When I first stepped into the world of nonprofit organizations, I quickly realized that a nonprofit board handbook serves as the backbone of effective governance. This guide isn’t just a dusty document sitting on a shelf – it’s a living resource that helps board members understand their roles, responsibilities, and duties within the organization.
The handbook provides everything needed to fulfill fiduciary responsibilities and make informed decisions about governance, management, and operations. Without this crucial tool, even the most well-intentioned board can struggle to maintain strategic direction and keep the organization financially sound.
Nonprofit boards are technically the most powerful entity within a nonprofit, yet too many board members don’t fully grasp their core responsibilities. This gap in understanding can lead to serious problems – from finances to fundraising to long-term sustainability. While an executive director and staff members handle the day-to-day operations of a nonprofit corporation, the board of directors functions as the governing body.
For two reasons, a thorough, current, and easy-to-use board manual is critical to a properly operating board of directors: the composition changes over time, and both new and existing board members need a continually updated resource and reference manual they can rely on when considering different issues and making decisions throughout their tenure.
The board holds primary responsibility for ensuring the nonprofit organization fulfills its mission, complies with laws and regulations, and acts in the best interest of its stakeholders – including donors, members, and the public. Boards maintain responsibility for overseeing the organization’s financial affairs, including budgeting, financial reporting, and auditing.
They must ensure the organization uses its resources in a responsible manner and achieves its goals. Finally, the board sets the strategic direction by identifying the organization’s mission and goals, then developing strategies to achieve them. This overview provides guidance for understanding nonprofit board governance, recruitment, and retention practices that lead to an effective nonprofit board.
Understanding Board Composition and Structure
A board of directors serves as more than just a governing body – it represents the intersection of legal obligations, ethical principles, and practical oversight. In the United States, US 501(c)(3) public charities (not private foundations) must follow specific state and federal law requirements.
Every nonprofit organization starts by incorporating like any company in a state or similar jurisdiction, and the laws and rules of that state govern the makeup of the board. These rules normally make it into the bylaws when the nonprofit entity is formed. For example, state law might dictate that there must be at least three board members and three officers.
The Board of Directors information section should include a complete listing of members, their contact information, and when their terms end. I recommend including a brief description of board members’ responsibilities here as well.
This section should also outline any Board committees, the Board members who currently serve on those committees, and the responsibilities of those committees. Having this information readily accessible helps everyone understand the organizational chart showing all positions and how the division of labor flows throughout the organization.
Essential Components of Your Board Manual
Historical Foundation and Legal Framework
The history section should contain an information sheet or brief written history of the organization’s founding. Additional information in this section may include the Articles of Incorporation and the IRS 501(c)(3) determination letter. These documents provide context for understanding how the organization came to be and what legal framework supports its existence.
The board needs to be familiar with the organization’s bylaws, as their actions are governed by its terms. The current organizational bylaws should be maintained in the board manual where members can easily reference them during meetings.
Mission, Vision, and Strategic Planning
The Organizational Framework section must include the mission and vision statements for the nonprofit organization in the board manual. Other documents may include the organization’s current strategic plan, which guides long-term priorities and goals.
This strategic planning process helps the board set the future by establishing where the organization wants to go and how it will get there. The strategic plan should align with the organization’s mission, values, and available resources, creating a roadmap that the staff will then implement and operationalize.
Documentation and Record-Keeping
Because the composition of the board changes regularly, there should be instructions in the board manual on where and how directors can access the minutes from prior board meetings. Included with the board minutes should be a continuously updated document that tracks all decisions made by the board that are not completed within one year. This practice ensures continuity in leadership and governance even as board members come and go, maintaining the organization’s stability over time.
Financial Information and Policies
The finance section of the board manual should contain the most recent annual report and audit report, if any. This section also should contain the current annual budget, any resolutions or policies related to banking or investments, and instructions on how and where to access the organization’s financial statements. Financial management represents one of the board’s most critical responsibilities, requiring transparency and accountability to stakeholders. The board must ensure accurate financial records are maintained and that the organization is financially sound.
