Collaborating for Change By Kevin Crenshaw, Esquire

In an ever-changing society and fluctuating market, the role of not-for-profit organizations is increasingly integral to many trends of social service and business. Both economic and governmental trends have propelled many organizations into the "Partnership Age." Communities across the country are lauding the successes of community partnerships. On a governmental level, municipalities are targeting and focusing the efforts to provide social services to their citizens by utilizing nonprofit agencies. In many cases the arrangement is mutually beneficial. The challenging economy has lead many nonprofits to seek other funding sources while the political imperative for balanced budgets has created the economic drive for governmental downsizing. For many of the same reasons, nonprofit agencies often team up with other nonprofit organizations to increase the scope and effectiveness of their services. For-profit businesses are also seeking the assistance of non-profits for their outreach and community mobilization strategies.

Regardless of the makeup of the partnership, in most cases the successes of the partnerships are greater than the sum of each organizations acting respective of each other. As this trend grows, more nonprofits are looking to develop partnerships with governmental units, other nonprofits, and/or for-profit ventures. Highlighting the success of these partnerships cannot go without cautions. Below are a few legal concerns that must be considered when developing a formal partnership.

• Creating formal partnership agreements. Despite the magnitude or degree of the partnership, a formal contract between both parties is the first step in avoiding any legal ramifications during the course of the relationship. It is important for the agreement itself to be inclusive. Consider the following issues when preparing and reviewing partnership agreements.
  • Liability, liability, liability!: The "mothership" of legal implications for community partnerships is of course liability. One key way to reduce any undue responsibilities is to require parallel liability clauses. Other entities may attempt to place all legal liability on the association. Instead, liability clauses should be parallel, placing responsibility on the other party if its employees or volunteers are negligent, and on the association if the association is negligent.
  • Due diligence: It is important to include policies that establish the scope and requirements for research, cost-benefit analysis, and risk assessment regarding alliances. It will also define authority and approval processes for making alliance agreements.
  • Deadlines and Penalties: It is in the best interest of both parties to have clear and explicit deadlines for services rendered. First, this provides a pre-established mechanism for evaluation of the partnership. This will help to eliminate unfair assessments and it provides guidelines for leveling penalties against the negligent partner. Second, it ensures timely completion of services.
  • Compliance with nonprofit tax regulations: The Internal Revenue Code guidelines for tax-exempt status must be unequivocally taken into account. Be sure to include polices on public disclosure and proof that the agency will not profit from the venture.
  • Exit clauses: Even the best-laid partnerships need exit clauses for the agencies protection.
• Adherence to the stated mission. Along with their tax-exempt status comes great responsibility. Charitable organizations or 501(c)(3)s are inherently dedicated to the public benefit and not individual gain. For this reason, partnerships pursued by nonprofits must benefit the organization's clientele or supplement the goals of the overall mission of the 501(c)(3). In a time of intense company scrutiny, the intent/use of funds continues to come under fire. One key way to avoid this pitfall is to create a partnership that mutually reinforces the missions and goals of both partners involved. This correlation should be evident in practice as well as clear in writing.
• Copyright and reproduction protection. Intellectual property is a growing area of concern given the increases of piracy facilitated by technology. This concern is heightened when an organization enters into a partnership agreement. As a nonprofit organization, it is particularly important to maintain what is as well as what is not your intellectual property. In some cases it may be more important to differentiate what is not copyrighted, owned, or endorsed by a 501(c)(3). For example, charitable organizations are charged to be nonpartisan; therefore, alliances with governmental units can come under scrutiny.
• Privacy and confidentiality. Nonprofits must always protect the interest of their clients and members. This priority takes precedent in collaboration agreements.

While the aforementioned areas are important, they are by no means a comprehensive overview of the law's role in nonprofit partnerships. The words of caution here should not serve as deterrents to forming alliances with other entities, but rather tools to begin assessing the legal implications.

The magnitude and complexity of our social and economic problems have expanded. They are outpacing the institutional as well as economic capabilities of individual nonprofit organizations, governmental units, and for-profit businesses to deal with them. Alliances between community stakeholders will be essential to change for the future.

References
Austin, James E. (Fall 2000). Partnering for progress. Leader to Leader Institute. Retrieved January 9, 2004

Schall, Eric. (Fall 2000). Liability trends for nonprofit organizations. Community Risk Management & Insurance. Retrieved January 9, 2004.

Internal Revenue Service. IRS issues new guides for charitable organizations. Tax Information for Charities & Other Non-profits. Retrieved January 9, 2004.