Basic Nonprofit Boardroom Terms and DefinitionsReview our list of common terms and definitions for new nonprofit board members navigating through the first few months of board service.
When first joining a nonprofit board, many of the terms, practices, and roles may be unfamiliar to those who have not spent time in the nonprofit sector. The below glossary provides an overview of common expressions and roles on a nonprofit governing board.
Mission: A statement outlining an organization's core objective, explaining why it exists and what it seeks to achieve. It typically includes details about the organization's current activities, target audience, and the societal issues it aims to address.
Vision: A statement that communicates an organization’s long-term aspirations, emphasizing the desired impact and broader societal change it aims to achieve.
Values: Fundamental principles, standards, and beliefs that guide an organization’s actions, decisions, and interactions. Collectively they define the culture and identity of an organization, influencing decisions in alignment with its mission.
NONPROFIT ROLES & RESPONSIBILITIES:
Board of Directors: The governing body responsible for overseeing an organization's strategic direction, financial health, and adherence to its mission. Composed of a group of individuals, the board provides governance and makes key decisions on behalf of the organization, ensuring it serves the best interest of its beneficiaries and community.
Officers: Individuals who hold distinct leadership roles among the board, such as Chair, Secretary, Treasurer. While titles can vary across organizations, officers ensure effective nonprofit governance and organizational leadership. Officer responsibilities are typically outlined in an organization's bylaws and may be subject to state regulations that govern nonprofits.
Employees: Individuals hired by a nonprofit to perform day-to-day operations and fulfill specific roles critical to the organization's functionality in support of its mission. They report to supervisors or managers within the staff hierarchy, distinct from the Board of Directors.
Executive Director: The highest-ranking employee tasked with leading and managing a nonprofit organization. The position's specific responsibilities can vary depending on size, mission, and organizational needs. May also be referred to as the Chief Executive.
BOARD ROLES & RESPONSIBILITIES:
Chair/President: Leads the nonprofit Board of Directors. Though title may vary, this officer position serves as the head of the board, presiding over meetings, providing leadership to board members, and representing the organization. This key position is crucial for guiding the organization's strategic direction, fostering collaborative decision-making, and ensuring effective nonprofit governance in pursuit of the nonprofit’s mission. This role, as well as any other roles that comprise the Executive Committee (Vice Chair, Secretary, Treasurer, etc), must be elected for by the board.
Vice Chair: Acts as a deputy to the board Chair, often assuming the Chair's duties in their absence. The Vice Chair may also have certain responsibilities delegated by the Chair or take lead on certain aspects of the organization's governance.
Secretary: Responsible for maintaining accurate records of all board meetings, managing official documents, and handling correspondence. This role ensures transparency, accountability, and proper documentation of the organization's activities, while also facilitating communication among board members and stakeholders, while ensuring compliance with legal and governance requirements.
Treasurer: The primary financial officer responsible for managing financial aspects of the organization. This role involves maintaining accurate financial records, creating budgets, monitoring transactions, and providing financial reports to the leadership and Board of Directors. The Treasurer is tasked with ensuring fiscal responsibility, transparency, and compliance with applicable laws and regulations.
Board Member: An individual serving on a nonprofit’s Board of Directors, contributing their time, resources, and expertise to advance the organization’s mission and goals. Board members provide strategic oversight and governance, with a legal duty to act in the nonprofit’s best interests.
BOARD GOVERNANCE STRUCTURES:
Board Meeting: A scheduled gathering of a nonprofit’s governing board members to discuss, make decisions, and provide oversight on matters related to the organization's mission, operations, and strategic direction. The frequency varies depending on the organization's bylaws, size, mission, and needs, most commonly occuring on a monthly or quarterly basis. Board meetings can be held in person and/or online.
Committees: Subgroups within a nonprofit’s board governance structure formed to support specific functions, tasks, or areas of responsibility. Composed of board members, volunteers, or individuals with relevant expertise or interest, committees aid in workload distribution, leverage board members’ expertise, and ensure effective management of various aspects of the organization. Committee structure and functions may vary across organizations. Members of the board may belong to one or more committees.
The two primary committee structures are ‘standing committees’ and ‘temporary committees’ (also known as ‘ad hoc’ or ‘special’ committees). Standing committees are permanent, tasked with handling ongoing functions or responsibilities. Temporary committees are formed for specific, time-limited purposes or to address a particular issue or project. Both committee types often possess formal decision-making authority within the organization.
Working Group: A collaborative team formed to address a specific task or project, with a focused scope. Unlike temporary committees, working groups are task-oriented, short-lived, and primarily advisory, lacking decision-making authority within the organization.
Board Retreat: A structured, off-site gathering of an organization's Board of Directors, offering dedicated space and time for board members to collaborate on critical aspects of the organization's development and effectiveness. Retreats focus on strategic planning, governance discussions, and relationship building in a concentrated and often relaxed setting. Retreat formats vary but typically entail one or more days of meetings, workshops, and activities held away from the organization's regular meeting place.
