Organizational Structure

Liability

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With authority and legal responsibility comes liability. As the accountable body, the board assumes overall liability over the affairs of the organization and individual board members remain liable for their own actions. Individual board members have only responsibilities and, without due delegation, no personal authority to act on behalf of the nonprofit. As the ultimate authority, the full board must ensure that the organization is operating in compliance with the laws and its own policies. If legal action ensues, it can often be traced to an inattentive or passive board. The courts rely on facts and circumstances — therefore the board must be able to prove it has acted as a vigilant, diligent, and educated oversight body. Individual board members can help defend themselves by demonstrating their own active participation via accurate board meeting minutes.

Fortunately few board members are sued but in today’s litigious society, it is necessary for a nonprofit to be strong on risk management and proactively protect the assets of the organization — as well as the assets of individual members of the board.

Additional references

The Nonprofit Risk Management Center is a good resource for risk-management issues and liability protection www.nonprofitrisk.org.

Hopkins, Bruce R. Legal Responsibilities of Nonprofit Boards http://www.boardsource.org/Bookstore.asp?Item=116