LINC: Types of Nonprofit Boards

1. LINC: Types of Nonprofit Boards Kimberly A. Lowe. Avisen Legal, P.A. March 29, 2018

2. What Are We Going to Cover • Participant Experience Poll • Different Types of Nonprofit Organizations and Boards • Personalities • Activities • Pitfalls • Questions

3. Tell Me What You Know • What Nonprofit Board(s) have you served on or want to serve on? • Why?

4. How your fiduciary duties work • When you are a member of a board of directors you are required to perform your duties in accordance with a standard of conduct. • 317A.251 STANDARD OF CONDUCT. §Subdivision 1. Standard; liability.  A director shall discharge the duties of the position of director in good faith, in a manner the director reasonably believes to be in the best interests of the corporation, and with the care an ordinarily prudent person in a like position would exercise under similar circumstances. A person who so performs those duties is not liable by reason of being or having been a director of the corporation.

5. Best Interest? • Standard Business Judgement Rule learned in law school • Best interest of the corporation is dictated by the purpose of the organization (not by shareholder primacy) • Still have self-dealing concerns • Need to know purpose to meet the duty • Need to understand how this works if serving in an appointed seat.

6. Charitable Organizations – 501(c)(3)s • Public Charities • Boots on the ground • Broad base of funding • Sometimes grant making organizations • Either donative or fee for service • Private Operating Foundations • Private Foundations • Limited number of funders • Makes grants to PCs and POFs

7. Public Charities – Educational • Schools • Charter Schools – parents and teachers • Private Schools – alumni, parents, community leaders, pastor, archbishop • Colleges and Universities • State – land grant or others (UofM versus St. Cloud State) • Private institutions – St. Kates, St. Thomas, Macalester, St. Olaf, St. Johns and St. Bens • Trade Schools or specialty institutions • Dunwoody • The College of Visual Arts • Topical Educational Organizations • MN CLE

8. Public Charities - Churches • Churches are special in the eyes of the IRS. • Term Church includes conventions, associations of churches & integrated auxiliaries of a church. • Faith and/or denomination dictates board structure and governance tasks • “Board” is populated by parishioners selected by: • Senior religious leader • Congregation • Some Churches have a closed board structure populated by “management”

9. Public Charities – Religious Organizations Religious organizations that are not churches typically include nondenominational ministries, interdenominational and ecumenical organizations, and other entities whose principal purpose is the study or advancement of religion.

10. Public Charities – Agencies • Client serving organizations where services are paid for by the government on a person served basis • Minnesota Autism Center • Opportunity Partners • Minnesota Adoption Resource Network • These boards tend to have a mixed bag of board members including professionals in the field, people served representatives • Complex mix of issues given funding source • Earned revenue models are tricky to navigate

11. Public Charities – Arts Organizations • Promotion of the arts • Includes everything from: • MN Orchestra • Guthrie • Local dance or theater companies • Art or music schools • Buildings that house these activities • Ordway Center for the Arts

12. Public Charities – Civic Orgs • Blend of cultural activities • Libraries • J.J. Hill Center • Friends of the Minneapolis Public Library • Museums • MiA • Minnesota History Center • Minnesota Science Museum • Minnesota Zoo (legislative)

13. Public Charities – Child Focused • Girl Scouts/Boy Scouts/YMCA/YWCA • Professional boards • Booster Clubs for schools or other activities – parent boards • Amateur Athletic Organizations • Hockey, Gymnastics, Soccer, School Districts, etc. • Parent occupied boards; transitory

14. Public Charities – Access to Justice • Many of you may serve on our local access to justice boards: • VLN • LegalCORPS • Children’s Law Center • Mid-Minnesota Legal Aid • Boards made up of lawyers with the seats rotated from firm to firm • Funding sources are critical

15. Public Charities – Healthcare • Nonprofit Healthcare Systems tend to have professional boards populated by high level business people • Community Health Organizations have local boards populated by people served as well as professionals • Hospitals tend to have foundations that support the hospitals but these are fundraising boards populated by people who can attract and ask for money. Lawyers do tend to serve on these boards due to the prevalence of healthcare practices in our large law firms • United Hospital Foundation

16. Social Enterprises or Supporting Organizations • Some operating public charities have additional entities to connected to them that either raise money for the primary organization or operate a revenue generating enterprise. • These organizations have separate existences but are connected to either the supported organization or the “parent” organization.

17. Foundations (may be public charities) • Purpose is to raise and give away money • Family Foundations – funded by a wealthy families • Some are very large now • Community Foundations – pooled funds of money from various sources directed by the community foundation • Foundations connected with trade associations • HCBF/RCBF • Controlled Foundations – connected to law firms or for profit corporations

18. Association World (501(c)(6)) • The nonprofit sector is populated with many, many associations • Still a “nonprofit” but not a charitable organization • Board is composed of representatives of the members served by the association • As far as best interest of the corporation is concerned, need to take into account purpose of the trade association and delegating bodies goals and purpose. Can be difficult to manage since fiduciary duties are entity specific. • Professionally managed

19. Contact Information Presented by Kim Lowe Avisen Legal, P.A. 612-584-3400 klowe@avisenlegal.com