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Mar 09 2020

To Survive and Thrive: Nonprofit Board Oversight Responsibilities

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.

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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.

It is the nonprofit board’s responsibility to ensure the organization fulfills its mission by following all its bylaws.

 

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Providing Leadership

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.

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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.

Board members are also called on to act as organizational ambassadors, supporting and enhancing fundraising efforts. Such advocacy is key to a nonprofit’s long-term sustainability.

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?

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Bottom Line

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.

Want to read more? Check out these insightful articles:

  • Donor Stewardship: Relationship Building Strategy for Nonprofits
  • Criteria for Hiring a Skilled Nonprofit Accountant
  • Nonprofit Treasurer Duties: Guide to Finding the Right Person
  • How to Get Your Nonprofit Board Members on Board
  • Building a High-Impact Nonprofit Board: 4 Tips for Nonprofits
  • Bookkeeping for Nonprofits: Best Hiring Practices
  • Nonprofit Internal Controls: How To Prevent Fraud

Did you find this article useful? We welcome your thoughts and comments.

Written by Joseph Scarano · Categorized: Fundraising Stewardship · Tagged: Nonprofit Board, Nonprofit Mission, Nonprofit Stewardship, Nonprofit Sustainability

About the Author

Joseph Scarano is the CEO of Araize, Inc., developers of cloud-based FastFund Online Nonprofit accounting, fundraising and payroll software solutions to help your nonprofit become more transparent, accountable and sustainable.

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