Posts Tagged ‘Risk Mitigation for Nonprofits’

Risk Management for Non Profits

Thursday, March 18th, 2010

Executive Directors of nonprofit organizations (NPOs) wear many hats—especially these days, when budgets are tight and staff is scarcer than ever.

One thing you might not take time to consider often is risk and litigation avoidance—but doing so is vital to the health and well-being of every NPO. Lawsuits stemming from a non profit’s every day activities have the potential to hit hard, with damages and legal fees amounting to tens or hundreds of thousands of dollars.

Employment practices are probably the largest source of potential trouble for nonprofits. The Equal Employment Opportunity Commission (EEOC) reports that employment practices complaints rose sharply in the early 90s and held steady around 80,000 cases reported annually, until 2008, when the number jumped to 95,000!

Claims are highest for race discrimination, followed by sex, national origin, religion, retaliation, age and disability discrimination. Non profits must be highly cautious around hiring practices—for both paid employees and volunteers. Proper hiring, interviewing, training, and record-keeping are constant challenges. Good practices must be established and diligently enforced, and NPO executives must be up on all applicable employment laws.

A newer trend is donors suing nonprofits over use of their funds. When private donations make up a significant part of your revenue, it’s especially important to practice transparency and keep meticulous records. Unfortunately, nonprofits are accused of fraud at increasing rates, and donors are more sensitive than ever about how their money is spent on administrative expenses.

Government enforcement and regulatory agencies are keeping a close watch on nonprofits to ensure that public grant money is used judiciously. Improper transactions can be deemed illegal, and the IRS can revoke a non profit’s tax-exempt status, impose a penalty, or both.

Nonprofits, like any business, must monitor liability insurance coverage, and update when needed. Protecting staff, volunteers, and clients from harm is absolutely vital to keeping your nonprofit organization functioning and fulfilling its mission.

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