Whether through forgetfulness, sloppiness, or conscious disregard, a nonprofit’s management can easily make mistakes that violate the requirements of its governing documents. Such mistakes, once discovered, should not be left unaddressed. Technical violations of governance requirements can lead to a range of problems, from invalidating contracts to threatening the organization’s tax exemption. Here are some steps to consider when a violation is discovered:
- Evaluate the risk.
Not every technical violation of a charter document’s requirements is an emergency. Sometimes what appears to be a problem turns out to have an easy solution. For example, if a nonprofit’s bylaws require its directors to receive advanced notice of meetings, but no such notice was given, the fact that the directors attended the meeting anyway and didn’t object to the lack of notice may be sufficient to show that the notice was not required in that situation. This evaluation can be difficult to do without a thorough understanding of nonprofit governance, so it’s always a good idea to run the issue by your attorney.
- Notify appropriate management of the mistake.
Managers of a nonprofit, especially the members of its board of directors, have an affirmative obligation to ensure that the organization is properly managed. If a violation of charter requirements is significant enough that it may create problems, management needs to know about it.
- Document the solution.
Correcting mistakes often requires creating documents after the fact. Organizations should avoid back-dating materials in hopes of simply papering over the problem. Instead, the organization’s board should acknowledge the fault and ratify the actions that are affected by it. For example, in the example above if a director did not receive proper notice about a meeting and failed to attend, it’s possible that the actions taken at the meeting are void. In that case, the board will need to meet again or sign a written resolution ratifying the actions taken at the meeting.
- Study the problem and make changes if necessary.
Once the technical fault is resolved management should take a moment to study how the fault arose in the first place and explore ways to ensure that it doesn’t happen again. This may simply involve management taking the time to refamiliarize themselves with the organization’s charter documents. But in some situations it may require adopting a more formal process to ensure that faults aren’t likely to happen in the future.
Consult with a nonprofit governance attorney
The Church Law Center of California provides organizational, operational, and governance advice to religious and secular nonprofits. We help clients ensure that they stay in compliance with their charter documents and applicable law. Call us today to find out how we can help your organization. We can be reached at (949) 892-1221 or reach out to us through our contact page.