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Governance
Liability and Risk Management
Personal Liability as a Board Member
For more information on Board Liability please visit: www.ncnb.org
www.genie.org
www.charityvillage.ca
How Board Members Can Avoid Personal Liability
Nonprofits are often ripe targets for embezzlement, fraud, and
other financial improprieties. But what about the boards of directors
- can they be held personally liable? The short answer is, in some
cases, yes.
Board members can minimize their risk of personal liability by
doing the following:
Keep an eye on organizational documents. The board should look
over legal and financial documents and analyses prepared by staff
members, outside auditors, and independent counsel.
Obtain and carefully review both audited and unaudited periodic
financial reports of the organization.
Review from time to time all articles of incorporation, bylaws,
and other governing documents.
Become actively involved in deliberations during board meetings.
Comment as appropriate and ask questions where prudent. If you do
not feel right about an action the board is taking, request that
your dissent be recorded in the meeting minutes. Make decisions
deliberately and without undue haste or pressure.
Keep written records of board preparation and deliberation. That
way, if the need arises, these written records should be able to
prove due diligence.
Request the assistance of an expert when appropriate. Hire independent
accountants to assess and evaluate any matter that has significant
financial ramifications. Request that legal opinion be obtained
on any matter that has unclear legal ramifications.
Remain an active and open board member. Attend the organization's
meetings, read the organization's publications, and keep fully apprised
of important policies and activities.
Acknowledge potential conflicts of interest, disclose them to the
board, and withdraw from making decisions when a potential conflict
is involved.
© National Center for Nonprofit Boards
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