Potential Liability Risks in Not-For-Profit Boards
Volunteering to be a member of Not-for-profit boards is not a straightforward and simple task. Although the position offers an individual a platform or opportunity to provide free service to society, it has potential threats that would affect a person’s fortune and livelihood. Not-for-profit boards pose a risk of lawsuits for negligence, error in judgment, financial mismanagement, and wrongful acts (Kavaler & Alexander, 2012). Claims against the boards tend to be disruptive and costly to organizations. Potential liability risks that non-profit boards are prone to include general, federal, and corporate liabilities.
Not-for-profit boards have governing, legal, and fiduciary responsibilities in non-profit corporations. According to Kavaler & Alexander (2012), in the healthcare sector, the boards are charged with the duty of handling employment tax activities, ensuring the organization follows state laws and representing organizations they work. In general, the liabilities can be considered a risk because the board is answerable to statutory bodies if some state laws are neglected or broken.
Not-for-profit boards are answerable to the IRS for limitations and regulations of requirements of the Internal Revenue Code. According to Youngberg (2010), the boards have fiduciary liability to ensure that programs are run per state and federal tax requirements. The responsibility is a risk if an organization violates tax rules and regulations or when an institution is denied tax-exempt status (Youngberg, 2010). In summary, if tax requirements are broken, board members are individually held accountable by the IRS.
Conclusively, non-profit boards are held liable for Gross negligence. Gross negligence is closely associated with general liability. Boards are charged with the duty of eliminating or preventing bad things and actions in non-profit organizations. The liability is a potential risk to individual board members because they can be sued for any wrongdoing resulting in the organizations they head. Overall, not-for-profit boards have responsibilities that are risky because some, such as gross negligence, can lead to their prosecution.