Board-Specific Policies
The Board Policies section should contain organizational policies that pertain directly to board members, such as policies involving conflicts of interest, insurance policy coverage, legal liability, travel and meeting expense reimbursement, and more. All US 501(c)(3) nonprofits should have a conflict of interest policy, a whistleblower policy, and a document retention and destruction policy.
These policies may be developed in committees or at the full board level. Additional policies the board may consider include a rainy day policy, a gift acceptance policy, a non-discrimination policy, and a “give or get” fundraising policy. In a perfect world, this would be codified into a board agreement.
Staff and Resource Information
The staff section of the board manual should contain a complete listing of current organization staff members and their positions, as well as an organizational chart. This helps board members understand who handles what responsibilities and how the staff structure supports the organization’s mission.
The Resource Development section should contain a list of current grants, amounts, and duration. Other materials in this section may include sample grant proposals, sponsorship policies, and information about annual fundraisers. Understanding the organization’s funding sources helps the board make informed decisions about financial sustainability.
General Operations and Calendar
The final section of the board manual should contain a calendar of board meetings for the year and a staff calendar with days off and important events. It also may include a list of programs, current brochures, and information about the organization’s website and social media pages. This General Information helps board members stay connected to the organization’s activities and understand how to communicate with stakeholders through various channels.
Core Responsibilities Every Board Member Must Know
Governance and Policy Setting
At the most basic level, boards are the governing body of the nonprofit organization. Boards must follow the Duty of Obedience, which means the board should follow local, state, and federal law and its own bylaws. Boards must follow their own policies and bylaws or they open themselves to risk, lawsuits, or reputational damage.
The board is responsible for setting the organization’s mission, vision, and strategic direction, and ensuring it fulfills its legal and ethical obligations. The board also oversees the organization’s operations and ensures it achieves its goals.
Governance practices require the board to review policies, practices, milestones, financial data, goals, work plans, and executive director reports. The roles and responsibilities of nonprofit boards vary depending on the organization’s size, structure, and mission.
However, several key roles and responsibilities are common to most nonprofit boards. Understanding board responsibilities is critical for nonprofit organizations to function effectively and fulfill their mission. Board members have a legal obligation to ensure the organization complies with all applicable laws and regulations.
Fiduciary Duty and Financial Oversight
Fiduciary Responsibility means the board is responsible for ensuring the organization’s financial sustainability and integrity. This includes developing and approving the budget, overseeing financial reporting, ensuring compliance with financial and legal requirements, and protecting the organization’s assets.
Board members must follow the Duty of Care, which means when they act as board members for the nonprofit, they must protect the organization’s assets and reputation and put all other interests aside. Part of the board’s responsibility for “setting the future” includes passing a budget that creates a financial plan for how money will be raised and spent in the next year, consistent with the Duty of Care.
The budget should be passed before the fiscal year begins. In a perfect world, the board-approved budget should allow some flexibility for staff leaders to achieve the organization’s goals while also providing guardrails that can be updated over time.
Budgets are also moral documents telling the world, including staff and stakeholders, what you prioritize. If you care about professional development, you’ll put it in the budget. If you can pay people what they are worth, you’ll put it in the budget. Passing a budget is not merely voting on numbers – it is charting a future and the norms and values of an organization.
Meeting Obligations and Due Diligence
The most fundamental responsibility nonprofit boards have is to meet. Most states require that a board meets regularly, at least once a year. Most nonprofit boards also do nearly all their governing work during meetings, including full board meetings and committee meetings. It’s during meetings that boards review policies, practices, milestones, financial data, goals, work plans, and executive director reports. Plus, nonprofit boards shine when they get together and talk, socialize, conduct training, review materials, ask questions, and carve up their division of labor.
Conducting effective board meetings is essential to the success of a nonprofit organization. Effective meetings start with an agenda outlining the topics to be discussed, the order in which they will be addressed, and the expected outcomes. Establish ground rules for board meetings that promote open communication, respect for differing viewpoints, and a focus on achieving the organization’s goals.
