Non-Profit corporate governance is something many non-profit directors and officers should be aware of. Operating a non-profit entity can be a rewarding and socially beneficial endeavor. However, far too many non-profits focus on their service missions without giving enough attention to proper governance. Bad governance can easily drive an organization into chaos, detracting from its ability to deliver on the critical work it does. Whether you operate a charity, a foundation, or any other type of non-profit, experienced legal counsel will advise you on how to address these and other common governance issues:
Ignoring Fiduciary Duties
Non-profit directors and officers owe certain fiduciary duties to the non-profit, such as the duties of care and loyalty. Failure to abide by these responsibilities is dangerous to the well-being of the organization. Every decision, if not properly handled, has the potential to attract unwanted scrutiny from the IRS, government regulators, the media, and others.
Failure to Establish and Enforce Codes of Ethics
This issue is related to the fiduciary duties that directors and officers have on many non-profits. Establishing and enforcing a comprehensive code of ethics can ensure that every member of the non-profit understands what is and what is not acceptable conduct. Not doing so puts the health of the organization at unnecessary risk.
Avoiding Conflicts of Interest
It is tempting for non-profit board members to offer their professional services to the organization in exchange for a fee. This, and similar behavior, can quickly lead to conflicts of interest. Officers and directors should be required to disclose and update any potential conflicts of interest and abstain from making decisions that could implicate them. This is an important part of a non-profit’s corporate governance issues
Failure to Provide Proper Oversight
Non-profit boards routinely delegate tasks to committees and other individuals within the organization. While there is nothing wrong with this, failure to provide oversight can lead to abuse. For example, does your non-profit have a clear policy concerning expense reimbursement? Is the policy enforced? Are individuals within the non-profit abusing the authority entrusted to them?
Misunderstanding the Laws Governing the Non-Profit
Various local, state and federal laws may govern the non-profit organization. And these laws are not limited to tax-exempt status (although this is a major area). Laws also govern the extent to which the organization can engage in activity that might be considered political lobbying. Proper training and retraining can rectify any misunderstanding of these and other laws.
Forgoing Risk Management Policies
There are many things a non-profit can do that could either jeopardize its tax-exempt status or otherwise harm the organization’s viability. Everyone, from the board down to volunteers, should be made aware of potential violations. Additionally, there should be a policy in place to report and investigate alleged wrongdoing. Risk management is the responsibility of everyone in the organization.
Managing Internal Conflict
No matter the nature or size of the non-profit, conflict between members is inevitable. Whether it’s two volunteers who can’t get along or two board members who disagree vehemently on a decision, your non-profit must have effective conflict resolution procedures in place.
Is your non-profit successfully meeting its mission? Could scarce resources be better used to advance the organization’s purpose? The only way to answer these questions is to have a method of assessing the non-profit’s performance. Stakeholders want to understand how successful your non-profit is, so adopting benchmarks and other metrics can help.
This is a concern for every non-profit. A non-profit that is reluctant to divulge details of its operation is one that few will trust. Of course, not every piece of information is subject to transparency. Knowing where to draw the line between transparency and confidentiality is critical to how the public will perceive your non-profit.
Being mindful of these and other governance issues can save your non-profit headaches down the road. A trusted non-profit entities attorney can assist. SederLaw works with a broad array of organizations in helping them best achieve their mission while ensuring everything is properly run.