The board is responsible for ensuring that the organization is appropriately stewarding the resources entrusted to it and following all legal and ethical standards.
A board has a fundamental, legal responsibility to provide oversight and accountability for the organization. Referred to as the board’s “fiduciary” responsibility, the board must ensure that the organization is appropriately stewarding the resources entrusted to it and following all legal and ethical standards.
BoardSource has codified many of these legal and ethical standards as a part of our Recommended Governance Practices, which includes the following recommendations:
- The board should have more than the one annual meeting required by law. Most state laws require at least one annual meeting, but BoardSource believes that one meeting is insufficient for boards to provide proper oversight.
- The board must formalize a process for setting appropriate compensation for the executive and approve the compensation package. This ensures that the full board is confident that the executive is being appropriately compensated and that the organization is not opening the organization to the risks of excessive or inadequate compensation.
- The full board should review the Form 990 before it is filed. This ensures that board members are familiar with the information reported on the 990 and that it accurately reflects the organization’s financial and operating environment.
- The board must ensure that there are policies related to disclosing and managing conflicts of interest and that there is a strong whistleblower process in place.
- The board should ensure that an annual audit is conducted and that the board engages directly with the audit firm to discuss the results.
To increase transparency around organizational practices, including the work of the board, nonprofit organizations can update their GuideStar profile to provide additional information about their leadership practices. Learn more about BoardSource’s partnership with GuideStar.
But true oversight and accountability goes far beyond these core practices, and requires active engagement from each individual board member. BoardSource has a number of relevant resources, a few of which are listed below.
Guides, Tools, Templates, and Infographics
Ethos of Transparency
Bylaws: Effective Rules for Your Board
Programmatic Oversight Tool
Identifying and Managing Risk