This may include guidelines for speaking time, decision-making processes, and conflict resolution. Encourage participation from all board members by creating opportunities for discussion and input, and by recognizing and valuing diverse perspectives and viewpoints.
Executive Leadership Management
One of the most important tasks of a board is to hire, evaluate, and possibly fire its chief executive. As nonprofits grow and get older they tend to professionalize, become more sophisticated and start to delegate to and empower experts. If your organization is lucky enough to hire an executive director, the board (possibly in conjunction with a search firm) will create a job description and an annual executive director evaluation tool.
The board is responsible for overseeing the organization’s management and ensuring it is operating effectively and efficiently. This includes hiring and evaluating the CEO or Executive Director, monitoring organizational performance, and ensuring the organization adheres to its policies and procedures.
Boards must understand the division of labor and how to use it effectively. The Oversight function requires the board to ensure the organization is operating in the best manner possible while the executive director and staff handle day-to-day operations.
This clear separation of roles prevents micro-managing and allows staff to lead in their areas of expertise while the board provides strategic direction and oversight. The executive leadership team should work in collaboration with the board, with open and transparent communication helping to build trust and ensuring everyone is working toward the same goals and objectives.
Strategic Planning and Organizational Direction
Vision Setting and Future Planning
In general, nonprofit boards are responsible for setting the long-term vision for the organization. In reality, boards typically do this with the executive director. In either case, the board should be bought into the mission, vision, and values of the nonprofit. After this vision is set through a strategic planning or goal-setting process, the staff will then implement and operationalize that plan. The board should be bought into the mission, vision, and values of the nonprofit to provide effective leadership and governance to the organization.
Develop and implement a strategic plan that guides the organization’s goals and priorities, and aligns with its mission and values. Monitor progress toward the plan’s objectives and make adjustments as needed. The organization’s strategic plan, program areas, and current strengths and weaknesses should be considered when identifying the organization’s needs and the skills and expertise required to achieve its mission. Identify any gaps in the board’s skills and experience, and determine the diversity of the current board to ensure you have the right people at the table.
Risk Management and Compliance
Nonprofit boards are responsible for ensuring the organization is operating morally, ethically, and legally and in alignment with its purpose or mission. This includes managing risk. Some risk is acceptable because you must take some risks to succeed. Some risk you transfer with insurance.
But other times you must mitigate and reduce risk. Boards must balance financial and reputational risk with opportunities for the organization. Board members are also responsible for identifying and mitigating risks to the organization, including financial risks, legal risks, reputational risks, and operational risks.
Develop a risk management plan to identify and mitigate potential risks that could impact the organization’s operations or reputation. This includes ensuring the organization’s activities align with its mission, that financial records are accurate and transparent, and that the organization adheres to all applicable tax and reporting requirements. Board members are responsible for overseeing the organization’s governance practices, including setting strategic direction, establishing policies and procedures, and monitoring performance. Effective governance practices will help nonprofit organizations ensure they are fulfilling their mission, serving their community, and operating with integrity and accountability.
Fundraising as a Board Responsibility
Why Fundraising Matters
Fundraising is critical to the success and sustainability of nonprofit organizations. Without adequate funding, nonprofits would be unable to fulfill their missions and serve their communities. Fundraising provides nonprofits with the financial resources they need to operate, grow, and achieve their missions.
Nonprofits rely on donations, grants, and other sources of funding to support their programs and services, pay their staff, and cover their operating expenses. Fundraising enables nonprofits to expand their programs and services, reach more people, and have a greater impact in their communities.
With additional funding, nonprofits can hire more staff, purchase equipment and supplies, and expand their facilities to better serve their clients. All boards have a Duty of Care, which means they must protect the organization. For nonprofit boards, part of the Duty of Care is making sure the organization can pay its bills – which requires fundraising. After an organization creates and passes a budget, boards need to ensure they resource that budget. Boards can’t just be there for the spending part – they must be there for the fundraising part. Board fundraising is often a sensitive subject and a perpetual challenge, but it remains essential to organizational health.
