Top Risks Facing Nonprofit Board of Directors

March 14, 2022

Managing a nonprofit requires a unique mix of business savvy, personal compassion, and sharp problem-solving skills. If you possess all of these traits, you may be well-suited to a leadership role in a nonprofit—but you should know, too, that these qualifications aren’t enough. A leader must also have a common sense to identify and avoid many of the problems that can compromise a nonprofit’s board of directors. Maintaining an organization’s integrity is much harder than simply fundraising and promoting your work. As a leader, you must be invested in avoiding the risks nonprofit board of directors face, and you need to invest in nonprofit insurance for the liabilities you cannot eliminate.

Social Media Misuse

In the age of Instagram, most people have heard horror stories about the disastrous consequences that can accompany a distasteful social media post. In the worst case scenario, you may be “canceled” by the internet, and in the best case scenario, you may face derision from your friends. It’s no surprise, then, that social media misuse is a major source of liability for a nonprofit. You might stalk a potential staff member’s social media profile to assess whether they are a good fit for the role, for example, but seemingly minor missteps can, in fact, qualify as a violation of privacy and employment law.

Workplace Misconduct

Misconduct doesn’t just happen online. Sometimes it happens in person, too, within a nonprofit organization. In such cases, misconduct may come in the form of workplace bullying, sexual harassment, or discriminatory comments. No matter how the problem plays out, though, the results is the same: this kind of misconduct poses a major threat to a nonprofit and its board of directors, too.

501(c)(3) Noncompliance

Obtaining 501(c)(3) status from the IRS is a major accomplishment for many organizations, and it comes with many benefits. In addition to the major tax savings, nonprofits can enjoy a boost in credibility amongst the public and lower postage rates from the USPS. Some nonprofits make the mistake of overlooking the many requirements that come with 501(c)(3) status, though, including filing annual tax returns. Failure to meet all criteria can result in noncompliance, which is one of the biggest risks facing nonprofit boards.

Conflicts of Interest

The key to every successful nonprofit is transparency. It is imperative that your organization disclose information that affects its operations and its donors. Unfortunately, though, nonprofits do not always do this — especially in cases that may involve a conflict of interest. If a leader, staff member, or volunteer within your organization has personal or financial interests that conflict with their service to the organization, these interests should be disclosed immediately and investigated thoroughly so as to avoid any appearance of impropriety.

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