People working at small historical organizations often fill several roles. Board members, the executive director, or the staff may serve in more than capacity to keep the doors open. This section introduces the legal requirements associated with non-profit governance including documents required for 501(c)(3) organizations and the legal obligations and best practices associated with boards of trustees.
Any organization can benefit from clearly defined roles on each level of governance. Developing guidelines for each position – for members of the board of directors, the executive director, and the staff alike – helps to outline expected contributions and how work will be dispersed throughout the organization. Below are five kinds of documents that serve as means of structuring the ways that your organization’s mission and purpose will be attained.
Filing for 501(c)(3) Federal Tax Status
After an organization is formally incorporated in its state, it can apply for nonprofit status with the Internal Revenue Service. Under 501(c)(3) status, the IRS recognizes an organization as a tax-exempt and charitable educational entity. This designation indicates that the funds used to operate the institution do not profit any private shareholders and that the institution will not try to influence legislation or participate in campaign activity. The IRS provides information on 501(c)(3) exemption requirements on their website here. The site also links to additional information on the application process and other important information.
Museums, historic homes, and other organizations with this status are eligible to receive tax-exempt contributions. The IRS will require a receipt from the museum for the donor to file if these gifts exceed $250. To avoid conflicts of interest, if a person donates an object, the museum cannot assess its value but can provide a list of certified appraisers..
Any donation made to an organization without this status from the IRS may not be tax-exempt, so it is crucial that you file the necessary paperwork before fundraising. To gain 501(c)(3) status, an organization must file the appropriate paperwork with the IRS annually. Depending upon the size of your budget, these forms include the 990, the 990EZ, or the 990-PF. To learn more about the application process, visit the IRS departmental website here.
Sources on filing for 501(c)(3) status:
- NOLO Law for All offers legal information for a variety of institutions. Visit the site to find useful articles, downloadable legal forms, and legal information for nonprofit organizations. NOLO’s explanation of 501(c)(3) requirements is very well-written and easy to follow.
- In 2012, the N.C. Center for Nonprofits compiled this booklet, “How to Start a 501(c)(3) Nonprofit Organization.”
- Here, Findlaw.com defines the five different types of 501(c)(3) non-profit organizations and their different classifications.
- Is your organization in compliance with federal law? Check out this Compliance Guide for 501(c)(3) Public Charities from the IRS.
Articles of Incorporation
In terms of overarching governance, any non-profit institution needs to write out two documents – the articles of incorporation and the by-laws. The articles of incorporation detail the relationship between your institution and the state in which it operates; by-laws focus on internal governance. The method of incorporation varies from state to state; some states have standard forms that need to be filled out while others require that you write them out yourself (with the help of a lawyer if you deem it necessary).
Articles of incorporation typically detail an organization’s legal status as a non-profit, its 501(c)(3) federal tax status, its right to hold property and receive gifts, and provisions for its assets in the event of dissolution. Please visit your state’s secretary of state’s office for information on how to become formally incorporated.
The Internal Revenue Service requires that all incorporated organizations have a set of bylaws. The bylaws are also an operating manual for governance. According to The Foundation Center, bylaws set out in writing
- The size of the board and how it will function
- The roles and duties of directors and officers
- The rules and procedures for holding meetings, electing directors, and appointing officers
- Conflict of interest policies and procedures
- How grant monies will be distributed
- Other essential corporate governance matters, including a means for amending the bylaws and dissolving the organization if its life is over
Sources available when writing by-laws:
Nonprofitally.com offers good advice for nonprofit organizations generally, but this link takes you to excellent information on bylaws, including a very clear video that walks you through the process of writing them. The page also contains several sets of sample bylaws as pdfs that you can download and a useful template.
The process of amending bylaws can be confusing. Here is an adaptable template for keeping track of your work, created by the Nevada State Education Association.
Here are some further tips for writing bylaws from KU’s Community Tool Box.
Example of by-laws:
- Bylaws of the Groton Historic Society The Groton Historical Society in Groton, MA is an all-volunteer organization founded in 1894. In 1999, the Board of Trustees passed this set of bylaws, notable for their brevity and their clarity.
- Friends of the Museums of Florida History, Inc. Museums and historic sites that are owned by local or state governments often rely on a friends group to raise money and support them in other ways. Here is a set of bylaws from the Friends of the Museums of Florida History, Inc.
Board of Trustees
The board of trustees is charged with oversight of the institution, ensuring that an institution’s actions are in accordance with its stated purpose. This oversight spans many different areas – hiring the museum director; future planning for the organization; fundraising, writing, and monitoring the budget; public relations and serving as the public face of the museum; writing and updating policies; and writing, reviewing and approving a strategic plan.
Although it is the duty of the board of trustees to oversee the museum, the relationship between its members and the staff of the museum is best described as a partnership or collaboration. Regular communication between all levels of governance – the board, the museum director, and the staff – is necessary for successful operation. Each branch of the administration serves a crucial role; when these areas are all on the same page, the possibilities for success are endless!
