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OKACAA 2015 Region VI Conference - Techniques and Tools for Effective CAA Board Leadership

October 22, 2015, Tulsa, OK, CAPLAW, Veronica Zhang, Esq.

Veronica Zhang

on 17 May 2016

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Transcript of OKACAA 2015 Region VI Conference - Techniques and Tools for Effective CAA Board Leadership

depends on authority delegated
by the local government
Should be
more than just advisory
Should have power to:
Administer CSBG program
Make some decisions and provide meaningful input – especially from low-income sector – to government officials
Fully participate in development, planning, implementation, evaluation of program
Techniques and Tools for Effective CAA Board Leadership
Rules Governing Tripartite Boards
CSBG Organizational Standards Resources
Case Study #1: Local CAP Redesigns its IT and Accounting Systems
CAPLAW Resources
Non-Profit CAA Boards
Public CAA Boards
More Facts
After the mess with Startup, CAP decided to award the contract to IT. Unfortunately, the local news caught wind of the RFP leak and published a series of embarrassing stories about Blake’s conversations with John. CAP terminated Blake for cause, in large part due to his involvement in the Startup fiasco. The local media, however, continued pressing for more drastic leadership change, and due to the storm of negative publicity surrounding CAP, Jackie, the Executive Director, was forced to resign. The board felt bad about Jackie’s resignation – she was as clueless as the board about the RFP leak. To thank her for her 30 years of service to CAP, the board approved a $25,000 departing payment to Jackie.

The CFO position proves to be a difficult one to replace because of the high demand for qualified fiscal directors. As CAP approached the end of its fiscal year, the position was still vacant.
OKACAA 2015 Region VI Conference
Tulsa, OK
October 22, 2015

Veronica Zhang, Esq.

Initial Facts
Jackie - Executive Director of CAP
Blake - CFO of CAP
Lisa - Chairwoman of CAP board
Rachel - CAP board member
John - CEO of Startup, Inc.
CAP board considering 3 bids received from RFP to re-design its IT and accounting systems:
IT, Inc.
- $35,000; 4 weeks to complete
Government Solutions, Inc.
- $28,500; 5 weeks to complete + free maintenance
Startup, Inc.
- $22,000; 3 weeks to complete
Roles of Board and ED/CFO
Fiduciary Duties
Duty of loyalty
Disclosing Lisa's conflict of interest
Approval of transaction by a majority of disinterested directors
Document conflict and steps taken to address conflict
Duty of care
Ensure that board has full information
Ensure adequate time for discussion
Conflicts of Interest
Legally prohibited vs. legally permissible
Procedure for validating transactions involving conflicts of interest:
Exclude interested parties
Review and approval by independent directors
Support decision with comparables/bidding
separate policies
for board and employees
Consider sanctions for violations
Employees - integrate with personnel policies
Board members - integrate with removal procedures in bylaws
CSBG Org. Standard 5.6 (Private):

Each governing board member has signed a conflict of interest policy within the past 2 years.

CSBG Org. Standard 5.6 (Public):
Each tripartite board/advisory board member has signed a conflict of interest policy, or comparable local government document, within the past 2 years.
Succession Planning
Plan for different circumstances:
Unplanned vs. planned
Voluntary vs. involuntary
Short-term vs. long-term
Emergency plan: Who appoints (chair / committee / full board)?
Designate back-up individuals and cross-train for position
Designate authority and restrictions
Provide oversight and support of interim ED
Cover communications plan with funding sources and public
Broader succession policy for planned transitions
ED Compensation and Review
Incentive compensation
must be paid according to agreement
Severance payments
can only be paid with grant funds in limited circumstances (2 CFR 200.431(i))
IRS rules
: Total compensation cannot be excessive
"Intermediate sanctions" for excessive benefits to insiders
Penalties against recipient of benefit and organization officials who approved it
Rebuttable presumption if certain procedures are followed
Head Start cap
if any portion of compensation paid with federal grant funds ($183,300 for 2015; includes accrued leave)
Conduct performance review
and set compensation annually
Periodic Risk Assessment
Risk assessment should cover all aspects of the CAA's operations:
Financial management
Contracts and procurement
Human resources
Service delivery
Protecting vulnerable populations
CSBG Org. Standard 4.5 (Private):

The organization has a written succession plan in place for the CEO/ED, approved by the governing board, which contains procedures for covering an emergency/unplanned, short-term absence of 3 months or less, as well as outlines the process for filling a permanent vacancy.
CSBG Org. Standard 7.4 (Private):
The governing board conducts a performance appraisal of the CEO/executive director within each calendar year.

