The Next (and Last) Bylaw Pitfall (#5) Is: Having Overly Generalized Indemnification & Insurance Policies
The Problem
When it comes to potential exposure topersonal liabilityfaced by board and staff members affiliated with nonprofits, many organizations fail to clearly and sufficiently stipulate what guarantees and protections they offer. In some cases, unfortunately, organizations don't even secure appropriate insurance necessary to truly honor their promises. Virtually all nonprofits should, and do, endeavor to indemnify their stakeholders from legal claims arising as a result of their service to the organization. Such decisions, however, merit requisite due diligence.
Indemnification obligations are generally two-fold:
Coverage of expenses that might be incurred in defending a legal action;
Payment of any judgments or necessary settlement fees
How do nonprofit meet these obligations?
For most nonprofits, only with appropriate insurance coverage can they truly honor their indemnification commitments. In our experience, many nonprofits needlessly expose themselves, and their stakeholders, to liability and potentially disastrous financial obligations by simply adopting brief, catch-all indemnification and insurance clauses in their by-laws.
Carefully consider the following questions:
Does the indemnification and insurance clause expressly require the nonprofit to procure insurance coverage appropriate for its organizational needs and does it provide for procedures to assure that such coverage is maintained and can be adjusted as needed as the organization evolves?
Assuming a nonprofit's by-laws obligate the organization to maintain insurance coverage for purposes of indemnification, are the by-laws clear as to those who are actually indemnified? Are staff expressly indemnified? What about volunteers? If so, are the terms of the underlying insurance policies in sync with the by-laws?
Should the nonprofit also guarantee corporate funds in order to indemnify a stakeholder if its insurance carrier were to refuse to pay or if actual damages exceeded coverage limits? Remember, insurance coverage has its limitations.
What discretion should a board of directors have, if any, in authorizing the indemnification of a stakeholder who actedin bad-faith or engaged illegal conductwhile loosely acting on behalf of the nonprofit? (An unfortunate examplecan be found here.)
Actions to Consider
Read More about the limitations of insurance, please read the following recentQ&A from the Nonprofit Risk Management Center.Scroll to the last question for the important question regarding what D&O insurance covers.
NONPROFITS: GOVERNOR’S GOALS REQUIRE MORE FUNDING, DETAILS
ByFRANK G. RUNYEON
January 13, 2016- Albany, NY- Governor Andrew Cuomo delivers 2016 State of the State Address and 2016-17 Executive Budget Address to the people of New York State. (Gov. Andrew Cuomo’s Flickr Account)
The plans that Gov. Andrew Cuomo laid out in his State of the State address and budget lack the details and funding to make them a reality, nonprofit leaders told New York Nonprofit Media. Many expressed optimism that the hurdles could be cleared and were generally happy with the governor’s direction, but warned that poor planning and underfunding could derail his well-intentioned initiatives.
The governor made a series of spirited proposals earlier this month that could profoundly affect the nonprofit community, including a $28 billion increase in funding for housing, $2.1 billion more for education and a renewed pledge to enact a statewide $15 minimum wage. But the governor’s speech left questions for many nonprofit leaders about how those initiatives would meet current needs, fulfill previous pledges and impact the nonprofit community.
Part of the problem is that nonprofits were essentially left out of the governor’s address, said Doug Sauer, CEO of the New York Council of Nonprofits, Inc., which represents those organizations statewide.
Last year’s State of the State included several references to the nonprofit community, including how nonprofits address hunger, affordable housing, employment for minorities and community development. “There were lots of nonprofit themes,” Sauer said. "This year? Virtually ignored."
"When you look at it, it's devoid of much positive for nonprofits, even though his budget might be doing something,” Sauer said. “It was clearly not any kind of point of emphasis. That's a clear shift.”
Minimum Wage
In particular, the governor did not address the thorny issue of how nonprofits could cope with raising the minimum wage to $15 per hour, which Republican senators and nonprofit groups have said could cause nonprofits to suffer disproportionately because they often rely on state funds to do their work.
