Joining a Nonprofit Board: Duties, Liability, and Questions

An invitation to join a nonprofit board usually arrives as a compliment, and it is one, but what you are being offered is a legal office whose duties attach the day you accept. The organization may admire your judgment, your address book or your giving record. The law will care chiefly about whether you read the financial statements, disclosed your interests and kept the institution faithful to its purpose.

What follows sets out those duties, the financial expectations, the documents that reveal an organization’s health, the real reach of insurance and the federal Volunteer Protection Act, and how to leave well, so that you can decide whether to accept and on what terms.

What the seat actually carries

The New York Attorney General’s Charities Bureau, in its director guidance Right from the Start (issued May 15, 2015), describes a board that rarely runs daily operations but remains responsible for hiring and firing key officers, engaging auditors and authorizing significant transactions. Failing those obligations, it warns, can result in financial and other liability for the board. The IRS’s governance guidance adds that a board tolerating secrecy or neglect makes diversion of charitable assets to insiders more likely.

Care, loyalty and obedience, in working terms

State law defines these duties, and the wording varies; New York’s is a sound model.

Care asks you to know the organization’s finances and activities, to take part regularly, and to act in good faith with the diligence, care and skill of a prudent person in a similar position. Read the board book before each meeting, obtain minutes of any meeting you miss, and have any dissent recorded in the minutes or a letter to the board; the Attorney General notes that such a record is necessary for a director to disclaim responsibility for a decision.

Loyalty asks you to act in the organization’s interest rather than your own, and to disclose any real or possible conflict before joining and whenever one arises. The IRS encourages a written conflict-of-interest policy with periodic written disclosure by directors.

Obedience asks you to keep the organization within the law, its mission and its governing documents, including its registrations, reports and payroll taxes.

A board seat is not a thank-you note for past generosity but an office of trust that the law expects you to occupy.

Give or get, stated in dollars

Many boards expect each director to give, to raise money from others, or both, an arrangement often called “give or get.” It is a board practice, not a legal duty; the Attorney General tells prospective directors to understand fundraising and personal giving commitments before joining.

Ask for it in writing: the amount, whether it is annual, and what counts toward it. Suppose a museum expects each trustee to give or raise a fixed sum every year. If that fits the plan you have made for giving to charity with structure, it is easy to honor; if it would displace other commitments, say so now rather than at renewal.

Reading the Form 990 before you say yes

Every Form 990 filer must complete Part VI, on governance, and make the return publicly available for three years. Federal tax law generally does not mandate these policies, but the IRS considers them to improve compliance, so a “No” deserves a conversation. In the latest return, read:

1. Part VI, lines 1a and 1b: voting and independent directors. Being a donor, of any amount, does not by itself make a director non-independent.
2. Line 2: family or business ties among officers, directors and key employees.
3. Line 5: any significant diversion of assets, meaning, under the 2025 instructions, more than the lesser of 5% of gross receipts, 5% of total assets, or $250,000.
4. Line 8: whether board and committee meetings were contemporaneously documented.
5. Lines 11a to 15: whether every voting director received the complete return before filing; conflict-of-interest, whistleblower and document-retention policies; and whether unconflicted people set executive pay using comparability data and contemporaneous documentation.

Part VII lists every current officer and director whatever their pay, key employees above $150,000 of reportable compensation, and the five highest-paid other employees above $100,000. Pay deserves particular attention now: under the One Big Beautiful Bill Act (Public Law 119-21), for taxable years beginning after December 31, 2025, the definition used for the excise tax on remuneration above $1,000,000 is no longer confined to the five highest-paid employees. IRS Notice 2026-36 says current employees generally enter the expanded definition, while preserving interim limited-hours and nonexempt-funds exceptions until further guidance.

The audit, the management letter and the budget

Part XII, line 2 shows whether an independent accountant compiled, reviewed or audited the statements, and whether a committee oversees that work. The IRS suggests that a charity with substantial assets or revenue consider an audit even where none is required; state law may require one.

