The Handbook of Board Governance, 3rd Edition

69The Best of Boards, The Worst of Boards: The Not-for-profit Experience

Adam Quinton, BA, MA, MBA

Board Member, Startup Investor/Advisor

Introduction

The not-for-profit (NFP) sector in the United States is, most people sense, a substantial part of our economic and social structure. But many have little idea that the sector is, collectively, a giant both in financial terms and the extent to which it touches so many people’s lives.

Consider the following:¹

• There are 1.5 million NFP organizations in the United States.
• They generate annual revenues of $2.6 trillion.
• They employ some 10 percent of the total workforce.
• Of the U.S. population, 25 percent volunteer time to NFPs.
• NFPs were the beneficiaries of $485 billion of annual giving in 2021.

With this scale and reach into the lives (and wallets) of so many citizens, the good governance of NFPs is crucial to ensuring their ongoing impact and sustained public support.

The legal construct and hence roles and responsibilities of the board of a NFP bear many similarities to those of their for-profit cousins, including the duties of care and loyalty. However, there are also significant differences. Most important is the overarching importance of the board’s fiduciary duty since NFPs are custodians of contributed funds.

In the United States, regulatory oversight is primarily conducted at the state level by the charities offices of the various states’ attorneys general either on their own (27 jurisdictions) or with another state agency ...