Serving on a not-for-profit board
A note from John
Many busy business owners and executives devote time to serving on not-for-profit boards of directors. They give back to their communities, professions and special causes by providing their business expertise. This type of volunteer leadership improves communities and enhances the lives of those served by these outstanding men and women.
Taking on a role as part of a volunteer board, however, cannot be taken lightly.
There are certain legal responsibilities that each board member should be fully aware of before taking on the role. The board acts as trustee of the organization's assets and ensures that the not-for-profit is well managed and remains fiscally sound. In doing so, the board member must exercise proper oversight of the organization's operations and maintain the legal and ethical accountability of its staff and volunteers. The main legal responsibilities of a not-for-profit board are often summarized in "the three Ds."
- Duty of Care: Board members are expected to actively participate in organizational planning and decision-making and to make sound and informed judgments.
- Duty of Loyalty: When acting on behalf of the organization, board members must put the interests of the not-for-profit before any personal or professional concerns and avoid potential conflicts of interest.
- Duty of Obedience: Board members must ensure that the organization complies with all applicable federal, state, and local laws and regulations, and that it remains committed to its established mission.
In addition to its legal responsibilities, the board acts in a fiduciary role by maintaing oversight of the not-for-profit's finances. Board members must evaluate financial policies, approve annual budgets, and review periodic financial reports to ensure that the organization has the necessary resources to carry out its mission - and remains accountable to its donors and the general public.
It is important that your organization has up-to-date bylaws to ensure liability protection based on state law. Your not-for-profit should also have a risk management strategy, and each board member should be clear on their duties and responsibilities therein. When these elements exist, board members can focus their energy on accomplishing the mission through working together.
Adapted from grantspace.org