CSBG Org. Standard 7.5 (Private):
The governing board reviews and approves CEO/executive director compensation within every calendar year.
CSBG Org. Standard 4.6 (Private):
An organization-wide, comprehensive risk assessment has been completed within the past 2 years and reported to the governing board.
Financial Oversight
Who is coordinating with the board to:
Prepare and regularly review financial statements
Prepare annual budget
Coordinate annual audit and review auditor findings
Work closely with Audit Committee during transition period
Shared services with another CAA or non-profit organization
Strategic dashboards to facilitate sharing key financial metrics with the board
CSBG Org. Standard 8.7 (Private):
The governing board receives financial reports at each regular meeting that include the following: 1. Organization-wide report on revenue and expenditures that compares budget to actual, categorized by program; and 2. Balance sheet/statement of financial position.

CSBG Org. Standard 8.7 (Public):
The tripartite board/advisory body receives financial reports at each regular meeting, for those program(s) the body advises, as allowed by local government procedure.
CSBG Org. Standard 8.9 (Private):
The governing board annually approves an organization-wide budget.

CSBG Org. Standard 8.9 (Public):
The tripartite board/advisory body has input as allowed by local governmental procedure into the CSBG budget process.

CSBG Org. Standard 8.10 (Private):
The fiscal policies have been reviewed by staff within the past 2 years, updated as necessary, with changes approved by the governing board.
CSBG Org. Standard 8.2 (Private):
All findings from the prior year’s annual audit have been assessed by the organization and addressed where the governing board has deemed it appropriate.

Community Action Board
Federal CSBG Act & regs
(42 U.S.C. §

State Non-Profit Corporation Act
State CSBG statute & regs
Head Start Act
(42 U.S.C.
§ 9837(c)(1))

CSBG Contract with State
CAA's Articles of Incorporation and Bylaws
If applicable,
(if applicable)
Case Study #2: Local CAP has a Board Meeting
The Basics
CAP is a community action agency in the town of Local. It covers eight counties and has a budget of $17,000,000 dollars.

CAP’s board of directors has 25 seats. Each of its eight counties has three seats on the board: one from the public sector, one from the private sector, and one low income representative. The final board member is a former governor who does not regularly attend board meetings, has no official vote, but occasionally advises the board on legal issues and political matters.

On July 1, the Board had its first meeting of the calendar year. The board Secretary, Keeper, opened up the meeting by asking for agenda items. Several board members offered items to put on the agenda. Keeper announced that they would go through the agenda items and then adjourn the meeting. The first hour of the meeting involved reports from the Executive Director, Chief Financial Officer, and the Director of Operations, all of whom read their reports aloud to the board and then thanked the board for their time.
The Problem with Al
The next item on the agenda was about a board member. Three months ago, Al Wayzabsent, a low income representative, was removed from the board after a string of missed board meetings. After his sixth consecutive missed meeting, the board decided to vote to remove Al. The board’s bylaws did not say anything about missed meetings or removal, but after a short discussion the board voted to remove Al from the board. The board secretary recorded detailed notes of their discussion, noting each director’s position and, when possible, recording direct quotes of board members thoughts and opinions about Al’s capabilities as a director. The board is now beginning to discuss how to replace Al and hopes to have a new low income rep seated by September.
The Selection
At the July board meeting, the directors began making plans to fill the seat left vacant by Al’s removal. CAP’s procedure for filling the low income seat was their typical one, and it went like this: Board chair Ted Honcho asked another officer, Treasurer Digits, to lead the process. Digits was thorough: she spent many hours speaking to program staff, managers, program participants, Head Start teachers and parents, etc., asking for recommendations for enthusiastic and responsible people from the low-income community. She even spent a few Saturday afternoons hanging around the food pantry, making conversation and generally, as she said, “scoping out the low income scene.” At the next board meeting she returned with a recommendation. She told the board about Emm, the aunt of a Head Start teacher who has been a donor and vocal supporter of CAP for many years. She’s also the executive director of a local homeless shelter. The board expressed their support for Emm and, at the following board meeting, voted to seat Emm on the low income sector of the board.
The Low Income Sector and the
Democratic Selection Process
© 2015 Community Action Program Legal Services, Inc.
CAA Self-Assessment Tools
Nonprofit CAAs and Public CAAs:
Glossary of Terms
Provided as guidance by the Organizational Standards Center of Excellence (OSCOE)
Intended to clarify intent of the CSBG Working Group in the development of the CSBG Organizational Standards
Series of 10 Short Videos for Board Members
Intro video + nine videos on each of the nine Org. Standards categories (each approx. 10 minutes long)
Videos review each of the 58 Org. Standards (for private CAAs) and highlight how they relate to the oversight role of a Community Action board
Calendar of Required Actions
Checklist divided by how often the board must take action to help CAA boards internally plan and track what actions must be taken and when

