An experienced board of directors bolsters a nonprofit by lending the gravitas and credibility of the members’ combined experience. However, a nonprofit board is more than reputational window dressing. It is meant to conduct nonprofit board oversight responsibilities.
Since the 2008 financial crisis, corporate governance has been under intense scrutiny, and this focus is also aimed at nonprofits. Regulatory agencies, donors, beneficiaries and the public want boards to check and balance the relevant key nonprofit functions.
Protecting the Mission
An organization’s tax-exempt designation is inextricably tied to its stated mission. If the mission is not consistently maintained, the nonprofit status is at risk. It is the nonprofit board’s responsibility to ensure the organization fulfills its mission by following all its bylaws.
This is not a task to be taken lightly, but an actual legal obligation. Called the duty of obedience, it is one of three such primary nonprofit board oversight responsibilities.
A nonprofit’s CEO or Executive Director oversees its day-to-day operations. If that person is inexperienced, weak, conflicted or corrupt, the nonprofit could be in trouble.
The nonprofit board also has an oversight has responsibility to thoroughly vet prospective CEOs, hire experienced ones, determine their appropriate compensation and then continuously monitor their performance and integrity.
Safeguarding and Enhancing Financial Management
The board’s second oversight responsibility is its duty of care, which requires it to make sure that the nonprofit’s monetary, physical, cyber, staff and reputational assets are protected from waste, abuse, misuse or theft. This includes providing the resources to hire experienced personnel and to implement cost-effective accounting software designed for the specific needs of nonprofits.
Ensuring Legal Standing
Like for-profit corporations, nonprofits need to follow federal, state and local laws and regulations. Staff members develop and ultimately implement policies to fulfill such obligations, but the board is duty bound to routinely review and approve those policies to ensure organizational compliance.
The Ultimate Check and Balance
The third and final legal oversight responsibility is the duty of loyalty.
Do your board members:
- Attend and actively participate in board meetings?
- Possess in-depth knowledge and experience?
- Avoid conflicts of interest?
- Monitor each other and advocate for change when needed?
Your nonprofit strives to do good, but to survive and thrive in doing so, it needs a dedicated board willing and able to act as an appropriate check and balance.