Reflections on BLF14: Post #3 – Legal issues for Nonprofit Board members

Gems from the 2014 Board Leadership Forum, submitted by Laura Boyer.

GOB in DC

GOB in DC at the 2014 Board Leadership Forum last autumn (Laura is third from the right)

The Get on Board committee is made up of a handful of talented people who are passionate about our community.

Legal issues for Nonprofit Board members – Two lawyers who specialized in assisting nonprofits with their business posed questions based on actual cases. The stories seemed so outlandish that they could not have possibly happened.

  • One executive director of a nonprofit who had years of international travel expenses had never saved a single expense reimbursement receipt. The board members of the organization were forced to pay special tax penalties that the IRS prohibits from being covered by insurance or paid by the organization.
  • Other worst case scenario examples that could have been prevented by proper board oversight:
    • prominent private school had full-time “volunteer” teachers who were given “gifts” of $20k per year with no withholding taxes taken out resulting in huge tax penalties;
    • organization didn’t pay its accountant’s bill, so accountant stopped work;
    • Then, organization didn’t file its tax returns for 3 years, automatically losing its 501(c)(3) status. All board members must educate themselves on their legal responsibilities.

Lack of professional expertise is not an excuse. All nonprofits should regularly consult with accountants and attorneys to review their business practices.

Submitted by Laura Boyer

One more gem from Laura’s BLF14 experience will post soon – watch for it! The topic will be:

Consensus-based Leadership – I have experience with collective decision making, so I was excited to hear more about it from consultants who train people in the process. They demonstrated the benefits of their process visually by lining us up in different formations that represented different forms of hierarchies.

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