It is important to manage legal risk for NPOs. For these Not-for-Profit organizations (NPO), there are often many requirements and guidelines to follow. Especially regarding funding and leadership. To ensure compliance, your organization’s board and senior management must conduct regular legal check-ups. This will ensure proper due diligence and prevent costly mistakes and avoid exposure to legal liability. 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 familiar with your organizational and legal documentation.
Aside from keeping key organizational documents in a centralized location, management should review the documents. They should also compare them against the organization’s objectives and its present activities. This should always include letters and patents as well to ensure there is no mission drift.
2 – Know who’s responsible.
Make sure there are clearly defined lines of authority between senior management and the board of directors. Having responsibilities properly divided after thoughtful deliberation and with adequate supervision and documentation. Leave no room for ambiguity in role definition.
3 – Monitor the use of property.
The charity needs to ensure that it is mitigating all risks for liability. This includes measures such as assigned liability agreements with any third parties that make use of its property and the charity/NPO should also notify its property insurers of any third parties who plan to use the space.
4 – Check insurance and risk transfer documentation.
Protect the charity or NPO and its directors, officers, and assets, by having the necessary insurance and risk transfer documentation. Keep a historical record of the insurance coverage, full disclosure of all risks to avoid denial of coverage, regular review of coverage, and more.
5 – Monitor intellectual property assets.
Check that trademarks and copyrights are not vulnerable to attack or being potentially wasted if not adequately 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), organizations must ensure the proper steps have been taken before engaging with potential clients. Routinely check mailing lists for recipients who have requested to unsubscribe to mailing lists and immediately take necessary actions.
7 – Monitor employee and volunteer liability risks.
Charities and NPOs often rely on volunteers in addition to their paid employers. Reduce liability risks from personnel with actions such as background checks, providing thorough training, protecting against bodily harm, and anything specific to your industry.
8 – Be prepared for a CRA audit.
Like any organization, a charity or NPO must comply with organizational requirements. 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 some challenges 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. This is 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 relevant documents and the corresponding legal requirements when investing their surplus funds.