The number one reason why people don’t give to a nonprofit is trust. Building trust comes down to transparency. In essence, do they know enough about your organization to give up their hard-earned money?

In today’s marketplace, donors and grantors are demanding more accountability. Gone are the days where it was difficult for potential donors to find information on nonprofit organizations. Not only can you look up anything online and have news articles on specific topics sent to your inbox, the 990 informational returns and financial statements for any entity can be found online.

Board members need to understand their roles and responsibilities in order to protect the reputation of the organization because donors are likely talking about your organization and the work you’re doing in the community. Don’t let a lack of knowledge or common board governance myths get in the way of doing your part as a board member.

For more information, download our guide to nonprofit leadership here.

Being on a nonprofit board is rewarding, but it doesn’t come without some responsibilities. In fact, a common misperception about being on a nonprofit board is that, because you are volunteering your time without pay, you aren’t liable for anything. In fact, there are instances where you may have to pay out-of-pocket fees or fines for not fulfilling your duties as a board member.

Board duties can be boiled down to three categories: duty of care, duty of obedience, and duty of loyalty. Failing to act with due care in governing the organization, engaging in a conflict of interest transaction or act of disloyalty, or failing to follow the organization’s statutes are all reasons you could be held liable as a board member.

The duty of care means you, as a board member, act on behalf of the organization to make prudent decisions as any normal person would. To make those decisions, you need to be involved and engaged, attend meetings, and ask questions.

The duty of loyalty means you put the organization’s interests ahead of your own.

The duty of obedience means you are a steward of the organization and involved in its mission. Deviating from the mission of the organization has consequences. Nonprofits are given tax-exempt status because their product or service is for the general public and the good of the community. Straying from that work could result in losing your tax-exempt status.

As an individual board member, your role and responsibilities are:

• Attend board meetings
• Be prepared and informed
• Speak your mind and ask hard questions
• Go with your gut feeling (because it’s often correct)
• Be a steward of your organization’s assets
• Be a servant leader in your organization

In addition to fulfilling your duties, there are preventative measures you can take to protect yourself as a board member, but they do not replace or cover you if you are neglecting your responsibilities.

It is a best practice to keep accurate minutes at board meetings. To prove you’ve acted in good faith of the organization, you need a tracking mechanism to show what you talked about and the conclusions the board came to. Remember, if it’s not documented, it didn’t happen. Also, be sure to include any members who abstain from voting or vote against a motion in your minutes.

There’s also some federal protection through the Volunteer Protection Act of 1997, and Oregon has special protection for those who serve as directors without pay. Directors and officers (D&O) insurance can protect in many situations but should not be considered a catch-all and will not cover any board member who has not fulfilled the three duties.

Noncompliance is the number one reason nonprofits lose their tax status, and unfortunately, a few common myths can lead board members on the path to noncompliance. Below are eight commonly held beliefs about being on a nonprofit board and what you need to know instead:

If you have any questions, please reach out to our nonprofit team. To find out more about how to be an effective leader on your nonprofit board, download our ebook here.