*Editor's Note: This blog has been updated as of April 9, 2021 for accuracy and comprehensiveness.

Let’s dive into part five of our board responsibility series, where we’ll explore legal standards and ethical norms. It is the Board’s ultimate responsibility to ensure the organization is adhering to legal standards and ethical norms. As such, the organization must be in compliance with regulatory and legal requirements, transparent about its revenue and expenditures, and maintain accountability.

Compliance

As part of the Board’s fiduciary responsibility, they need to ensure that the organization is in compliance with regulatory and legal requirements imposed by government and regulatory bodies at local, state, and federal levels. An organization may have a written conflict-of-interest policy, which is important, but it is meaningless if the Board does not carefully monitor and adhere to it. As a board member, it is your responsibility to ensure that policies and procedures are reviewed and updated when necessary, and that they are being followed.

In addition, as a board member, you should ensure that your organization adheres to local, state, federal laws and regulations that apply to your organization, such as filing the IRS Form 990 and other documents on a timely basis, as well as ensuring that the organization registers with appropriate state agencies before beginning an organized fundraising campaign.

Lastly, it is the board’s responsibility to ensure that they act in accordance with the provisions of the organization’s bylaws and articles of incorporation, and regularly review and amend them when necessary.

Transparency

By making available the organization’s financial data and other information as we will discuss, it provides transparency with the public and sends a message of honesty and integrity; however, do not confuse transparency with sharing information that is appropriately confidential.

Nonprofit organizations are expected to share more and more routinely and openly to the media and public about their financial condition, major activities, and staff compensation. It is recommended that your organization provide information about its operations, including governance, finances, programs, and activities available to the public. In addition, nonprofit organizations should consider making information available on the methods they use to evaluate the outcomes of their work and sharing the results of those evaluations.

Specifically, nonprofits should:

• Document how executive compensation is linked to performance, as well as how other peer and similar-sized organizations pay their officers.
• Have clear policies and procedures for document retention.
• Establish policies and procedures for gift acceptance.
• Establish policies and procedures for vendor products and supplies through documented procurement procedures.
• Ensure the organization publishes annual reports that include financial data, key activities and achievements.
• Ensure the organization responds willingly to all reasonable requests for information from individuals and organizations, including the media.

Accountability

One of the board’s main responsibility is to assess the adequacy of major organizational policies and procedures, where accountability measures appropriately fall to management. However, the board needs to ensure that the organization does the following:

• Adopts a code of conduct or ethical standards for board members and officers.
• Identifies possible conflicts of interest, establishes procedures to deal with conflicts, and annually discloses and resolves such conflicts.
• Implements the organization’s whistleblower policy.
• Keeps detailed records of any lobbying expenditures and activities.
• Develops and maintains personnel policies and procedures.
• Conducts annual audits of financial data.
• Develops and maintains personnel policies and procedures.

Check out the rest of our board series here. Questions? Contact us.