Developing Fundraising Strategies
The first step to successful fundraising is to develop a comprehensive fundraising plan that aligns with the organization’s mission, goals, and strategic plan. The plan should include a range of fundraising strategies, such as major gifts, grants, corporate partnerships, events, and online giving.
Organizations will want to build and cultivate relationships with individual donors, corporate partners, and foundation representatives. This includes engaging donors through personal outreach, providing regular updates on the organization’s activities and impact, and expressing gratitude for their support.
Another helpful strategy for fundraising is to engage board members in fundraising by providing them with training and support, setting clear expectations for their fundraising efforts, and recognizing their contributions and successes.
One of the most important strategies in fundraising is to steward donors and maintain donor relationships by regularly communicating with them, providing updates on the organization’s activities and impact, and expressing gratitude for their support. This includes developing a strong donor recognition program and ensuring that donors feel valued and appreciated.
Engaging Board Members in Fundraising
Board members can play a critical role in fundraising efforts for nonprofit organizations. Organizations should set clear fundraising goals for the board and communicate them clearly, including specific dollar amounts or other measurable outcomes.
Board members should lead by example and make their own contributions to the organization’s fundraising efforts, demonstrating their commitment to the cause and inspiring others to get involved. Board members can also help cultivate relationships with potential donors by hosting events, making introductions, and serving as ambassadors for the organization.
Organizations should encourage board members to actively participate in fundraising campaigns, such as soliciting donations from their networks, and sharing fundraising appeals on social media. Celebrate fundraising successes with the board and recognize the contributions of individual board members, helping to build a culture of fundraising and inspire continued engagement.
By engaging board members in fundraising efforts, nonprofit organizations can leverage their connections, expertise, and passion to help secure the resources needed to fulfill their mission and make a meaningful impact in their community.
By following these strategies, nonprofit organizations can build successful fundraising programs that support their mission and goals, and engage donors in meaningful and impactful ways.
Building and Maintaining an Effective Board
Recruitment and Diversity
Building a strong and diverse board is critical to the success of a nonprofit organization. A strong board brings together a diverse range of skills, experience, and perspectives, and provides effective leadership and governance to the organization. Recruiting and retaining nonprofit board members is critical to the success of the organization. Recruiting a diverse group of board members with different backgrounds, experiences, and perspectives can bring new ideas and approaches to the organization, leading to innovation and creativity.
Board members bring their skills and expertise to the organization, contributing to the organization’s success in achieving its goals and objectives. Finding and attracting the right nonprofit board members is essential to the success of an organization. The first step in recruiting nonprofit board members is to develop a board member profile that outlines the skills, experience, and expertise needed to support the organization’s mission and goals. This can help guide the recruitment process and ensure that the board has a diverse range of perspectives and expertise.
Start by identifying the organization’s needs and the skills and expertise that are required to achieve its mission. Consider the organization’s strategic plan, program areas, and current strengths and weaknesses. Use the information gathered to develop a board profile that outlines the skills, experience, and diversity that are needed on the board. This will serve as a guide for recruiting new board members and identifying potential candidates. Actively recruit new board members who have the skills, experience, and diversity needed to strengthen the board.
Onboarding and Development
Provide training and orientation to new board members to ensure they understand their roles and responsibilities, the organization’s mission and values, and the skills and knowledge needed to be effective board members. Providing comprehensive orientation and ongoing training for board members can help them better understand their roles and responsibilities, and develop the skills and knowledge needed to contribute effectively to the organization. For board and staff leaders looking to improve their board’s development, be sure you are providing a strong board member orientation, ongoing training, and time for relationship-building and a little fun!
Foster an inclusive and welcoming culture on the board that values diversity and encourages open communication and collaboration. Ensure that all board members feel heard and valued, and that the board is responsive to the needs of the community. Recruit board members who bring diverse perspectives, skills, and expertise, and who are committed to the organization’s mission. Provide ongoing training and development opportunities to help board members build their skills and knowledge. Just like nonprofit staff leaders, nonprofit boards need to think about culture and representation too.
