Board Formation and Governance

The board is a critical component of an RSD as it directs the district, forms a plan for the future, establishes mission, vision, and values, has the ability to fire and hire the staff, and is ultimately legally responsible for all decisions.

Elections/Appointments of Board Members

Utility boards are appointed and/or elected. The requirements for trustees or board members are located in IC 13-26-4. The board must always have an odd number of members varying from 3 to 13. The members must be selected through appointment or election in the methods accepted by the sections of the Indiana Code governing regional districts.

Job Descriptions

Each board member should be given a general job description (see sample board member job description [PDF]). In addition, it is a good idea to make up a list of expected responsibilities for each officer. Your board may operate very differently, but it is still a good idea to outline duties so that both the district and the member get what they expect.

Conflict of Interest

The Indiana State Board of Accounts requires completed Conflict of Interest forms for board members. The purpose is to ensure that board members do not vote on difficult issues that may present a conflict of interest, based on their personal pursuits or activities. In addition, when a potential conflict of interest does occur, a board member must declare this to the board and must abstain from voting. Examples include situations in which the board member has confidential information, or would profit financially or otherwise benefit. SBOA has a form [PDF] which should be used for this purpose.

Insurance

The legal responsibilities of board members, detailed in this portion of the guide, make the board members legally responsible and liable for decisions of the district. Therefore, it is important for a district to have insurance. The size and scope of the district should help to dictate the policy.

Important Preliminary Tasks

There are two tasks that the new board should address quickly. First, the board should write and approve by-laws. By-laws outline the rules for the board and the organization. Secondly, the board should write a mission statement, explaining why the district exists and what they seek to do. Mission statements provide direction to board members (see sample bylaws [PDF] and set of mission, vision, values, and goal statements [PDF]).

Listed below are some of the main legally-required and suggested functions for a board. Please note that this list is not all-inclusive.

Legal Functions

1. Ensure that the utility complies with all applicable federal, state, and local laws and ordinances.
2. Conduct business only as a board. Any decision must be made by the board as a whole and is therefore legally binding.
3. Avoid conflicts of interest or even the appearance of conflict. Board members with fiduciary interests in a company doing business with the utility should abstain from voting on issues related to these businesses. A conflict of interest form should also be filed with the utility clerk and kept on file.
4. Ensure that the utility receives, records, and expends funds in accordance with acceptable accounting, purchasing, and record-keeping standards, and that all records are made available according to state and federal law.
5. Ensure that revenues cover operations, plus debt service and reserves. Rate review should be part of the periodic utility review process. Utilities need to function as a business and as such require strategic planning to ensure utility operations are maintained and that customers are satisfied.
6. Board members must direct all operations.
7. Board members have a legal responsibility to protect utility assets.
8. Board members must validate all major contracts.
9. Members should attend all board meetings.
10. Duty of Care - A legal relationship arising from a standard of care, violation of which subjects the actor to liability. ¹
11. Duty of Obedience - The duty of obedience requires officers and directors to perform their duties in accordance with applicable statutes, and with the association's articles of incorporation, bylaws and policies. ²
12. Duty of Loyalty - A person's duty not to engage in self-dealings or otherwise use his or her position to further personal interests rather than those of the beneficiary. ³

Suggestions for Boards

1. Require attendance at meetings of board members, utility operator, engineer, and the utilities clerk.
2. Require an agenda listing items that require board action.
3. Record minutes of meetings, read minutes, and make sure they are correct. Minutes of the last meeting need not necessarily be read at the meeting, but all members will be expected to read them beforehand. Minutes may then be accepted or amended. If requested, the secretary will read the minutes.
4. Record objections and debate controversial or difficult issues.
5. Conduct an annual audit.
6. Review financial statements and budget summaries; insist on explanations.
7. Require monthly reports of operations from the utility's operators and clerks or other financial operators, including copies of expenditures.
8. Require a work order system for all utility operations as a means of tracking problems, resolutions, and expenditures.
9. Allow a general public comment period at the end of the regular business session.
10. Generally, follow Robert's Rules of Order as a guide for conducting meetings.