Certified Nonprofit Professional Practice Exam

According to state law, who is the legally liable body for a nonprofit organization?

1. The volunteer board of directors

2. The executive director

3. The employees of the organization

4. The members of the community

The correct answer is: The volunteer board of directors

The legally liable body for a nonprofit organization is the volunteer board of directors. This is because the board is responsible for the overall governance and strategic direction of the organization. Under state laws, the board of directors has fiduciary duties, which include the responsibilities of care, loyalty, and obedience to the organization’s mission and applicable laws. They are charged with decision-making and ensuring the organization operates effectively and in compliance with legal requirements. In the event of legal issues, such as lawsuits or financial liabilities, it is the board that typically holds ultimate accountability. They must act in the best interest of the nonprofit, making their role not only crucial for governance but also significant in terms of legal liability. This is distinct from the roles of the executive director and employees, who may operate under the board’s supervision but do not share the same level of legal responsibility for the organization as the board itself. Members of the community, while they may support or benefit from the nonprofit, do not have any legal obligations or liability tied to the organization’s activities.