patent. These letters patents also set out its name By laws are enacted for the carrying of its business and other purposes specified in the Corporations act.
Registered charity status with the Canada Revenue Agency and the federal government?
A non profit organization may be registered as a charity with the Canada Revenue Agency (CRA) of the federal government. This will give it the capacity to issued tax receipts for charitable deductions as well as exempt it from paying most taxes. They are required to submit annual reports related to their charitable revenues and expenditures.
Governance structures are frameworks within which the work of the Board is carried out. The business affairs of an incorporated organization is invested in its Board of Directors, which is elected by its members.
The governance policies of the Kenora Association for the Kenora Association are found in Board Process Policy Analysis Paper
and Board Executive Relationship Policy Paper.Clear definitions of responsibilities, authorities and accountabilities of governance of the Kenora Association of Community Living are set out in these bylaws and governance policies and procedures.
The preferred governance structure of an agency will depend to a large degree on the size of the Board and the nature, complexity, culture and size of the agency and may not match any of the theoretical models described exactly but may use a mix, based on the benefits of each.
A Board's governance structure should:
A Policy Governing Board (adopted by the Kenora Association for Community Living):
- sets policy that determines the long-term direction for the agency;
- makes decisions that set broad guidelines for the agency; and
- hires senior staff, e.g., an Executive Director, to implement policies and manage day-to-day operations.
An Administrative Governing or "Working" Board(May be appropriate for small and simple, non-unionized organizations):
- sets policy that determines the long-term direction of the agency; - is concerned with the detailed operational aspects of programs within the agency;
- appoints a committee of the Board to implement policies and manage day to day operations; and
- may hire administrative or program staff to support operations.
Governance Policies:
- are established to set a broad framework for actions and decisions;
- are designed to direct the agency's operational areas such as finances, human resources, administration, and programs;
- should be clear, concise, and consistent with each other as well as with the agency's by-laws, mission and vision; and
- should be written and adhered to.
Further Reference
Carver, John, Boards that Make a Difference, 2nd edition, Jossey-Bass Non-Profit Series, Jossey-Bass Inc., Publishers, 1997.
United Way of Canada website. About Governance Policies and Procedures
Board composition is unique to each agency. This may be determined by:
- the kind of agency you have, e.g., size, structure, nature of programs and services;
- identification of the specific skills, expertise and the strengths needed on the Board to govern the agency and guide progress on the agency's strategic goals and priorities; and
- agreement on the scope of the Board's tasks and responsibilities and how many people it will take to get the work done. When recruiting prospective Board Members, qualifications to consider may include:
- skills, such as financial, legal, human resource, public relations;
- personal and/or professional experience, such as direct involvement with related services, previous non-profit board experience;
- personal qualities and interpersonal skills, such as judgement, integrity, communication, team work, leadership; and
- commitment, such as ability to dedicate time and/or devote resources such as personal connections, financial support. The overall balance of skills, experiences, personal qualities for the Board as a whole is as important as the abilities of each individual member. The key to a well balanced, functioning Board is to:
- focus on the contribution that the individual can make, as a member of the Board, toward the achievement of the mission; and
- have respect for the contributions of all members.
- Once elected, a Board of Directors assumes responsibility for the affairs of the agency. It may consider doing the following:
- consult with your staff, funders and legal counsel to determine what legislation and policies are applicable and to clarify contractual obligations;
- know what is going on in your organization and take action when necessary; use reasonable skill and care in making decisions; be honest and work in the agency's best interests; be faithful to the agency's mission.
Some steps a Board of Directors may take to minimize risk:
- establish and follow effective governance and accountability policies and procedures for the agency;
- determine the agency's insurance needs by consulting with an insurance agent who is well versed in non-profit Board liability matters to explain general liability, professional liability, workers' compensation, asset protection and directors' and officers' insurance; and
- educate or inform themselves, and seek professional or specialized advice as necessary, on all matters requiring Board action.
Further Refererences
Knowing your responsibilities and obligations
Abbey-Livingston, Diane and Wiele, Bob, Working with Volunteer Boards. Ministry of Citizenship and Culture: Queen’s Printer for Ontario, Toronto, Ontario, 1983.
Board Match, Altruvest Charitable Services website.www.boardmatch.org
Canadian Centre for Philanthropy website. www.nonprofitscan.ca
Draper, Nancy, Strengthening Leadership: Governance. Family Space Quinte Inc., Belleville, Ontario, 1997.
Gahlinger-Beaune, Rosemary, Good Work, An Operations Manual for Canadian Not-for Profit, Toronto:McGraw Hill Ryerson
Ingram, Richard, Ten Basic Responsibilities of Non Profit Boards. National Center for Non Profit Boards, Washington, D.C., 1995. www.ncnb.org 5. Millard, James A., The Responsible Director. Toronto, Ontario. 1989.
