Governance practices for small not-for-profits

Every not-for-profit organization has a board of directors to provide leadership, oversight, and accountability for staff. An effective governance model provides not-for-profit leadership with the tools needed for decision making and delivering on the mission of the organization.

Boards are most effective when they maintain their focus at a strategic level and allow management to lead daily operations. However, many smaller not-for-profits have working boards with additional responsibilities, and separating management and governance is critical.

Board roles and responsibilities

The board is charged with a fiduciary duty, and has three primary legal duties — care, loyalty, and obedience.

Duty of care

Take care of the not-for-profit with prudent use of all assets, including facility, people, and good will.

Duty of loyalty

The not-for-profit’s activities and transactions should be, first and foremost, advancing its mission. Recognize and disclose conflicts of interest and make decisions that are in the best interest of the organization, not in the best interest of the individual board member or any other individual or for-profit entity.

Duty of obedience

The not-for-profit must obey applicable laws and regulations; follows its own bylaws; and must adhere to its stated corporate purposes and mission.

Effective boards focus on priorities or specific outcomes and are there to guide the organization strategically. Some common responsibilities include:

• Creating, reviewing, or adopting policies
• Approving strategic organizational plans
• Monitoring progress — against the strategic plan, for example
• Overseeing the executive director
• Approving and reviewing the budget

Boards should provide accountability and adequate support to staff.