The Attorney General suggests reading at least two years of audited statements, then asking whether the opinion is unqualified, whether the auditor sent a management letter identifying concerns, and whether the IRS has recently audited the organization. Ask also how actual results are tracked against the budget and cash-flow projections. Our guide to vetting a charity before a major gift reads the same documents from the donor’s side.

Insurance, indemnification and the Volunteer Protection Act

Ask whether the organization indemnifies directors and carries directors’ and officers’ liability insurance, and what the policy excludes; if there is none, the Attorney General advises finding out why. The guidance also recommends employee fidelity coverage, observing that embezzlement is discovered surprisingly often.

The federal Volunteer Protection Act of 1997 adds a narrower layer. It shields a volunteer, expressly including a director, from liability for harm caused on the organization’s behalf, if the director acted within the role, held any required license, and did not cause the harm through willful or criminal misconduct, gross negligence, recklessness, or conscious, flagrant indifference to the rights or safety of the person harmed. Harm caused while operating a vehicle, vessel or aircraft for which the state requires a license or insurance is excluded. Its limits matter as much:

• It covers only a director who is essentially unpaid: no more than $500 a year in compensation or other things of value in lieu of compensation, not counting reasonable reimbursement of expenses actually incurred.
• It does not affect a claim the organization itself brings against you, or the organization’s own liability.
• States may attach certain conditions, and may opt out for state-court cases in which every party is a citizen of that state.
• It does not reach convicted crimes of violence or sexual offenses, hate crimes, civil rights violations, or misconduct while intoxicated.

Tax exposure sits outside the Act. At a public charity, a director who knowingly and willfully, without reasonable cause, approves an excess benefit to an insider may owe an excise tax of 10% of it, capped at $20,000 per transaction; one who votes against it ordinarily does not. The federal penalty on those who willfully fail to pay over withheld taxes exempts an unpaid, honorary director who takes no part in day-to-day or financial operations and has no actual knowledge of the failure, unless the exemption would leave no one liable.

When you are both donor and director

As a voting director of a public charity you are a “disqualified person” for excess-benefit purposes, and remain one for five years after you leave; so are your family members and entities you own more than 35% of. An insider who receives an excess benefit owes an excise tax of 25% of it, and a further 200% if it is not corrected in time.

Suppose the board considers leasing a building you own. Disclose the interest in writing, leave the room for the discussion and vote, and see that the terms are documented as at or better than market. Good practice suggests the same restraint when the board debates your own gift. The organization need not publish contributors’ names from Schedule B, but fellow directors may see them: a board copy with a donor’s name redacted does not count as complete for line 11a.

Time, and leaving well

The Attorney General calls time the most important consideration: joining without enough of it is often at the root of a board’s troubles, and declining for that reason should be respected. Compare the average weekly hours Part VII reports for each director with what you are told.

If you later step down, resign in writing under the bylaws, and if you are leaving over a decision you opposed, put the dissent on the record. Settle or clarify any pledge, hand over committee work, and confirm the insurance still covers claims about your years of service. To lend expertise without fiduciary duty, consider an advisory council, which ordinarily has no authority to act for the board, or one of the roles in our guide to putting what you know to use.

Questions to ask before you accept

1. May I read the bylaws, conflict-of-interest policy, recent minutes, and two years of Forms 990 and audits?
2. What is the giving and fundraising expectation, in dollars, and how is it counted?
3. How many meetings, committees and hours should I expect?
4. What indemnification, D&O and fidelity coverage exists, and with what exclusions?
5. Was the latest audit opinion unqualified, and what did the management letter raise?
6. How is executive compensation set and documented?
7. Are payroll taxes, the Form 990 and state charity registrations current?
8. Which of my own and my family’s interests must I disclose, and how are conflicts handled?
9. How do orientation, terms and resignations work?

This article provides general U.S. educational information and is not legal, tax, insurance, or investment advice. Nonprofit governance and volunteer-liability rules vary by state; confirm current rules with the relevant agency and a qualified professional who knows your facts.