"He makes no reference to it,” Sauer said. “Nor does his budget include any money (to address it).”
The “15 and Funding” campaign, which aims to amend government human services contracts to fund the minimum wage increase to $15 an hour, released statements expressing cautious support for the governor’s plans, despite the omission.
“We stand with (Cuomo) in the fight to raise the statewide minimum wage to $15 per hour,” said Jennifer Jones Austin, executive director and CEO of the Federation of Protestant Welfare Agencies, one of the cosponsors of the campaign. “We remain hopeful that the increase will be funded for the more than 100,000 government contracted human services workers employed by nonprofits.”
The Human Services Council, another campaign cosponsor, added a critical note: “HSC is troubled by some aspects of the governor’s proposed budget, but we also have reason to be hopeful.” The organization listed key investments that should be included – but are currently missing – from the governor’s plans. Full funding for human service contracts topped the list.
Nonprofit leaders speculated that the governor’s silence on the issue could be political maneuvering to appease business interests ahead of difficult negotiations with state Senate Republicans – or perhaps the governor simply did not yet have a solution to the problem. Regardless, nonprofits said, they are currently in the dark over how or if the issue will be resolved.
Education
Early learning and child care advocates were alarmed by a lack of funding that they estimate could result in 21,000 kids losing spots in child care programs as organizations redirect funding to meet new federal requirements.
"We're very deeply, horribly concerned about the lack of investment in child care at a time when we have several new standards coming into effect in the state that are going to cost the state something on the order of $90 million – just in known costs,” said Betty Holcomb, policy director for the Center for Children's Initiatives, referring to the federal Community Development Block Grant program. CDBG will require nonprofits to spend what Holcomb estimates will be tens of millions of dollars to fulfill new standards related to inspections, background checks and training. “And that could result in the loss of slots for tens of thousands of children.”
Although they were happy to hear of the governor’s new program to expand prekindergarten to three-year-olds, Holcomb noted that there is no new funding to help the more than 100,000 four-year-olds outside of New York City who still do not have access to full-day pre-K.
While Holcomb said that New York City’s success in fully implementing universal pre-K was laudable, much of that credit goes to Mayor Bill de Blasio for providing funding to create the 68,500 slots needed for the city’s children to attend full-day programs. New York state on the whole will continue to fall short of universal pre-K under the current funding.
“It's a small step forward, but not enough.” Holcomb said. “And it just ignores and fails to fulfill the promise of full-day (pre-K) for four-year-olds.” The governor’s new funding regime for three-year-olds is welcome news, she said, “but that can't be a substitute for what districts are ready and prepared to do."
Other education nonprofits were more buoyant, especially those supporting service-rich “community schools.” Cuomo’s pledge of “$100 million to transform every failing school in New York into a comprehensive, holistic, full-service community school” energized long-term proponents of the schooling strategy.
“We are excited to see the state seize on community schools as a way to strengthen academic success,” Phoebe C. Boyer, president and CEO of The Children’s Aid Society, said in a statement.
However, the $100 million alone would not be enough to properly transition struggling schools to the community school model, said Yolanda McBride, director of public policy at The Children’s Aid Society, which promotes the model and runs two community schools currently on New York’s receivership list.
"It's a huge undertaking – turnaround is a huge undertaking,” said McBride, explaining that both training and dedicated resource coordinators would be needed to bring together programs and services to properly meet the needs of each school community. “We think there should be additional funding set aside – on top of the $100 million – to do that,” she said.
Housing
Nonprofit housing advocates were happy to hear the governor’s $28 billion pledge for affordable and supportivehousing in New York, but would remain watchful since the particulars of the plan haven’t been hammered out yet.
“His verbal commitment to the 20,000 units is very heartening,” said Giselle Routhier, policy director at Coalition for the Homeless. “But we still have very few details.”
Such large housing commitments typically are made in a joint plan between the mayor of New York City and the governor before they are announced. There’s some concern that the ongoing spat between Cuomo and de Blasio could impede progress on such a plan, which is expected to be called the New York/New York IV agreement.
