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Best Board Ever: Your Nonprofit Needs this Free Guide

boardroom with large table and chairs

Recently I had the pleasure of presenting on the legal and financial duties of nonprofit boards at the Iowa Museum Association. One of my main core services is nonprofit formation and compliance, and a nonprofit’s board of directors (or supervisors, depending on what they’re called) is essential to both of those categories.

Had a great time speaking with the wonderful people at the #Iowa #Museum Association on the legal & financial duties of #nonprofit boards, earlier this week! 👨🏼‍💻👨🏼‍💼#presentation #GFLF #boardroom #nonprofitlaw

Posted by Gordon Fischer Law Firm, P.C. on Wednesday, July 11, 2018

When submitting a 501(c)(3) application (or a different type of tax exempt application), the IRS almost always requires at least three distinct individuals be listed on the board of directors. In terms of compliance, the nonprofit board is the governing body of the organization and therefore has distinct duties and obligations to the corporation.

Whether just starting out or continuing a long-standing tradition of operational excellence, it’s essential your nonprofit’s board know their responsibilities, understand their fiduciary role, and implement best practices. This goes for the board of directors as a collective body, as well as each of the individual directors.

Collective Responsibilities of Nonprofit Boards

Each nonprofit organization is unique and consequently, each nonprofit benefits from individualized counsel on how to maximize board operations. But, there are general guidelines of good advice that apply across the board. (Ha! Get it?) To that point, I’ve created a resource explaining board duties, best practices, and legal and financial responsibilities that most all nonprofits will find useful. If you’re a nonprofit leader (such as an executive director) you could even print this out and include it in board orientation materials and board handbook.

Download your copy of the “Best Board Ever” guide here!best board ever handout image

Questions? Thoughts? Need a speaker to present on a topic related to nonprofit formation and guidance or employment law? Don’t hesitate to contact Gordon via email at gordon@gordonfischerlawfirm.com or by phone at 515-371-6077.

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Legal & Financial Responsibilities of Nonprofit Board Members

nonprofit board members discussing duties

In wise words attributed to Voltaire (and the Spider-Man comic book), “With great power, comes great responsibility.” Never have these words been more true than when it comes to serving on a nonprofit’s board of directors. Being asked or elected to serve on a board can be a huge honor, but it also comes with great legal and fiscal responsibilities.

Legal Duties

Let’s start with three of the major legal duties:

  • Duty of care: This means that board members are expected to actively participate in making decisions, resolving issues, and participate in planning.
  • Duty of loyalty: Board members must put the interests of the nonprofit ahead of their own personal and professional interests. This means that even merely potential conflicts of interest must be studiously avoided. (Your nonprofit MUST have a Conflict of Interest Policy that each board member signs.)
  • Duty of obedience: Compliance with all local, state, and federal regulations and laws applicable to the nonprofit is an essential responsibility for board members.

Additionally, these three major legal duties ensure the organization is committed and stays true to its stated mission.

 

nonprofit board room

Financial Duties

Board members must act as fiduciaries by closely overseeing the nonprofit’s finances. Board members are tasked with reviewing financial reports (i.e. donations received and expenses), evaluating policies (such as a cash handling policy or a gift acceptance policy), and approving budgets. They must also take into account the resource needs of the organization, in addition to accountability to donors, parties served, and the general public.

Whether you’re donating your time and serving on a nonprofit board, or running a nonprofit and are training the board (sometimes called “managing up,” and not an easy thing to do), it’s important the aforementioned duties are fully explained and understood by all parties.

Let me suggest two good and very practical ideas. First, consider providing a board orientation, once a year, where the entire meeting is devoted to an outsider explaining and discussing with the board the full extent of its legal and fiscal duties. Second, consider drafting and distributing a “job description,” not only for your employees, but also for your board members. Put in writing what you expect of the board, including the legal protection they must offer.

Working with nonprofit leaders is one of my passions and a critical part of my main mission to promote and maximize charitable giving in Iowa. If you’re on the board of, or work for a nonprofit that is facing challenges, or if you simply want to be prepared to avoid challenges, don’t hesitate to reach out. 

I can be contacted at anytime by phone (515-371-6077) or email to schedule a free consultation.

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