Basics of Nonprofit Board Governance

The mechanism for managing a nonprofit organization in modern conditions is determined by its constituent documents. In this article, we will consider the common aspects of nonprofit board governance.

Nonprofit organization management system

Even though there are different ways of organizing a nonprofit organization (NPO), they are united by the presence in the structure of two governing bodies: the board and an executive committee. In an NPO, which is formed on the principles of membership of participants, the board can be the supreme governing body. However, it is important to understand that public organizations, which are also nonprofit, have a huge number of participants. In this case, the board includes a limited number of members representing the interests of certain groups of participants.

Common functions of the nonprofit board governance

Some functions define the basics of the board management activity in a nonprofit organization:

  • The board participates in fundraising

Board participation in fundraising does not mean that board members have to go around and ask for money. For many, this is not a very pleasant experience. But you can recommend an organization, sign letters of support, look for in-kind donations or free event venues, just to name a few ways you can help. They also expand the circle of contacts of NPOs and potential sources of funding. Finally, their participation in the development of the organization’s resources, indicating active and engaged governance, is an indication of the organization’s credibility, that it performs well, that it is accountable, and that it is unlikely to misuse funds.

  • The board establishes internal control mechanisms

Internal financial control protects the assets of the NPO by regulating financial transactions and promotes both the integrity of the organization and its effectiveness. When internal controls are in place and clearly spelled out in board instructions, they provide donors and other stakeholders with confidence that NPO resources are being used wisely and appropriately. The board must ensure that internal financial controls are used by all employees of the organization.

  • The board combines the interests of the company and the community

By overseeing resources and mission, setting standards, and evaluating performance, good leadership positions the organization as a clear, trustworthy, and accountable partner that works in the best interest of society as a whole. The board ensures that the NPO is responsive to the needs of the community it serves, that it knows and understands that community. These functions are especially important in relation to the mission and strategic planning of the organization.

  • The board encourages transparent communications

A broad target audience requires an unusually high degree of transparency from NPOs. The board ensures that the organization has developed its own concept in the field of communications and that all public materials, grant applications, fundraising letters, financial and substantive reports, websites, service descriptions are well presented and truthful.

  • The board controls the publication of the annual report

The annual report is a means of conveying financial and other information about the activities of an NPO to the general public. The annual report shows how much money went into the organization, who provided the money, and for what programmatic and administrative purposes it was spent. Usually, the results of a financial audit or reconciled financial figures are included in the annual report. The annual report is also a great opportunity to publish information about the activities and programs of NPOs. The board should ensure that the report is published regularly and is available to interested parties either in print or online.