Academic journal article Journal of Accountancy

Don't Volunteer for Trouble: Risk-Avoidance Strategies Can Help Protect CPAs Who Do Unpaid Work for NPOs

Academic journal article Journal of Accountancy

Don't Volunteer for Trouble: Risk-Avoidance Strategies Can Help Protect CPAs Who Do Unpaid Work for NPOs

Article excerpt

Make sure you don't put yourself on the road to hell when you act on your good intentions. Not-for-profit organizations (NPOs) always need volunteer services, including those only certified public accountants can provide, and at one time or another many civic-minded CPAs accept a request to pitch

For their unpaid work, they reap modest rewards: Being a volunteer board member can help satisfy a CPA's desire to support a favorite cause, raise his or her profile in the community, meet people and establish professional contacts as well as learn new skills, for example. The pluses sometimes come with negatives, however. Here are guidelines that will help protect a CPA against legal liabilities when he or she gives time and expertise to an NPO.


CPAs often participate in general board stewardship of an NPO or contribute accounting services. In many not-for-profit organizations, a CPA serves as the treasurer. Most volunteer board members assume they face no real risk of major liability, but that isn't true. Even at the smallest NPO, problems can arise. Board members may have legal responsibility if an employee embezzles money, one of the organization's staff members or unpaid workers commits an act of sexual misconduct, the entity fails to pay its payroll taxes or someone is injured on its property because of hazardous conditions.

Some board members think they are protected by legislation covering people acting in a volunteer capacity for NPOs. It's true that most states have laws (Nebraska and Oregon are exceptions) that exempt directors, trustees and members of NPOs from lawsuits arising out of the conduct of day-to-day affairs. But much of that immunity evaporates if the court deems the volunteer's conduct was "willful, wanton, negligent (or) grossly negligent"

Congress's attempt to relieve board members from legal liability is the Volunteer Protection Act of 1997 (VPA). Essentially, the VPA exempts volunteer workers of nonprofit organizations and government entities from liability for harm caused by their actions or omissions if

* They act within the scope of their responsibilities.

* The volunteers are properly licensed.

* The harm wasn't caused by willful or criminal misconduct, gross negligence, reckless misconduct or conscious, flagrant indifference to the rights or safety of the injured party.

* The harm wasn't caused by the unpaid worker operating a motor vehicle, vessel, aircraft or other vehicle.

The VPA also limits punitive damages if the conduct took place while the volunteer was acting within the scope of his or her responsibilities.

Many CPAs who are volunteer board members of NPOs assume the VPA and similar state laws provide sufficient liability coverage for them should something go wrong. This isn't so. For example, the act doesn't protect volunteers in situations where they violate federal or state civil rights laws. Thus, if an unpaid worker is charged with discrimination based on race, gender, national origin, religion, disability or age, for example, the VPA is irrelevant. Nor does it protect volunteers in instances where sexual offenses have occurred or when drugs or alcohol are involved.

Second, the federal law does not prevent unpaid workers from being sued by the organization. For example, if an NPO is sued based on the actions of one or more of its volunteers and a judgment is entered against it, the entity may sue the volunteer to recover his or her proportionate share of the financial judgment. While it's unlikely an NPO would sue in such cases, it is legally possible.

Although the VPA appears to offer unpaid workers more protection against personal injury claims than many state laws do, the act's constitutionality has yet to be tested in the courts. In section 14501(a)(5), Congress states, "Services and goods provided by volunteers and nonprofit organizations would often otherwise be provided by entities that operate in interstate commerce. …

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