Mismanagement of funds refers to instances where a person fails to observe laws or guidelines when handling finances for another person or organization. Most mismanagement lawsuits involve some form of negligence or neglect on the account of the liable party. 

These types of cases are frequently found in connection with trusts, board of director lawsuits, and any time an agency relationship is found (as in a power of attorney or with an executor of an estate). 

What Are Some Examples of Mismanagement of Funds?

Mismanagement of funds is a common source of many business disputes.  Some examples of mismanagement of funds may include:

  • Mingling the funds with the person’s own personal accounts
  • Divulging information about the funds without the party’s authorization (i.e., breach of confidentiality)
  • Using the funds for the person’s own personal use
  • Violations of fiduciary duties of trustees
  • Failing to account for any transactions or changes in a trust account
  • Violations of various business or trust laws

Of course, the person or party entrusted with the funds is generally not bound to perform extraordinary feats of financial investment. Instead, the party is required to invest the funds in a way that is “reasonable” and “prudent”. On the other hand, if the party was hired under contract specifically because of their investment skills, they would be expected to perform under the terms set forth in the contract.

Who Can Be Held Liable for Mismanagement of Funds?

Persons who might be held accountable for the mismanagement of funds may include:

  • Trustees (as in a trust dispute)
  • Members of a board of directors or similar overseeing body of an agency
  • Persons holding organizational office such as a treasurer
  • Persons who have been authorized to make financial decisions on behalf of another person, as in a power of attorney arrangement.

What Are Some Legal Remedies for Mismanagement of Funds?

Legal remedies for a mismanagement of funds will aim to be proportionate to the type of conduct involve. A common remedy may require the payment of damages for financial losses connected with the mismanagement of funds. Other remedies may include a re-writing of the financial agreement, and/or a replacement of the person managing the funds. 

Do I Need a Lawyer if I Have Legal Issues Involving a Mismanagement of Funds?

Any type of a mismanagement of funds can present many challenges for an individual or a business. You may wish to hire a business lawyer if you need assistance with legal issues or if you need to file a lawsuit. Your attorney can represent you in court if necessary. Also, you may wish to contact a lawyer for advice at the outset of the management relationship, which can help you avoid conflicts from the beginning.