Retention Strategies
Retaining nonprofit board members is important for maintaining continuity in leadership and governance and ensuring the long-term sustainability of the organization. Board members are responsible for ensuring the organization operates with integrity and accountability, complying with legal and ethical standards.
Retaining experienced and dedicated board members ensures continuity in leadership and governance, maintaining the organization’s stability and long-term sustainability. Clearly defining board member roles and expectations, and providing regular feedback and support, can help board members feel valued and engaged in the organization’s mission and activities.
Open and transparent communication between the board, executive leadership team, and staff can help build trust and collaboration, and ensure that everyone is working towards the same goals and objectives. Recognizing and appreciating board members’ contributions and achievements can help build a positive and supportive board culture, and encourage board members to continue their service to the organization.
Providing meaningful opportunities for board members to engage with the organization’s mission and activities, such as attending events, participating in committees, or volunteering, can help board members feel more connected to the organization and its impact.
Overall, retaining nonprofit board members requires a focus on engagement, communication, and support. By providing board members with meaningful opportunities to contribute to the organization’s mission and providing them with the tools and resources needed to be effective in their roles, nonprofit organizations can build a strong and committed board that can lead the organization towards long-term success. Nonprofit boards should improve over time – this is a key but often overlooked responsibility.
Continuous Board Development
Self-Assessment and Improvement
Nonprofit boards should improve over time. This is a key but often overlooked responsibility. Boards should use various tools to recruit top talent, retain existing talent, and remove board members who are not honoring their commitments. Since most organizations plan to be around for a long time, boards should be permanently working to make the board sustainable.
For some boards, this may mean term limits to keep the organization from entrenched thinking. For other boards, it includes using governance and nomination functions to create a talent pool to draw on for future board leadership.
Conduct regular assessments and evaluations of the board’s performance, as well as the organization’s programs and services, to ensure that they are meeting the needs of stakeholders. It’s also important to evaluate the effectiveness of board meetings by soliciting feedback from board members and using that feedback to make improvements to future meetings.
Finally, it is essential to follow up on decisions and actions from previous board meetings to ensure that they are being implemented effectively and achieving the intended outcomes.
Cultural Competence and Representation
For example, if an organization is in a predominantly Latinx community, it should consider making sure there is authentic and inclusive representation on the board of the service population and/or the geographic community it serves. The same goes for youth, people with disabilities, etc.
Board members are the closest things to “owners” of the not-for-profit corporation, which means they have responsibilities to each other, to the government, and to stakeholders. Boards should not be content with the status quo or decline. Nonprofit boards are responsible for working toward mission attainment.
This means there will always be people to meet, dollars to raise, coalitions to join, positions to take, and documents to review. One of the biggest responsibilities of a nonprofit board is the ambassadorial role. Board members should use their personal and professional networks, skills, talents, and superpowers to strengthen the organization.
This brings us to the Duty of Loyalty. Board members should not put any other organization or self-interest ahead of the organization. Board members should be constantly moving the organization forward and creating the conditions for success.
Establishing Governance Best Practices
Policy Development and Implementation
Clearly define the roles and responsibilities of the board and its members, as well as those of the executive director and staff. This includes developing job descriptions, setting expectations for performance, and establishing clear lines of communication and decision-making.
Develop policies and procedures that guide the organization’s decision-making and operations, such as conflict of interest policies, financial management policies, and strategic planning processes. Adopt clear policies and procedures that guide the organization’s decision-making and operations, such as financial management policies, conflict of interest policies, and procurement policies.
Delegating responsibilities among board members is an important part of effective nonprofit governance. Here are some steps to delegate responsibilities effectively: Start by identifying the different areas of responsibility that need to be assigned, such as fundraising, finance, program management, and governance.
Clearly define the roles and responsibilities for each board member, including the tasks and activities that they will be responsible for, the level of authority they have to make decisions, and the expected outcomes.
Assess the skills and interests of each board member to determine which areas of responsibility align with their strengths and interests. Match board members to areas of responsibility based on their skills and interests, while also ensuring that the distribution of responsibilities is equitable and aligned with the organization’s needs.