Developing a Board of Directors
When putting together a board of directors, or perhaps replacing one or more of its members, keep in mind – the board must be constructed to meet the needs of your organization. Select individuals with a variety of skills, knowledge, and areas of expertise; this diversity will augment the ability of the board to fulfill the duties listed above. For instance, a trained lawyer can help with legal matters, or an accountant or development officer can help with fundraising and budgeting. Other crucial areas of knowledge include organizational planning, personnel management, public relations, and nonprofit trusteeship. Additionally, including members of the community on the board of trustees is a means of building trust and accountability between your institution and the surrounding community.
Boards must have at least three officers – a president, a treasurer, and clerk or secretary. The president works closely with the executive director while also leading the board, the treasurer maintains the financial records for the museum, and the clerk writes and distributes board’s agenda and minutes. Additional roles include a vice president and an assistant treasurer to assist the president and treasurer, respectively; others can be added as needed according to the needs of your institution.
Finally, the board does not need to do all of its work together when everyone is present. Many boards divide their work into committees and then share the results with everyone in the board meeting. These committees are usually specified in the bylaws; so, if you are considering adding, changing, or removing a board sub-committee, make sure to update your bylaws as well.
Potential committees include an executive committee (the officers of the board), finance, development, governance (recruiting new board members), programming, personnel, building and grounds, strategic planning, marketing and public relations, and events.
Overviews about boards:
- Leading With Intent is the only survey to gather information from both chief executives and board chairs on their experiences in the non-profit boardrooms of America. This report offers answers to many questions related to boards, their purpose, function, challenges, and even how they change over time. It is conducted by BoardSource, an organization focused exclusively on non-profit governance.
- Blue Avocado is a free online magazine aimed at community nonprofits with ample and practical coverage of board service.
- BoardSource is an essential resource for nonprofits looking to magnify their impact through governance practices. It offers publications (some at no cost) on such topics as board recruitment and assessment, organizes webinars and live events, and runs a blog.
- Leading by Design is a blog published by Anne W. Ackerson, a museum consultant and former director of the Museum Association of New York, that addresses “forward-thinking” governance and leadership.
- The Minnesota Council of Nonprofits has published brief articles on governance divided into two categories: Board Basics and Leadership Development. Topics addressed include, “Board Composition and Structure,” “The Board’s Role in Risk Management,” and “Leadership vs. Management.”
- Independent Sector offers articles on the “33 Principles for Good Governance and Ethical Practice,” from complying with all federal laws and regulations, to promoting board diversity, to completing accurate financial records, to respecting donor privacy.
- Kim Andrews at the Shofuso Japanese House and Garden has provided Sustaining Places with samples of various documents pertaining to the organization’s board. They are: director job description and expectations; candidate application; board officer agreements for different positions; conflict of interest policy and disclosure statement; board and committee structure; executive committee job descriptions; board giving form; and board assessment form.
Sources for board development:
- BoardSource offers this article on how nonprofit boards should be structured.
- The Bridgespan Group offers recruiting tips for figuring out what talent you have on your boards and what talent you need.
- Wondering how to orient your board members? Read this sample board orientation checklist.
- The Center for Nonprofit Excellence lists helpful resources on board development, including sample policies and tips for strategic planning. The organization offers free webinars on board development. Video links at the bottom of the page include past webinars on topics such as active board participation and the board’s role in fundraising.
Board Position Responsibilities and Training:
- Compass Point Nonprofit Services provides a useful template for writing Board Committee Job Descriptions.
- Wondering what the major responsibilities of a board member are? Here is an easy-to-read list from Richard Male and Associates.
- The Midwest Center for Nonprofit Leadership offers a document clarifying the legal duties of board members.
- What should the relationship be like between museum staff, director of development, and trustees?
- The American Alliance of Museum’s Free Management Library provides this article titled “Basic Guidelines and Sample Agenda for Board Training Session.”
- Also from BoardSource, the Twelve Principals of Governance that Power Exceptional Boards.
- How should trustees contribute to fundraising? A brief article from fundraising consultant Armand Battisti.
Sources for fixing broken boards:
- Broken boards? Here are some indications that all is not well with board members and tips on how to ameliorate the situation.
Sources for board self-assessment:
- The Maine Association of Nonprofits provides a guide to determining if your board is ready for self-assessment.
Sources for succession planning:
- The Federal Reserve Bank of Kansas City provides this toolkit for executive succession-planning.
The success of a museum or historic site, like any business or organization, is largely dependent upon the people working there. Clear roles and expectations, as well as clearly articulated means of resolving disputes, help institutions run smoothly. Personnel policies are one means of laying out these parameters and procedures, and they can cover any number of procedures – employment, payment, performance evaluation, conflict-of-interest, termination, resolving grievances, and sexual harassment.