In order to ensure compliance with legal requirements, and to avoid exposure to legal liability, it is important that the board and senior management of charities and Not-for-Profit Organizations (NPOs) undertake regular legal check-ups to ensure proper due diligence. According to Carters Professional Corporation, the following 10 tips identify key issues that charities and NPOs should address for effective legal risk management.
1 – Get to know your organizational and legal documentation
Aside from keeping key organizational documents in a centralized location, management should review and compare the documents, which include letters and patents, against the objectives of the organization and its present activities. This is done to ensure there is no mission drift.
2 – Know who is in charge
Make sure there are clearly defined lines of authority between senior management and the board of directors, and that responsibilities are divided after thoughtful deliberation, and with adequate supervision and documentation.
3 – Monitor third party use of property
If applicable, the charity needs to ensure that it is mitigating their risks for liability, and has signed liability agreements with third parties for the use of its property. In addition, the charity/NPO should notify insurers of its property of any third parties who plan to use the space.
4 – Check insurance and risk transfer documentation
Protect the charity or NPO, along with its directors, officers, and assets, by having the necessary insurance and risk transfer documentation. This extends to keeping a historical record of the insurance coverage, full disclosure of all risks to avoid denial of coverage, regular review of coverage, and more.
5 – Watch out for wasting intellectual property assets
Check that trademarks and copyrights are not vulnerable to attack or being potentially wasted if not properly protected.
6 – Ensure compliance with privacy and anti-spam law
In compliance with the Personal Information Protection and Electronic Documents Act (PIPEDA) and Canada’s Anti-Spam Legislation (CASL), charities and NPOs must ensure the proper steps have been taken before engaging with potential clients.
7 – Monitor employee and volunteer liability risks
Charities and NPOs must mitigate the liability risks from employees/volunteers too, which includes taking actions like background checks, providing thorough training, protecting against bodily harm, and more.
8 – Be prepared for a CRA audit
Like any organization, it is important for a charity or NPO to be in compliance with organizational requirements, and organizations should know what charitable objects are on file with the CRA, including thorough information on receipts, submit annual information returns, etc.
9 – Ensure compliance with donor restrictions
Donor restricted funds may also pose a challenge for charities. To ensure compliance with donor-restricted funds, the charity must be aware of them in the first place, and ensure the organization understands the consequences of failing to comply with the applicable restrictions.
10 – Know the legal basis for investing surplus funds
Investment of surplus funds must be carefully determined, based on the investment powers found in letters patents/articles of incorporation, incorporating legislation, or by default in applicable provisions of the Trustee Act. A charity/NPO should not solely rely on the recommendation of an investment manager who has not cross referenced the applicable documents and the corresponding legal requirements, when investing their surplus funds.
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