Provide board members with the support and resources they need to fulfill their responsibilities effectively, such as training, mentoring, and access to relevant information and data. These steps can help nonprofit organizations delegate responsibilities effectively and ensure that board members are engaged, fulfilled, and contributing to the organization’s success.
Transparency and Accountability
Accountability and transparency are essential for maintaining public trust and confidence in nonprofit organizations. Foster a culture of transparency and accountability by regularly communicating with stakeholders about the organization’s activities, financial performance, and impact, and by implementing policies and procedures that promote ethical behavior and responsible stewardship of resources.
Foster a culture of transparency and accountability by providing regular updates on the organization’s performance and financial management, and responding promptly and appropriately to concerns or issues that arise.
Publish annual reports that provide an overview of the organization’s activities, financial performance, and impact, as well as information about the organization’s governance structure and leadership. Ensure that the organization is complying with all legal and regulatory requirements, including filing required reports with government agencies and maintaining accurate financial records.
Communicate regularly and openly with stakeholders, including donors, volunteers, staff, and community members, about the organization’s mission, goals, and activities, as well as its financial performance and impact.
Conduct regular independent audits of the organization’s financial statements to ensure that they are accurate, complete, and compliant with generally accepted accounting principles. Effective accountability and transparency is critical for nonprofit organizations to demonstrate their commitment to their mission and the communities they serve, and build trust and credibility with their stakeholders. Ensure the financial sustainability of the organization by developing and monitoring a budget, diversifying funding sources, and engaging in sound financial management practices.
Addressing Board Engagement Challenges
The Engagement Problem
This may seem redundant but I want to call out the single biggest problem with volunteer boards – engagement. Most board members of most nonprofit organizations are checked out and not fully participating. Sometimes this is because board members dump all the work on paid staff. Other times, it is because of “social loafing” or “free riding,” which is the phenomenon that groups are lazy. The more members there are in a group, the more likely they are to assume others will pick up the slack.
Regardless, many board members are not responding to emails, reviewing critical materials, attending meetings, raising money, or other vital tasks. On the flip side, some nonprofit members are overly involved by either micro-managing or pitching in where it isn’t needed. Board members should get clear on what constitutes great board engagement and then reinforce that norm. We all have our nonprofit love languages, and some show up by asking great questions and others want to lick envelopes. Still, others think staying out of the way is the best way to let the staff lead. Every organization must find its own balance and then reinforce those practices.
Finding the Right Balance
Schedule regular board meetings to review the organization’s performance, discuss strategic priorities, and make decisions on key issues. Being a board member of a nonprofit carries with it a lot of responsibility and a lot of respect, but no compensation because the motives should be impact, not profit. Board members are the closest things to “owners” of the not-for-profit corporation which means they have responsibilities to each other, to the government, and to stakeholders. Feel free to use the nine core responsibilities described in this article like a checklist to gauge your own or your board’s performance.
Implementing Effective Strategies for Success
A strong and effective nonprofit board is built through careful consideration, time, and care. The strategies and best practices provided here will help nonprofit organizations build an effective nonprofit board handbook. The board handbook is the first and most important tool in the process of building the board you want and sustaining board members to provide effective and efficient governance oversight, fundraising support, and more. Some organizations may benefit from outsourcing business services like bookkeeping, financial management, or administrative tasks to allow board members and staff to focus more on strategic governance and mission-critical activities. By following these best practices, nonprofit organizations can build strong and effective boards, enhance their governance practices, and improve their overall performance and impact.
Nonprofit board governance refers to the processes, policies, and practices that guide the decision-making and oversight responsibilities of a nonprofit organization’s board of directors. Effective governance ensures that the organization operates in a manner consistent with its mission, values, and ethical principles, while also complying with legal and regulatory requirements. Establishing and maintaining effective governance practices in a nonprofit organization is essential for ensuring the organization is operating in compliance with legal and ethical standards, while fulfilling its mission and serving its community.
