Are you in the dark about what your board of directors is supposed to do? You're not alone. Nonprofit board responsibilities are often poorly understood and badly communicated.
Board member duties fall into two camps: legal responsibilities and "should do" tasks.
Legal Responsibilities of the Board of Directors
A nonprofit incorporates in the state where it is headquartered. For charitable nonprofits (501c3), incorporation precedes filing for tax-exempt status from the IRS. You won't be able to apply to the IRS for tax exemption until you incorporate. Some small charitable groups do not incorporate, but for most, the pros and cons of incorporating reveal that doing so makes sense. Importantly, incorporation limits personal liability for the board of directors.
Many states have laws governing the functions of the board of directors of nonprofits and the conduct of board members. For instance, a nonprofit board must oversee the nonprofit organization's operations and make sure that its staff and volunteers act legally and ethically. States often use the following principles of nonprofit corporation law.
Duty of Care
A board member must be active in organizational planning and decision making. Board members must exercise reasonable care when he or she makes a decision for the organization.
Reasonable care is what an "ordinarily prudent" person in a similar situation would do.
Duty of Loyalty
A board member must never use information gained through his/her position for personal gain and must always act in the best interests of the organization. Board members must avoid conflicts of interest or the appearance of conflicts.
Duty of Obedience
A board member must be faithful to the nonprofit organization's mission. He or she cannot act in a way that is inconsistent with the organization's goals. The public trusts the board to manage donated funds to fulfill the organization's mission.
Also, your board must:
- Make sure that the organization follows the law.
- Approve all key contracts.
- Attend most board meetings, thus indicating a dedication to the organization.
- Hire and supervise the executive director who then hires staff.
- Make sure the organization remains financially solvent by evaluating financial policies, approving budgets, and reviewing financial reports.
Make Sure Your Board Members Understand and Commit to Their Duties
Since a nonprofit belongs to the public and serves the public interest, the board of directors has been given the responsibility of making sure that the organization abides by the law.
Make sure that your board members realize the seriousness of their duties when they agree to serve on the board.
To ensure that a potential board member understands his or her responsibilities, the CEO and board president should have a sit-down meeting with the new board member.
Such a meeting will likely impress the new board member or potential members with the seriousness of their board commitment. An overview of board responsibilities is especially important for new members who haven't served on any other boards and for members recruited from among your volunteers.
While volunteers bring an in-depth knowledge of how the organization works, they may not understand what a board does or realize that they must help with fundraising.
After that initial meeting, the next step is training. If you have several new board members, a group training works well. Board members can learn about the organization's history, mission, bylaws, activities, and more.
Include a tour of your facility, introductions to key staff, and some time devoted to observing your programs in action. Arm new board members with lots of reading that they can do on their own.
Don't assume that new board members understand:
- What a nonprofit is
- How a nonprofit is different from a for-profit
- The role of staff versus the board
- Potential conflicts of interest
- How nonprofits get their revenue
Match Board Members to Your Organization's Needs
Your board can be an excellent source of pro bono expertise in areas that you need to understand but can't afford professional help. For instance, your board members could have skills in:
- Public relations
- Legal and human resources or programmatic areas such as social services, education, religion, etc.
Put Fundraising Front and Center
So many nonprofits are reluctant to mention fundraising to their board members. Yet, helping to raise funds has everything to do with making sure the charity remains financially sound.
Finances are not just about overseeing the budget. It is about understanding how the organization is funded, how fundraising works and participating in that fundraising.
Consider the fundraising potential of every board member. That doesn't mean that every board member should be wealthy. However, they are expected to set an example by donating to the organization and soliciting other contributions. Every board member should participate in giving in the way that they can afford.
Many successful nonprofits require a donation to the organization from their board members. The amount required doesn't have to be extraordinarily high. It's the commitment that is important.
Board members should be comfortable with fundraising. The most successful nonprofits have active and engaged boards. They give personal gifts, and they participate in fundraising campaigns.
When you recruit and train board members, you should make their fundraising duties clear. Not everyone will want to call personally on donors, but they can do something.
Make a list of ways to help with fundraising, such as writing thank-you notes or calling donors to say thanks. Board members should be able to identify potential major donors and make an introduction. Suggest that board members solicit items from businesses for your annual auction or help organize a fundraising event.
Keep board members active. No one gets a free pass. Just showing up for board meetings is not enough.