Non-Profit Board Governance: Issues of Capacity 2016 NPCNYS Annual Conference

Transcription

1 Non-Profit Board Governance: Issues of Capacity 2016 NPCNYS Annual Conference 1

2 Presentation Overview 1. A Functioning Board 2. Building a Board of Capacity 3. Lessons from the Field Fran Barrett, Interagency Coordinator for Not-for-Profit Services 4. New Models to Board (and Corporate) Capacity JOE NYC 2

3 1. What is a Functional Board? 3

4 What is a functioning Board? 1. Well informed 2. Well equipped to oversee the affairs of the corporation 3. Holds regular meetings 4. Effectively makes decisions Delegates power and responsibility wisely 5. Documents its decisions and decision making process 6. In order to: Manage the organization to further its mission (this will not happen with any consistency without 1-4) 4

5 Functioning Board Legal Duties The board is responsible for managing the organization and must make decisions crucial to the life and direction of the organization -- In carrying out those responsibilities, members of a board of directors must fulfill fiduciary duties to the organization and the public it serves, specifically: 1. Duty of Care 2. Duty of Loyalty 3. Duty of Obedience NYS Attorney General s Office : Right from the Start Guide 5

6 2. How do I Build a Board with Capacity? 6

7 What is Board Capacity? 1) Effectively oversees the operations and staffing of the Corporation to further mission 2) Ensures sufficient income to meet expenses and further mission 3) Develops strategic plans so the Corporation can meet its mission into the future 7

8 The Road to a Board Capacity Getting Started: 1. Do we have the right team? -review current board make-up and plans for future 2. Do we have the right process? -review by-laws and committee structures to support efficient and effective decision making? 3. Are we protected? -review internal controls, conflict of interest and whistleblower policies, indemnity language and DnO insurance 8

9 The Road to a Board Capacity Do we have the right team? 1. Does your Board have right expertise/experience to oversee the affairs of the Corporation 2. Does your Board have the time, numbers and energy to do the work? 3. Does your Board have a make-up that is sustainable? 9

10 The Road to a Board Capacity Do we have the right team? Resources for expanding your Board: 1. Your Corporation s networks 2. Your Board s networks 3. NPC and other coalitions 4. Retired government officials 5. Local businesspersons, clergy and former elected 6. Local trade groups/associations 7. Linked-in, Boardnet, charitystrong, etc. 10

11 But... The Road to a Board Capacity Do we have the right team? No one of capacity will sit on a board that's dysfunctional. -Fr. John Merz

12 The Road to a Board Capacity Do we have the right process? NYS Attorney General s Office: Anyone thinking of joining a board should: 1. Read the certificate of incorporation, by-laws, tax exemption application, and meeting minutes for at least the last year, current budget and cashflow projection 2. Review the 990s, audits, AG registration and reports 3. Review reporting structure, internal controls and conflict of interest policy 4. Review committee structure to ensure they are sufficient So you need to get your house in order to attract talent! 12

13 The Road to a Board Capacity Do we have the right process? 1. Do you know what your By-laws say? 2. Do you do what your By-laws say? 3. Do your By-laws and your practices support a functioning Board that makes the best decisions? 4. Can a change in your By-laws and voting structure unstick things? 5. Are you delegating? -Committees -Consultants 13

14 The Road to a Board Capacity Do we have the right process? NYNPCL Directors and officers shall discharge the duties of their respective positions in good faith and with the care an ordinarily prudent person in a like position would exercise under similar circumstances. In discharging their duties, directors and officers, when acting in good faith, may rely on information, opinions, reports or statements including financial statements and other financial data, in each case prepared or presented by: (1) one or more officers or employees of the corporation, whom the director believes to be reliable and competent in the matters presented, (2) counsel, public accountants or other persons as to matters which the directors or officers believe to be within such person's professional or expert competence or (3) a committee of the board upon which they do not serve, duly designated in accordance with a provision of the certificate of incorporation or the bylaws, as to matters within its designated authority, which committee the directors or officers believe to merit confidence, so long as in so relying they shall be acting in good faith and with that degree of care specified in paragraph (a) of this section. 14

15 The Road to a Board Capacity Do we have the right process? Using Committees Committees of the Board NYNPCL 712: the board may designate from among its members committees, each consisting of three or more directors, and each of which, to the extent provided in the resolution or in the certificate of incorporation or by-laws, shall have all the authority of the board, except that no such committee shall have authority as to the following matters: 1. The submission to members of any action requiring members' approval under this chapter 2. The filling of vacancies in the board of directors or in any committee 3. The fixing of compensation of the directors for serving on the board or on any committee 4. The amendment or repeal of the by-laws or the adoption of new by-laws 5. The amendment or repeal of any resolution of the board which by its terms shall not be so amendable or repealable. 15

16 The Road to a Board Capacity Do we have the right process? Using Committees Committees of the Corporation NYNPCL 712(e): Committees, other than committees of the board, whether created by the board or by the members, shall be committees of the corporation. No such committee shall have the authority to bind the board Members of such committees of the corporation may be non-directors, shall be elected or appointed in the manner set forth in the by-laws, or if not set forth in the by-laws, in the same manner as officers of the corporation. 16

17 The Road to a Board Capacity Do we have the right process? Using Consultants other persons as to matters which the directors or officers believe to be within such person's professional or expert competence

18 The Road to a Board Capacity Do we have the right process? Using Technology lower impediments to participation 18

19 The Road to a Board Capacity Are we protected? Bylaws Release of liability & indemnification (NYNPCL ) Conflict of Interest Policy Whistleblower Policy DnO insurance Trainings 19

