Nonprofit boards are responsible for a broad spectrum of legal and fiduciary duties.
These 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.
To help you understand the responsibilities of nonprofit boards better, here’s a breakdown of 10 of their most basic obligations.
10 NPO board of directors' responsibilities
1. Determining and upholding the organization’s mission
The board’s most fundamental duty is ensuring everyone involved with your nonprofit understands why it exists.
This 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
It’s also one of an NPO board of directors' responsibilities to prevent mission creep by ensuring programs, activities, and services stay in line with your organization’s overall purpose.
2. Conducting strategic planning
To meet organizational goals, a nonprofit board of directors must work with staff and volunteers to both conduct strategic planning and evaluate outcomes in terms of cost and effectiveness.
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 frequently involves things like staffing, program initiatives, fundraising, and resource allocation.
3. Choosing an executive director
Your nonprofit’s board is responsible for appointing and supervising the executive director (or chief executive officer) who will manage day-to-day operations.
This typically includes:
- Assessing your 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 be prepared to liaise directly with your executive director to further the organization’s mission.
4. Providing financial oversight
Another key board obligation is overseeing your nonprofit’s financial health by:
- Assessing program costs and monitoring budgeted versus actual amounts
- 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
This is an especially important responsibility since proper financial oversight is essential for remaining accountable to donors.
5. Ensuring legal integrity and accountability
As trustees, your organization’s board must keep your nonprofit compliant and accountable by ensuring you:
- Follow all applicable laws and regulations
- Make annual tax filings and GST/HST payments when required
- Keep accurate records to meet donor and governmental information requests
It’s also part of your NPO board of directors' responsibilities to understand your 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
- 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.
7. Monitoring programs and services
To ensure activities stay consistent with your mission, the board’s responsibilities also typically include:
- Gathering data on who’s using your programs and services
- Monitoring trends around participant numbers and user categories
- Determining how much to budget for specific activities
The board should also work with your 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 recruits.
This may include:
- Identifying 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 interest
In addition to recruiting new board members, the existing board should also set these recruits up for success by assisting with onboarding and training.
9. Enhancing your public image
As a key link between the public and your nonprofit, all board members should be prepared to:
- Consistently speak well of your organization and advocate for its services
- Help create its public brand
- Determine who its public spokesperson should be, and how they should interface with the media and potential funders
Upholding a healthy public image may also require that your board maintain a rigorous public relations program.
10. Assessing their own performance
From time to time, it’s important to assess how well your NPO 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 your organization, it can be worth hiring an outside consultant to help facilitate the board’s assessment—especially if there are ongoing issues or conflicts.
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!