One of the most common questions I am asked by nonprofit Board members is, “How do I adequately perform my role as a Board member?” It can be challenging to determine: Am I doing enough? Am I doing too much (micro-managing)? What am I responsible for? The board is responsible to set policy, approve strategy, and select and evaluate the chief executive. The people the organization serves and its employees, count on the board. Board members should serve as active and visible members of the organization.
The first step is to understand the role of a Board member. Among other things, under New York’s Not-For-Profit Corporation Law, nonprofit Boards are responsible for the duties of care, loyalty and obedience. What exactly do those terms mean?
The Duty of Care
The duty of care sets the minimum standard for how directors must approach their job as board members. The duty of care requires Board members to be aware of the organization’s finances and activities and to regularly participate in its governance. Directors should act ethically, morally and legally, making decisions that a prudent individual would make in a similar position and circumstance. This also means to regularly attend and participate in board and committee meetings, as required.
The Duty of Loyalty
The duty of loyalty requires Board members to make decisions that are in the best interest of the organization, regardless of how the board member may be personally affected. Nonprofit organizations are required to have a written “conflicts of interest” policy whereby, all Board members disclose any conflicts of interest prior to joining the Board, annually, and when they arise throughout the Board member’s term of service. Board members are required to annually sign a conflict-of-interest statement. Board members should not use their service as a means for personal or commercial gain.
The Duty of Obedience
The duty of obedience requires Board members to ensure the organization complies with applicable laws and regulations, to follow the organization’s policies and to carry out its mission. Board members should act to protect the charitable assets of the organization while promoting the purpose as set out in their mission statement.
In addition to the above, an effective Board member must understand the organization and what it is looking for from a director. Educate yourself on the mission, financial status, goals, and strategic plan. The NYS Attorney General’s guidance tells prospective members to consider reading the organization’s certificate of incorporation, application of federal income tax exemption, by-laws and meeting minutes for at least a year. Another way to gather insight is to obtain a current list of board and committee members and ask the board chair, chief executive and financial officers what is expected from a board member. What are the strengths and weaknesses of the organization and what challenges, and opportunities are they facing? Talk with current and former Board members to gain an understanding of the Board’s role, what is working well and what struggles they may be confronted with. Consider what area of expertise the board make-up is lacking and do you possess that skill. Review the organization’s Form 990, audited financial statements and management letter, if applicable. Determine if filings are up to date on the Charities Bureau website.
Finally, share your knowledge and experience! Board members come from all different backgrounds which makes each member a valued contributor to the mission. Anyone age 18 and over is eligible to serve as a Board member. The diversity and talent each Board member brings promotes the success of the organization. Nonprofit organizations are the backbone of our community. The Board members who offer their time to help govern and support those organizations are vital to ensuring our communities remain strong and able to provide the services we all depend on.
Interested in training for you and your fellow Board members? We are here to help. Please do not hesitate to reach out to discuss your specific situation.
This material has been prepared for general, informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Should you require any such advice, please contact us directly. The information contained herein does not create, and your review or use of the information does not constitute, an accountant-client relationship.
