Becoming a not-for-profit board member can be an exciting and fulfilling experience—but with it comes a great deal of responsibility.
As not-for-profit organizations (NPOs) are held to increasing levels of scrutiny and regulatory compliance obligations, boards must be able to demonstrate that funds are used responsibly, information is safeguarded, and services have a positive impact on the community.
To run the organization effectively, it’s crucial for board members to understand their responsibilities. The exact job description of the role can sometimes be unclear and may vary depending the organization’s focus or size, but across almost every board there are common duties and accountabilities.
Here are nine key things that a not-for-profit board is responsible for:
1. The organization’s vision and mission
The board sets the tone and purpose of the NPO by establishing and upholding its vision and mission. These two items lay the foundation for the organization and all of its activities, policies, and plans.
Board members should review the NPO’s vision and mission on a regular basis and make sure they are clearly communicated to management, staff, and other key stakeholders.
2. Strategic planning
Similar to the vision and mission, board members are responsible for setting the strategic direction of the organization. A strong plan determines your organization’s goals and maps out how it will achieve them. This includes ensuring that management and staff are well positioned to carry out tactics and activities, adapting the plan to environmental factors, and keeping stakeholders informed on the NPO’s progress.
Good governance is critical for any not-for-profit organization. It ensures that the organizational structure and business processes are clear and have oversight, and that decisions are in the best interest of the NPO and its stakeholders.
For the organization to operate and stay compliant, board members must ensure the fundamental elements of governance are in place and working effectively. This can include governance of the overall organization and/or specific projects and functions.
4. Financial management
Proper management of the NPO’s finances includes establishing and maintaining accounting procedures, budgeting, financial record keeping and reporting, resource allocation, and asset protection. The board also oversees annual auditing by an independent accounting firm.
All board members should have enough financial literacy to understand financial statements and terminology, to allow them to ask questions and make informed decisions for the organization.
5. Tax and regulatory compliance
As a board member, you are responsible for ensuring the NPO meets all tax and financial reporting requirements. This can include paying sales, income, and payroll tax; filing government remittances, such as CPP and EI deductions; and filing quarterly and annual reports.
It’s important to know the federal and provincial tax and regulatory requirements for your organization, including any due dates for filing. In some cases, board members can be liable if the NPO does not meet certain tax obligations. A professional advisor who is experienced with the not-for-profit sector can help you understand the requirements and stay in compliance.
6. Risk management
As fraud and cybersecurity issues become more prevalent in the not-for-profit sector, boards must take an active role in managing risk. A variety of stakeholders, including donors, members, government organizations, and the public, will want assurance that your NPO is financially and technologically secure.
Failure to manage risk can result in accreditation loss, financial penalties, and reputation loss. There are also circumstances where board members could be legally responsible if funds are missing due to fraud. Board members should make sure the organization has a plan for risk prevention, detection, and recovery that includes regular reviews and updates to technology, processes, and policies.
7. Internal controls and policies
Strong policies and internal controls are an integral part of risk management, but they also provide a framework for board members to achieve their organizational and financial management responsibilities.
Examples include (but are not limited to) controls for financial transactions, documentation, data security, and segregation of duties, as well as policies for codes of conduct, conflicts of interest, procurement, and recruitment and succession. Board members should also draft and review bylaws for the organization that align with provincial regulations.
Board members need to make sure that bylaws and procedures are in place to recruit and elect new members. This includes having succession plans for both tenured and term roles and developing onboarding programs to get new members up to speed.
One of the most important aspects of recruitment is finding the NPO’s executive director. This is a crucial role for the entire organization. The board is responsible for conducting a search and choosing someone who is qualified and able to manage operations, report on performance, and act as a bridge between the board and management or staff.
9. Community outreach and advocacy
Building strong relationships and goodwill with the community, including donors, volunteers, and clients, is a vital part of serving on a not-for-profit board.
Board members are expected to support the organization’s initiatives and help achieve its goals. This can include participating in fundraising and donor events, promoting the NPO’s services, engaging in government advocacy, public relations, and building general awareness.
How can board members learn more about their role?
Being on a board is an opportunity to support a worthy cause or issue and contribute to the community—not to mention, gain valuable skills and experience.
To help you understand your role as a board member, including best practices on strategic planning, financial literacy, fraud prevention, and more, check out BDO’s NPO Board Guide series.
Tim Sothern, Partner