Tools for Top-Notch CAAs
Bylaws Toolkit
The Biz
Another item on the agenda for the July board meeting was the impending departure of a long time board member, Biz. Biz is a very successful businesswoman and her seat on the board actually belongs to the Bacon Chamber of Commerce (it’s written into CAP’s bylaws), although 90% of the time, Biz comes as their representative. Her knowledge of business and finance is highly sophisticated and the board has relied heavily on her expertise—so heavily that financial matters were usually tabled if Biz was not at the meeting (for example, if the Chamber of Commerce sent a different representative). Sadly, this next board meeting will be Biz’s last. Honcho reviews the process for selecting board members and asks the remaining board members for recommendations of private sector directors. Pubby, a county commissioner who sits on the board’s public elected official sector, tells the board that she knows a very smart and very well connected philanthropist, Phyllis, who might be just the right fit. The board is excited about Phyllis’s connections and fundraising capacity and asks Pubby to bring her in. The board learns more about Phyllis when she comes to the next meeting, where she is interviewed for one hour. Phyllis leaves the room while the board has a discussion and then votes to seat her.
During a break at the board meeting, two directors from the board’s private sector—Mulcahy and Potter, from CAP’s religious and veterans communities, respectively—have a discussion by the snack table. Mulcahy is complaining to Potter that Pubby “seems like she has checked out. Half the time she sends a representative, and we never know which representative we’re going to get. She has been on the board since she was elected commissioner 25 years ago, and she’s probably got another 25 years left in her.” Potter replies that there is nothing they can do about it—she is on the board until her term as commissioner is up, and anyway, they wouldn’t want to upset their connections with the local political world.
Back in the meeting, Phyllis is invited in, where they announce that she has been seated on the board. Phyllis asks what the next steps are, and she is told that board meetings may seem intimidating at first, but she’ll get the hang of it quickly. Honcho suggests that Phyllis pair up with Mousey, a newer board member who hasn’t spoken a word at a board meeting in 18 months, and “you two newbies can learn together.” Phyllis asks if there are any documents that she should review, and Honcho explains, “There are some legal documents, but they are really only relevant when a specific issue comes up. I wouldn’t recommend going through them now. When a problem arises, you’ll have a good opportunity to take a close look. Now, let’s get back to business…”
Board Self-Assessment Resources
Board Self-Training Tools
The July Board Meeting

Form 990
Annual disclosure form for directors, officers and key employees?

Regular monitoring and enforcement under conflict of interest policy?
CSBG Org. Standard 8.6 (Private):

The IRS Form 990 is completed annually and made available to the governing board for review.
2. What are the proper roles of (i) the board, (ii) Jackie and (iii) Blake in this RFP process?
Should the board be involved in the RFP process?
Procurement policy should define required involvement in procurement decisions

Communications policy between staff and board:
Designate a representative spokesperson
Set up a process for board members to follow when contacted by staff
Confidentiality Agreement
Duty to safeguard proprietary information
obtained in the individual's capacity as a director, officer, employee or volunteer
Should cover client, donor, member, staff and volunteer personal records
State privacy laws
protecting personally identifiable information (including financial information)
Require board members, employees and volunteers to sign a copy of the policy
Organizational Policies
Whistleblower Policy
Useful tool to
detect fraud and other misconduct

Identify the
intended audience
(employees, volunteers, vendors, service providers)
Specify the
matters covered
(e.g., financial fraud, workplace safety, employment practices)
Describe the
reporting process
Confidential reporting
Internal investigation and follow-up
Documentation, protection against retaliation
CSBG Org. Standard 7.1 (Private):

The organization has written personnel policies that have been reviewed by an attorney and approved by the governing board within the past 5 years.
CSBG Org. Standard 7.7 (Private):

The organization has a whistleblower policy that has been approved by the governing board.

CSBG Org. Standard 7.7 (Public):
The department provides a copy of any existing local government whistleblower policy to members of the tripartite board/advisory body at the time of orientation.
Procurement Policy
Uniform Guidance (2 CFR 200.318):

Must maintain written standards of conduct covering conflicts of interest of employees engaged in the selection and award of contracts.
Must avoid both
General Standards:
Select appropriate procurement method
Have written procurement policies
Ask for representations regarding conflicts of interest
Document cost/price analysis and vendor selection
Keep procurement records
Engage in full and open competition
CSBG Org. Standard 8.11 (Private):

A written procurement policy is in place and has been reviewed by the governing board within the past 5 years.
Discussion Questions
What issues should the CAP board consider as it decides among the three bids at the August 24, 2015 board meeting?
What are the proper roles of (i) the CAP board, (ii) Jackie and (iii) Blake in this RFP process?
Which organizational and personnel policies should the CAP board revisit after what happened in this RFP process?
Strategic Dashboards
Succession Planning Toolkit
3-part guide to succession planning
3. Which organizational and personnel policies should CAP revisit after what happened in this RFP process?
Discussion Question
Do you think the board acted properly in approving Jackie’s bonus? What other options would you have considered?
1. What issues should the CAP board consider as it decides among the three bids at the August 24, 2015 board meeting?
Which proposal would you select to do CAP's IT/accounting system redesign and why?
Customized Risk Management Tool for CAAs
Risk Assessment Webinars
Conflicts of Interest Policy Best Practices

Include policy in board application materials and personnel policies and require signatures prior to appointment/hire

Have a broad definition of related parties

Require board members and employees to complete an annual disclosure form

Review contractor list annually to ensure board is aware of potential conflicts

Have sanctions for violations of policy
Related persons
" include:
Immediate family members, which include any of the following relationships:
Spouse, and his/her parents;
Children, and their spouses;
Parents, and their spouses;
Siblings, and their spouses;
Grandparents and grandchildren, and their spouses;
Domestic partner, and his/her parents; and
Any individual related by blood or affinity whose close association with the employee is the equivalent of a family relationship.
Corporations/trusts in which the individual has a controlling interest
Sample Procurement Grid
Incentive Compensation - 2 CFR 200.430(f)
Must be based on cost reduction, or efficient performance
Allowable to the extent that the overall compensation is determined to be reasonable
Allowable only if paid or accrued pursuant to an agreement entered into in good faith between the agency and the employees
the services were rendered, or pursuant to an established plan followed by the agency so consistently as to imply, in effect, an agreement to make such payment.
Severance Payments - 2 CFR 200.431(i)
A payment in addition to regular salaries and wages to workers whose employment is being terminated.
Allowable only if
Required by law
Required by employer-employee agreement
Required by established policy that constitutes, in effect, an implied agreement on the agency's part
Required by circumstances of the particular employment
OK CSBG Statute - 74 Okl. St. 5037
Board of CAA is responsible for
Appointing and dismissing ED
Approving contracts, annual budget requests and operational policies of CAA
Ensuring that auditor completes annual audit
Convening public meetings to give public opportunity to comment on policies and programs
Evaluating programs and policies of CAA
Ensuring compliance with laws
Link to workshop presentation:

Democratic Selection Procedures Case Studies
Full transcript