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Strong board governance protects nonprofits from legal, financial, and reputational harm. When an organization's leadership has clear policies in place and follows them, it reduces the risk of mismanagement claims, regulatory penalties, and lawsuits that can threaten both operations and donor trust.
At the Law Office of Cameron Hawkins, we work with Atlanta-area nonprofits to strengthen their governance practices and reduce liability exposure through practical legal guidance.
Why Governance Policies Are Critical for Nonprofits
Unlike businesses driven by owners or shareholders, nonprofits are stewarded by volunteer boards responsible for overseeing the organization’s mission, assets, and compliance. Because of this unique structure, nonprofits are vulnerable to a variety of risks if they lack clear governance policies:
- Poor Decision-Making: When roles, responsibilities, and processes are unclear, important decisions can be made without proper authority, documentation, or legal oversight.
- Conflict of Interest Problems:
Without a defined procedure for handling conflicts of interest, nonprofits may inadvertently engage in self-dealing or favoritism, risking penalties or losing the trust and confidence of donors.
- Regulatory Violations:
Nonprofits that fail to maintain proper governance practices may be found in violation of IRS rules for tax-exempt organizations or Georgia charity laws.
- Personal Liability for Board Members: In certain situations, board members can face personal legal exposure if they fail to meet their fiduciary duties.
Governance policies provide the structure needed to guide the board’s actions and demonstrate that the nonprofit is committed to transparency, accountability, and ethical stewardship.
Key Governance Policies That Protect Against Liability
Conflict of Interest Policy
A well-drafted conflict of interest policy defines what constitutes a conflict, outlines disclosure requirements, and establishes a process for evaluating and resolving conflicts. Having a clearly established process and adhering to it protects the nonprofit’s credibility and helps maintain tax-exempt status.
Whistleblower Protection Policy
This policy protects individuals who report misconduct from retaliation. Having a clear procedure for handling complaints encourages early reporting of problems and demonstrates to regulators that the nonprofit takes compliance seriously.
Document Retention and Destruction Policy
Maintaining accurate records and appropriately disposing of them when no longer needed is critical during audits, grant reviews, or litigation. A strong document retention policy shows that the nonprofit is committed to transparency and regulatory compliance.
Board Meeting Procedures
Clear procedures around meeting notices, quorum requirements, voting, and recording minutes ensure that important decisions are made legally and properly documented. Good meeting practices help defend against claims of mismanagement or board dysfunction.
Financial Oversight Policies
Policies related to budgeting, expense approvals, financial reporting, and independent audits reinforce the board’s fiduciary responsibility to safeguard the nonprofit’s assets. They also reduce the risk of fraud or allegations of misuse of funds.
How General Counsel Can Help Nonprofits Strengthen Board Governance
Many nonprofits have basic policies in place but haven't reviewed them in years, or have boilerplate policies that don't fit their current operations. Outside general counsel can help by:
- Reviewing Existing Policies: Legal counsel can identify outdated, incomplete, or conflicting provisions that could create liability risks.
- Drafting Customized Policies: Every nonprofit’s mission and structure is different. General counsel can draft governance documents tailored to the organization’s size, funding sources, and operational realities.
- Training Boards on Their Duties: Board members sometimes don't fully understand their fiduciary responsibilities. General counsel can provide board training sessions on duties of care, loyalty, and obedience to reduce the risk of unintentional violations.
- Advising During Disputes or Investigations: If conflicts, complaints, or regulatory inquiries arise, having general counsel already familiar with the organization’s policies can make responding much faster and more effective.
Strong governance practices are more than just paperwork. They are critical for protecting the organization, the board members, and the nonprofit’s mission.
Is Drafting Governance Policies a One-Time Task?
Good governance is not a 'set it and forget it' project, but policies should not require daily or weekly modification. While many foundational policies only need periodic review and minor updates, nonprofits should reexamine their governance framework whenever there are major changes. For example, they may want to get outside general counsel review of their governance policies after:
- A leadership transition
- Rapid programmatic growth or expansion into new service areas
- Changes in applicable state or federal regulations
- Significant changes in funding sources or grant requirements
General counsel can provide ongoing support by conducting governance checkups every few years or assisting with updates as needed. This helps nonprofits stay compliant, prepare for external scrutiny, and ensure their board practices evolve alongside their mission.
Protect Your Nonprofit and Your Board With Strong Governance
Nonprofits that prioritize board governance are better positioned to weather legal challenges, maintain donor confidence, and fulfill their missions effectively. Whether your organization is new or well-established, ensuring your governance policies are up-to-date and legally sound is one of the smartest risk prevention steps you can take.
If your nonprofit needs help developing or updating governance policies, the Law Office of Cameron Hawkins is here to support you. Call us at (678) 921-4225 to schedule a consultation.
