Being on a nonprofit board is not a decision you should take lightly. The worse thing you could do, that might actually hurt the organization you want to help, is join a board because a friend tells you it won’t be a lot of work. On the contrary, you need to be serious about your commitment!
When you agree to join a nonprofit board you are agreeing to follow several basic fiduciary duties.
First you have a “Duty of Care” which simply means you are acting in a reasonable and prudent manner in carrying out your duties as a board member. You also need to have a “Duty of Loyalty” which means you are expected when making a decision on behalf of the board that you have put aside any personal interests and/or disclosed any conflicts of interest you may have. Also, as a board member you have a “Duty of Obedience,” meaning you are expected to abide by all the laws governing your organization and act accordingly to carry out your charitable purpose.
Board members are also expected to be “active members” and not place holders. This means you need to attend board meetings on a regular basis, read the materials sent to you ahead of time and for most nonprofits–evaluate the executive director’s performance and compensation plan. Board members should be involved and active on the various committees as well and do this work outside the regular board meeting and be ready to deliver a brief status report of the work being done. One of the worst things that can happen in a board meeting is for it to turn into a glorified committee meeting!
Board members should not take lightly any actions taken by the board. Being sloppy or lazy is no excuse if you truly intend to be serious about your “Duty of Care.” You need to understand and discuss all proposals, otherwise, it will be presumed you agreed to the action taken.
Minutes need to be taken at every board meeting no matter how short, and the minutes need to accurately reflect what was discussed and what actions if any were taken; also, board minutes should be distributed in advance and approved with any corrections.
As a board member you need to have a general knowledge and reasonable access to the organization’s records including but not limited to the articles of incorporation, the original by-laws and any amended copies, 501c3 determination letter, tax records, bank records, audits, meeting minutes, etc. Obviously it goes without saying that record keeping and internal controls are a vital part of making sure all the monies collected and spent are done so in a proper fashion.
To properly exercise your “Duty of Loyalty” you need to make sure that your position on the board of the organization is not such where you will directly or indirectly receive an inappropriate financial gain for you or any member of your immediate family. People do often ask if this means you are precluded from doing business with the nonprofit itself. The answer is, “no.” You can, but it should be disclosed and documented in advance. If a vote is taken by the board involving the work or service provided, the board member whose business is involved should not vote.
Finally, as a board member carrying out your “Duty of Obedience” you need to make it a point to be aware of all the local, state and federal regulations that the organization needs to follow and to make sure that the organization meets the various tax and financial reporting requirements.
While I realize this is a daunting task, rest assured you won’t get this by osmosis, meaning most board members need to have annual board training in order to understand the law and the changes that are taking place constantly. Remember when in doubt seek out legal counsel, accountants, or other professionals that you need in order to make the best decision possible. It is better to be safe than sorry!
DISCLAIMER: This information is not intended to provide legal or accounting advice, or to address specific situations. Please consult with your legal or tax advisor to supplement and verify what you learn here.