Risk Management Overview with Meg Tully, CAE Meg Tully, CAE Association Development Director

What Will You Learn? Learn how to minimize your Chapter’s risk through proper management of:  Governance Documents  Insurance  Business Management

What is a Chapter? Group, organization or association that has a formal relationship with a parent or umbrella organization and has jurisdiction over a geographic area rather than an activity or special interest.

Governance Documents Keeping these documents up to date is vital to protect your Chapter against legal liability. These include: –Charter Agreement –Articles of Incorporation –Bylaws –IRS Group Tax Exemption –Policies and Procedures Manual –Job Descriptions

IECA Responsibility IECA maintains documents governing our relationship with Chapters: –Charter Agreement Legal rights & responsibilities of each; to be updated soon with input from CAC Legal rights & responsibilities of each; to be updated soon with input from CAC –IECA Bylaws Summary of organizational governance and rules Summary of organizational governance and rules –IRS Group Tax Exemption Extends IECA’s 501(c)(3) status to US Chapters. Requires Chapters to have bylaws similar to IECA and file tax documents annually. Extends IECA’s 501(c)(3) status to US Chapters. Requires Chapters to have bylaws similar to IECA and file tax documents annually. IECA Chapters

Chapter Responsibility IRS Financial Reporting To maintain group exemption, US Chapters must complete a new Form 990, Form 990EZ or Form 990-N. To maintain group exemption, US Chapters must complete a new Form 990, Form 990EZ or Form 990-N.Overview First changes to Form 990 in 30 years First changes to Form 990 in 30 years Applies to 2008 activity Applies to 2008 activity More financial info at StayExempt.org: More financial info at StayExempt.org: Use an accountant familiar with non-profit accounting to ensure proper submittal of annual information to the IRS. Use an accountant familiar with non-profit accounting to ensure proper submittal of annual information to the IRS. Chapters outside the US should follow the rules regulations appropriate for their respective countries. Chapters outside the US should follow the rules regulations appropriate for their respective countries.

Chapter Responsibility Form 990’s 2008 Tax Year (Filed in 2009 or 2010) Form to File Form to File Gross receipts normally ≤ $25,000: 990-N (E-Postcard) Gross receipts normally ≤ $25,000: 990-N (E-Postcard) Gross receipts > $25,000 and $25,000 and < $ 1 million, and Total assets < $2.5 million : 990-EZ or 990 Gross receipts ≥ $1 million, or Total assets ≥ $2.5 million: 990 Gross receipts ≥ $1 million, or Total assets ≥ $2.5 million: 990 Form 990-N Due by 15 th day of 5 th month after close of tax year Due by 15 th day of 5 th month after close of tax year Info needed: EIN, Tax Year, Legal name and mailing address, name and address of principal officer, web site Info needed: EIN, Tax Year, Legal name and mailing address, name and address of principal officer, web site Failure to file for 3 consecutive years jeopardizes tax-exempt status. Failure to file for 3 consecutive years jeopardizes tax-exempt status. More Info: More Info:

Chapter Responsibility Articles of Incorporation Establish a U.S. Chapter as a separate legal entity in the state in which it is based. Outside the U.S., may be known as proof of business determination. This Means: Greater freedom for Chapter Greater freedom for Chapter Can enter into contracts in your own name Can enter into contracts in your own name Can file legal actions in your own name Can file legal actions in your own name Requires filing your own reports with Requires filing your own reports with state and federal authorities Responsible for own financial debts Responsible for own financial debts Need to maintain “good standing” status with state every year Need to maintain “good standing” status with state every year

Ensure your state Secretary of State lists the Chapter in its database. Usually this can be accessed on line. Ensure a current officer or designee (e.g. Chapter attorney) is listed as a contact. Ensure your state Secretary of State lists the Chapter in its database. Usually this can be accessed on line. Ensure a current officer or designee (e.g. Chapter attorney) is listed as a contact. Pay the annual filing fee and complete any state- required paperwork. State fees can range from $25 - $500 a year. Pay the annual filing fee and complete any state- required paperwork. State fees can range from $25 - $500 a year. Chapters based outside the US should maintain good standing according to their specific laws and regulations. Chapters based outside the US should maintain good standing according to their specific laws and regulations. Chapter Responsibility Maintain “Good Standing” (U.S. Chapters)

Did You Know? If you do not maintain your Chapter’s incorporation status, members may be generally held personally liable for the debts and other liabilities of the Chapter!

