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Board members of Not-for-Profits who are negligent in the duties open themselves to civil or criminal penalties.

Not-for Profit Board Members’ Call to Duty

Though generally not involved in the day-to-day affairs of a not-for-profit organization, the board of directors stands as the ultimate authority—responsible for the actions of the organization’s executives, staff and volunteers. While board members have various responsibilities, generally through their committee assignments, they all have well-established duties:

Duty of Care

This involves proper stewardship of the not-for-profit’s resources—including financial, material, human and goodwill—in order to cultivate sustainability. While they are not expected to always be right, board members must exercise informed, reasonable judgement in making decisions. One example of this is the selection (including setting compensation) and annual review of the organization’s executive director.

Duty of Loyalty

Board members must act in good faith on behalf of the organization and not in their own self-interest. For example, it could be considered a conflict of interest if a board member who owned a construction company bid on a contract for a not-for-profit’s building expansion.

Duty of Obedience

Board members are required to obey all applicable local, state, and federal laws pertaining to the not-for-profit, as well as carry out the organization’s mission in an ethical manner. Examples of this are the timely, proper filing of IRS Form 990; and completing the necessary paperwork to maintain 501(c)(3) status.

Duty of Fiduciary

Board members are expected to carefully oversee the organization’s finances. This aids in strategic planning as well as provides transparency for donors, the public and applicable governmental agencies. This includes establishing budgets, accounting systems and controls, financial reports for internal and independent review, meeting minutes, and fundraising goals and strategies. 

Those board members who are negligent in the aforementioned duties open themselves to civil or perhaps even criminal penalties.

About Jimmy Mo

Jimmy Mo CPA, Partner, EisnerAmper Not-for-Profit Services Group, has expertise in not-for-profit and health care industries, working with organizations such as museums, foundations, cultural/religious and research/scientific, among many others.

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