4 Ways to Navigate Nonprofit Legal Challenges in 2024

The legal landscape for nonprofit organizations continues to evolve rapidly in 2024. Driven by legislative changes, shifting societal norms and technological advancements, this dynamic environment presents a unique set of challenges and opportunities. 

From navigating regulatory complexities to addressing emerging risks, like data privacy concerns and shifts in employment law, there are some key legal challenges facing nonprofits, so let’s explore the relative pros and cons of various legal support models available to nonprofits, ensuring they are well-equipped to make informed decisions in the year to come.

The Role of Legal Expertise

Given the sector's dynamic nature, the need for sound legal advice and support is more pronounced than ever in an environment that’s as promising as it is complex.

There's often a delicate balance between mission-driven goals and the practicalities of management, including legal considerations. Traditionally, the sector may not have emphasized legal expertise as heavily as the for-profit world, due to budget constraints or a focus on mission over management. This approach, while understandable, can pose risks in today's increasingly complex legal environment. 

Nonprofits, like any organization, need to navigate a myriad of legal issues — from tax to regulatory compliance to employment law — and insufficient legal guidance can leave them exposed to various risks. Here are four areas to consider.

1. Risk Management

Effective legal advice is crucial for navigating regulatory changes and identifying potential legal risks. Nonprofits, as they increasingly integrate technology into their operations, for example, must be mindful of data privacy regulations. Proper legal guidance helps in formulating strategies to mitigate risks, as well as safeguarding the organization from legal disputes and potential reputational damage.

2. Strategic Decision-Making

Legal advisers play a crucial role in strategic planning by assessing the legal implications of  nonprofit executives and board members’ decisions. Their input ensures that organizational strategies and governance are both effective and legally compliant. This is particularly important considering the liability that board members, for example, may bear for their decisions.

3. Protect Organizational Interests

Legal expertise is key in protecting the nonprofit’s interests, whether in protecting intellectual property, navigating complex agreements or ensuring fair employment practices. From non-payment of wages to discrimination claims, nonprofits — many of which employ large workforces — face many of the same employment-law challenges as their for-profit counterparts. And other legal risks arise when nonprofits — many of which face worker shortages — utilize volunteers to plug operational gaps.

4. Compare Legal Support Models

Each nonprofit has unique legal needs, influenced by its size, scope of operations and resources. Understanding the pros and cons of different legal support models can help in making an informed decision:

In-house counsel. Offers dedicated legal guidance and deep integration with the organization’s culture. However, it may be cost-prohibitive and may not provide a wide range of legal expertise.

Outside counsel. Brings specialized knowledge for specific legal challenges but may be less familiar with day-to-day operations and more expensive.

Fractional general counsel. This relatively new model of delivering legal services provides a balance of dedicated support and breadth of expertise. This model can be cost-effective for nonprofits with regular, but not necessarily full-time, legal needs. Unlike external counsel who may only be engaged for specific issues, fractional general counsels work alongside nonprofit leaders regularly, allowing them to develop a deeper understanding of the organization's mission, culture and strategic goals. However, given the fractional nature of such an arrangement, it’s important to understand and address issues related to accessibility and the need for alignment with the organization’s specific needs.

The choice among these models should be based on a careful evaluation of the nonprofit's specific circumstances and requirements. The goal is to ensure that the legal support model selected effectively meets the organization's needs while aligning with its resources and objectives.

Navigating Risk Management for Nonprofits in 2024

As the nonprofit sector gears up for the complexities of 2024, a strategic approach to risk management becomes increasingly crucial. Recognizing and addressing potential threats is not just about ticking boxes; it's about safeguarding the mission and ensuring sustainable impact.

A foundational step in this process is the prioritization and impact assessment of risks. Nonprofits, with their unique challenges and goals, must take a discerning look at the landscape of potential risks. This requires an ongoing commitment to not only identify these risks but to continuously assess and re-prioritize them, in consultation with legal advisers, and in line with changing circumstances and emerging trends. In some cases this thorough due diligence will lead to adjustments in how a nonprofit operates or fundraises, including ceasing certain activities that could threaten an organization’s tax-exempt status. It may also reveal the need to acquire insurance to mitigate certain liability risks or to make changes to employment policies.

Another key element in the equation is communication. Clear, consistent and transparent communication within the organization forms the bedrock of effective risk management. It’s about creating an environment where every team member, from the boardroom to the front lines, including volunteers, understands their role in identifying and mitigating risks. This includes familiarity with policies and procedures and the importance of proactive reporting of potential risks.

Embracing a holistic and proactive approach to risk management will be key to a nonprofit’s resilience and success in the new year. This approach, which requires reflection, review and refinement of operations and policies, not only addresses immediate concerns but also sets the stage for long-term sustainability and impact.

The preceding post was provided by an individual unaffiliated with NonProfit PRO. The views expressed within do not directly reflect the thoughts or opinions of NonProfit PRO.