Do Nonprofit Boards Have Fiduciary Duties?

At first it sounds scary - fiduciary duty! What is it?  BoardSource defines fiduciary duty as requirement for:

 “Board members to stay objective, unselfish, responsible, honest, trustworthy, and efficient.

Board members, as stewards of public trust, must always act for the good of the organization, rather than for the benefit of themselves.

They need to exercise reasonable care in all decision making, without placing the organization under unnecessary risk.”

Fiduciary duties extend to all aspects of the nonprofit, but here I will focus on the fiduciary duties in the financial realm.  Here are some examples of financial matters that boards should exercise care in:

1. Budget approval – annual or more frequently in seasons of transitions in programs or finances
2. Review of financial reports – frequency can vary by nonprofit, but board should determine how often financial reports are needed. 
3. Monitor financial health – understanding beyond review of financial reports.  Can include actual results compared to budget.  A review of operating reserves/unrestricted net assets. Management of cash and investments. 
4. Adequate internal controls or safeguards - make sure that the organization is not being exposed to unnecessary risk.  
5. Compensation guidelines  - documentation to guide staff in how employees are compensated.  Can include pay scale approvals and philosophy of compensation for hiring, promotions, etc. 
6. Tax compliance – payroll tax filings, 990’s, UBIT, etc.