Keep your local authorities and nonprofits in good working condition

Every county has an industrial authority (whether you know it or not). Most cities and towns will have a housing authority (sometimes whether you know it or not). Did you ever create a nonprofit corporation to facilitate a financing?

It’s worthwhile, at least once a year, to make sure these entities are in good working condition from a legal perspective. It’s much easier to keep your authority or nonprofit in good shape, than to get it back if it falls into legal disrepair. Here are some questions you can ask to get this process started –

Do you know who the Board members are? Can you find them?

If something comes up and you need to have a meeting on short notice, could you assemble a quorum? Have any terms expired? Has anyone moved out of the area, or died? The Bylaws (can you find the Bylaws?) may require an annual meeting to choose officers and new board members.

Different types of entities have different rules for declaring a vacancy, and then filling it, if you can’t identify or locate board members. In this regard, we recommend that if you set up a local nonprofit for which governing board independence is not an issue, then provide in the governing documents a mechanism for the local elected officials to reconstitute the board if need be.

Are there any official filings that need to be done?

A nonprofit may need to make an annual filing with the North Carolina Secretary of State’s office to maintain its legal good standing. If your nonprofit is a 501(c)(3) organization, it needs to file an annual return. On a similar note, can you locate the corporate records (including the corporate seal)? If the nonprofit or authority is a party to any on-going contracts, have those been reviewed to be sure you’re in compliance?

Are the insurance coverages in place?

If your nonprofit or authority owns any property, does it have casualty and liability insurance in place? This property probably won’t be automatically covered under the local government’s policies; in some cases, it can’t be covered under those policies. Do the board members and officers have directors’ and officers’ liability coverage? It’s not particularly expensive, especially compared to a lawsuit.

For the most part, these issues won’t be a problem, until all of a sudden they become a big problem — whether that’s because you need to have a meeting in a hurry and you don’t know who should meet, or someone slips and falls at the community center that’s owned by a city-controlled nonprofit.

For extra bonus points, think about setting up a system like this for the community nonprofits – and perhaps even the small for-profit businesses – with which your local government does business. We’re not suggesting you do this review for those entities, but instead ask them to undertake their own review, and perhaps certify to you annually that they’ve done the review and everything is in order.

These steps won’t help you avoid all possible problems arising from sloppy corporate housekeeping, but they’ll take you a big step forward.

Please see the disclaimer and call us at Sanford Holshouser if you have any questions about this material, or if we can otherwise be of any help.