Robinson, Maureen K., Developing the Non Profit Board. National Center for Non Profit Boards, Washington, D.C., 1994. National Center for Non Profit Boards
Gill, Mel, The Governance Effectiveness “Quick Check”. Institute On Governance website, 2000.
The duty to declare conflicts of interest rests with the Board Member.
- relate broadly to ethical behaviour, which includes every aspect of governance; and
- may adversely affect judgement and lead to decisions that may be flawed and open to challenge. The perception of conflict:
- can be just as damaging as a direct or indirect conflict; and
- may not be improper, however, is vulnerable to legal challenges and public misunderstanding. In addition to the risk of potential legal action against the Board of Directors, loss of public confidence and a damaged reputation are the most likely results of a poorly managed conflict of interest policy. Some steps a Board may take to avoid even the appearance of impropriety may include:
- adopting a conflict-of-interest policy that prohibits or limits business transactions with Board Members and requires Board Members to disclose potential conflicts;
- disclosing conflicts when they occur so that Board Members who vote on a decision are aware that another member's interests are being affected;
- requiring Board Members to withdraw from decisions that present a potential conflict;
- establishing procedures, such as competitive bids, so that the organization is receiving fair value in a transaction;
- establishing protocols to provide guidance to Board Members in terms of the steps to be followed in the event that the potential for conflict of interest arises; and
- setting out expectations concerning confidentiality and conduct of Board Members before, during and after meetings.
Further Reference
Canadian Institute of Chartered Accountants, Control and Governance Series. - Guidance on Control (1995) - Guidance for Director – Governance Processes for Control (1995) - Guidance on Assessing Control (1999)An effective meeting often has at least five components: - an effective chairperson;
- an agenda;
- a process for making decisions;
- a well-managed discussion; and
- a productive physical set-up.
The Chairperson’s job is to:
- keep the meeting discussions focussed on the agenda;
- facilitate debate;
- encourage thoughtful participation and contribution from all members;
- resolve conflicts; and - get results from the meeting.
A good agenda meets four requirements: - (all agenda items relate to the mandate of the Board so that the Board is not spending time on items more appropriate for staff, committees or volunteers;
- most items focus on action or decision;
- the purpose of each item is clearly indicated on the agenda; and
- a realistic time frame is set for each agenda item.
An agreed upon meeting format and guidelines assist the Board Chair and contribute to productive meetings:Parliamentary procedure is intended to protects the right of the majority to decide and the minority to be heard, the rights of individual members to be heard and protects the rights of absentees; and - although a consistent process will assist in getting work done, care should be taken to avoid spending more energy on process than the results. Keeping minutes of Board and Annual Meetings is part of the required record keeping for non-profit corporations and assists the Board with governance and accountability. Some keys to keeping good minutes are:
- clearly state decisions using the wording approved by the Board;
- include sufficient information to describe how Board Members
reasonably came to reasonable decisions; and - have all Board Members review the minutes to make sure that they understand and agree with what took place during a meeting and that the minutes accurately reflect the actions of the Board.Board Sub-committees are used by some Boards to help get their work done. Effective sub-committees:
- facilitate the Board’s decision-making by considering in depth the issues referred to them and making recommendations to the Board;
- may provide Board Members, staff, volunteers and general members with an opportunity to contribute particular expertise and gain a more detailed understanding of areas of the agency’s responsibility; and - have the potential to be a recruiting and training ground for future Board membership.
An Annual General Meeting (AGM) is a requirement for non-profit corporations, in addition to regular Board of Director’s meetings. The following business is conducted:
- approval of the minutes of the preceding AGM;
- nominations and elections to the Board of Directors;
- presentation and approval of the audited annual financial statements;
- appointment of the auditor to hold office until the next AGM;
- approval of any changes to the Letters Patent or by-laws as recommended by the Board of Directors;
- approval of a resolution ratifying all the decisions and actions taken by the Board in the past year;
- the Board President or staff may give reports about the achievements of the past year; and
- at the conclusion of the formal business meeting, the agency may also choose to hold educational, social or recognition activities.
Take warning signs seriously. These problems won’t go away unless something is done about them. They will make it impossible for the Board to carry out its responsibilities and inevitably will lead to more serious organizational difficulties . Based on Mel Gill’s research on Effective Board Governance and some practical experiences of community agencies funded by the ministries, warning signs may include, but are not restricted to, such things as the following:
- too much or too little turnover of Board Members, the Executive Director and/or senior management staff;
- ongoing/unresolved complaints or concerns raised by Board or staff members about the functioning of the organization;
- chronic problems with finances and/or meeting service targets;
- poorly managed and/or poorly attended Board meetings;
- unresolved conflicts among Board Members or between the Board and the Executive Director;
- low level of participation by Board Members in discussions, “rubber stamping’ of Executive Director recommendations; and/or not enough information available for the Board to make decisions; and
- inability to make decisions, or Board Members and/or the Executive Director not following Board policies or decisions.