Executive Sessions: A confidential meeting, or segment of a meeting, attended by organization's leadership and/or Board of Directors to address sensitive or confidential matters, such as personnel issues, legal concerns, conflicts, or strategic decisions, away from the public or general membership. Executive sessions facilitate candid discussions and the resolution of complex issues while safeguarding privacy and confidentiality. Rules and procedures for conducting executive sessions are typically detailed in an organization's bylaws.
COMMON STANDING COMMITTEES:
Finance Committee: Responsible for overseeing the organization's comprehensive financial management, including budgeting, planning, and investment strategies.
Governance/Nominating Committee: Primarily concerned with board recruitment, officer nominations, and governance policies, ensuring the board is composed of qualified individuals and operating in accordance with its established bylaws.
Development/Fundraising Committee: Tasked with developing fundraising strategies, managing donor relations, and cultivating resources to advance the organization's mission.
Executive Committee: Composed of officers or key board members, this committee typically has the authority to make specific decisions on behalf of the board in periods outside of regularly scheduled board meetings. Unlike other committees, the members of this committee must be elected to their respective offices by the board.
Audit Committee: Primarily responsible for overseeing the organization's financial reporting, audit processes, and internal financial controls. The committee focuses on financial transparency, ethical conduct of financial activities, and adherence to legal and regulatory standards. Audit committees often collaborate with external auditors to verify financial statement accuracy, and compliance with accounting standards.
Programs Committee: Oversees the nonprofit’s programs and services to ensure alignment with and advancement of the organization's mission. The committee monitors and evaluates existing programs, guides the development of new initiatives, and may be involved in budgeting and resource allocation to ensure efficient and impactful program management.
Diversity, Equity, Inclusion, & Belonging (DEI&B) Committee: Tasked with promoting and advancing diversity, equity, inclusion, and a sense of belonging throughout the organization, its programs, and amongst its members and stakeholders.
BOARD MEMBER RESPONSIBILITIES:
Fiduciary Responsibilities: The legal and ethical responsibilities that board members owe to the organization. These duties require them to act in a way that upholds the organization's mission, serves its beneficiaries, and demonstrates prudence, integrity, and transparency in their decision-making and oversight. Fiduciary Duties encompass the Duty of Care, Duty of Loyalty, and Duty of Obedience.
Duty of Care: Board members are expected to make informed decisions, exercise due diligence, and act in the organization’s best interests. This includes attending and actively participating in meetings, staying informed about the organization’s activities and operations, and carefully engaging in decision-making on behalf of the organization.
Duty of Loyalty: Board members must prioritize the organization's interests above personal interests or conflicts of interest at all times. They are expected to publicly disclose any conflicts and avoid actions that could harm the organization's mission or financial well-being.
Duty of Obedience: Board members must ensure the organization complies with its mission, acting within its stated purposes, objectives, bylaws, and policies, while adhering to applicable laws and regulations.
Give Policy: The financial contribution that board members are expected to personally make to the organization on an annual basis. The specific amount can vary depending on the organization and its policies.
Get Policy: The financial contribution board members are expected to secure on behalf of the organization through donations and other support from their personal and professional networks on an annual basis.
Give/Get Policy: Represents the total financial commitment that each board member is responsible for contributing to the organization on an annual basis, combining both ‘Give’ and ‘Get’ expectations.
COMMON BOARD MEETING TERMS:
Board Book: A compilation of key documents and materials created exclusively for board members, usually distributed in advance of a scheduled board meeting. Although formats may differ across organizations, it functions as a comprehensive resource, providing board members with the necessary information to make informed decisions on the meeting agenda and fulfill their governance duties effectively. Typically, the responsibility for compiling a nonprofit organization's board book rests with the executive director, often in collaboration with administrative or executive staff.
Meeting Minutes: Written records summarizing the main discussions, decisions, and actions from a meeting of the organization's Board of Directors or other governing bodies. These records serve as an official account of the meeting and are essential for transparency, accountability, and compliance. Although not federally mandated for all nonprofits, meeting minutes are widely considered a best practice and may be required by state laws or regulations. Typically, the responsibility for recording and storing meeting minutes lies with the organization's Secretary or a designated record-keeping individual.
Motion & Resolution: Formal governance terms that are crucial in facilitating decision-making and recording official actions taken by an organization's Board of Directors and/or members.
A motion is a proposal or formal request made by a board member or meeting participant to address a specific issue or take a particular action during a meeting. Common motions include making budget decisions, policy approvals, or Officer elections. Typically, a motion must be proposed by a Member, seconded by another Member, and then subject to debate and a vote by the board.
A resolution is the formal statement that records a significant decision or policy adopted by the organization, serving as an official record of these actions. They can also convey the organization's stance on various matters, such as endorsing a cause or recognizing individual contributions.
Yay, Nay, Abstain: Common terms used by board members when voting on a motion or resolution. ‘Yay’ indicates approval, ‘nay’ signifies opposition, and ‘abstain’ from voting means choosing not to vote either in favor or against the motion or resolution. The final tally of ‘yay’ and ‘nay’ votes determines the approval or rejection of the motion or resolution. Abstentions are recorded but not counted as votes for or against the proposal.
