Did you know that if you serve on an organization’s board of directors, you also share liability for the actions of that organization? We’re breaking down board member risks and best practices.
Serving on the board of directors for local emergency service organizations, like ambulance agencies and fire departments, is a great way to get involved and serve your community. Personally, I had the opportunity to serve on the board of directors for my community ambulance company early in my career as a volunteer EMT, and it was truly a great experience. But, if not for the knowledge of the other board members, I wouldn’t have fared so well. That’s why I wanted to share some insights that nonprofit board members should fully understand about their role, responsibilities and risks.
If you serve a board in any capacity—there are risks.
It doesn’t matter whether your board is partially or wholly-comprised of ESO operational personnel or whether those individuals are voting or non-voting members—each member of a board shares some liability for the actions of that organization. This means that if wrongdoing is proven, the board may not only have an exposure, the individual board members may also have a personal liability exposure.
Top responsibilities of board members
One of the ways to help limit your exposures as a board member is to understand your role so that you can fulfill those responsibilities. Board members should have a similar onboarding process to any other volunteer or employee; this includes having a job description, conducting background checks (including looking for conflicts of interest) and participating in a training program led by an experienced board mentor.
Generally, board members help make sure that the organization makes sound and legal decisions by overseeing the Chief, finances and grant opportunities, as well as bylaws and policies.
- The Chief Executive - The Chief Officer or Executive Director is responsible for making sure that all personnel act appropriately—and you’re responsible for overseeing the Chief’s actions (unless specifically stated otherwise in the bylaws). As a board member, it’s your job to make sure this person has a job description, performance-based reviews and is held accountable for meeting their goals/objectives, and limited contracting authority including requiring the signature of the treasurer and board meeting discussion prior to anything not fitting into the approved budget.
- Financial oversight - The board must verify that the organization is following financial best practices including reviewing documents like Form 990 (a public document and includes information about officers in the organization), checking that there’s one individual to handle income and another to handle expenditures, and reviewing fundraising risks (for example, if funds are raised for a building that’s never constructed and then the funds are used for other purposes without the expressed permission of each donor—there’s a liability risk).
- Grant opportunities - Many nonprofits derive a portion of their revenue or funding from government and private foundation grants—and failure to perform or track the stated tasks in grant proposal and requirements may be cause for concern.
Breaking down bylaws
Your ESO should have bylaws and policies in place to help prevent liability concerns for all levels—including the board members. Here are a few bylaw and policy best practices to consider:
- Review bylaws and policies of the organization at least every two years.
- When you create new bylaws and policies, particularly if they conflict with those already in existence, they must be carefully developed and reviewed by legal counsel.
- Once approved, the new policy should be disseminated to the board, staff and volunteers, as applicable, before implementation.
- If the board is unwilling to change the bylaws of the organization, this could pose a serious risk to the organization and the board members themselves. Immediate action is required if that is the case in your ESO.
5 Topics your board members should evaluate:
One of the reasons that board members should have a vested interest in continually reviewing bylaws and policies is that the risks you face are everchanging. Here are some growing risks and hot topics your board members should talk about today:
- Conflicts of interest - A growing area of liability concern is understanding and managing conflicts of interest. The simplest way to understand this concern is to follow the money. If a donation made to the organization directly benefits an individual in the organization, there is the potential for questions and reasons for concern.
- Intellectual property - Another emerging area of liability is the protection of intellectual property assets of the organization. This can include copyrights, trademarks, and other intellectual property assets such as software programs, apps and publications.
- Political advocacy - While not as common in ESOs, the failure to manage lobbying and political activity compliance places the ESO tax-exempt status in jeopardy. Consult with your legal counsel if there is a reason for concern.
- Employment practices - Failure to properly address harassment, sexual or other employment practice concerns occurs too frequently and has no place in the workplace. Board members should verify proper policies are in place, harassment prevention programs are completed annually and communication channels are open.
- Diversity - Not only should staff and volunteers reflect the communities they serve, the board should work toward this goal as well—including having an equal number of women and men, a race representation that reflects the community, and proportionately matching the physical ability, sexual orientation and religion of the community it is serving.
If you’re already serving on a board or you’re considering it—this isn’t meant to scare you. In fact, it should empower to know that your role is truly important and you’re making a difference in your community. Just take time to assess your responsibilities, take a deep look at the organization you’re serving, consult with legal counsel (if needed) and take action. You’ve got this!
- Internal Revenue Service (2021), About Form 990, Return of Organization Exempt from Income Tax. Retrieved March 2021 from https://www.irs.gov/forms-pubs/about-form-990
- Internal Revenue Service (2020), IRC Section 4946 - Definition of Disqualified Person. Retrieved March 2021 from https://www.irs.gov/charities-non-profits/irc-section-4946-definition-of-disqualified-person
- Lewis, Robert L., Effective Nonprofit Management, 2001, Aspen Publishers.
- R.T. Ingram, Ten Basic Responsibilities of Non-Profit Boards, 1996, National Center for Non-Profit Boards
- VFIS, Managing Volunteer and Combination Emergency Service Organizations, 2006.
Education, Training and Consulting Specialist for VFIS
The information contained in this blog post is intended for educational purposes only and is not intended to replace expert advice in connection with the topics presented. Glatfelter specifically disclaims any liability for any act or omission by any person or entity in connection with the preparation, use or implementation of plans, principles, concepts or information contained in this publication.
Glatfelter does not make any representation or warranty, expressed or implied, with respect to the results obtained by the use, adherence or implementation of the material contained in this publication. The implementation of the plans, principles, concepts or materials contained in this publication is not a guarantee that you will achieve a certain desired result. It is strongly recommended that you consult with a professional advisor, architect or other expert prior to the implementation of plans, principles, concepts or materials contained in this publication.
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