”We hope that they can rise above that and acknowledge that this is very much needed to make sure supportive housing can come online quickly,” said Routhier. Housing developers need a concrete plan to have the confidence to seek funding and acquire the property needed to build the envisioned housing.
“Since both of their commitments are so long-term, we really need that in writing,” Routhier said of the mayor and governor’s multibillion-dollar promises for programs that will span 15 years. “That's really important.”
On the whole, nonprofits were hopeful about the governor’s budget and message – still, they said, they need to be sure to hold politicians to their promises.
“It's not that we're trying to be ‘Debbie Downers’ here,” Routhier said. “It's our job to say what needs to be done to make sure this happens.”
- See more at: http://nynmedia.com/news/nonprofits-governor-s-goals-require-more-funding-details#sthash.ZzOqlHS5.dpuf
Southern Tier Capacity Building Program Resources and Workshops Announced
A series of free trainings for nonprofits will be offered to nonprofit board and staff members in the Southern Tier of New York in 2016. Participants who attend a training will qualify to apply for the Southern Tier Capacity Building Program, which includes the Mini-Grant Program and Assessment Program.
These resources are supported by United Way of Broome County, The Stewart W. and Willma C. Hoyt Foundation, The Community Foundation for South Central New York and Conrad and Virginia Klee Foundation.
Nonprofit Board Service: Understanding Your Roles and Responsibilities [Binghamton] Thursday, March 3, 2016 from 9:00 AM to 12:30 PMVestal, NY | WSKG
Board members are the fiduciaries who steer the organization towards a sustainable future by adopting sound, ethical, and legal governance and financial management policies, as well as making sure the nonprofit has adequate resources to advance its mission. This session will provide Board Members with a critical orientation to the responsibilities, knowledge, and skills needed to be an effective board member as well as offer practical guidance for implementing the more challenging aspects of governance practices.
You may have heard that the board of directors has three primary legal duties. Come to the workshop to learn more about what it means to put these duties into practice.
The Duty of Care: This duty is fulfilled when a board member acts in good faith in all dealings with, and on behalf of, theorganization.
The Duty of Loyalty: This duty involves acting in the best interest of the organization at all times.
The Duty of Obedience: Nonprofits have an obligation to operate in a manner that fulfills the stated purpose or mission as defined in the articles of incorporation, bylaws, application for tax-exempt status, and other official documents.
What will be covered:
Review of survey data on the understanding of roles and responsibilities and governance trends in the Broome region
Overview of legal and fiduciary responsibilities
Policy and monitoring functions of the Board
Accountability and using a committee structure effectively
The relationship of the Board of Directors to the Executive Director
This workshop is free and open to nonprofit directors, board and staff. We encourage you to register a member of your board for this very important workshop. Nonprofits who have a Board Member attend will qualify to apply for a 2016 Southern Tier Capacity Building Mini-Grant, as well as special assessment support offered directly by the New York Council of Nonprofits.
In Partnership with
Broome Leadership Institute
Since 1988, BLI has offered a six month community leadership training program for adult professionals.
BLI fosters a network of leaders who are committed to understanding and improving the quality of life in our region.
Each BLI class is comprised of 20 selected candidates that reflect the diversity of the community and represent a cross section of business, government, education and non-profit organizations. Participants meet from September through March and gain an increased understanding and awareness of various industries and issues within our community.
In each issue of Nonprofit Knowledge Matters, we highlight trends to help charitable nonprofits survive and thrive. This year’s first look ahead focuses on the top public policy challenges and opportunities that charitable nonprofits will face in 2016. Just to clarify, “public policy” means “external-influences-that-can-limit-your-nonprofit’s-mission.” As with much of the Council of Nonprofits’ work, these trends focus where the action is: in states and localities; perhaps some of these trends are happening right now in your community. Help your nonprofit’s board and staff monitor where the pinch-points will be for your nonprofit in 2016 by reading 2015-2016: The Years in (P)Review.
