While nonprofit governance can take many forms, your board should follow specific nonprofit board governance best practices.
A nonprofit board leads the organization forward in its mission, while meeting and maintaining expected governance standards. While nonprofit governance can take many different forms, a board’s role remains the same: to provide effective leadership, strategize for growth, and maintain accountability for the organization.
Performed correctly, nonprofit board governance gives beneficial oversight to ensure your organization effectively accomplishes its mission, while abiding by governmental rules and regulations. A board’s failure to provide proper guidance harms the effectiveness of your organization and could result in significant legal implications.
Follow these nonprofit board governance best practices to avoid missteps in nonprofit board governance and enhance your nonprofit’s impact.
What is Nonprofit Governance?
Put simply, nonprofit governance is the process of providing oversight for a nonprofit organization. Nonprofit governance follows a decision-making system to advance the organization’s goals by providing leadership and accountability.
Responsibilities vary depending on the nonprofit, but nonprofit board governance includes making hiring decisions, maintaining ethical practices, strategizing for growth, and providing financial accountability for the organization.
How Do Nonprofit Governance Models Differ?
Since every nonprofit is different, it’s no surprise the governance of nonprofit organizations differ as well. Governance for nonprofits can take many forms, depending on the nonprofit’s mission, size, and funding avenues. As an organization grows or changes, it may modify its governance structure to increase effectiveness and make a greater impact.
Some common nonprofit governance models include:
- Advisory: Advisory boards function just like the name implies — members work in an advisory role to assist an executive officer or board of directors. An advisory board helps by thoroughly examining an issue and making recommendations so executive staff or the board of directors can take appropriate action.
- Collective: In this model, the board and staff cooperate and work together, without any organizational hierarchy. Decisions are made by group consensus.
- Governing: Operating under this model, a board provides oversight and accountability for the organization. A chief officer and staff, or volunteers carry out the daily operation of the organization.
- Managing: This working model enables board members to form nonprofit governance committees to manage various administrative and operational aspects of the organization.
- Patron: This model relies on significant donors who further an organization’s cause through fundraising. While the board members contribute financially to the organization, their community influence encourages others to give as well.
Keep in mind, many organizations find a combination of models works best. This could include forming a governing board but also establishing working committees to perform needed tasks within the organization.
While models for governance for nonprofits can affect an organization’s overall effectiveness, following nonprofit governance best practices remain crucial for the success of any organization.
8 Nonprofit Board Governance Best Practices to Follow
While each board possesses different responsibilities, following nonprofit board governance best practices increases a nonprofit’s effectiveness and ensures compliance with legal requirements.
On a foundational level, top nonprofit board governance best practices involve examining, planning, and communicating with stakeholders. Many nonprofits utilize digital nonprofit board management software to increase collaboration and productivity, build strong board leadership, and ultimately, grow and mentor a successful organization.
1. Prepare for productivity
Productive boards meet on a regular basis and provide clear agendas, reports, and presentations to members several days in advance of meetings. This gives busy board members time to acquaint themselves with the issues at hand, allowing them to formulate questions or perform follow-up research.
Advanced meeting preparation gives boards a clear advantage by enabling them to share materials in advance digitally, cutting down on time-consuming manual tasks and allowing last-minute changes. Real-time information eliminates confusion and improves accuracy. When board members attend meetings fully informed, it enables focused, strategic discussions that lead to action.
2. Delegate duties
Good governance for nonprofits often entails delegating duties to committees or task forces to increase efficiency.
An organization’s bylaws often regulate committees, delegating them to perform a certain task. An example is a nonprofit governance committee, which examines a board’s structure and practices. Other committees could include areas of finance, fundraising, and marketing.
A board usually appoints a task force on an as-needed basis. Individuals with more time or expertise in a particular area can fully examine an issue and recommend particular actions to the board. This gives the board a fresh outlook, leading to a greater array of potential solutions.
3. Maintain records
A key responsibility of not-for-profit governance includes maintaining records and overseeing financial reporting. This encompasses everything from accurately recording meeting minutes to thoroughly reviewing financials and tax documents.
An organization also should establish an efficient organizational system for documents, and set a policy for retaining and destroying records. Organizations must keep accurate accounting of donations and expenditures, and establish procedures for checks and balances to guarantee financial integrity. Depending on the organization’s size, audits ensure financials stay above-board. At the end of the day, an organization’s financial oversight rests with the board.
4. Perform assessments
Board assessments provide critical information into how your organization can improve. Assessments can take several forms, such as board or committee assessments or individual employee evaluations. At its core, assessments allow respondents to honestly measure performance toward objectives.
Obtaining candid feedback and evaluating results is the first step toward fixing real (or perceived) problems. It gives your organization the opportunity to change direction or create different solutions, if needed. Providing an avenue of open, clear communication allows everyone’s voice to be heard, so your organization can work as a team to effectively achieve goals.
5. Identify conflicts of interest
When it comes to governance for nonprofits, establishing trust remains of utmost importance. The IRS recommends organizations adopt a conflict of interest policy to offer protection against charges of impropriety, and organizations risk losing their tax-exempt status if operating in a manner inconsistent with charitable purposes.
A conflict of interest policy should require those with a potential conflict, or appearance of conflict, to disclose the conflict and abstain from making decisions relating to it. Following ethical practices remains essential for the health of the organization and for retaining trust with the organization’s stakeholders and surrounding community.
6. Plan recruitment
Your organization may possess a dynamic, engaged board, but what happens when a member’s term expires? Planning ahead for open board seats, and strategizing for diverse composition, ensures your board provides strong leadership.
Identifying board member roles and keeping track of term limits allows your board to function more efficiently, because a board can plan for potential new members without a sudden vacancy. This gives the board time to find potential nominations, allowing them to examine recruits’ background, skills, and other factors that set them apart. A balanced board leads to a greater variety of thought, resources, and solutions.
7. Provide orientation
New members should thoroughly understand the nature of the board’s responsibilities and procedures. A new member orientation gives a detailed overview of the organization’s rules and regulations, financial documents, and other important policies and procedures. Each board member should understand their legal responsibility in providing oversight and accountability.
In addition to orientation, consider offering board members education resources and training opportunities to increase their knowledge and improve their leadership. While that could relate to specific offices or roles within your board, it could also correlate to continued education into your organization’s mission. After all, your board operates to further the goals of your organization.
8. Manage risk
Risk management ensures the health and longevity of your organization. A board who works actively to identify, assess, and manage risks protects the organization and sets the stage for growth.
Nonprofit governance best practices include performing an annual risk assessment to determine and prioritize potential risks. This includes examining potential legal and insurance risks, operational risks, and financial and funding risks, among other areas. Some boards may choose to hire a professional to help with the process. Proper risk management protects an organization’s assets, ensuring its work can continue into the future.
Nonprofit Governance for the Future
Nonprofit governance is the foundation of your organization. Nonprofit board governance best practices enhance the effectiveness of your organization, ensuring it follows legal regulations and operates in a manner consistent with its vision. A board with a high level of commitment to leadership, accountability, and progress drives the organization toward growth and success.
If you seek to strengthen your nonprofit governance and streamline your board’s communication and collaboration, consider OnBoard’s nonprofit board management software. Start your free trial to see how you can empower your board today.
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