Chapter Responsibility Bylaws Defines legal provisions of the Chapter including officers, elections, governance, etc. Policies and Procedures Manual Details how a Chapter will conduct business including meetings, finances, code of conduct, etc. Valuable to protect Chapter director and member interests. Job Descriptions Specifies the roles and responsibilities of each Chapter Board member and any Chapter employees. Protects Chapter directors from legal liability.

Insurance Overview Business Owners (General Liability) Business Owners (General Liability) Directors & Officers Directors & Officers Errors & Omissions Errors & Omissions Event Liability Insurance Event Liability Insurance Event Cancellation Event Cancellation All Chapters should appoint a risk manager (usually a director) to manage the Chapter’s exposure to risk of financial loss. This person should be familiar with insurances and be responsible for the Chapter’s insurance coverage such as:

Business Owners (General Liability) Coverage typically includes: Premises loss of use and medical expenses for office site activities, natural disaster, etc. Premises loss of use and medical expenses for office site activities, natural disaster, etc. Auto use, records and financial protection Auto use, records and financial protection Employment practices, e.g. harassment protection Employment practices, e.g. harassment protection Protection against alleged negligence resulting in bodily injury, property damage or claims of slander or defamation of character Protection against alleged negligence resulting in bodily injury, property damage or claims of slander or defamation of character

Directors & Officers Insurance Coverage typically includes: Protection against allegations of “bad decisions” or “wrongful acts” such as making misleading statements about Chapter services and policies Protection against allegations of “bad decisions” or “wrongful acts” such as making misleading statements about Chapter services and policies Protection against claims of false advertising or marketing practices (e.g. privacy rights) Protection against claims of false advertising or marketing practices (e.g. privacy rights) Employment Practices Liability similar to general liability insurance but specific to D&O persons Employment Practices Liability similar to general liability insurance but specific to D&O persons

Other Insurance Errors & Omissions Errors & Omissions –More comprehensive than D&O Event Liability Insurance Event Liability Insurance –One-time coverage for off-site Chapter events Event Cancellation Event Cancellation –Financial protection in case a Chapter in case a Chapter event can’t be held event can’t be held

Costs & Considerations Cost depends on the way the Chapter conducts business on a daily basis. Does it have an office? Assets? Employees? Events? Cost depends on the way the Chapter conducts business on a daily basis. Does it have an office? Assets? Employees? Events? Risk Manager – appoint someone to be in- charge Risk Manager – appoint someone to be in- charge Selecting a Broker – it’s personal: find one whose personality type and objectives match your Chapter’s needs. Selecting a Broker – it’s personal: find one whose personality type and objectives match your Chapter’s needs.

Business Management Each Chapter should also be prepared to manage other risks which may arise. Member Data Usage – CAN-SPAM act of 2003 (Controlling the Assault of Non-Solicited Pornography and Marketing) and “opting out” Member Data Usage – CAN-SPAM act of 2003 (Controlling the Assault of Non-Solicited Pornography and Marketing) and “opting out” Legal Workshops – Directors should participate to gain a working knowledge of association law Legal Workshops – Directors should participate to gain a working knowledge of association law Retain Legal Counsel – expect to pay $175-$250/hour. IECA can provide a recommendation. Retain Legal Counsel – expect to pay $175-$250/hour. IECA can provide a recommendation. Indemnity Protection in state statute and policy of the Chapter (usually in bylaws) Indemnity Protection in state statute and policy of the Chapter (usually in bylaws)

Next Steps As always, Chapter success and IECA’s success are dependent on each other. We will expand “Managing Chapter Finances” to include this presentation material. We will expand “Managing Chapter Finances” to include this presentation material. We will add a checklist of items you will need to do on an annual basis. Look for it as part of the charter agreement revisions. We will add a checklist of items you will need to do on an annual basis. Look for it as part of the charter agreement revisions. Call us at any time to get help on Call us at any time to get help on any of these areas of responsibility.