A foundational responsibility of a nonprofit board is to approve policies governing the organization.
In this second article, we explain the nonprofit board’s role in defining policies governing organization activities. We will explain the types of policies you need and how a board goes about implementing them.
A nonprofit board of directors has four key responsibilities: guide the mission, approve policy, apply governing structures and monitor results. In the previous article, we explored the important role of guiding the mission – making sure the organization is achieving its intended social purpose.
But achieving goals is not enough. Policies ensure the organization is achieving its goals legally and ethically. Policies form the foundation for board governance — how the board oversees its responsibilities to the community served by the organization. The right policies increase the likelihood the organization will achieve its mission.
What are nonprofit board policies?
Policies are rules. If a mission defines where you want to go, policies define how the board expects the organization to behave to get there. Sometimes nonprofit policies are required by law – for example, completing an annual audit because of IRS requirements. But the organization may adopt a policy only because it is important to its mission. An organization opposing cruelty to animals may adopt a policy to reject donations from organizations that test products on animals.
Policies also may define desired results, or “ends”. For example, a school board may set a policy for desired standard testing scores. But it does not specify teaching methods or the “means” the school uses to achieve those scores. Another way to think about board policies is that they are not detailed procedures. Policies should empower the staff while allowing creativity and expertise in the implementation.
What nonprofit board policies do you need?
Fortunately, there are many examples of nonprofit board policies to provide guidance. Here are some key board policies your organization could consider:
Bylaws and board policies – rules for how the board is structured and makes decisions
Financial policies – governs how your organization manages donations
Conflict of interest policy – guidance for situations when a board member or key staff may have a conflicting personal interest
Whistleblower policy – defines the process for employees or board members to raise concerns without fear of retaliation
Program policies – policies guide legal requirements, participant requirements or desired outcomes
Employee and volunteer policies – designed to protect staff and volunteers and comply with law
Be aware that while most policies are not required, many policies are considered best practices. Some donors may reconsider giving to organizations that are missing important policies.
How to implement nonprofit board policies
Here is the typical process to add or modify policies:
Prepare a draft. While your legal or professional advisor can help you do this, remember that policies are unique to the organization. Starting with a template helps your board begin the conversation. After this, advisors address final questions and ensure state-specific legal compliance.
Approve. Board policies take effect when they are formally approved with a board vote. Voting rules are typically set by the bylaws.
File. Make sure approved policies always are available to board members in an organized filing system.
Board policies and governance
Policies become the foundation for board governance. They should be helpful to the board in making decisions or managing expectations. As organizations encounter new situations, an existing policy may need to be clarified or expanded, or perhaps a new policy should be written. Embrace improvements as a legacy you are leaving for future board members.
When a policy is not being enforced or complied with, here are some questions to ask before placing blame:
Are policy expectations understood, or could the board have been clearer?
Did the policy assign responsibility?
Were resources provided in the budget to enable implementation and monitoring?
Did the board consider the effort required to comply, and was the expectation realistic?
Practical next steps
Here are suggested changes that help your board evaluate and improve policies:
Use a checklist to identify potentially missing policies.
Your board has a lot of information to manage. Evaluate your document organization system.
Customizable policy templates can get you started. You can compare templates to your current policies if you think they can be optimized.
Remember, templates do not substitute for legal advice or a professional opinion. They are intended to provide a starting point for discussions with board members and advisors.
Next up, understand how a nonprofit board supports the organization through governing structures.