-defines the agency’s basic purpose – its reason for being;
-directly links and must be consistent with the objects described in the agency’s Letters Patent and Bylaws; -describes precisely in one or two sentences what the agency does and for whom; and -guides basic decision for governing and managing the agency.Kenora Association for Community Living Mission Statement
A broadly defined but enduring statement of purpose that distinguishes an organization from others of its type and identifies the scope of its operations in terms of clients and services. It should embody its members' philosophy, reveal the image it wishes the association to seek reflects the association's self-concept and indicates its primary client's needs that the association will attempt to satisfy.
The goal of KACL is to ensure that all people with special needs have the opportunity to live a meaningful and satisfying lifestyle and interact as an equal in their community by providing continuing opportunities for personal growth through education, training, support, advocacy and an informed public.
Kacl arrived at their mission statement by asking 3 questions:
Who do we serve?
What do we want to achieve or do for the who?
How?
The Ontario Non-Profit Housing Association suggests,
"When writing a mission statement for the first time, start by asking yourselves a few key questions:
-Who are we? Who does the Board represent now? Are there other stakeholders who should be represented?
-What are our values? How do these values apply to you? What other values should be incorporated?
-What are the basic needs we want to address? Whom do we want to serve? Will our definition of this group comply with the Human Rights Code?
How do we want to address these needs?
-What makes us unique?"An agency’s vision statement:
-describes what the organization would like to be;
-is developed through the strategic or long-range planning process;
-should challenge an agency to maximize its potential; and
-be the motivating force behind future activity.
Explicitly stating the values of an agency:
-provides a foundation for organizational behaviour and culture; and -tells everyone what you believe in and how they should expect to be treated.Values should be apparent in all activities throughout the agency:
-policies and practices should be consistent with the stated values; and
-values cannot be qualified, i.e. used in some circumstances but not others.
An accepted or professed rule of action or conduct concerning the delivery of service. A clearly defined and coherent philosophy of service should include its theoretical orientation, its goals, and its model and methods of service delivery. Service delivery principles help staff to know what is expected of them. It provides a focus for the activities of the association. It provides principles of accountability.
Strategic/long-range planning is:
-an activity that is guided by the Board of Directors to determine the future vision and how the agency will achieve its strategic goals; and
-"a process that builds commitment from its key stakeholders to a particular direction that will guide the future allocation of the agency’s resources."
Because all agencies are unique, an individual agency’s approach to strategic planning should be tailored to specific circumstances. There are a number of key components commonly found in strategic planning processes, including:
- identifying and involving stakeholders i.e., any persons or groups who will be directly or indirectly affected and/or will influence the agency’s overall direction;
- reviewing and renewing the commitment to the mission and values;
- assessing the agency’s current capacity to fulfil its mission e.g., using a SWOT (strengths, weaknesses, opportunities and threats) analysis;
- identifying priorities for the future and developing a vision;
- developing strategic directions; and
- developing a strategic plan that utilizes the agency’s strengths and improves capacity in areas of weakness and will lead the agency in practical ways towards the achievement of the vision.
Kacl Strategic/Long-Term Planning is carried on through its long-term goals, its Policy Analysis papers and various Strategy Planning Retreats which have been carried every 5 or 10 years
- is expected to monitor the functioning of the agency to determine if it is operating in an appropriate manner and proceeding within the directions that the Board has determined through policy;
- needs sufficient information about the agency, its services, legal and funding requirements to ask the “right questions”; and
- needs the support of structure and processes to effectively carry out this monitoring function.
Monitoring is usually carried out in relation to:
- board-approved policies and processes:
- legal and funding requirements;
- approved annual budgets;
- the terms of contracts and agreements; and
- the agency’s strategic/long-range plan.
Accountability for results will be enhanced if the agency’s short and long-range plans, contracts or agreements:
- identify expected outcomes;
- define the manner in which achievement of outcomes will be measured; and
- described the mechanisms and processes by which the data or information needed will be collected and reported on.
In agencies where an Executive Director is delegated to manage the day-to-day operations, it is important to the Board in its monitoring function, that:
- accountability relationships and processes are established between and Executive Director and the Board;
- clearly defined roles and responsibilities are in place for both the Board and Executive Director; and
- there are clear, agreed upon expectations about outcomes and performance indicators for the agency and the Executive Director’s work.
The Board is responsible for the decisions made relating to finances. Each individual Board Member should understand the financial information that is being presented to the Board.
Tools available for a Board to use include:
"The budget has two functions:
- planning: the budget documents, in monetary terms, the goals and objectives of the agency for a period of time (usually one year); and
- monitoring: the budget serves as a guide to track the agency’s progress on the achievement of goals."
