Is Your Board Executing Its Fiduciary Duties?

While the nonprofit sector has developed a high level of goodwill and public trust over the years it’s hard to imagine any charity in Canada would be mismanaged or poorly governed. The nonprofit sector is not immune to malaise that can put a charity in jeopardy.

In recent conversations with nonprofit professionals and lay persons I have found an almost disbelief about how some charities have found themselves in precarious legal situations. I wish I could say every charity operates beyond reproach, however there are recent cases where governance volunteers and executive management have failed to be vigilant to execute their fiduciary duties. This highlights volunteer goodwill is not enough and nonprofit leaders need to arm themselves with the knowledge, skills and aptitude when assuming their respective roles.

The Legal Duties of Directors of Charities and Not-For-Profits, Carters, By Terrance S. Carter and Jacqueline M. Demczur, October 2012 highlights the, “Liability risks for directors of charitable and not-for-profit corporations that [can] arise at common law and by statute. A director can be held personally liable for his or her own actions or inactions, as well as jointly and severally with the other members of the board of directors…”  Charters does provide an excellent list of legal duties of board volunteer and executive management teams that can inform an organization’s annual operating and governing reviews and serve as a basis for board and executive training.

Additionally, the nonprofit Chartered Professional Accountants (CPA) Canada, suggests “they [Board of Directors] must take pro-active steps to protect charitable property. Any loss of charitable assets due to the inactivity or failure to act of the directors could make the directors liable for breach of their fiduciary duties, or possibly even breach of trust.”  (Source:  20 Questions Directors of Not-For-Profit Organizations Should Ask About Fiduciary Duty, CPA Canada, Burke-Robertson, 2009, p.15). 

It would be prudent for all senior leaders and volunteers to review this CPA document, the Charters document and examine the benefits of  pursuing the Standards Program Accreditation with Imagine Canada

In addition to making use of the resource links, the following initiatives can help build an awareness inside your organization:

  • Engage Board members in events where they can build personal and professional relationships with non-executive employees,
  • Incorporate training sessions with your board and new employees,
  • Review the resource materials and discuss the fiduciary responsibilities with all Standing and Ad hoc committees of the Board,
  • Establish a comprehensive whistleblower policy and process,
  • Conduct 360 performance reviews of Executive Management and Officers of the Board of Directors that incorporate an evaluation of their fiduciary duties, and 
  • Consult legal counsel on matters of the organization’s legal responsibilities and seek advice about ways to monitor board and executive employee performance.

Resources:

20 Questions Directors of Not-For-Profit Organizations Should Ask About Fiduciary Duty, CPA Canada, Jane Burke-Robertson, 2009

The Legal Duties of Directors of Charities and Not-for-Profits, Carters, By Terrance S. Carter and Jacqueline M. Demczur, October 2012

Imagine Canada (Standards Program)

Ontario Ministry of Labour or consult your provincial government website for related information.

Disclaimer: The content of this post is not intended to serve as legal advice. I recommend executive management and the governing board consult appropriate legal counsel.

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