Category Archives: Oversight

Diversions of Nonprofit Assets

The Washington Post has identified over 1,000 nonprofit organizations that have reported a “significant diversion” of assets. Its important to note that there are over 1,616,000 tax-exempt nonprofits in the U.S. today; thus, these filings represent less than 1% of tax-exempt nonprofits. It’s also interesting to note that a quick review of Arizona’s list includes only 21 organizations – most of which reported the diversions in a clear, transparent, and confidence inspiring manner.Continue Reading

IRS Study Indicates Good Nonprofit Governance Leads to Better Tax Compliance

The IRS has released preliminary results from their study of tax-exempt organizations’ governance practices. As expected, the preliminary findings suggest that organizations with good governance policies are more likely to comply with tax laws. On April 19, Lois Lerner, the Director of the IRS’ Tax-Exempt and Government Entities Division, spoke on this issue at a…Continue Reading

Yes Virginia, Nonprofit Directors Really Can be Held Liable for An Insolvent Nonprofit’s Debts

When serving as a director or an officer of a nonprofit organization, a director’s duties shall be discharged: (i) in good faith; (ii) with the care an ordinarily prudent person in a like position would exercise under similar circumstances; and (iii) in a manner the director reasonably believes to be in the best interests of the corporation. These duties are owed not only to the corporation, but also to its creditors. In discharging duties, a director is entitled to rely on information, opinions, reports or statements, including financial statements and other financial data, if prepared or presented by one or more officers or employees of the corporation whom the director reasonably believes are reliable and competent in the matters presented as well as certain experts and committees. However, a director is not acting in good faith if the director has knowledge concerning the matter in question that makes otherwise permissible reliance on others unwarranted.Continue Reading

Lessons to be Learned From the Arizona Fiesta Bowl

Could one man really do that much damage to an Arizona institution as high profile and important as the Fiesta Bowl? More likely, the nonprofit scandal of the year was a group effort fueled by a dysfunctional board. The Fiesta Bowl board bears all the hallmarks of a board more interested in administering than governing the organization. Still, there are lessons to be learned from the Fiesta Bowl’s governance and oversight failures.Continue Reading

Top 10 Nonprofit Governance Mistakes (From a Lawyer’s Perspective)

Failing to Understand Fiduciary Duties. When you volunteer to serve as a director or officer of a nonprofit, you accept the responsibility to act with the duties of good faith, due care and loyalty. You also accept the potential liability for failing to fulfill those duties. Increased scrutiny from the I.R.S., Congress, state attorneys general, the Department of Justice, donors and the media require vigilance at every step. It is no longer sufficient to rubber stamp committee or staff recommendations or to simply “abstain” from dicey decisions. Today, board service comes with real responsibilities and real consequences for those that fail to live up to them.Continue Reading