As a nonprofit organization, your board of directors and officers may face a certain number of inherent risks that need to be addressed and mitigated early in order to avoid potential legal issues. Even if you already have D&O coverage for nonprofit boards, here’s what you need to understand about these common risks.
Pay Extra Attention to Taxes, Regulations and Other Legalities
Nonprofit boards may face serious penalties for ignoring or misinterpreting tax regulations and other legalities. Make sure your organization:
- Conducts thorough background checks on all board members to avoid potential conflicts of interest
- Fully understands the implications of a tax-exempt status
- Complies with all local laws, regulations and guidelines
- Double-checks whether it is permitted to lobby representatives or get involved in political activities
Closely Manage Staff and Maintain a Harmonious Work Environment
Another common reason directors and officers boards may face legal claims is employee dissatisfaction or mistreatment. It’s essential to pay close attention to your staff’s work environment in order to avoid lawsuits. The board may want to:
- Create a detailed code of behavior for all staff members
- Create a system for reporting bullying and other abusive behavior in the workplace
- Conduct frequent trainings to ensure all staff members are on the same page
Even nonprofits with D&O coverage for nonprofit boards still need to remain aware of the various risks facing the organization. By staying alert and watching out for these risks, you can help your board avoid legal problems.