Take Care When Preparing Board Minutes
By Frank Monti, CPA
Since tax-exempt, nonprofit organizations are established to serve a community need, minutes of periodic board meetings are an essential way to document that the nonprofit is fulfilling its mission to satisfy its goals and to continue to maintain its tax-exempt status.
In addition to documenting that the board has met, clear and concise minutes of board meetings document that the organization is being run by the community it is serving.
The board minutes are the record of official actions by the board. The minutes are important evidence of authority and should be carefully and accurately kept since they furnish the legal authorization of the general operation of the organization.
Characteristics of Good Board Minutes
The board should be composed of individuals who represent the community in which the organization operates. Board members should possess some expertise, knowledge or interest in the charitable activities of the organization or possess some other skill (legal, finance, etc.) that the organization needs at the Board level.
All board members must be provided with a copy of the organizations by-laws. These are the rules and regulations of the organization and the operational guidelines for the board. The by-laws tell the board members about their authority and responsibility. While there may be many discussions that occur at a board meeting, it is essential that the minutes reflect discussions that demonstrate and document the board doing its job. The degree to which the minutes document other activities at board meetings is at the discretion of the board.
Board minutes should make specific reference to the date of the previous meeting. In addition, the written minutes of that previous meeting should be specifically approved and noted as being a complete and accurate record of that meeting. The official copy of the board minutes should be manually signed by the corporate secretary or his/her designee.
Any information sent out in advance of the board meeting should be referenced and appended to the current minutes. This information must be identified as being sent to the board members in advance of the meeting. One of the most important items to be sent in advance of the meeting is the meeting agenda.
The agenda should contain notification of any votes that will be taken at that meeting. Note that the by-laws may require that certain items can only be voted upon if the board members have had advance notification that such items were to be discussed and raised for vote at the upcoming meeting. While other items may arise during the meeting that result in a vote, it is essential that items that are planned to be specifically brought before the board for a vote be included in the advance agenda.
The fact that a quorum of the board was present must be noted. It should not be left to the reader to assume that if a board meeting was held, there existed a quorum in accordance with the by-laws. The names of the board members present, excused and absent should be noted. If any members leave early, it should be noted in the minutes when the member left the meeting.
Items requiring a vote of the board should be specifically noted. The motion that was voted upon must be identified as a motion put to a vote and the results of that vote must be recorded. Vague references such as it was decided do not take the place of a properly conducted and documented vote of the board.
It is not necessary to record how each board member voted. However, board members who specifically abstain from voting should be noted. The exact vote need not be recorded (i.e., 6 in favor, 4 against). Votes that require a certain level of majority, e.g., two-thirds, should be noted as having obtained that specific level of majority.
The date for the next board meeting should be specifically stated in the minutes. Future required actions and the date for the next board meeting should be specifically stated in the minutes.
Minutes Should Not Be a Verbatim Account of the Meeting
Minutes should not provide too much detail. They should record the decisions made and the actions taken. If there is a debate or discussion of note, only record the major points for and against the issue being discussed. Members must be able to have meaningful discussions without having to worry about individual liability, so names or direct quotations should not be recorded in the minutes. At the same time, the minutes should provide enough information to be a useful resource, so make sure your minutes are not too skimpy. Include enough detail to clearly explain what decisions were made and why so they will be helpful in the future.
Record information that could be helpful during a legal review. Since minutes are a legal record of a meeting, they can be used in court if questions of legal liability arise. If minutes provide the right information, they can be a resource for the organization during a legal review. Any actions or questions around a specific legal issue should be included, with appropriate detail provided. For example, if a board member discloses a potential conflict of interest at a meeting, it should be noted along with the action that board member took. Individual members who disagree with a board action and are concerned about personal liability should be sure to have their dissent noted in the minutes.
Circulate the Minutes Soon after the Meeting
After a meeting, the minutes should be circulated to the board prior to the next meeting. Members should review them for any mistakes or missing information before approving them. Any corrections should be addressed at the next meeting, and changes should be voted on. The approved minutes are signed by the secretary and the chair and are archived. The archives of minutes should be organized and easy to locate.
Frank Monti, a Principal with Kahn, Litwin, Renza & Co., Ltd. (KLR), a Rhode Island based certified public accounting and business consulting firm, servicing the needs of nonprofit organizations and closely-held businesses in Rhode Island and Massachusetts. Call him at 401-274-2001 or email to firstname.lastname@example.org.