(This blog was not written with the assistance of artificial intelligence.  I actually wrote it myself the old fashioned way.)

Chapter 617 – Corporations Not For Profit of the Florida Statutes.

What Every Nonprofit Board Member Should Know  produced by the State of Tennessee.

These are just two states that I chose to highlight because of my experience.  In short, serving on a board of directors of a nonprofit organization is serious and important.  This service should not be taken lightly because there are important legal obligations board members assume when they accept the position.  It is so important that they are codified in state statutes.

If you think about it, the role of the Board of Directors for a nonprofit organization is important because it is the body responsible for protecting the “public trust”.  A nonprofit is formed to do a “public good” which is why it has a tax exempt status.  Therefore the government needs the Board to oversee this tax exempt benefit.

The legal duties of a nonprofit board members include Duty of Care, Duty of Loyalty and Duty of Obedience.

Duty of Care – this is fairly straightforward – a board member ought to perform his/her duties in a manner that a prudent person would in a similar situation. You need to be familiar with the organization’s activities and financial condition.  That is right.  You have a legal  obligation to understand the organization’s financial condition.  Claiming not to understand financial statements is not acceptable and is not a “legal out”. This means you should be reviewing financial statements each month, and if you don’t understand them, you should be educating yourself to gain an understanding.  No exceptions!  (Rob Lane speaks to this in Podcast #8 – The Mystery of Nonprofit Financials)

To honor this Duty of Care, a board member must prepare for, attend and participate in board meetings.  The board member must act in good faith when making decisions.

Duty of Loyalty – a board member must act in the best interest of the organization.   This means a board member should not seek to personally benefit at the expense of the nonprofit, nor should a board member seek to benefit a third party at the expense of the nonprofit organization.

This seems simple, doesn’t it?  Most times it is.

However, potential conflicts can arise which is why a conflict of interest policy is important and all conflicts should be disclosed.  For example, if a board member owns a marketing company, and the nonprofit organization needs marketing services, there is no “law” that says the board member cannot provide those services for remuneration.  What is important is the relationship is properly disclosed, and there was a proper bidding of services.

Best practices for NonProfit Board of Directors suggest an organization have a Conflict of Interest policy and have each Board member disclose conflicts, in writing, on an annual basis.

Duty of Obedience – THIS IS A BIGGIE – a board member must make decisions which uphold the organization’s bylaws (that means you need to review these.. yes boring, but important), which support the mission, and to not make decisions which conflict with the goals of the organization.  A board member must ensure the organization is compliant with applicable laws and regulations.

To fulfill this Duty, a board member must examine all governing and legal documents.  (A few you should review include:  Bylaws, Tax filings (990 or 990PF), Financial Audit, Strategic Plan, etc.)

Serving on a nonprofit board is an honor and a privilege.  It comes with legal obligations   codified in state statute.  Here is a nice resource to share with your Board of Directors:

Roles and Responsibilities of the Board – a summary produced by NH Center for Nonprofits.