Not-for-profit organizations receive the same treatment as for-profits when it comes to liability for errors, omissions or other wrongful acts that involve governance, employment practices or misuse of funds. Penalties and court cases could be involved that implicate the not-for-profit’s leadership and board of directors.
Historically, not-for-profits have not gotten off any easier than their for-profit counterparts in settlements (). Resolving employment, financial and governance-related liabilities can be particularly difficult for not-for-profits because they typically operate on budgets that are smaller and more likely to be affected by the reputational consequences that come with a liability issue than for-profits. An issue uncovered with how your not-for-profit manages its funds, for example, could have donors reconsidering their contributions.