
Nonprofit Legal and Ethical Red Flags
Even the most well-intentioned nonprofit can find itself facing legal or ethical challenges. Like a thriving garden, a healthy organization requires more than good soil and good intentions, it needs regular tending, watchful eyes, and the willingness to deal with problems before they spread. Boards have a duty not just to react to crises, but to anticipate and address risks before they take root. Common Legal and Ethical Risks The following situations should prompt immediate board attention, even when they arise without any wrongdoing or bad intent. Ignoring early warning signs rarely makes them go away, it usually just gives them more time to grow. Governance & Compliance Governance problems are among the most common (and most preventable) risks nonprofits face. Operating with outdated bylaws or policies can leave an organization legally exposed without anyone realizing it. Failing to file required annual reports, including IRS Form 990, the Oregon DOJ CT-12, and Secretary of State renewals, can jeopardize tax-exempt status and good standing. (While we at Law Garden are happy to help you get your tax exempt status reinstated and get you back in good standing, we would rather help you stay informed and compliant!) Conflicts of interest that are


