What is the Role of our Board?

The nonprofit board of directors serves to ensure the success of your organization. They determine your mission and choose the CEO to execute that mission. They serve as a link to the community through advocacy, marketing, and fundraising (including making and seeking contributions and helping to organize fundraising events). They also evaluate the progress of your nonprofit.

Responsibilities of a Nonprofit Board

The duties of a nonprofit board fall into four broad categories.

Planning

Board members set the mission, ensure effective organizational planning, and

identify and monitor your organization’s programs and services.

Management

Board members evaluate the effectiveness of your organization’s top management by selecting the chief executive, monitoring performance, recruiting new board members (unless your board members are appointed), and assessing board performance.

Operations

Board members provide financial oversight by approving the annual budget, reviewing financial reports, and confirming that internal controls are in place. Most organizations also require that board members secure resources sufficient to achieve the nonprofit’s mission.

Fiduciary Duties of a Nonprofit Board

A nonprofit board must act in good faith while performing the specific fiduciary duties of care, loyalty, and obedience.

Duty of Care	Board members must use the care that an ordinarily prudent person in a similar position would exercise in a comparable situation. They must know about organizational issues, attend board meetings, and exercise independent judgment
Duty of Loyalty	Board members must act in a way they believe is in the best interests of your organization. They must avoid conflicts of interest, observe confidentiality obligations, and not abuse opportunities for personal gain
Duty of Obedience	Board members must act within your organization's purposes and ensure that you stay on mission

The consequences of breaching a nonprofit fiduciary duty are as severe as those for a breach at a for-profit entity. Consequences include personal liability, potential charges brought by a State Office of the Attorney General, and the attendant risk to your organization’s reputation, which impacts your employees and those relying on your organization’s services. Many nonprofits minimize liability risk through indemnification and/or directors and officers' insurance.

Ethics and Program Support

Board members ensure that your organization upholds legal and ethical rules including developing and enforcing a conflict-of-interest policy. Board members communicate your nonprofit’s mission to the community to garner program support. Because nonprofits have tax-exempt and charitable tax status, board members and staff members must adhere to strict regulations on lobbying.

Sarbanes-Oxley Compliance

While most people have heard of the Sarbanes-Oxley Act of 2002 ( http://www.soxlaw.com) as it relates to for-profit enterprises, two sections apply to nonprofits: whistleblower protection and record retention.

It is a criminal offense for anyone to violate the whistleblower protection afforded by Section 1107 of the Sarbanes-Oxley Act. Your organization should adopt procedures to report concerns or complaints regarding financial or accounting practices.
Section 1102 of the Sarbanes-Oxley Act mandates penalties for obstruction of justice caused by the destruction of documents that are or could become subject to an official proceeding or federal agency investigation. You should ensure that your organization has a record retention policy in place and follows it.

Board Health

Your board plays a pivotal role in your organization’s success. It is important that your board be effective. Periodic self-assessments determine its strengths and uncover any weaknesses that need remediation.

If the board fails to achieve goals, morale can suffer. Five common concerns can hamper your board’s effectiveness. Here are common symptoms of board dysfunction.

Concern	Member Symptoms
Distrust	members do not apologize when they say or do something potentially damaging to your board or organization members are not forthcoming about their weaknesses or mistakes or are reluctant to ask for help
Fear of Conflict	meetings are low energy and uninteresting members shy away from addressing the most important and difficult issues
Lack of Commitment	members are not aware of other members’ work and how those efforts benefit your organization discussions do not conclude with a specific call to action
Accountability Avoidance	members do not challenge others about plans or question other members' unproductive behaviors members are unconcerned with letting their peers down
Lack of Team Identity	members want credit for their own contributions while paying little attention to others’ contributions committee members are not willing to sacrifice for the good of your board

By law, nonprofit organizations must have a board of directors. Knowing your board’s duties and regularly evaluating your board are crucial to your organization’s success.