The governing board of any church, much like any corporation, is a serious entity. When accepting a board position, board members have a responsibility to do well by the church and its members. Their representation of the church, including any and all related business, must be conducted in good faith.
Each church board member, or director, has a fiduciary responsibility that must be upheld at all times. A “fiduciary responsibility” or duty, whether the church is incorporated or not, is an obligation to the church to maintain and promote moral, ethical, and financial practices that are representative of the church and its congregation.
A board member of a non-profit organization, which by federal definition churches must be, has many of the same obligations as a board member of any corporation or organization, except that they are part of an exclusively-protected class. The federal government and each state have a set of rules in place that help protect non-profit organizations from irresponsible board members.
A board member who violates fiduciary duties may be liable for damages to the organization and particular individuals. It is irrelevant as to whether or not the duty-breaching member is paid for services rendered. Churches and other non-profit organizations would be vulnerable without laws and by-laws that protect them.
It is essential that you take a look at fiduciary responsibilities of church board members if you are involved with a church and its practices.
What Does a Church Board Member with Fiduciary Responsibilities Do?
Church board members must act in a responsible manner according to the guidelines and expectations of the church. A board member most often has the responsibility of overseeing or directing any important decision-making that involves the church. Board members are held accountable for these decisions.
A board member should attend important meetings, staying abreast with church affairs. Hiring new board members or managers, or bringing in outside help, is also a function that a board member should conduct or oversee. This includes firing church officials or breaking ties with those outside the church.
A board member is responsible for monitoring financial reports, including conducting an audit once a year. Any financial transactions approved or conducted by a board member must be in the best interest of the church.
What Are the Basic Fiduciary Duties of a Church Board Member?
A church board member must meet the guidelines set by standard church practices and the guidelines set by the church itself. These standard practices are protected by laws in order to hold each board member accountable. Individual churches will define their tenets and bylaws accordingly, but the standard practices are just what they sound like: standard.
The standard practices for board members are the duty of care, the duty of loyalty, and the duty of obedience. In regard to churches, these three duties compose a sort of covenant explicitly crafted to bind board members to their obligations.
The duty of care is a promise to represent the church in a prudent and reasonable fashion, one that exercises concern for not only the church as a whole but also individual members. This duty holds a board member accountable for acting in a way that any reasonable person with invested interest in the church would act.
Even though the exact rules and expectations will vary, the duty of care holds a board member accountable for attending meetings and being reasonable with other members. It is important that a board member work diligently with other board members to promote and advance any mission or goal set forth by the board.
Oversight and understanding of financial records are critical. Questions about disbursements and acquisitions are also an important part of the responsibilities. A board member should maintain an open-door policy that provides any church official a chance to review the transactions of the church, and that allows for basic transparency of any and all church records.
The duty of loyalty is the dedication part of a board member’s responsibility. Board members must place the interests and well-being of the church ahead of their own. This includes the interests and well-being of donors, other board members, and other individuals with interest in the church.
Any conflict of interest must be disclosed, allowing for examination and discussion. An important part of loyalty for board members is to not act in any way that would financially or personally benefit them or people connected with them, such as family.
The duty of obedience ensures that board members hold accountable themselves and other board or authoritative members in respect to the church’s best interests and mission, state and federal laws, and the specific bylaws of the church. If a church is incorporated, it must follow any applicable laws or regulations to keep its corporate status.
All meetings, memberships, and elections must be conducted according to the bylaws of the church.
What Are the Bylaws of the Church?
The “bylaws” of a church are the rules of operation according to the church. The church is given latitude by the First Amendment, which separates church and state. In essence, this allows the church to decide its purpose and how it will conduct its business.
The bylaws include procedures and outlines for how leaders are elected, what functions they will serve, and what would cause their services to be terminated. The bylaws also allow churches to decide how they will formulate budgets, authorize spending, and delegate authority.
How Can a Church Protect Itself from Hiring an Irresponsible Board Member?
The first and most important step for any church is to properly conduct interviews according to what is expected of a qualified candidate. Background checks and references are important. It might also serve a church well to hire someone who has had a similar position in the past, at least one that required accountability.
It is crucial that churches have an explicit list of guidelines and rules for a board member to follow according to fiduciary responsibilities, laws, and bylaws. The expectations for a board member need to be clear and precise. Orientation for any new board member should be detailed with an informative question and answer session.
Board members should have to take part in a development or training program to develop the necessary skills to meet the demands of the job. Considering others’ viewpoints is essential in a fiduciary role, so making sure that a candidate is open to suggestions and opinions is key.
Are Church Board Members Liable for Breach of Fiduciary Duties?
Beyond the careful execution of good hiring procedures and practices, state and federal laws hold accountable any church board member or director. However, as long as board members act in good faith according to the laws and bylaws that govern the position, they should be protected from personal liability. Protection from personal liability doesn’t mean that a board member cannot be taken to court, but if a board member has conducted business in a reasonable and responsible manner according to the required guidelines and expectations of the church, a judge is likely to see no reason to hold said board member liable for damages.
Protection from liability only goes so far. Any board member may be held liable if said member causes injury to someone, commits fraud or conducts an illegal activity, combines the church’s funds with personal funds, fails to ensure tax payments, or doesn’t file tax returns.
Is There Anything That a Church Can Do to Help Protect Its Board Members?
If there are no provisions in a church’s bylaws to protect its board members, or a church is looking to further protect its board members, it may be worth considering an indemnification provision, a commonly drafted provision found in the negotiation of a business contract.
The indemnification provision protects an individual from personal liability for any obligations or debts incurred while representing a business. This provision, when it comes to a church, could be a slippery slope. The indemnification provision must be explicit that board members are still responsible for acting according to fiduciary duties and bylaws.
This provision is to help protect church board members from aggressive and unfair claims that might be subjective or unwarranted. It might be difficult finding a competent board member, especially one who is a volunteer, without offering a reasonable amount of protection.
Virginia Beach Church Law Attorneys at Anchor Legal Group, PLLC Represent Churches and Nonprofit Organizations in Legal Matters Concerning Fiduciary Duties and Other Related Issues.
For help with any legal matter concerning churches or other nonprofit organizations, our experienced Virginia Beach church law attorneys at Anchor Legal Group, PLLC will work hard to protect your organization and its members. Call us at 757-LAW-0000 or contact us online for a free consultation. Located in Virginia Beach, we serve clients throughout Virginia Beach, Chesapeake, Norfolk, Suffolk, Portsmouth, Newport News, Hampton, Eastern Shore. We also serve our clients throughout the United States through our network of associated attorneys.