Incorporated organizations are required to maintain financial records. This is also a requirement included in the legal contract between MCYS/MCSS and community agencies receiving funds. These records are the basis for the monthly, quarterly and annual financial statements and are subject to financial audit.
Charitable organizations are required to keep records of their donations and tax receipts issues.
Financial controls are the checks and balances that prevent fraud, detect errors and ensure the timely and accurate reporting of financial information. Examples of financial controls are: requiring more than one signature on cheques, regular review of the bank reconciliation statements, establishing policies for the management of petty cash, etc.
An audit is an independent study of the agency’s accounting records and systems to determine if its financial statements are fair and reliable. The auditor may suggest improvements to the financial systems to support adherence to accounting principles, compliance with the contracts and agreements, and to assist the Board of Directors with their monitoring functions.
-property insurance and fire alarm systems;
-schedules and plans for equipment inspections, repairs and replacements;
-schedules and plans for building or property repairs, maintenance and improvements; and
-inventory control.
Board Members should be aware of and comply with any legislative or contractual terms or requirements related to the upkeep, use or disposal of property and/or equipment purchased with MCYS/MCSS or other provincial government funds.
The Board may provide direction to the agency concerning the agency’s responsibility for human resources, such as;
complying with human resource legislation, (e.g. Employment Standards Act. Occupational Health and Safety Act, Pay Equity Act, etc.); and
-determining that personnel policies and management practices, which contribute to a positive working environment, and attract and retain qualified staff and volunteers are in place.
Further Resources
Government of Ontario E-laws website
This site contains links to all provincial government Statutes and Regulations. This is an excellent reference to check for both existing legislation as well as bills that are before the House that may have implications for a non-profit agency.Ministry of Labour website This site contains information about:Employment Standards, Labour Relations and Occupational Health and Safety. This site describes and provides guides to the legislation (Employment Standards Act, Labour Relations Act and Occupational Health and Safety Act), links to publications, fact sheets and resources on an extensive range of related topics helpful to anyone working, managing and/or governing an organization.
Pay Equity Commission website The Pay Equity Commission website provides information describing the functions of the Pay Equity Office (PEO) and Pay Equity Hearings Tribunal (PEHT). The PEO site provides information on publications and seminars about pay equity. The PEHT site provides information about the Pay Equity Act, Forms and rules, decisions and information bulletins related to the Tribunal.
a href="www.gov.on.ca/mbs/english/publications">Publications Ontario, Ministry of Consumer and Business Services website
The Board of Directors should account for the agency’s products and services and expenditure of
its funds. The Board’s accountability responsibilities may extend to all those with an
interest in the organization, including: -all relevant government bodies (municipal, provincial and federal); -donors and charitable funding organizations; and -the community, including participants/recipients of service, their families, stakeholders
and general members. It is a complex undertaking for agency Boards to effectively and diligently meet the multiple and, what are sometimes viewed as competing,
accountability requirements. Boards of Directors of community agencies funded by the ministries are accountable to the
government for fulfilling the terms of the approved contract. This contract outlines the
ministries’ legal, financial and service expectations and the related accountability
requirements. The Transfer Payment Business Cycle emphasizes accountability and the achievement of results.
Requirements include: -the Year-to-Date (quarterly) reporting of actual vs. budgeted service and financial
information; 4th quarter reporting providing preliminary full-year actual vs. budgeted service and
financial information; and -year-end Reporting and Reconciliation and submission of annual audited financial statements. Some agencies receive funds from a variety of sources. Each of these funding sources may
differ in their budget and reporting forms and processes and in their accountability
requirements. The Board should have an internal financial and accountability system
that allows it to have a complete overview of the agency and effectively monitor and
account for the use of resources, in a timely fashion and in the manner expected
by each individual funder. KACL receives funding from the Ministry of Community and Social Services, Ministry of Chidren Services, Ministry of Health, Kenora District Service Board, annually and
occasionally other Ministries under specific funding contracts The Board of Directors of an agency that is registered as a charity with the federal
government, is accountable to the Canada Revenue Agency (CRA) of the federal government for
use of any charitable funds. Canada Revenue Agency, Government of Canada website The Board of Director’s is elected by the agency’s membership to take charge of the agency’s affairs and should report on decisions made and actions
taken to: -participants/clients/families; and,/p>
-volunteers, the agency’s staff and general members. Agencies are encouraged to have some system for monitoring quality assurance for client
services. Some agencies voluntarily participate in accreditation processes as part of their
involvement with provincial membership or professional associations. Establishing professional
and/or minimum standards for staff qualifications is another means of quality assurance that
some agencies choose. Further InformationAccountability for MCYS/MCSS funding
Accountability to multiple funders
Accountability for charitable funding
Accountability to the agency’s general members and stakeholders
Accountability for quality of service
Notes