Where can I find information on a board's legal duties?
The board acts as trustee of the organization's assets and ensures that the nonprofit is well managed and remains fiscally sound. In doing so, the board must exercise proper oversight of the organization's operations and maintain the legal and ethical accountability of its staff and volunteers.
The main legal responsibilities of a nonprofit board are often summarized in the "three Ds":
Duty of care: Board members are expected to actively participate in organizational planning and decision-making and to make sound and informed judgments.
Duty of loyalty: When acting on behalf of the organization, board members must put the interests of the nonprofit before any personal or professional concerns and avoid potential conflicts of interest.
Duty of obedience: Board members must ensure that the organization complies with all applicable federal, state, and local laws and regulations, and that it remains committed to its established mission.
In addition to its legal responsibilities, the board acts in a fiduciary role by maintaining oversight of the nonprofit's finances. Board members must evaluate financial policies, approve annual budgets, and review periodic financial reports to ensure that the organization has the necessary resources to carry out its mission and remains accountable to its donors and the general public. The board must also ensure compliance with federal and state regulations.
To learn more about developing a board for a newer organization, please see our free recorded webinars or tutorials:
- Establishing a Nonprofit Organization
- Board and Governance Issues for Startup Organizations
- Before You Seek a Grant: A Checklist for New Nonprofits
See also our related Knowledge Base articles:
- How can I learn about developing my nonprofit's board?
- What is the board's role in fundraising?
- How can I find board members for my nonprofit?
More Knowledge Base resources about nonprofit boards
Have a question about this topic? Ask us!
Candid's Online Librarian service will answer your questions within two business days.
Ask usEste artículo está disponible en español
See spanish versionExplore resources curated by our staff for this topic:
Staff-recommended websites
-
Help 4 Nonprofits
Articles Library
Offers articles and links to resources on a variety of nonprofit management topics, including governance and board mechanics.
-
Staff pick
Board Roles and Responsibilities [PDF]
Outlines legal, financial and other related board duties.
-
BoardSource
BoardSource (formerly the National Center for Nonprofit Boards) provides an excellent selection of board resources for both members and non-members. Hover over the word "Topics" to find the resource library.
-
Free Complete Toolkit for Boards
The Free Management Library contains links and resources on a variety of topics related to organizational management for both for-profit and nonprofit organizations. The site includes a section on legal and ethical responsibilities of boards.
-
IRS
Governance and Related Topics - 501(c)(3) Organizations
IRS's recommended policies and practices for nonprofit governance, especially in regards to: Mission; Organizational Documents; Governing Body; Governance and Management Policies; Financial Statements and Form 990 Reporting; and Transparency and Accountability.
-
Harbor Business Compliance
Nonprofit Governance by State
This table lists the board member requirements for nonprofit organizations in each state, including any age or residency requirements for directors, required officer positions, and minimum number of directors.
-
Venable LLP
Preventing and Investigating Fraud,Embezzlement,and Charitable Asset Diversion: What's a Nonprofit Board to Do?
A lengthy, detailed guide to investigating or preventing fraud or embezzlement in a nonprofit. Written by a lawyer with a lot of nonprofit experience.
-
Staff pick
BoardSource
What are the legal responsibilities of nonprofit boards?
Describes the three main legal duties of nonprofit boards – duty of care, duty of loyalty, and duty of obedience. This site also includes downloadable BoardSource guides, tools, templates and infographics.
-
Blue Avocado
What to Do When You Really, Really Disagree with a Board Decision
"There are more choices than simply keeping quiet or being disruptive...." Jan Masaoka's blog posted Feb. 22, 2010.