Our nonprofit preschool just purchased a building and the president of the board has been trying to get us to pay off the mortgage in 1/2 to 1/3 the time. Since she is a broker and will handle the details, she will make a huge commission on the $350,000 purchase price. The bylaws say that board members can not work for the preschool. Can she do this?
Although some organizations adopt policies that prohibit any conflict of interest transactions with members of the board, there is no state law or tax law that provides an absolute prohibition. The tax law makes the transaction subject to the excess benefit rules, and the board should be sure to follow the safe harbor provisions in any dealings with a director. If it does the transaction it should make sure that it is in the best interests of the school and that the price is fair and reasonable. (See Ready Reference Page: “Charities Must Avoid Excess Benefit Transactions.”)
Whether it violates the bylaws is a question of interpretation. Do the bylaws say that a director may not be an employee of the school, or that directors may not be compensated for any services? It may make a difference on whether the transaction is prohibited. Simply because it is not prohibited, however, does not mean that you have to do it if you don’t think it is appropriate. You can always say No.
Legal Issues in Volunteer Involvement:
Maximizing the Benefits, Minimizing the Risks
Pre-recorded Webinar -
This pre-recorded webinar discusses: risk management and the organization's liability for the acts of volunteers; legal responsibilities in screening and placing volunteers; liability for harm to volunteers; applicability of volunteer protection statutes and workers' compensation statutes; insurance coverage and indemnification issues; applicability of employment discrimination laws; and more. The session also discusses confidentiality, protection of intellectual property, volunteer contracts, and ways to minimize risk through training and supervision. Learn to balance the risk of possible problems against the risk of turning away valuable volunteer support.
Weekly question and answer
Notice of each full edition
and its free stories
Report on 501(c)(3) electioneering
What our readers say about Nonprofit Issues
Once again you've tackled a tricky question and explained it so we all can understand the issue.--M.V.
Thank you for your informative and keen advice on nonprofit matters. I believe it's a unique and concise place to get answers to this often wispy area called nonprofit. --R.T.
Have a question?
Other ways to
Talk to the Editor
Next Conference Call:
Wednesday, September 10, 2014
Participate in this bi-monthly telephone seminar conference call and ask your questions directly to Editor Don Kramer.
Access the entire site
($9.95/24 hours, $17.95/3 months).
Full Day Program
A well-received full-day program that covers the current hottest topics in nonprofit law. Qualifies in Pennsylvania for Continuing Education credits.
Don is available for programs and speaking engagements ranging from a one-hour presentation to a full-day primer on nonprofit law. Contact us if you are interested in having him speak at your program.