COMMITTEES OF THE BOARD
Many factors come together for a board to set up its own committee structure. Each board has to search for and determine the best way to govern its own organisation. There is no one structure for committees of a board. Board committees are usually created when it becomes apparent that the business of the board requires a more focused approach then can be done with the full Council.
There are usually two types of board committees – standing committees and ad hoc committees. Standing committees are permanent and ongoing while ad hoc committees are created to achieve an identified objective usually to be achieved within a limited time or when the board has to handle immediate needs quickly and effectively.
The board in identifying its needs and its own capacity has a right to form its own committees. In doing so:
- The board needs to be clear about why it wants such a committee and what purpose will be served by it; (rationale)
- Responsibilities are identified and accountability to the board is established;
- Chair of each committee is usually appointed by the board;
- Members (within and beyond the board) are chosen with the board’s approval.
In establishing such committees there is an important distinction between board committees and operational committees of the organisation.
Board committees report to the board and are accountable to the board to help the board carry out its work of governance.
Operational committees are committees of management and help the CEO and senior staff in the operations of the organisation.
In small organisations volunteers (sometimes board members) may be members of operational committees. If board members do serve on such committees they are there for their skills and experience and not as a member of the board.
Board committees are:
- Accountable to the board;
- Deal with issues from a governance perspective;
- Usually do not duplicate operational committees.
Operational committees are:
- Accountable to management to enhance operational effectiveness;
- Deal with issues from an operational perspective;
- Formed by competent people with particular expertise in the given area.
Each committee of the board needs its own terms of reference. Such committees, with board approval, should have its specific mandate which contains:
- Its rationale;
- Its membership; and power to co-opt;
- Its board role and responsibilities;
- Its accountabilities to the board;
- Its status as a standing or an ad hoc committee of the board;
- A specified time for review.
The size of such committees should be contained with an emphasis on effective involvement and timely outcomes. Sometimes a member of staff may be an informed and critical member for the committee; sometimes someone from the community with interest and experience could be invited onto the committee.
The chair of the committee leads the group within its terms of reference and reports directly to the board as agreed upon.
Such committees of the board should meet regularly as required by their tasks. A brief written report of such meetings should go out with the board papers. Matters requiring board decision should be noted and/or be placed on the board’s agenda.
The actual number of these board committees will vary. Some boards have no committee structure at all; others have a finance committee; and others need to assess the value of the committees they have.
The real issue re committees of the board is to have only those that are making for good governance and that each established committee is adequately resourced to fulfil its mandate.
Good governance needs board members who are enthusiastic about the mission of the organisation; who together have the right range of skills to do the work of the board; who are vigilant about their board policies and processes; who “own” the strategic directions of the organisation; and who have the critical reflection needed to improve their own performance and that of the organisation.
Within this approach to good governance each board can consider whether it needs and capacities require committees. The following are some committees that boards establish to help them in the work of governance:
- Governance Committee;
- Finance & Audit Committee;
- Strategy Committee;
- Fundraising Committee.
The Governance Committee
Good governance doesn’t just happen. It takes hard work by all the members of the board and it’s a never ending effort. The governance committee of the board facilitates the board in its work of governance. It enables the board to be focused on its mission, have the right people who are needed on the board, raises matters of board policy and enables the development of its members.
The Governance Committee helps keep the board on its mettle by focusing on a number of areas of board life such as:
- how the board keeps its focus on the mission of the organisation;
- the way the board undertakes its own role and responsibilities;
- the board’s capacity to deal with its own strategic development and to recruit accordingly;
- the active orientation and coaching of new board members;
- the board’s own documentation;
- the on-going education of all members of the board;
- succession planning for board leadership and for the chief executive;
- the regular board assessments of its performance.
In reporting to the board, the Governance Committee should actively engage the whole board in the conversations and decision-making of each of its responsibilities.
The Governance Committee could be an ad hoc committee and so meet on an as-needed basis. Boards of all sizes stand to gain from having such a committee as its role can enhance the performance of the full board. In emergencies the board often can look to members of this committee to see the organisation through a critical period. The chair of this committee needs to work closely with members of the board so the committee stays in touch with the needs of all on the board and members feel valued.
No matter how a board may organise itself the board always remains the body responsible and liable for the organisation. This responsibility is and remains; The board cannot delegate its financial responsibility to anyone or to any committee of the board or to management. This is very true of the finance committee.
Most boards of any reasonable size organisation choose to have a finance committee as a standing committee of the board. In establishing a finance committee the board cannot simply transfer its responsibilities of overseeing the finances of the organisation.
Many board members fail to give proper and focused attention to the finances of the organisation. These can be quite complex and understanding an organisations finances often presumes a reasonable amount of skilled knowledge. People become board members for all kinds of reasons and often without financial understanding.
