This section focuses on the work of an organization's directors/ trustees regarding their responsibilities under the law; how they are selected, trained and compensated; and how they oversee the foundation's charitable purpose.
Options highlighted in bold are required by law. All other options are voluntary practices that individual organizations can choose to implement.
- We have a designated board of directors or trustees that is responsible for governing the organization's affairs.
- Board members are elected as outlined in our charter or bylaws, as applicable.
- If not specified in our charter, we have developed bylaws and/or policies to establish terms of service for board members and selection criteria.
- When possible, we strive to build an inclusive board by actively recruiting new board members who reflect the diversity of the communities and constituents we serve, or who demonstrate the capacity to balance and understand the diverse needs and issues of those communities and constituents (see definitions of race/diversity and inclusive practices). Note: For family foundations that have provisions for outside directors: We pursue diversity and perspectives that can be brought to the foundation from individuals outside the family.
- If we are governed by explicit requirements for board service that preclude achieving our diversity goals: We employ other appropriate means to gain diverse perspectives on the board, such as through the use of advisors and consultants.
- We periodically assess the composition of the board against the organization's desired goals.
- We have developed and periodically review a leadership succession plan for the board.
Board Fiduciary Duties of Care, Loyalty and Obedience
Duty of Care
We have taken steps to ensure that our board members are aware of, fully understand and fulfill their fiduciary duty of care, devoting the time, attention and resources necessary to understand and prudently oversee the organization's affairs.
Mission and Strategy
- We have a written mission statement, approved by our board.
- We have a set of guiding values.
- We periodically review our charter and other donor instructions to determine whether they need to be amended or re-interpreted to meet changing community needs in ways that reasonably honor the donor's intent. Note: Generally not applicable to corporate foundations.
- We periodically review our grantmaking priorities and objectives to help ensure that our grantmaking remains relevant and responsive.
- We consider strategies beyond our own grantmaking to advance our mission, such as:
- Collaborating with other grantmakers or donors that fund similar work.
- Providing technical assistance to grantees and other charitable nonprofits.
- Convening community leaders, nonprofits and/or other funders doing similar work.
- Promoting personal giving and volunteering by our board and staff (bearing in mind potential conflicts of interest).
- Engaging in public policy and advocacy on our priority issues and within the limits of the law.
- Our board members actively participate in governing the organization.
- Our board members ensure that our activities are consistent with our mission.
- We have clearly defined and documented the roles, responsibilities and expected time commitment of board members, officers and committees (if we have committees).
- Our board holds regular meetings each year, as frequently as needed to fully and adequately conduct the business of the organization.
- Written minutes are taken at every board meeting to accurately reflect discussions and actions taken at meetings.
- Our board members have access to, and general knowledge of, our organization's books, financial records, history and governing documents.
- Our board members work to protect, preserve, invest and manage our organization's assets, consistent with donor intent and restrictions.
- We ensure that the organization has a written investment policy adequate for its size and complexity, which includes investment objectives, asset allocation strategy, spending and/or payout policy, and rationale for selecting and evaluating investment managers/advisors
- Our board seeks professional legal and accounting advice when needed to support compliance.
- We regularly ensure that we have adequate property and liability insurance coverage.
- We periodically evaluate the performance of the board as a body.
- We plan for and encourage continuous learning and training of our board members, particularly on basic legal, accounting, audit, tax and fiduciary issues and responsibilities.
- We provide training and orientation for incoming board members and staff, if we have staff.
- We continually work toward increasing our awareness and understanding of multiple cultures in our increasingly diverse communities.
- When feasible, we encourage our board members to participate in regional and/or national grantmaking conferences, programs, associations or support groups for ongoing or continuing education and development.
- When appropriate, our board and/or staff consults subject matter experts or community representatives and/or includes them on committees or advisory groups.
