Understanding Board Fiduciary Responsibilities

A Practical Guide for Nonprofit Board Members

Serving on a nonprofit board is both an honor and a responsibility. While board members bring diverse backgrounds and expertise, all share a common legal and ethical obligation known as fiduciary responsibility.

Fiduciary responsibility does not mean you must be an accountant or attorney. It does mean that, as a board member, you are entrusted with acting in the best interest of the organization and its mission.

Below, we break down fiduciary responsibilities in plain language, with practical examples relevant to real nonprofit board service.

What Does “Fiduciary” Mean?

A fiduciary is someone who is legally and ethically required to act in the best interest of another. For nonprofit boards, this means acting in the best interest of:

• The organization

• Its mission

• The public it serves

Nonprofit board fiduciary responsibilities are generally grouped into three core duties.

The Three Core Fiduciary Duties of a Nonprofit Board

1. Duty of Care

Act with reasonable care, attention, and diligence.

Board members are expected to be informed, engaged, and thoughtful in their decision-making.

In practice, this means:

• Preparing for meetings by reviewing materials in advance

• Asking questions when something is unclear

• Understanding the organization’s financial position at a high level

• Participating actively in discussions and decisions

Examples:

• Reviewing financial statements and asking about unusual variances

• Understanding major risks facing the organization

• Ensuring appropriate financial oversight (audits, reviews, or internal controls)

What it does not mean:Micromanaging staff or handling day-to-day operations.

2. Duty of Loyalty

Put the organization’s interests above personal interests.

Board members must act in good faith and avoid conflicts of interest—real or perceived.

In practice, this means:

• Disclosing potential conflicts of interest

• Recusing oneself from decisions where a conflict exists

• Keeping board discussions and sensitive information confidential

Examples:

• A board member who owns a business discloses that relationship before the organization considers hiring them

• A board member steps out of a vote where a family or professional connection exists

• Decisions are made based on mission impact, not personal benefit

3. Duty of Obedience

Ensure the organization follows its mission, governing documents, and the law.

Board members are stewards of the nonprofit’s purpose and must ensure compliance with legal and ethical requirements.

In practice, this means:

• Upholding the organization’s mission and preventing “mission drift”

• Following bylaws and board-approved policies

• Ensuring required filings and compliance obligations are met

Examples:

• Confirming funds are used according to donor or grant restrictions

• Reviewing and approving the annual budget in alignment with mission priorities

• Ensuring accurate and timely filings with the Internal Revenue Service and state regulators

Financial Oversight: A Key Part of Fiduciary Duty

Board members are not responsible for bookkeeping, but they are responsible for financial oversight.

This includes:

• Reviewing financial reports regularly

• Understanding cash flow and sustainability

• Ensuring appropriate financial policies and controls are in place

• Asking informed questions about budgets, reserves, and risks

Strong financial oversight helps protect the organization, the board, and the mission.

Fiduciary Oversight vs. Management

A common misconception is that fiduciary responsibility requires board members to “do more.” In reality, it requires boards to focus on oversight, not execution.

The board’s role:

• Set direction

• Provide oversight

• Ask thoughtful questions

• Ensure accountability

Management’s role:

• Run daily operations

• Implement board-approved strategy

• Manage staff and systems

When these roles are clear, organizations are healthier and more effective.

Final Thoughts🌿

Fiduciary responsibility is about stewardship, trust, and care. When board members understand and embrace these duties, nonprofits are better positioned to fulfill their mission, build public trust, and thrive long-term.

Strong boards don’t have all the answers—but they ask the right questions.

Personal note: Good governance doesn’t have to feel heavy. Some of the best board conversations happen outside - where fresh air sharpens thinking and better questions come naturally.

Bring the strategic plan, the financials, and your curiosity. Same fiduciary duties. Better views.

The deck still counts.

Katya Koteff, CPA

Founder & Principal,

Koteff Accounting Group If you'd like to learn more about how we can help your organization and set up a time to meet with us, please fill out this form.

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