20 3. Lessons from the Field Fran Barrett, Interagency Coordinator for Not-for-Profit Services 20

21 4. New Models for Board (and Corporate) Capacity- Joe NYC 21

22 22

23 Today, community-based housing is at-risk Diseconomies of scale have compromised the viability of assets and undercut the ability of CDCs to own and manage affordable housing within their communities. A reduced project pipeline due to a scarcity of resources, city policies favoring high capacity players, competition from private developers and stricter underwriting requirements. Management problems within some groups has hurt tenants, assets and industry reputation.. Erosion of industry scale through transfer of troubled community-based assets to private ownership

24 Goals of the Initiative Improve and ensure the quality of housing for residents Strengthen the CDC industry to continue to serve and stabilize lowand moderateincome communities Provide resources for CDCs to expand their mission within communities.

25 Transfer in exchange for membership JOE NYC Legal Structure Allows for Grants from Foundations and Donations from Individuals Allows for Private Investment in Joe Portfolio (Optional) CDC MEMBERS JOE NYC NFP (Not-for-Profit Corporation/501c3 Supporting Organization and Sole Member of LLC) JOE NYC LLC (limited liability company) Beneficial Interest in the Affordable Housing Assets Distribution of Grants to CDC Members According to Members Agreement/ By-Laws Net Profit to NFP after upper tier administrative expenses Net Property Level Cash Flow to JOE LLC 25

26 Tax Credit Transaction Illustration Before General Partner Interest Transfer to the JOE NYC General Partner Interest Transfer to the JOE NYC Management Agreement & Fees Nominee Agreement Management Agreement & Fees Nominee Agreement or Land Trust Pine LP Pine HDFC Pine LP Pine HDFC/ Land Trust Pine GP Inc. Project Investor Member Pine GP LLC Project Investor Member Pine HDFC JOE NYC LLC Sole Member Local Sponsor JOE NYC NFP (Sole Member) Local Sponsor 26

27 Housing Developments Illustration of the JOE NYC NFP s Governance Structure Class A Voting & Economic Interest Class B Economic Interest Board of Directors of JOE NYC NFP Officers of the Board of Directors: President Vice-President Secretary Treasurer Executive Committee Asset Management Committee Audit Committee Finance Committee Class C Advice & Counsel Members Staff Executive Director Asset managers Acquisition Specialists Administrative Assistant Acquisition Committee Advisory Committee Committees 27

28 JOE NYC NFP Preliminary Organizational Chart JOE NYC Board of Directors Executive Director Third Party Support (First Three Years) Acquisitions / Rehabs / Recaps Asset Management Administration / Compliance Acquisition Specialist Two Asset Management Specialists Administrator 28

29 Member s Distribution Formula NOI / 5% Cap Rate $125,000 / Unit Depreciated Value of Building and Improvements Operating Reserve Balance NET MEMBER VALUE Hard Debt Other Long Term Liabilities 29

30 Operating Impacts of JOE participation Increased Revenue Improved collection of rent Faster turnover of vacant units Rent increases, where eligible and appropriate Reduced Operating Expenses: Lower utility costs, through group buying and retrofits Less bad debt, through enhanced asset management Reduced maintenance, after rehabilitation Real estate tax savings, after recapitalization Lower administrative costs, through enhanced asset management Reduced debt service, from recapitalization

31 Transfer Plan for Initial ~2,000 units Transfers in Process ECDO Portfolio 4 Projects / 299 Units Year 15 Group 6 Projects / 402 Units Transfer Target Date: 4 th Q 2016 HDFC Group 17 Projects / 942 Units Transfer Target Date: 1 st Q 2017 State-Funded Projects 6 Projects / 86 Units LIHTC Projects 4 Projects / 259 Units

32 Staffing Plan Executive Director: Peter Madden Executive Director, Peter Madden Executive Director, Peter Madden Esther Sandrof, Forsyth Street Advisors 1 Asset Manager: TBD 2 Asset Managers: TBD Marc Jahr, Community Development Futures 1 Acquisitions Specialist: TBD 1 Acquisitions Specialist: TBD Esther Sandrof, Forsyth Street Advisors Plus diminishing support from third-party consultants Marc Jahr, Community Development Futures

33 Jason Labate Senior Associate, Goldstein Hall PLLC Jason Labate practices in the areas of not-for-profit law, affordable housing and community development, banking and finance, and general real estate law. Jason represents a wide range of for-profit, not-for-profit and public organizations in various corporate, tax-exemption and real estate matters. Prior to joining Goldstein Hall, Jason attended Brooklyn Law School with a focus on economic empowerment and community development. He participated in Brooklyn Law School s Community Development Clinic, where he advised local groups on not-for-profit corporate formation, corporate governance, and tax issues. Jason has an MPA from NYU s Wagner School of Public Service and a BA from the University of Chicago with Honors in Public Policy. 33

34 Questions Discussion Feedback 34

35 The Disclaimer This presentation and its contents are the property of Goldstein Hall PLLC and are intended to highlight changing developments in the law and relevant legal and industry topics. The law is frequently evolving and information in this presentation may not reflect the latest changes in the law or legal interpretations. The information provided on this presentation should not be construed as legal advice or legal opinion regarding any specific facts or circumstances, but is intended for general informational purposes only. You should consult an attorney about your situation and specific facts and you should not act on any of the information in this presentation as the information may not be applicable to your situation. This presentation may not be reproduced, distributed, or recorded without prior written permission of Goldstein Hall PLLC. 35