School boards and private schools often choose to establish a
separate corporation for the purposes of fundraising, and register
the corporation as a charity. Foundations can generate many
benefits for a school or school board and the community they serve,
but for those who volunteer to sit on the board of directors, there
are significant responsibilities.
At common law and pursuant to statute, a director has a fiduciary
duty to act in the best interests of the corporation. An even
higher duty of care is owed for a board of directors of a
registered charity responsible for funds held in trust for
charitable purposes. The standard of care, sometimes referred
to as a trustee standard, requires a director to
demonstrate "a degree of skill and prudence comparable to a
reasonable business person caring for his or her own
Directors of a charity may be held personally liable for a breach
of trust, imprudent investment of the corporation's property,
mismanagement of the corporation's assets, the misdirection of
a special purpose trust managed by the corporation, or a breach of
Ensuring that adequate monitoring processes are in place, and
requesting regular reports from management, agents and advisors can
assist directors in meeting their duty of care. A foundation
should have an appropriate investment policy, and directors should
receive regular reports verifying that investments are made in
compliance with the policy. Similarly, directors should
receive reports regarding the allocation of trust funds that have
been established with special purposes. Directors should
ensure that they receive, review and understand the
foundation's financial statements and auditor's reports to
satisfy themselves that assets and liabilities are being managed
In addition to the duty of care, directors also owe a duty of
loyalty to the foundation, and must therefore avoid situations
where their personal interests conflict with those of the
foundation, or where their loyalty to the foundation may be
compromised by a duty of loyalty to another organization, such as
the school or school board. The duty of loyalty includes an
obligation to protect the foundation's confidential
information. Confidentiality and conflict of interest
policies can assist directors in understanding and meeting these
Directors should be familiar with the foundation's articles of
incorporation or letters patent, and bylaws, which together define
the corporate authority and governance structure. The bylaw
may address the foundation's indemnification of
directors. Directors should also review the extent of the
foundation's liability insurance for directors and officers,
and any exclusions.
Some statutes (for example, statutes relating to employment,
employee safety, disability accommodation, taxes, electronic
communications, and corporate record keeping) impose personal
liability on directors, where a failure to ensure the
foundation's compliance can result in a fine, repayment of a
debt, and in some cases, imprisonment. However, a director
may be able to establish a "due diligence" defense where
there is evidence that the board requested and received
confirmation that the foundation complied with its statutory
duties, and it was reasonable to rely on the information
Contributing time and energy to an educational foundation can be
personally fulfilling and of great benefit to the community.
A board of directors which is well-informed about its legal
responsibilities and has ensured that measures are in place to
protect the foundation's assets in a manner consistent with
common law and statutory requirements will serve the charity and
its beneficiaries well.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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