[MainstreetManagers] Duties of Board Members & More

[Tamara Nelson]

TAKE 2: My first email didn’t include all of my text …. Let’s try this again. 😊

Hello Everyone!
I hope that everyone made it home safely and had great rest and reconnection with your loved ones.  It was so very nice to share time with you guys and I do hope that we can keep the connections going.  As requested, here are the duties I touched on during our discussion for board members.

Board Member Fiduciary Duties
A Friendly Guide from the Oklahoma Main Street Center
Serving on a board is a meaningful way to support your community and help an organization succeed. It also comes with important responsibilities. Board members are trusted to protect the organization’s mission, finances, reputation, and future.
These responsibilities are commonly known as the duties of care, loyalty, and obedience.

1. Duty of Care
What It Means
The duty of care means paying attention, staying informed, and using good judgment when making decisions on behalf of the organization, much as a reasonable person would when handling their own important affairs.

What Board Members Should Do
Board members should:

  *   Attend and participate in board meetings.
  *   Read and understand financial reports, meeting minutes, and other materials before making decisions.
  *   Ask thoughtful questions when something is unclear or concerning.
  *   Make sure the organization has adequate resources and risk-management practices.
  *   Stay informed about the organization’s programs, finances, and challenges.
Common Examples of Failing to Meet This Duty
Problems can arise when board members:

  *   Regularly miss meetings.
  *   Approve proposals without reviewing them.
  *   Ignore warning signs of financial problems.
  *   Fail to pay attention to the organization’s financial condition.

2. Duty of Loyalty

What It Means
The duty of loyalty means putting the organization’s interests first. Board members should make decisions based on what is best for the organization—not on personal, financial, professional, or outside interests.

What Board Members Should Do
Board members should:

  *   Promptly disclose any actual or potential conflict of interest.
  *   Step out of discussions and voting when a conflict involves them or an affiliated business.
  *   Leave the meeting when appropriate while the matter is being discussed.
  *   Protect confidential and sensitive organizational information.
  *   Make decisions that support the organization’s mission and best interests.

Common Examples of Failing to Meet This Duty
Problems can arise when board members:

  *   Award an unbid contract to their own company.
  *   Use confidential information for personal financial gain.
  *   Participate in a vote involving their personal or business interests.
  *   Use board service primarily to promote themselves or their business.

3. Duty of Obedience

What It Means
The duty of obedience means helping the organization stay true to its mission, follow its governing documents, and comply with applicable laws and regulations.

What Board Members Should Do
Board members should:

  *   Follow federal, state, and local laws and reporting requirements.
  *   Make sure tax filings and other required reports are completed on time.
  *   Follow the organization’s articles of incorporation and bylaws.
  *   Keep the organization’s activities aligned with its stated mission.
  *   Honor donor restrictions and maintain proper financial controls.
  *   Help ensure compliance with safety, labor, and other applicable requirements.
Common Examples of Failing to Meet This Duty
Problems can arise when an organization:

  *   Uses restricted donations for unauthorized expenses.
  *   Violates safety or labor requirements.
  *   Fails to complete tax filings or required reports.
  *   Moves away from its charitable purpose without taking the appropriate legal steps.
Why These Duties Matter
Following these duties helps protect the organization, its community, and its board members. When board members do not uphold them, the organization may face:

  *   Personal legal or financial liability for directors.
  *   Damage to its reputation.
  *   Loss of public or donor trust.
  *   Regulatory scrutiny or penalties, including potential IRS concerns for nonprofits.
Board members should regularly review the organization’s governing documents, policies, and legal requirements

It was also requested on one of our zoom calls a couple of back of a list of what every nonprofit needs.  I believe we shared it at the Board Member Bootcamp, but not with you guys, my apologies.  Here it is:

DOCUMENTS
POLICIES & PROCEDURES
INSURANCE
Articles of Incorporation
Conflict of Interest
General Liability
Bylaws
Whistleblower Policy
Directors & Officers (D&O) Liability
IRS Determination Letter
Document Retention & Destruction Policy
Workers Compensation
Board Meeting Minutes
Financial Controls & Cash-Handling Policy
Property Insurance
Conflict of Interest Policy
Gift Acceptance Policy
Cyber Liability /Data Breach Insurance
Current board roster and officer list
Board Governance Policy / Manual
Commercial Auto/Hired & Non-Owned Auto
Financial statements and general ledger
Personnel/ Employee Handbook
Event/Special Program insurance
Annual Form  990 Filings
Fundraising & Donor Privacy Policy

Key Policies & Procedures
Expense Reimbursement & Travel Policy

Major contracts, grants and restricted-fund documentation
Data Security & Privacy Policy

Insurances and Licenses
Anti-Fraud Policy

Personnel & HR
Records of Board/Committee Authority


Volunteer Policy


Social Media/Communications Policy


Gift – In-kind/Donation Valuation Procedure


I hope this information is beneficial.  If it’s clear as mud, reach out!  Have a JOYFUL day!

Tamara Nelson, Economic Development Specialist
Oklahoma Main Street Center | Oklahoma Department of Commerce
301 NW 63rd Street, Oklahoma City, OK 73116
Tamara.Nelson at OKCommerce.gov<mailto:Tamara.Nelson at OKCommerce.gov>
c.405-778-9321 (text capable)
OKcommerce.gov<https://okcommerce.gov/>
[Title: State of Oklahoma logo - Description: Multi-color chevron pinwheel with the word Oklahoma to the right.]

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