What is the board of director/trustees liability for accounting mistakes?
A nonprofit corporation can be liable for penalties for inaccurate record keeping or accounting errors, or for filing its annual returns (Form 990s) late. Each board member has a legal responsibility to ensure that the nonprofit avoids such penalties. Board members must exercise “due care” in the performance of their duties, which includes overseeing/approving the financial and accounting practices of the nonprofit and ensuring accurate and timely IRS filings. Trustees will generally not be liable if they have relied, in good faith, on advice provided by competent professional advisors, such as accountants and lawyers. Therefore, hiring reliable professionals, asking pertinent questions, and familiarizing themselves with the nonprofit’s financial statements, internal controls, and accounting practices, are important ways that nonprofit trustees can protect themselves from liability for a failure to exercise “due care.
