Are You Legal? How do you know?

How do you know that you are “legal”?

There are many ways of defining and examining your legal responsibilities. Two of the basic areas include compliance with external legal requirements and internal financial accountability.

Are you legal?

First, you need to know what provincial/state legislation affects your general operation. This typically takes two forms.

There is usually a generic act or legislation governing not-for-profit boards, sometimes called a “Societies Act”. Roles, responsibilities, legal requirements for actions taken and decisions made, and reporting of same, will be included.

There may also be “sector-specific” legislation. The most common examples for the not-for-profit sector are legislation covering public education, such as an Education Act or Schools Act, governing boards of education and school boards, legislation covering public libraries, such as a Public Libraries Act, governing public library boards, and legislation covering higher education, such as a Colleges and Universities Act or Higher Education Act, governing Boards of Governors, Academic Senates and sometimes student government.

When did you last inquire about current legislation and review them?

Similarly, a primary funder such as a municipality or foundation may have policies and procedures that affect your scope and reporting. Best to know them than to be found out of compliance and thus ineligible for funding.

Are you transparent financial stewards?

What steps have you taken to ensure that each board member is financially literate? It is not good enough for one director (usually a commerce graduate or an accountant or bookkeeper) to have some competence and assume all the burden (and responsibility). Each board member has a critical fiduciary role. You cannot delegate this. Can you read a balance sheet? Do you see the integration of income/expense (profit/loss) statements and balance sheets? What are the red flags? This is not rocket science – but you need to know what to look for and what questions to ask. When did you board last take some training (even an hour!) together with a financial manager, preferably external to the organization? In one study I found that board members wanted further education in many areas – but only one topic kept them awake at night and that was their lack of basic financial literacy. Deal with it.

What are your mechanisms for active oversight? internal controls? More about this in greater detail in a later blog. Suffice to say, you need appropriate policies and procedures.

Do you understand the audits? External auditors report to the board. What questions do you ask? Why?

Addressing legal responsibilities is not difficult. You just need to acknowledge them, get the basic information and training, and move forward together!

What are your main “pain points” with regard to issues of oversight and accountability? What advice would be most helpful to you? And we always assume that you are asking for a friend!

Get in touch. We’ll address your questions and concerns in an upcoming blog post.

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We are currently addressing these 10 Critical Questions Boards Need to Ask Themselves:

1 Why are you here?

2 Who is your employee?

3 What is your role?

4 Why are you meeting?

5 How do you ensure sustainable resources?

6 What are your KSFs?

7 How do you manage risk?

8 How do you ensure accountability and transparency?

9 How do you foster a culture of inquiry and assessment?

10 How do you continue to improve?

See our other blog posts for more insights.

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