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The Board of Directors: An Imperative Piece of a Nonprofit’s Structure

 The Board Of Directors An Imperative Piece Of A Nonprofit’s Structure 
A Board of Directors is a vital, and in Massachusetts required, part of all nonprofit organizations. They serve as the nonprofit’s governing body. As a public entity, the IRS recommends a minimum of three board members, with at least 51% of the voting members being unrelated. This rule is to ensure the board functions independently and is not influenced by familial relationships, preventing conflicts of-interest. 

Key board roles include Chairperson, Secretary, and Treasurer. Board Leadership have legal duties including the Duty of Care, to participate actively in decisions making on behalf of the organization; Duty of Loyalty, to put the interest of the organization before their personal and professional interests; the Duty of Obedience, they are legally responsible for ensuring the organization complies with applicable laws and adheres to its stated mission. 

​The board is responsible for key decisions around the strategic planning, developing the mission and goals, and financial oversight, stearing the organization towards a sustainable future
. They also work to build relationships with funding organizations and other key stakeholders. Board membership is a highly sought-after position for individuals who want to give back to their community or sector.

Sought Out Expertises of Board Members
Nonprofits search for board members that can provide knowledge, expertise, and direction in various areas of the organization. A healthy board is a diverse board. On average they are made up of 15 members. Many members have backgrounds in finance, marketing, public relations, governance, leadership, and more. Nonprofits are encouraged to create inclusive boards that range in diverse backgrounds and cultures. Historically, board members are appointed as volunteers and not compensated for their service.

Board Responsibilities
According to the Council of Nonprofits, boards have three main legal duties they are responsible to focus on. Those include:

  1. Duty of Care: Take care of the nonprofit by ensuring prudent use of all assets, including facility, people, and goodwill;
  2. Duty of Loyalty: Ensure that the nonprofit's activities and transactions are, first and foremost, advancing its mission; recognize and disclose conflicts of interest; make decisions that are in the best interest of the nonprofit corporation; not in the best interest of the individual board member (or any other individual or for-profit entity).
  3. Duty of Obedience: Ensure that the nonprofit obeys applicable laws and regulations; follows its bylaws; and that the nonprofit adheres to its stated corporate purposes/mission.

Other common responsibilities that board members oversee are:

Strategic Planning
One of the most important roles of the board is to develop and approve the strategic plan for the organization. The strategic plan sets forth the mission and vision for the nonprofit and outlines the goals and objectives that it hopes to achieve. The board is responsible for making sure the strategic plan is aligned with the values of the organization and it reflects input from all stakeholders.

Resource Development
Another key role is to ensure that the nonprofit has adequate resources to achieve its goals. This includes financial resources, human resources, staffing, and other types of resources that may be necessary. 

Fiscal Oversight
In addition to setting direction and ensuring adequate resources, the board has a responsibility to provide oversight to make sure that the nonprofit is operating effectively and efficiently. The board is responsible for approving budgets and ensuring that expenses are controlled.  They review financial statements, monitor compliance with laws and regulations, and assess programmatic results. 

Evaluation of Executive Leadership
The Executive Director is known to be responsible for the day-to-day operations of a nonprofit, but the board is responsible to analyze the performance of their leadership. Boards are tasked with completing an annual performance review of the Executive Director. In this review, they can clarify the organization's goals and expectations and address any concerns they might have. Many times this duty is carried about by the board chair, but all board members should have access to the findings. Alternatively, if a nonprofit does not have an Executive Director, the board is responsible for the hiring process and setting the compensation for that role. 

Looking to make your current nonprofit board more effective? We encourage you to reach out to us and schedule a free consultation. With over two decades of nonprofit experience, we will be happy to assist you!