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Association Members May Sue Former Directors for Breach of Fiduciary Duty
Nonprofit and Church Legal Trends - Free Edition - November December 2008 (free edition)
Members claim former board failed to supervise, manage, and obtain adequate insurance.
Application: With the new 990 disclosures and growing emphasis on accountability and transparency in CSR and state regulations as well as nonprofit watchdog organizations, the moral to this case is that a board must review bank statements, do audits and have adequate insurance to protect a nonprofit against embezzlement and to assure that internal controls are in place to reduce the risk or discover it quickly if it does occur.
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