The Basic Facts about Nonprofit Governance

A great deal of thought, time, attention, and organization goes into forming and maintaining a nonprofit organization. One of the most critical elements of a successful nonprofit is the board, which holds the legal responsibility for the operation of the nonprofit organization. Whether you are considering starting your own nonprofit, or you are interested in sitting on a board, it is important to understand what governance really means for your organization.

What is Nonprofit Governance?

Nonprofit governance refers to the board of directors, which operates as the backbone to most nonprofit organizations. Governing boards have a lot of responsibility and input into how the organization is managed. Some of the most crucial responsibilities include:

  • Establishing the purpose and mission of the business
  • Selecting the Executive Director (if not already established)
  • Providing support for the Executive Director
  • Setting policies and ensuring effective planning
  • Monitoring and strengthening services and programs
  • Overseeing finances, and ensuring adequate resources
  • Protecting assets
  • Ensuring ethical and legal integrity
  • Enhancing the public standing of the business

These are only some of the responsibilities of governing boards.

Nonprofit Governance and the Law

In addition to the primary roles above, nonprofit boards must also adhere to state and federal laws. The American Competitiveness and Corporate Accountability Act (Sarbanes-Oxley Act) is one of the most relevant pieces of legislation. The Sarbanes-Oxley Act regulates how corporate boards manage financial controls. In terms of nonprofit organizations, Sarbanes-Oxley may not be wholly applicable, but many nonprofit organizations find it beneficial to voluntarily adopt some of the provisions, such as:

  • Board oversight and committees
  • Disclosure
  • Document retention
  • Whistleblower policies
  • Audits

The Internal Revenue Service (IRS) also recommends nonprofit organizations consider governance practices, like Sarbanes-Oxley, to determine if the provisions could benefit the organization and help ensure compliance with applicable tax laws.

Nonprofit Governance Gone Wrong?

Governing boards have a lot of responsibility and power. A poorly organized or unethical board, or board member, can quickly make your nonprofit organization a disaster. There are several ways that you can protect your organization and assets in the event of a questionable board or board member, such as:

  • Contact your state association for nonprofits
  • Look into community-based nonprofit resources
  • Contact a nonprofit management group

Many people also find it helpful to contact a nonprofit law attorney to help be certain that their legal rights are protected when a governing board goes wrong.

Contact Daic Law today to speak with our nonprofit attorney about your governing board and your legal rights. Our goal is to protect your legal rights and be sure that your nonprofit organization is legally and ethically secure. Contact us by calling (713) 808-5246, or send us an email at info@daiclaw.com.

Related Articles

Six Steps to Starting a Nonprofit Organization – Part 1

Six Steps to Starting a Nonprofit Organization – Part 2

Sources

https://www.councilofnonprofits.org/tools-resources/board-roles-and-responsibilities

http://nonprofitanswerguide.org/boards-governance/