Different from for profit entities, nonprofits must be two things:
1) Organized as a nonprofit with the correct paperwork (usually nonprofit articles of incorporation and bylaws) and,
2) Operated as a nonprofit, which means operating under the oversight of a board of directors. Sometimes the board members are simply called "directors"--not to be confused with THE director of the organization...who may or may not be on the board as a member of the board of directors. Confused, yet?? Hopefully I can clarify by asking and answering some of the questions I, myself, had when I first jumped into the nonprofit world:
Who chooses the first board members?
When founding a nonprofit, the board selects itself. Seems funny, but that's how it works. Usually there are one or two people who are passionate and excited about a mission and a cause, and they (usually by default) start working and sharing about what they're doing, which makes others excited about their cause, too! In my case, when I started our group 8 years ago, I started sharing about my idea on social media and in my circle of friends, which quickly turned into informal, and then formal "information meetings." In those meetings, I would let people know that we're looking for board members and to contact me if they were interested. Through that, I was able to gather a group of 5 ladies (including myself) to form our founding board. In hindsight, it might have helped to have some information for me and for them about what it meant to BE on a board *facepalm*, but we learned pretty quickly as we went! Hopefully I can help get you a few steps ahead of me. :)
What does it mean to be on a nonprofit board?
The role of nonprofit boards is defined by each state, but it's very similar in all states and looks like the following (excerpt taken from the HomeschoolCPA):
Duty of Care
Read and understand mission, vision, and governing documents.
Attend board and committee meetings.
Be informed and prepared to participate in decision-making and oversight.
Exercise same care as a prudent person would in the handling of their own affairs.
Duty of Loyalty
Be prepared to put organizational objectives above self-interest.
Establish and follow written policies concerning conflict of interest situations.
Disclose personal financial interests when needed/excuse yourself from voting.
Avoid entering into business relationships between board members and the organization. That means hiring board members as teachers, bookkeepers, etc. Hired workers should step down from serving on the board.
Duty of Management
Develop policies that assure the financial responsibility of the organization.
Keep accurate and complete records of income, expenses, investments, and minutes.
Develop budget as a blueprint for program plans and all organizational spending.
Develop fundraising goals and assist the organization in acquiring adequate resources.
Duty of Compliance
Understand and comply with governing documents, including bylaws and code of conduct.
Know and comply with state and federal laws governing non-profit organizations, including registration and reporting requirements.
Practically, this means regular (monthly or quarterly) board meetings, and potential discussion and decision making between board meetings among other things. Being on a nonprofit board can be a wonderful thing to be a part of! It is ideal to have at least one member on the board who has been on a nonprofit board before. Either way, there are numerous resources out there for you to learn quickly how to be on a board, and how to conduct board meetings. Don't let it scare you but be willing to learn!
For more information on anything you read above, you can reach out to me directly for a private consultation where I can answer your questions more in-depth. CLICK HERE to schedule a consultation.
NONPROFIT BOARD RESOURCES: