A nonprofit organisation must have a board of directors in order to function. This elected body governs your organisation in areas ranging from finances to the goal of the charity.
Having the appropriate personalities on your board of directors is critical to the success of your firm. This article will assist you in forming your first board or growing an existing board to better serve your charity.
What Exactly Is a Board of Directors?
A nonprofit board of directors serves as the organization’s support system. Its responsibilities include financial management, structural counselling, executive director recruiting, and much more. While the board is often not engaged in day-to-day operations, it is actively involved in ensuring the organization’s overall well-being, effectiveness, and financial health.
The Internal Revenue Service (IRS) advises that nonprofit organisations have at least three unconnected directors, although no specified term duration is required.
What Role Does the Board of Directors Play?
Before you begin the process of electing your board, you should understand the importance of this group to the success of your company. While the functions and obligations of a board may differ depending on the state in where your nonprofit was formed, the typical responsibilities of a board include:
Enforcing the Organization’s Mission and Purpose: Because the mission is the core of any nonprofit, a board’s primary responsibility is to maintain that mission as well as the organization’s purpose.
Hiring a CEO/Executive Director: While your board of directors plays an important role in your nonprofit’s growth and effectiveness, it does not engage in day-to-day operations. As a result, the board must employ a CEO or executive director who can offer effective day-to-day leadership.
Incorporating New Members: A board must also seek out and include new board members who are capable of successfully sustaining the organization’s ideals.
Assessing Fund Allocation: Careful asset distribution within an organisation ensures that all sections get enough financing, therefore supporting the achievement of each component of a nonprofit’s goal.
Generating Money and Ensuring Financial Stability: In addition to ensuring the distribution of funds, the board is responsible for generating additional assets in order to provide a firm basis for the nonprofit’s long-term financial stability.
Supporting and Evaluating the CEO/Executive Director: The board of directors of a nonprofit organisation not only functions as a support system for the CEO/executive director, but also evaluates their work performance.
Ensuring the Organization Follows Legal and Ethical Practices: It should come as no surprise that a nonprofit’s ethics are critical to its success in fulfilling its objective. In this scenario, the board’s responsibility is to ensure that the business constantly follows legal and ethical procedures throughout its operations.
Creating a Positive Public Image: Fostering community trust not only draws private investment, but also builds credibility among community members who may utilise the services your organisation provides.
Recognizing and Resolving Conflicts of Interest: The IRS requires charities to adopt a documented conflict of interest policy that will be enforced by the organization’s board of directors. This forbids any board member from abusing their position to further their own interests.
Additional Legal Obligations
A nonprofit board of directors must also perform some legal obligations. Depending on the state in which your organisation is based, these legal requirements may differ. They do, however, typically concentrate on three major areas: responsibility of care, duty of loyalty, and duty of obedience.
Duty of Care: This entails making proper use of the organization’s assets. Board members must specifically guarantee that the use of such monies promotes the interests of the organisation and people who benefit from its services.
Duty of Loyalty entails recognising and reporting any conflicts of interest, as well as making choices that benefit the organisation as a whole rather than a single board member.
Duty of Obedience: Board members must also guarantee that the organisation abides by all relevant laws and regulations while carrying out its purpose and bylaws.
Putting Together Your First Board of Directors
If you’re still in the process of forming your nonprofit, selecting the correct board members is critical to ensure the organization’s efficacy and stability. Here are a few pointers to get you started:
Establish Roles. Designating functional duties to individual board members may enhance the board’s overall efficacy and operation, whether you choose to designate elected offices or just define clear tasks for board members to complete.
Create and Adhere to Bylaws. Developing a set of rules that support your organization’s objective provides a solid basis for guiding board members’ decision-making. Furthermore, state law may mandate organisations to create bylaws.
Make Your Mission a Priority. Another effective technique for selecting board members is to look for applicants that are enthusiastic about your organization’s purpose and objectives.
Recognize any conflicts of interest. Conflicts of interest limit a board member’s capacity to successfully maintain your organization’s beliefs and best interests. As a result, while assessing board members for your organisation, it is critical to examine possible or current conflicts of interest.
Filling Board Positions
When selecting new members for your organization’s current board of directors, look for people who are passionate about your nonprofit’s objective. Here are a few pointers to think about as you begin your search:
Consider Your Volunteers. Outstanding volunteers may make wonderful additions to a board of directors. These people already give their time and energy to your organisation, and they will most likely bring the same devotion and goodwill to your board.
Investigate Candidates Among Loyal Donors. Donors are another category to consider when selecting new board members since they provide your organisation with funds. That is, they have a track record of devoting time and money to guaranteeing your nonprofit’s success and survival.
Extend Your Lookup. Diversifying your search to include other organisations will help you build a well-rounded board of directors.
What Exactly Are Elected Officers?
Elected officials are board members tasked with controlling the organization’s day-to-day operations and ensuring its long-term viability. The bylaws of the organisation should clearly describe each position’s responsibilities.
While elected officer responsibilities are not necessary in many jurisdictions, they may assist ensure the functioning of the board of directors. They may also serve as a basis for leadership.
The four most frequent elected nonprofit officials are:
Treasurer: The treasurer is in charge of analysing the organization’s financial health by keeping track of revenues and expenditures.
President: As the board’s head, the president often has control over critical operations such as contract signing and staff hiring and firing. This function is distinct from the CEO/executive director position, which is normally filled by the board after the president role has been assigned.
Vice President: The vice president assists the president. In many circumstances, the vice president takes over as president after the existing president’s tenure expires.
The secretary organises board meetings, which may involve scheduling meetings, alerting board members of the meeting schedule, arranging meeting agendas, and documenting meeting minutes.
Conclusion
Creating and running a charity requires the formation of a board of directors. This group should ideally advocate for your organization’s best interests in areas ranging from finances to public relations. To build or grow a board of directors that best represents the requirements of your charity, look for members who will respect your organization’s vision and purpose.