Want to stay up-to-date with policy trends? Make sure your nonprofit is a member of its state association of nonprofits and subscribe to Nonprofit Advocacy Matters, our free newsletter that focuses on nonprofit policy trends, rounded out by examples of nonprofits engaging in everyday advocacy.
Charity regulators moving forward with single portal multi-state registration plans
State charity regulators working to streamline the difficult and expensive process used by nonprofits to register for charitable solicitation in multiple states seek your input as they design the beta version of a “Single Portal Multi-State Registration” website that they plan to launch this year. They have issued a “request for information” (RFI) to the public – including charitable nonprofit staff members, board members, fundraising consultants, and professional advisors to nonprofits – asking for help designing a process that will be as nonprofit friendly as possible. We encourage all those who currently complete registrations on behalf of charitable nonprofits – whether in just one state or in multiple states – to learn more about the single portal multi-state charitable registration project, and then comment on the RFI to help shape the end-product so your nonprofit will have a better experience using the portal.
Yesterday I delivered my 6th State of the State address. In it I laid out a transformative agenda to build on the success of the last five years and continue to move New York State forward.
We are the progressive capital of the nation. We are Built to Lead and we will show the nation why with these bold, signature initiatives:
Maintain our commitment to fiscal discipline and government efficiency, while cutting taxes for small businesses and capping property taxes for New York homeowners.
Rebuild and modernize critical infrastructure from Montauk to Buffalo with an interconnected, planned system of mass transportation, roads and bridges and airports for the next 100 years.
Offer our children the best education in the nation with a $2.1 billion increase in school funding to $25 billion, the highest total spending on education in the history of the state of New York.
Ensure a cleaner, greener state by eliminating the use of goal in New York by 2020 and allocating $300 million to the Environmental Protection Fund.
Bolster public safety by funding the permanent deployment of more New York State Troopers and National Guard at key target areas across the state.
Lead the nation in social progress by offering the county’s most robust paid family leave policy and first-in-the-nation $15 minimum wage.
Stand up for public integrity and government reform through comprehensive ethics reform.
Yes, this is an ambitious agenda, and, yes, it’s is going to be a challenge. But we are New Yorkers and there is nothing that we cannot do. We have proven the capacity to take on the toughest issues of the day, and done what was once dismissed as impossible. Together, we will build a smarter, stronger and fairer New York than ever before – and we will show the nation the way forward once again.
Dick Squire, (ACCORD) A Center for Dispute Resolution, Inc., Vice Chair Steering Committee
Joseph Sellepack, Broome County Council of Churches, Special Projects Chair
Keith W. Leahey, MSW, Mental Health Association, Steering Committee member
Committees
MEMBERSHIP COMMITTEE Family Enrichment Network Darrell Newvine
Islamic Organization of Southern Tier Ehtisham Siddigue
Catholic Charities, Broome County Lori Accardi
Johnson City Senior Center Kathy Greenblott
PROGRAM COMMITTEE
Family Enrichment Network Darrell Newvine
Four County Library System David J. Karre
Islamic Organization of Southern Tier Ehtisham Siddigue
Broome County Council of Churches Rev. Joseph Sellepack
Community Options Inc. of Southern Tier Paul J. Weckel
Tioga Opportunities, Inc. Kathleen L. Horner
Broome County Urban League Jennifer Lesko
Discovery Center of the Southern Tier Margaret Crocker
Opportunities for Broome Inc. Mark Silvanic
SPECIAL PROJECTS COMMITTEE
Family Enrichment Network Darrell Newvine
Four County Library System David J. Karre
Islamic Organization of Southern Tier Ehtisham Siddigue
Catholic Charities, Broome County Lori Accardi
Broome County Council of Churches Rev. Joseph Sellepack
Catholic Charities, Broome County Lori Accardi
Tioga Opportunities, Inc. Kathleen L. Horner
American Cancer Society, Southern NY Region Attn. Rachel Cervoni
Fairview Recovery Services Michele Napolitano
Jewish Federation of Broome County Sima Auerbach
SWS Inc. Ronald Charsky
Meals on Wheels of Western Broome Susan Jacobs
