Community involvement can be a rewarding experience. It offers a unique opportunity to make a difference in the community where you live and work. Serving on a nonprofit board is just one way to have an impact; however, volunteer service carries some risks. The best way to balance the rewards with the risks is to approach any type of volunteer commitment with the same level of care and research that you would do before taking on a new job.
Five Facts to Know:
Before accepting a director or officer position on a nonprofit board, consider the following facts:
- Nonprofit organizations should be run with the same degree of care as for-profit companies. They should have strong financial and internal controls and documented operating procedures.
- All directors of nonprofit and for-profit organizations are subject to basic duties: duty of care and diligence, duty of loyalty, and duty to comply with laws.
- As an officer or director, you could face claims of harm to the organization or to an individual due to mismanagement of the organization’s finances. You could be directly liable for claims for bodily injury, property damage or personal injury related to performance of your duties for the organization or vicariously liable for the acts of staff members.
- Your homeowners insurance may not provide coverage for claims resulting during your tenure serving as an office or director; however, policy endorsements or special liability policies may be available for these circumstances.
Some states have laws that protect volunteers working for nonprofit organizations from claims, but that is the exception.
Five Questions to Ask:
You need not let the risks associated with board service stop you from making a positive difference in your community, but they should guide you in asking good questions that will help determine if the nonprofit organization is a good fit for you. When exploring the possibility of board work, consider asking the following five questions:
Q. What are the nonprofit organization’s mission and goals, and what is the regulatory environment in which it operates?
A. Ask for copies of the organization’s bylaws and IRS Form 990.
- Bylaws provide a framework for the organization’s operation and management. They often provide information about the duties of officers and directors, timing of board meetings, and officer/director term limits.
- Form 990 is an annual reporting return that federally tax-exempt organizations must file with the IRS. It contains information on the filing organization’s mission, programs and finances.
Q. What are the duties of a director or officer?
A. Ask the board development or recruiting committee for a job description or list of expectations for board members, including time commitment and any financial obligation. You can also talk to current board members about their experiences so you are clear on what is expected of you.
Q. Is appropriate training provided for board directors or officers?
A. You should be given the opportunity to meet with the board chair and the executive director to learn more about the organization’s mission, programs, staffing, finances and strategic plan. If not, ask for a meeting.
Q. Does the organization have adequate insurance?
A. Just like for-profit businesses, nonprofits need adequate insurance. Depending on the organization, this can include:
- General liability insurance to protect against classic slip-and-fall scenarios
- Property insurance to protect the nonprofit’s equipment, furniture, and computers from fire, earthquake, theft, etc.
- Commercial auto insurance to cover staff or volunteers who use their own vehicles for the nonprofit’s activities
- Workers’ compensation to cover any injuries to staff
- Professional liability insurance to protect against any claims of mismanagement
- Directors and officers insurance to protect against any claims brought against the board
Q. Are there any potential conflicts between activities in which you currently engage and
the best interest of the organization for which you will serve?
A. Ask to see a code of ethics or conflict of interest policy for the nonprofit.
To learn more about the insurance needs of non-profit organizations, please contact one of our offices in Albany, Oregon at (541) 967-8062, in Lebanon, Oregon at (541) 258-2131 and our Cammack-Kingsley insurance office in Stayton, Oregon at (503) 769-7105, Monday through Friday, 8:00 a.m. to 5:00 p.m. For more information about our other insurance services, visit our website at www.rhodeswardenins.com