Glossary of Nonprofit Governance Terms

501(c)(3): Public charities and private foundations as defined by the IRS. These organizations are exempt from federal, state, and local taxes (except for unrelated business income tax) and can accept tax-deductible donations.

501(c)(4): Social welfare and advocacy organizations as defined by the IRS.

501(c)(6): Trade associations and business leagues as defined by the IRS.

501(c)(7): Membership organizations, such as social clubs, as defined by the IRS.

Ad hoc committee: A temporary committee established to address a specific issue.

Advisory Board: A group that provides advice and support to the organization but does not have formal governing authority or voting rights.

Advisory or Auxiliary Board/Council: A group created to advise and support an organization or its leadership. It does not have a governing role.

Advocacy: Actions that speak in support of or recommend a cause, mission, or organization that benefits others.

Agenda: The document that describes the business taking place at a board meeting. It is prepared by the board chair and chief executive and sent out in advance.

Annual Fund: The nonprofit’s annual fundraising effort to generate donations for operating expenses.

Annual Report: A yearly document that provides a summary of the organization’s activities, achievements, financial statements, and goals. It’s often shared with donors, stakeholders, and the public.

Articles of Incorporation: An official statement of the creation of an organization filed with the appropriate state agency.

Audit: A formal review of financial activities and legal transactions.

Audit Committee: The board committee responsible for overseeing financial reporting, accounting policies, internal protocols, monitoring risk, and audit compliance functions.

Board Member Agreement: A document outlining the expectations, roles, and responsibilities of a board member, ensuring that they understand and commit to their duties.

Board of Directors: The governing body of a nonprofit or for-profit corporation with legal and ethical responsibilities to the organization.

Bylaws: The legal operating guidelines for a board, describing governance processes, structure, and other essential organizational procedures.

Capital Campaign: A focused fundraising effort over a specific period, usually for defined purposes.

Capital Reserves: Funds set aside to cover unforeseen expenses or to invest in the organization’s long-term stability and growth.

CEO (Chief Executive Officer): The top staff position in a nonprofit or for-profit organization, also referred to as the executive director or president, depending on a number of factors in the make-up of the organization.

Chair: The chief volunteer position and elected leader of the board in a nonprofit organization; this person is also often called the president of the organization.

Charitable Contribution: A tax-deductible donation given to a nonprofit organization.

Conflict of Interest: A situation where personal or professional concerns of a board or staff member could affect their ability to prioritize the organization's welfare.

Conflict of Interest Policy: A written policy that defines how potential conflicts of interest should be disclosed and managed to ensure board members act in the organization's best interest.

Consent Agenda: A component of the meeting agenda that groups routine items and resolutions as one item. It does not require discussion before the vote.

D&O (Directors and Officers) Insurance: Insurance that protects board members and top staff from personal liability resulting from board decisions or actions.

Duty of Care: The requirement for board members to be informed about the organization’s activities, participate in decisions, and act in good faith.

Duty of Loyalty: The requirement for a board member to remain faithful and avoid conflicts of interest.

Duty of Obedience: The requirement for a board member to stay true to the organization's mission and comply with laws and regulations.

Emeritus Status: An honorary title for a former board member invited to stay on as a nonvoting member in an advisory capacity.

Endowment: A fund or collection of assets whose investment earnings support an organization or specific project. It may have donor-imposed restrictions.

Executive Committee: A committee with specific powers outlined in the bylaws that allow it to act on the board’s behalf when a full board meeting isn’t possible.

Executive Session: A confidential board meeting where only board members and invited individuals are present.

Fiduciary Duty: The responsibility of board members to serve as trustees of the organization’s assets on behalf of the greater community.

Form 990: An annual information form submitted to the IRS, detailing an organization’s finances and programs.

Form 1023: The application form that nonprofits must file with the IRS to obtain 501(c)(3) tax-exempt status.

Governance: The legal authority of a board to establish policies and be accountable for the outcome of decisions.

Grant: Financial support provided by a foundation, government agency, corporation, or individual to support a specific project or the general operations of a nonprofit organization.

Incorporation: The legal process through which a group is recognized by the state as a separate entity from the individuals managing or governing it.

Intermediate Sanctions: Penalties imposed by the IRS on individuals involved in excess benefit transactions with a nonprofit organization, including board members, executives, and other insiders.

Lobbying: Attempts to influence legislation through direct contact with lawmakers or constituents.

Mission Statement: A brief description of the organization’s approach to fulfilling the need it was created to address.

Net Assets: The term used instead of equity on a nonprofit's Statement of Financial Position.

Nonprofit Organization: A nongovernmental organization established for purposes other than financial profit. Its programs, fundraising activities, and investments must generate more revenue than expenses to sustain its mission.

Officers of the Board: Individuals elected or appointed to key leadership positions on a nonprofit board, typically including the Chair, Vice Chair, Secretary, and Treasurer. These officers have specific responsibilities and duties as outlined in the bylaws.

Quorum: The minimum number or percentage of board members who must be present to conduct official business, as defined by the bylaws.

Restricted Funds: Donations or grants that come with specific limitations on how they can be used, as dictated by the donor.

Robert’s Rules of Order: A parliamentary procedure used to conduct meetings.

Secretary: An officer responsible for taking minutes and keeping records of the board.

Standing Committee: A permanent committee that focuses on specific areas of the board’s work, such as finance, governance, or fundraising.

Statement of Activities: A financial document equivalent to an income statement that summarizes the organization's income and expenses over a period.

Statement of Cash Flows: A financial document summarizing cash transactions during a period.

Statement of Financial Position: A financial document summarizing the organization’s financial balances at a given date, equivalent to a balance sheet.

Strategic Plan: A long-term roadmap that outlines an organization's goals, strategies, and actions for achieving its mission. It provides direction and helps guide decision-making over a set period, usually 3-5 years.

Sunshine Laws: Regulations that require certain nonprofit or public meetings to be open and accessible to the public, ensuring transparency in operations.

Transparency: A system of operation and communication that allows people to understand how the organization operates, makes decisions, and uses resources.

Treasurer: A board officer responsible for coordinating and ensuring financial oversight of the organization.

Unrelated Business Income Tax (UBIT): The tax that a nonprofit must pay if it sells goods or services not directly related to its mission.

Vice Chair: A board officer who replaces the chair when necessary and may be the chair-elect.

Vision Statement: A description of what the organization intends to achieve in the future, either in terms of itself or its community impact.

Watchdog Agencies: Third-party sources that provide tools and information to evaluate nonprofit performance.

Whistleblower Policy: A policy that protects employees or board members who report unethical or illegal activities within the organization.