Do Not Panic Board Members!

There has been talk recently about pursuing the Directors or Trustees of non-profit organizations whose funds were invested with Bernard Madoff.  This talk is raising unnecessary alarm among talented individuals who have chosen to serve on the Boards of important organizations in our community.   Board members absolutely have a responsibility to take the time to read and understand financial information. They absolutely should consider themselves accountable for decisions that they make, including financial choices. They should make every conceivable effort not to fall prey to criminal schemes. But in most instances, due to a Federal law enacted in 1997 after more than ten years of effort, they are protected from legal liability.

It’s critical that our community’s valuable volunteers are aware that, unless they engage in “willful or criminal misconduct, gross negligence, reckless misconduct, or a conscious, flagrant indifference to…rights or safety,” volunteers (including Board members) are generally protected from legal liability by the Federal Volunteer Protection Act of 1997.

As Chair of the Board of Friends of WLRN the fund raising agency for Public Television Station WLRN-TV and Public Radio Station WLRN-FM I rely on the diverse skills and talent of each of our Directors. I expect all of them to take seriously their responsibility to understand the organization’s financial condition and make sound decisions; if they find they cannot take the time to do so I expect them to resign. But the protection of this important Federal law frees them and their employers from the specter of potential legal action if through no fault of their own something should go wrong. The Act was intended to give non-profits the benefit of talented community members like our Board who (in the past) were deterred from Board or other volunteer service by fear of the type of legal action being suggested in the Madoff example.

By protecting volunteers the Act frees them to serve our community without this risk. Now more than ever our community is relying on our non-profits to help fill the gaps created by the economic downturn. Now more than every our non-profits need the service of skilled volunteers who help them perform their missions in the most effective – including cost-effective – manner possible.

Janet Kyle Altman is a principal at Kaufman Rossin. one of the Southeast’s largest accounting firms. She can be reached at jaltman@kaufmanrossin.com