Serving on Board of Directors for Non-Profit Organizations: Beneficial and Cautious | Vann & Sheridan, LLP
 
Vann & Sheridan Attorneys at Law

Serving on Board of Directors for Non-Profit Organizations: Beneficial and Cautious

January 2, 2012

Filed under: Business Law — jrvann @ 4:29 pm

James R. Vann
 

In previous years, serving as a board member for non-profit and/or charitable organizations was perceived as prestigious and a great way to give back to the community.  Sure, you were expected to attend a few galas and a board meeting every now and then, but it was all doable, feasible, and most of all – monetarily sensible.  Now however, in the midst of our nation’s significant economic downturn and sharp decrease in government funding to charity organizations, such organizations are relying on board members more than ever for their knowledge, contributions, and time.  So before hastily accepting a board position for a non-profit or charitable organizations, there are a few things to consider.  Below are some key points to ensure that such a decision is the right one.

 

Time:  Charity organizations today generally require a greater amount of time from their board members.  Given the economic and community decisions which need to be made, it generally requires more time to consider situations and options for the organizations.  Most charity boards, on average, hold seven board meetings a year – each of which generally last three to four hours.  On top of such meetings,  other options for service of the board members includes responsibilities to  attend auctions, fundraisers, galas, entertain people, serve as the face of the organization to the media, attend retreats, and the list goes on and on.  While giving back to the community through such organizations is often rewarding, know that it is a tremendous investment in terms of time.

 

Money:  Many non-profit organizations today share the common idea that board members should be leaders in the fundraising efforts for the non-profit.   Thus, there could be a responsibility that their board members are to sponsor events, buy tables, and donate funds to the respective non-profit , etc.  Additionally, non-profit groups often look to board members to share their personal contacts for fundraising, and even request that board members personally call their friends and colleagues to ask for money.  This has proven beneficial for many organizations and is a great way to increase fundraising efforts.  Just be sure to know the expectations ahead of time.

 

Liability: What many do not know is that in serving as a board member, you have a fiduciary duty to the organization and could become liable if funds or the organization is mismanaged.  Depending upon the type of organization it is, how it is managed, how the by-laws are written are a few things to consider regarding potential liability.  In order to avoid such liability, board members need to be aware of their fiduciary duty, and keep a close eye on the charity’s finances and accounting books.  Likewise, purchasing insurance to cover any liability as a board member is also a wise decision.

 

If you should have any questions about your potential liability while serving in a board member capacity, please contact us.

 

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