The board of directors bears the primary responsibility for ensuring that a charitable organization fulfills its obligations to the law, its donors, its staff and volunteers, its clients, and the public at large. The board must protect the assets of the organization and provide oversight to ensure that its financial, human and material resources are used appropriately to further the organization’s mission. The board also sets the vision and mission for the organization and establishes the broad policies and strategic direction that enable the
organization to fulfill its charitable purpose.

When the board determines that the organization is ready to add paid staff, the board is responsible for selecting, overseeing, and, if necessary, terminating the chief staff officer. In smaller, un-staffed organizations, the board may have a more direct role in overseeing and sometimes delivering the organization’s programs and services. In larger organizations, the board generally works as a strategic partner to the staff leadership in ensuring that the organization meets its goals and commitments.

• The board is responsible for governing and overseeing the affairs of the organization.

• The organization’s mission and strategic direction are set by the board in conjunction with the CEO and senior staff, and the results should then be used to guide decisions.

• Clear policies (compensation, fiscal, and governance) are critical to guide and protect the board and the organization.

• All state laws require nonprofits incorporated in their state to have a board of directors.

• IRS Form 990 contains a series of questions concerning the board and its governance practices— including a question asking whether the IRS Form 990 was provided to the full board for review.

Federal, state and local laws governing charitable corporations and trusts require that each organization have a governing body that is entrusted with the power to act on behalf of the beneficiaries of the organization.

The duties and requirements for directors of charitable organizations are generally determined by the laws of the state in which the organization was founded or incorporated. Some states also have established requirements for the board of directors of any organization that conducts activities, particularly fundraising, within its borders.

The Revised Model Nonprofit Corporation Act, adopted in 1987 by the American Bar Association’s Subcommittee on the Model Nonprofit Corporation Law of the Business Law Section, sets forth parameters for the structure and composition of boards. It also sets forth duties of loyalty and due care by requiring that: “a director shall discharge his or her duties as a director, including his or her duties as a member of a committee (1) in good faith; (2) with the care an ordinarily prudent person in a like position would exercise under similar circumstances; and (3) in a manner the director reasonably believes to be in the best interests of the corporation.¹

The Revised Act has been adopted in whole or in modified form by 23 states ² for regulation of nonprofit entities, including charitable organizations. The original Model Act (developed in 1952) has been adopted in whole or in modified form by six other states and the District of Columbia.³

¹ Revised Model Nonprofit Corporation Act § 8.30 

² The Act has been adopted in whole or with modifications in Alaska, Arkansas, California, Colorado, Georgia, Hawaii, Idaho, Indiana, Maine, Minnesota, Mississippi, Missouri, Montana, Nebraska, North Carolina, Oregon, South Carolina, Tennessee, Utah, Vermont, Washington, West Virginia, and Wyoming. 

³ Alabama, New Jersey, North Dakota, Texas, Virginia, and Wisconsin have adopted the original Model Nonprofit Corporation Act as promulgated or modified.

1. Are we all aware of our collective board responsibilities? If not, how can we increase awareness of these responsibilities?
2. The mission should drive the organization’s strategic direction.Therefore, it is important that the board, CEO, and senior staff agree on how to further the organization’s mission. How close are we to this ideal? Does the board regularly review and approve any changes to the organization’s mission? 
3. One of the ways the board protects the organization’s assets is by overseeing its fiscal affairs. How recently have we evaluated our performance in this area and looked for ways we could strengthen our oversight role related to the following? 

• Reviewing and approving the organization’s annual budget
• Approving key financial transactions 
• Approving fiscal and governance policies 
• Establishing compensation policies and practices How has the board adapted our policies as the organization has changed? What more might we need to do?