In establishing a finance committee it is to ensure that the board as a whole takes an informed responsibility for the finances and financial viability of the organisation. In particular the finance committee, on behalf of the board:
- looks to the financial systems and planning of the organisation;
- monitors the flow of funds and their investment to ensure financial viability;
- secures the assets of the organisation;
- anticipates financial difficulties;
- ensures that good systems are in place;
- ensures the board receives accurate, complete and timely financial information;
- takes responsibility for conduct of the annual audit;
- assures compliance to all legal and contracted arrangements.
The finance committee usually works with the senior financial member of staff as well as the CEO. However, it is the chair of the finance committee who reports to the board and ensures that each member of the board understands the report and its implications.
The budget of the organisation must be the outcome of a collaborative process of staff and of management as well as contributions from the finance committee. Again it is the finance committee that presents the annual budget to the board and ensures that the board’s future directions are provided for in an adequate resource allocation. It is the board who must ultimately approve the budget.
The finance committee can give comfort to the board by ensuring it that there are good budget systems in place. Some of these are:
- an established budget cycle for development and for monitoring of all finances;
- a definite link between financial resources and overall strategic directions and goals;
- that staff are held accountable for their budgets;
- regular budget reports to the full board that allow for adequate analysis of line items.
Strategy Planning Committee
One of the most significant roles a board is to plan for the future of the organisation. Such planning involves both board and staff, brings energy to the tasks to be done, gives a sense of direction, focus for the organisation as a whole and ensures strategic thinking is integrated into all aspects and activities of the organisation.
To have a strategy planning committee of the board, the board must have a commitment to developing strategy planning for the organisation. Such a commitment will find expression in the way the board engages in creating the vision and mission and sets and resources its strategic directions for the future.
The strategy planning committee needs to ensure an inclusive process of the board members and appropriate staff and often of outside experienced people in the field. The actual development of the plan can benefit from the involvement of a professional consultant.
The strategy planning committee can be mandated as a standing committee or as an ad hoc committee of the board. It is important that the committee members reflect the make up of the organisation as a whole. It needs to take into account the diversity and range of areas within the organisation and not just the more vocal members.
Strategic planning has to look where the organisation needs to be in the next 3 to 5 years, changes that need to take place, the new developments, programs that need to be introduced, closure or continuity of existing services and staffing requirements for this period.
Members of the strategy planning committee require clarity of thought and an ability to think strategically. The chair of this committee needs to appreciate that an open, creative, inclusive process is essential in order to develop the strategic directions for the future of the organisation.
The strategy planning committee will present the final draft of the strategic directions to the board for its ratification. The committee may continue its role as it monitors for the board the operational/business plan of the organisation that will have the details and assigned responsibilities as well as resource allocation for the unfolding of the strategic directions.
The board itself needs to take responsibility for the unfolding of the strategic directions it has endorsed. It can do so by having the key directions on the regular board agenda and the CEO reporting directly to these directions.
Within Australia boards are only slowly coming to see that fundraising is a critical element of their governance responsibilities.
Many nonprofits have relied upon government funding to ensure their organisations’ viability and the continuation of their programs. That source is no longer sufficient to meet growing needs and competition for funding in some cases is now with for profits. The status quo with regard to traditional sources of funding is changing.
One of the board responsibilities is to ensure there are adequate resources available for its organisation, for the development of new programs and the rising costs of running services to meet new needs.
Fundraising as an issue has to be now a part of any good governance. The development of fundraising within many nonprofits has become crucial for survival and the delivery of quality services.
The establishing of a fundraising committee as a standing committee of the board helps ensure that the oversight and coordination of funding raising in all its forms are, in fact, a board responsibility.
Each board needs to judge its need for a standing committee for its fundraising activities and to clarify the role and relationship of this committee to the board as a whole. In fact, the board may need to recruit a person onto the board to chair this committee
The fundraising committee of the board should always be chaired by a member of the board who has the contacts, knowledge, enthusiasm and skills to lead the board’s efforts and to ensure accountability for all efforts to raise funds, to apply for grants, new contracts, etc.
The fundraising committee of the board becomes a key group in all fundraising processes. Its members need to be a good mix of board members and staff and other community people committed to the work of the organisation. The relationship between this committee and staff associated with fundraising needs to be cultivated.
The size of any fundraising committee depends on the range of activities, the complexity of the approaches being undertaken and the size of volunteer resources available.
Fundraising members, whether board or staff, need to:
- be able to articulate the mission, values and outcomes being achieved by the organisation as they seek out prospective donors;
- have good documentation about the history, its highlights and vision for the future;
- have the opportunity and support to approach individuals, corporations and other sources of funding;
- be adequately briefed on the financial stewardship of the organisation.
Good governance is complex and a board often doesn’t have the time to deal with the details associated with some of its critical issues. Good committees of the board can enable the details to be dealt with so the board can move the organisation forward. Committees do not replace the work of the board but rather enhance its capacity to do its work effectively. The sound structuring of committees of the board involve members of the board often in collaborative efforts with staff and interested people. A board owes it to its organisation to seriously consider its committee structure so it can do its work in a timely and effective way.