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What does a Not-For-Profit Board do?

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  • Written By: Dale Marshall
  • Edited By: Kristen Osborne
  • Last Modified Date: 18 September 2016
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Like the board of directors of any other type of organization in the United States and many other countries, a not-for-profit board of directors broadly formulates the policy and activities of the non-profit organization it directs. The board also reviews the organization's activities and finances on an ongoing basis. Members of a not-for-profit board may be chosen in a number of different ways, depending on the nature of the organization. The precise manner of that choice, and the term of service, is usually laid out in the organization's constitution or charter. Many not-for-profit organizations attach a great deal of importance to the makeup of their boards. They aim to recruit directors who represent a broad cross-section of the community they're serving, and can bring a fresh perspective to the organization.

One of the most crucial duties of any not-for-profit board of directors is to monitor the organization's financial health. Regardless of an organization's size or budget, mismanagement or misallocation of funds can have serious consequences for the organization's mission. A non-for-profit board must periodically review the books and approve them. The boards of larger organizations often hire independent accountants to perform a full-scale audit, which should then be confidentially reviewed with the board.

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One of the other main duties of any not-for-profit board is to coordinate among the organization's different activities and ensure those activities are consistent with the organization's mission. For example, many non-profit organizations operate businesses, especially in the retail arena. Thrift stores are highly visible examples of a non-profit organization operating retail outlets and employing people in accordance with prevailing labor laws. The retail operations of not-for-profit companies often turn a profit; however, that profit is usually counterbalanced by the costs of the organization's activities in other areas. The boards of such organizations will work to ensure that the retail operation doesn't overshadow the group's main activity, which is spelled out in its charter.

Since revenues are an important component of any not-for-profit organization's operation, many expect their directors to take an active part in fundraising. Other types of not-for-profit organizations, such as membership organizations, often have varied missions. Labor unions, for instance, are not-for-profit organizations that exist to organize the unorganized, as well as to provide a host of services to existing members. The board of directors of a labor union, then, will try to balance the needs of each of these two groups against the other, ensuring that neither of these main functions overshadows the other, or monopolizes too much of the union's resources. A labor union board of directors will also ratify membership action. For example, most labor unions require not only the vote of a local union to strike, but also the approval of the union's board of directors.

Community service clubs, such as Lions and Rotary clubs, have hierarchical structures, with local clubs as offshoots of regional and national organizations, and an overall international umbrella organization. Usually, there's a board of directors at every level above the local. These boards review the activities of local clubs to ensure they are consistent with the group's charter or constitution, and explore other areas in which they might be able to serve their local communities.

Religious organizations also are considered to be not-for-profit, and they will often select a board of directors in addition to their spiritual leaders. In many cases, one of the main jobs of the board of a religious organization will be to evaluate and, when necessary, replace the spiritual leader. Other functions of this particular not-for-profit board will be to evaluate the organization's different activities on an ongoing basis, allocating resources and determining goals and timetables.

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