Useful Past Tips: RISK MANAGEMENT: The little things can really save you Special events in a litigious world Preparing for a disaster A disaster recovery checklist Legal - A simple game plan for charities

1. The little things can really save you

Risk management is a much-bandied catchphrase that often loses its importance in translation. The fact is no nonprofit can eliminate every possible risk. What they should do is make prudent decisions about limiting the damage of potential risks.

Larry Bain, scout executive of Andrew Jackson Council, Boy Scouts of America, and Stan Kynerd, attorney and member of the Andrew Jackson Council, provided several handy tips about managing risk at a recent Nonprofit Risk Management Institute in Washington, D.C.

The first step is for a risk management committee to identify hazards and trends in the organization’s business that could affect personal health or the organization’s finances, according to Bain and Kynerd.

Risks could be individual injury, property damage, loss of goodwill to the organization and financial loss, according to Bain and Kynerd.

Keep in mind the safety of your employees, the nonprofit’s image, proper accounting controls, liability, health and property insurance, and legal issues such as contracts, public relations specialists, and law compliance.

Determine the procedures for contract execution and public response to incidents.

A well-balanced risk management committee should include a mix of the following: attorneys, accountants, insurance professionals, civil and environmental engineers, physicians, business managers, the nonprofit are employees, and safety and environmental specialists among others.

A good chairperson is able to control the group, actively seek their opinions to help identify risk and disaster plan. The CEO and chairperson also must work together to monitor the committee and make adjustments to improve performance as necessary.

2. Special events in a litigious world

Every nonprofit loves the positive attention a special fundraising event usually brings, but nothing spells disaster like the lack of proper preparation and knowledge of your potential liabilities.

Markel Insurance Company’s Risk Management News, gives several tips about what rugs a nonprofit should look under to make sure an event comes off without snags.

• Discuss your fundraising goals with an insurance agent, accountant and attorney to clarify any of the corresponding implications of your event.
• Figure out hazards at the special events sites and know how you’ll manage activities, feeding, people requiring special accommodations, security and emergencies.
• Give key personnel specific tasks. Proper management could take a team approach.
• Make sure vendors and partners understand their responsibilities and get certificates of insurance from vendors that indicate liability coverage amounts.
• Know your donors, what they’re donating, and what large contributors may want in return. Be aware that how you accept their donations will reflect on your organization.
• Develop specific limitations and exclusions of your policy with your insurance agent if you plan to accept material goods for resale.

3. Preparing for a disaster

Although nobody likes to think about disasters, they are a fact of life, and nonprofits must be prepared for them if they are to fulfill their mission. This reality was addressed in a booklet released by BDO Seidman’s Institute for Non Profit Excellence, titled “Disaster Preparedness and Recovery: A Guide for Nonprofit Board Members and Executives.”

According to the guide, part of the fiduciary responsibility for sound management of an organization includes three main items:

• Anticipating and planning for disasters that might affect the organization
• Doing as much as possible in advance to mitigate the effects of a potential disaster
• Putting things back in order as quickly as possible after a disaster strikes.

Generally, disasters affect five key areas of nonprofits: people, operations, facilities, finances and spillover effects from something that has affected some other person or organization.

Preparedness for disaster involves two main categories: preparation and prevention. Preparation usually involves general measures to minimize the effects of disaster, imagining scenarios that could happen; prevention entails specific steps to ward off a certain type of problem.

The guide recommends drawing up a disaster plan that includes several lists and charts: of possible disasters (which may vary depending on location or type of activity), activities it is important for the organization to maintain (and people responsible for them), persons in charge of disaster response equipment and suppliers and backup facilities.

4. A disaster recovery checklist

Having a disaster recovery plan in effect well before a catastrophe strikes is vital for any organization. Waiting until the cataclysm has left does not accomplish anything.

Speaking at a conference for nonprofits, Michael Robinson, IT Director of Creative Direct Response in Crofton, Md., offered some considerations and tips for any organization pondering a disaster plan.

• A well-thought-out and implemented plan is necessary before disaster of any size strikes.
• A good plan should include a schedule of phases, from response to recovery to restoration. Priority should be established of what is vital to protect, what is important to protect and what is useful to protect. The first element that is vital to protect is people. After that, the essentials most probably are:
  • Financial data;
  • Copies of signed contracts;
  • Databases;
  • Custom software;
  • Human Resources files;
  • Insurance files;
  • Proof of ownership/proof of loss.

There should be a team approach to a disaster recovery plan, but not everyone should be involved because some data may be sensitive in nature. Loss of data is a huge problem, but it is not just an IT issue. Having a plan may mean purchasing equipment that seems redundant, and equipment and procedures should be tested.

And, most importantly, make sure there is a means of retrieval in the event the system crashes.

5. Legal - A simple game plan for charities
By Errol Copilevitz, Esq.

In this age of ever-increasing scrutiny, charitable organizations must become far more cognizant, not only of the reality of regulation, but also of public perception. A positive image, like a personal reputation, must be earned.

More often than not, a successful nonprofit must have the necessary resources to pursue its mission, as well as a professional and dedicated staff that is guided by ethical standards which meet the expectations of donors. Set forth are eleven simple steps which I would suggest that you consider as a guideline:

1. Maintenance of charitable registrations and timely filing of annual reports. Your failure to do so could interrupt your ability to continue fundraising in the states, and the adverse publicity could be embarrassing.
   
   Increased oversight of content and volume of all mediums of fundraising activity. You have an obligation to ensure what is being said or written is true in fact. It is, after all, your message.
   
   Dedication to the program mission. Never underestimate the necessity of constantly reminding your staff and your board as to why the organization exists.
   
   Compliance with the Sarbanes-Oxley Act, to-wit: whistle blower protection and record retention requirements.
   
   Implementation and maintenance of a conflict of interest policy. Disclosure of possible conflicts is a must. As noted above, perception is sometimes as important as reality. Why open your organization to suspicion or concern?
   
   Implementation and maintenance of internal financial controls. You have a duty to your supporters to ensure that your resources are being used efficiently and effectively.
   
   Use an independent outside auditor, and establish an audit committee. The audit committee has to be able to assure the board that the financials they review accurately reflect the operation of the organization.
   
   Proper and regular compensation reviews.
   
   Oversight of related party transactions. This is again a perception issue. Sometimes related party transactions are to the benefit of the charity, but unfortunately not always.
   
   Employee handbook. This can be a key to successful day-to-day operation by staff.
   
   
2. Establishment and maintenance of an independent, active, and well informed board of directors who meet no less frequently than three times per year. When possible, board members should receive reports prior to the board meetings so that they have the opportunity to reflect upon them to be in a better position to ask questions of the staff.

Dedication to purpose and simple common sense (and good counsel) will protect an organization from disaster. The foregoing steps are not all inclusive, but are intended as a "bare bones" outline of the kind of things which charitable executives and boards can and should be thinking about as they move their organizations forward in pursuit of their programs.

Note: Errol Copilevitz is the senior partner in the law firm of Copilevitz & Canter, LLC. The firm specializes in representing nonprofit organizations and those who work with them in the appeal for public support. He can be contacted by email at: ec@cckc-law.com.

© 2006 The NonProfit Times Privacy Policy