For the past two weeks I have been writing about the three roles of a nonprofit board of directors. A nonprofit board of directors has three roles: Setting organizational direction, Ensuring the organization has the necessary resources to do its work, and Providing oversight. To learn more about setting organizational direction, and ensuring resources are in place for the nonprofit, please go back and read the last two posts.
Providing oversight
The board has the responsibility to provide oversight in several key areas.
Program Oversight – While the board is not involved in direct program implementation, they are responsible for planning, monitoring and evaluating programs and services offered by the organization. They may ask if the programs and services are in alignment with the organizational mission and if they are meeting an identified need in the community. The board is also responsible for evaluating the effectiveness of the programs and services offered; in other words, are the programs making a difference in the lives of those served?
Financial Oversight – The board of directors is directly responsible for providing oversight of the finances of the nonprofit. It is part of their role to establish budget guidelines, approve an annual budget and oversee the management of the organization’s finances. Additionally, as I wrote last week, it is the board’s responsibility to ensure the organization has the funds needed to fulfill its mission.
Risk Management – We don’t like to think that “bad things happen in nonprofits,” but they do…it is the board’s responsibility to ensure that there are systems and policies in place to minimize the risks that nonprofits can encounter. Such systems include internal financial controls, financial policies, human resource policies, etc. The key is…once these policies are in place, it is the responsibility of the board to ensure they are being enforced.
Legal and Moral Oversight – It is the responsibility of the board to ensure the organization is in compliance with all federal, state and local laws. It is also the board’s responsibility to ensure the organization is acting in accordance with its stated values, avoids conflicts of interest, and has accountability.
Evaluation of the Chief Executive Officer – Since it is the board’s responsibility to ensure the necessary resources are in place, including human resources, it is also their responsibility to evaluate the chief executive officer on an annual basis.
As we wrap up this series on board roles and responsibilities, it is important to note that these are not optional. The responsibilities discussed are mandated by the Internal Revenue Service for all nonprofit organizations.
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