|
|
 |
|
| Advisors' Forum |
A Free Lunch
07/01/2005
|
I sit on the board of a nonprofit organization that promotes sports and fitness
for inner-city children. We hold monthly fund-raising luncheons, for which we
charge a nominal fee—usually less than $100 per ticket, depending on the guest
speaker. Prior to this year, the nine board members were expected to attend
every luncheon and pay for their own tickets. Our board recently voted to waive
ticket fees for board members. The vote was duly published in our meeting
minutes, and one of our donors wrote a scathing letter opposing the change on
ethical grounds. Does this plan violate conventional guidelines for nonprofits
or any Sarbanes-Oxley-type regulations? Does it just look bad?
I do not feel that there are specific ethics or conventional wisdom that would
preclude the organization from waiving the admission fee for board members.
Sarbanes-Oxley has no application in this case (it only has a couple of
provisions applicable to nonprofits). Perhaps an argument could be made that
this is an automatic excess benefit under IRS rules, but that could be
eliminated by disclosure on the organization’s Form 990. The value of what they
are receiving as a benefit is not the ticket price, but the value of the lunch
itself. I imagine anyone on the board makes annual contributions greatly in
excess of this value.
I don’t think this looks particularly bad. By waiving
the admission fee, it is easier for board members to enthusiastically
participate in these fund-raising activities and easier to attract new board
members. The free lunch is just part of the price of fund-raising.
R. Michael
Sorrells, National Nonprofit Tax Consulting Group, BDO Seidman, Washington,
D.C.
Too often board members do not realize the commitment of time, talent and
treasure that is involved when agreeing to serve on a board. But savvy donors
are less likely to support an organization whose board members have not already
stepped forward. It is critical that board members approve any activities and
events the organization plans, understanding that their support of these events
must be evident.
This situation raises several other underlying issues.
First, the organization may be too dependent on these events. Second, the size
of the board indicates that board members are stretched pretty thin. Recruiting
a larger board may help the organization find other ways to raise money. It can
then involve the board in the more important fund-raising task of identifying,
cultivating and soliciting major donors.
Linda Lysakowski, Capital
Venture, Las Vegas.
The board made a bad decision here in waiving the requirement that board
members pay these ticket fees. Board members cannot expect donors to make
contributions if they are not willing to also make a financial sacrifice. In
addition, the negative publicity and possible violation of government
regulations by board members personally benefiting from free lunches could be a
problem, especially if these lunches are worth hundreds of dollars.
Sarbanes
in this case is not applicable, but the board should reconsider its decision. At
the very least, board members should not be able to attend these luncheons at no
cost. In addition, the board should consider establishing a minimum
“give-or-get” policy and commit to raise a certain amount of funds each year
through personal giving or the solicitation of funds.
Frank L. Kurre,
Not-For-Profit Industry Practice, Grant Thornton, N.Y.
Nonprofit groups depending on donated funds generally expect their directors
to make personal contributions and to support the activities of their
organizations. The level of support expected varies from organization to
organization, and should take into account both the needs of the organization
and an individual director’s capacity to give.
Expecting board members to pay
$100 per ticket for a monthly luncheon may be entirely reasonable, unless a
director cannot afford to meet that obligation. Presumably, those directors
offer other important characteristics needed for your board. Board members
should be visible in the community, advocate for the organization’s mission,
attend events, bring others to the table to provide support and make the
organization their personal philanthropic priority. A tip: Avoid
misunderstandings by clearly stating expectations to board member candidates
(and veterans), and set forth those expectations in a policy statement approved
by the board itself.
Deborah Hechinger, BoardSource, Washington, D.C.
Send Us Your Questions. Are you wrestling with family issues, business
governance or succession decisions, investment or estate planning dilemmas,
problems related to philanthropic activities or foundations, or a similar
predicament? We invite you to email a detailed question to advisorsforum@worth.com
|
|
|
|
|
