Nonprofit boards are responsible for a broad spectrum of legal and fiduciary duties. These duties range from advancing their organization’s mission while avoiding any conflicts of interest (aka their duty of loyalty) to ensuring proper use of assets (duty of care), maintaining compliance (duty of obedience), and interfacing with the community. Nonprofit boards often work with the organization's leadership to set the strategic direction for the organization and ensure that internal controls are in place to help manage risk. While they are typically not involved in day-to-day operations, they engage in an advisory capacity to ensure the organization's work and execution are aligned with the mission and strategy. Here’s a breakdown of 10 of their most basic obligations.
NPO Board of Directors' Basic Responsibilities
1. Determining and upholding the organization’s mission
The board’s most fundamental duty is to ensure that everyone involved with your nonprofit understands why it exists. This duty includes writing a mission statement that outlines:
- What your organization does, and what its goals are
- Who your nonprofit serves
- Why its work is important
An NPO board of directors also has the responsibility of working to prevent mission creep by ensuring programs, activities, and services stay in line with the organization’s overall purpose.
2. Conducting strategic planning
To meet organizational goals, a nonprofit board of directors must work with staff and volunteers to conduct strategic planning and evaluate the cost and effectiveness of outcomes. Strategic plans may be:
- Operational (to address day-to-day and annual objectives)
- Short-term (to advance specific projects or priorities)
- Long-term (to guide your nonprofit’s future direction)
Strategic decision-making often involves setting the direction for staffing, program initiatives, fundraising, and resource allocation. Boards work closely with senior leadership to establish the organization's mission, vision, and strategic goals. They provide input on the organization's direction, priorities, and overarching strategies.
3. Choosing an executive director
Nonprofit boards appoint and supervise the executive director (or chief executive officer) who will manage day-to-day operations. This duty typically includes:
- Assessing the organization’s needs
- Determining essential leadership traits and skills
- Setting clear role expectations and objectives
- Evaluating performance and setting compensation
- Succession planning
The board chair must also liaise directly with the NPO's executive director to further the organization’s mission.
4. Providing financial oversight
Another vital board obligation is overseeing a nonprofit’s financial health by:
- Assessing program costs and monitoring budgeted versus actual spend
- Reviewing statements of financial position, operations and cash flows (preferably monthly) and ensuring tax compliance
- Developing internal controls and policies to prevent loss, theft, and financial confusion
Financial oversight is a fundamental responsibility since it is essential for maintaining donor accountability in addition to regulatory compliance relating to the organization's nonprofit status.
5. Ensuring legal integrity and accountability
As trustees, an NPO’s board members must keep the nonprofit compliant and accountable by ensuring that it:
- Follows all applicable laws and regulations
- Makes annual tax filings and GST/HST payments when required
- Keeps accurate records to meet donor and governmental information requests
It’s also part of an NPO board of directors' responsibilities to understand their organization’s code of ethics, constitution, and bylaws so they can preserve legal integrity by adhering to them.
6. Maintaining sufficient resources
Your board plays an integral role in maintaining adequate resources to fulfill your nonprofit’s mission by:
- Developing and approving the annual budget for operations, programs, staffing, and more
- Ensuring resources are allocated to the right activities
- Identifying where additional fundraising may be necessary to maintain cash resources
Since every board member should contribute to annual fundraising efforts in some capacity, it’s best to clarify these expectations in writing. This is often outlined in the organization's code of ethics.
7. Monitoring programs and services
To ensure that the NPO's activities stay consistent with its mission, the board’s responsibilities also commonly include:
- Gathering data on who’s using your programs and services
- Monitoring trends around participation and client categories
- Determining how much to budget for specific activities
The board should also work with the NPO's executive director to measure program success and participant satisfaction.
8. Recruiting and training board members
With first-hand knowledge of the board’s strengths and weaknesses, existing members generally take responsibility for bringing on qualified new members. This duty often includes:
- Identifying board skill, insight, or experience gaps and creating position listings to fill them
- Clarifying roles and responsibilities before shortlisting promising candidates
- Creating a conflict-of-interest policy and holding board meetings to discuss whether prospective members can act in the organization’s best interests
In addition to recruiting new board members, the board should also set these recruits up for success by assisting with onboarding and training.
9. Enhancing the NPO's public image
As a key link between the public and the nonprofit organization, all board members should be prepared to:
- Consistently speak well of their organization and advocate for its programs and services
- Help create its public brand through grassroots engagement and community outreach
- Determine who its public spokesperson should be, and how the spokesperson should interface with the media and potential funders
Upholding a healthy public image may also require that the board maintain an ongoing public relations program.
10. Assessing its performance
From time to time, it’s important to assess how well a NPO's board of directors' responsibilities are being upheld. Along with evaluating their own performance every few years, members of the board should earmark areas for development or improvement.
Since it’s essential to understand what they’re doing right and what isn’t working for the nonprofit organization, it may be worth hiring an outside consultant to help facilitate the board’s assessment—especially if there are ongoing issues or conflicts. Having an unbiased, outside opinion is helpful when dealing with board governance and alignment with the organization's leadership team.
Need financial leadership on your board? Enkel can help! At Enkel, we provide nonprofit organizations across Canada with controllership services that include budgeting, forecasting, scenario planning, and more. With years of nonprofit accounting experience, our nonprofit experts are perfectly positioned to provide financial oversight to your board. Contact us today to learn more!
