People asked to serve on a foundation's board often believe their primary responsibility will be directing the distribution of grants to non profit organizations. While this is certainly an important function, board membership actually entails much more. The key responsibilities of a foundation board are outlined below.

Determine the Mission of the Foundation

A mission statement allows a foundation to focus its grantmaking activities and communicate the foundation's role in and to its target community. It is created to coordinate with the foundation's established charitable purpose or what it was created to do. For example, a foundation may be established with a narrow charitable purpose such as to make grants to help disadvantaged youths or with a very broad purpose such as to make grants to any eligible organization. Board members define the foundation's mission, monitor adherence to the mission, and review it periodically to ensure it remains appropriate for changing times. Board members should fully understand and support the foundation's mission.

Ensure Legal and Tax Compliance

The board has a duty to operate the foundation in compliance with many and varied requirements including but not limited to corporate, state and federal laws. This entails being familiar with the foundation's by-laws, adhering to those by-laws and perhaps amending them appropriately. By-laws of the foundation are generally the "road map" for foundation governance. The by-laws are created at the foundation's inception, the by-laws set out the general powers of the board, the number, tenure and qualifications of board members, board meeting requirements, and decision-making procedures. In addition, the board must monitor the extensive legal and tax guidelines for the foundation. Because federal and state laws governing foundations are complex, consult your professional advisor.

Oversee Reporting and Recordkeeping

In order to comply with federal and state rules governing private foundations, and to provide public accountability for the use of charitable funds, private foundations must file an annual tax return, the IRS Form 990-PF, and keep a variety of records. These records include the IRS Form 1023 which the foundation submits to apply for tax-exempt status, employee records, and financial assets records. Different state filings may be required as well.

Manage the Finances and Assets of the Foundation

A foundation's operating costs — the costs of administration, including office equipment, professional assistance, and board meetings — must be monitored for efficiency and for compliance with state and federal requirements. More important, assets contributed to the foundation require careful investment management. The board is responsible for all of these fiduciary duties. To fulfill these responsibilities, the board usually establishes a budget, adopts investment management policies, and carefully monitors their implementation by board-selected professional advisors.

Set Grantmaking Policy for the Foundation

The board determines a method for distributing the foundation's assets, which reflect the foundation's mission and charitable purpose and comply with the foundation's by-laws. For example, the board may seek to distribute all of the foundation's assets within a set number of years, or to establish a perpetual source of funding for a particular cause. At the very least, the foundation will be required to distribute a minimum of 5% of its assets each fiscal year. Grantmaking policy also helps establish criteria for locating potential grant recipients and a decision-making framework for evaluating applications.

Make and Monitor Grants from the Foundation

The most exciting role of board members is reviewing grant requests and making grants from the foundation. This role is often the most visible evidence of the board's activities as well as the fulfillment of the foundation's charitable mission. Board members must work together to make effective decisions. Making grants, however, is only the start of the giving process. Monitoring the use and effectiveness of grants is an important next step for the board. For some types of grants such as foreign grants and scholarships, the IRS requires specific due diligence and documentation, and the board must ensure that such documentation is properly maintained.

Secure and Manage Staff or Advisors for the Foundation

Managing a foundation demands a passion and commitment to the charitable cause — but just as essential are certain specialized expertise, administrative skills and management experience. Some foundations hire paid staff members to handle daily operating duties. Many hire a service such as Fidelity Private Foundation Services, to handle the ongoing administration. And still many others may use professional advisors who have expertise in the rules and operating procedures required to meet the stringent legal requirements applied to private foundations. Many do all three. Board members are responsible for hiring decisions and for monitoring performance of staff or advisors.

Ensure Ongoing Leadership

The board is responsible for ensuring that new board members and leaders understand their roles and responsibilities and reflect the values of the foundation. Typically the foundation's by-laws specify the frequency of membership rotations and the process by which new members are selected, but board members should train and orient new leaders to their duties, the foundation's history, and its structure and purpose.

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