Nonprofit Boards of Directors are passionate about the causes they serve, but may not have the same business knowledge as a board member of a for-profit business. The best way to protect Directors is for the nonprofit organization to take steps to prevent errors and omissions, and to have adequate liability insurance in place in the event that something does go wrong. Continue reading to learn more, and contact MPB to see how we can help reduce your risks.
There are many ways to reduce Board liability, but some basic steps include:
1. Require all Board members to sign a written agreement specifying their duties and liabilities. This agreement should also require them to attend mandatory training sessions on their legal obligations as Board members.
2. Adopt and implement policies and procedures that will help the Board make informed decisions. These might include conflict of interest policies, document retention/destruction policies, and whistleblower policies.
3. Educate Board members on their fiduciary duty of care, which requires them to act in the best interests of the organization and exercise due diligence in decision-making.
4. Keep minutes of all Board and committee meetings, and make sure they are reviewed and approved by the Board on a regular basis.
5. Require Board members to disclose any potential conflicts of interest before voting on any matter.
6. Establish an audit committee to oversee the financial reporting process and ensure compliance with applicable laws and regulations.
7. Make sure the organization has adequate liability insurance in place.
8. Review contracts before entering into them, and make sure they contain indemnification clauses protecting the organization and its Board members from liability.
9. Seek legal counsel when necessary to help navigate complex legal issues.
10. Take steps to prevent and resolve disputes internally, before they escalate into full-blown legal battles.
By taking some simple precautions, nonprofit organizations can go a long way toward reducing the risk of liability for their Board members. If you’re looking for more information or help with property management services, contact the team at My Property Billing to see how we can help you reduce your risks.