- Our board members have access to, and general knowledge of, any written correspondence that details the founding donor's goals and expectations for the philanthropic organization
- If changing societal conditions and needs make following the donor's specific instructions impossible, unfeasible or extremely challenging to accomplish, we thoughtfully assess options and identify alternative program goals that reasonably honor the donor's intent.
- We dedicate sufficient human, financial and technological resources to advance the mission of the organization.
- If we have staff: We have developed and periodically review a leadership succession plan for the chief executive.
- If we have staff: We seek to employ diverse staff or paid advisors who are representative of the communities in which we work, or individuals who demonstrate the capacity to understand issues and communicate skillfully across cultural, class and other boundaries.
- We periodically evaluate our organization's operations, procedures and grantmaking, assessing whether they are attaining the goals and objectives explicit in our mission.
- We use evaluation as an ongoing process of organizational learning.
- We actively involve the communities and constituencies we serve in our evaluation and organizational learning.
Duty of Loyalty
We have taken steps to ensure that our board members are aware of, fully understand and fulfill their fiduciary duty of loyalty, setting aside personal or conflicting interests and acting solely in the best interest of the organization when making a decision or acting on behalf of the organization.
Conflicts of Interest
- We have a written conflict of interest policy. Note: The law does not require private foundations to have conflict of interest policies, but it would be difficult to achieve or demonstrate compliance with many provisions of tax law without having such a policy in place. As an indication of the growing importance of having a conflict of interest policy, the IRS has revised its Form 990, the annual information return filed by public charities, to specifically ask whether an applicant has adopted a conflict of interest policy, and if not, to identify steps the organization takes to address conflicts of interest.
- Our board members and staff (if we have staff) review our conflict of interest policy and acknowledge, in writing, that they have done so and understand what constitutes a conflict of interest, as well as our conflict of interest processes and procedures.
- Our board members and staff (if we have staff) complete and submit a conflict of interest disclosure form annually, and update the disclosure form as necessary.
- Our board members and staff (if we have staff) disclose any actual or perceived conflicts of interest.
Duty of Obedience
We have taken steps to ensure that our board members are aware of, fully understand and fulfill their fiduciary duty of obedience, obeying all state and federal laws pertaining to the organization and acting in furtherance of the organization's charitable purposes.
- Our board members and managers receive education on self-dealing, understand disqualified persons and have processes to evaluate potential self-dealing transactions.
- We do not engage in any self-dealing transactions between the philanthropic organization and any disqualified persons.
- If we are a corporate foundation: We have not paid the parent company (that is a substantial contributor to the fund) directly for any resources other than for reasonable expenses for business services.
- We expect board or committee members to serve the foundation without compensation, recognizing:
- Reimbursement of reasonable expenses directly related to board service does not constitute compensation
- Board members who perform traditional staff functions may be compensated as staff. Like all staff, these individuals should be reasonably compensated, document time spent, and have a job description, performance objectives and evaluations.
- If we compensate and/or reimburse board (or committee) members, we have developed a compensation and reimbursement policy.
- If we have a policy to compensate board (or committee) members for their service, we have taken steps to ensure that the compensation is reasonable and not excessive, as defined by law.
1. We demonstrate our commitment to public accountability by annually filing required tax forms, which provide public disclosure of the operations and activities of our foundation.
2. If our financial statements are audited, we make available to the public, upon request and/or in published annual reports or posted on our websites, our audit statement or auditor-approved summary of the audit findings.
1. In order to prevent improper activities, we have adopted a whistleblower policy to encourage good-faith reporting of any suspected violation of law, policy or practice. The policy ensures a process of action by the organization and guarantees protection of the reporting individual from retaliatory action.
For Community/Public Foundations Only
- Our governing body retains variance power by which it may modify a restriction or condition on the distribution of assets, if circumstances warrant
- The governing body, with respect to assets held in trust, has the power to replace any participating trustee for breach of fiduciary duty under state law or for failure to produce a reasonable return of net income.