BOARD GOVERNANCE LEGAL TERMS:
Robert’s Rules of Order: A widely recognized and commonly used set of rules and procedures for conducting meetings and making decisions within organizations. It serves as a valuable tool for nonprofit organizations, promoting fairness, efficiency, and order in meetings. While not legally binding, it is a widely accepted framework for governance and meeting conduct. Organizations can adopt their own rules based on their specific needs or governance documents, such as bylaws. Key aspects include meeting structure, decision-making procedures, participant roles and responsibilities, quorum requirements, guidelines for respectful debate and discussion, procedures for amendments, appeals and recommendations for meeting minutes content and format.
Bylaws: A set of written rules and regulations governing the internal operations, structure, and decision-making processes of a nonprofit organization. These critical documents outline the legal framework for the organization’s management, activities, and operations. Usually adopted during the nonprofit’s formation, bylaws can be amended as circumstances or priorities change over time. Nonprofits frequently require bylaws as part of their incorporation and tax-exempt status application processes.
Quorum: The minimum number of board members required for a meeting to be considered valid for conducting official business. Typically defined in the organization's bylaws, quorum ensures decisions are made with sufficient board participation and representation, while safeguarding the legitimacy of decisions. Specific requirements vary and are often expressed as a percentage or a fixed number of Members. Legal mandates for quorum compliance can vary based on jurisdiction.
Term Limits: Establish restrictions or guidelines that determine the maximum duration or number of terms an individual can serve in a specific leadership or governance position within the organization. These limits ensure fresh perspectives, facilitate leadership rotation, and prevent individuals from maintaining long-term control or influence. Typically outlined in the organization's bylaws, term limits specify the leadership roles affected, duration, eligibility for re-election, and potential exceptions.
Indemnification Policy: A clause, usually found within the organization’s bylaws, outlining the organization's commitment to protect and cover certain legal and financial liabilities incurred by board members, Officers, and volunteers when acting in good faith within their responsibility on behalf of the organization. While not mandated at the federal or state level, many nonprofit organizations opt to implement indemnification policies as a best practice, offering protection and reassurance to individuals serving the organization. It’s important for board members to be familiar with their organization’s indemnification policy, as the scope and terms of protection may vary.
Whistleblower Policy: A written policy and internal procedures instituted by an organization to promote and safeguard individuals who report misconduct, unethical behavior, illegal activities, or other wrongdoing within the organization. The policy establishes a confidential and secure avenue for employees, volunteers, or stakeholders to raise concerns without fear of retaliation. It holds particular significance for nonprofit organizations to ensure accountability and maintain trust among stakeholders. While not universally mandated at the federal level, certain state laws and jurisdictions may require organizations to have whistleblower policies in place.
Conflict of Interest Policy: A written policy establishing guidelines and internal procedures for recognizing, disclosing, and addressing situations in which individuals affiliated with the organization may have personal or financial interests that could potentially conflict with the organization’s best interests. This policy promotes transparency, ethical behavior, and responsible governance to safeguard the organization's integrity, mission, and interests.While not mandated universally at the federal level, some state laws and jurisdictions require organizations to have conflict of interest policies in place.
Directors & Officers (D&O) Insurance: A type of liability insurance that offers financial protection to individual directors and officers of nonprofit organizations in the event they are personally sued for alleged wrongful acts, mismanagement, or decisions made while fulfilling their leadership duties. This coverage serves to safeguard their personal assets. It is important to distinguish that indemnification policies and D&O Insurance are similar yet distinct mechanisms designed to shield individuals in director or officer roles from personal liability. Many organizations opt for both indemnification policies and D&O insurance to ensure comprehensive protection for their leadership teams.
501(c)(3) Status: A U.S. Internal Revenue Service (IRS) designation granted to eligible nonprofit organizations that meet specific criteria, allowing them to be exempt from federal income tax. It also enables donors to make tax-deductible contributions in support of the organization's mission. This status is subject to meeting IRS requirements, including operating for specific charitable or educational purposes and adhering to regulatory standards.
IRS Form 990: A required annual tax document that nonprofit organizations submit to the IRS. It offers a comprehensive overview of the organization's finances, governance, and operations, enhancing transparency for donors and the public. This form enables individuals to evaluate the organization's financial stability, mission, and governance practices. Nonprofits are required to complete and disclose Form 990 to maintain their tax-exempt status.
Annual Financial Audit: A comprehensive examination of the organization's financial records, transactions, and internal controls. This audit aims to verify the accuracy, transparency, and compliance of the organization's financial statements with accounting standards, legal mandates, and reporting requirements.
Independent financial audits, conducted by an external, independent auditor or accounting firm, are not universally mandated for all nonprofits at the federal level. However, some organizations may be required to undergo an independent financial audit under specific circumstances, depending on factors like size, funding sources, and state regulations. Additionally, many nonprofits opt to voluntarily undergo independent audits to meet donor expectations, enhance transparency, or strengthen governance practices.
* DISCLAIMER * The information provided on this blog post does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only.