Our 501(c)(3) has had the same treasurer since 1986. She is the only person who signs checks and is fighting adding anyone to the account. We do not get monthly reports and there are some questions about some things, but we cannot seem to get a straight answer. Everyone is aware of the situation but she was just reelected. Are there federal laws governing how the money is to be handled?
This situation contains some of the classic signs of trouble, a long-term treasurer who apparently fights sharing responsibility and oversight and won’t answer questions clearly. It sounds as though you don’t have separation of functions and internal controls, and I am guessing that you don’t have an outside accountant audit or even review your books.
You ought to get some outside help immediately to review the finances and help you institute a system in which you can be confident that money is being handled properly. You can tell the board that there comes a time when overlooking such clues could be a breach of fiduciary duty and lead to personal liability. Even if everything is fine, and I don’t want to jump to contrary conclusions, you ought to have additional people who can sign checks. If your treasurer got hit by the proverbial truck tomorrow, you couldn’t function financially.
I am not aware of any federal laws that affirmatively govern the way your money is to be handled, except that it has to be spent generally for charitable purposes and in accord with governmental restrictions, if applicable. I am aware of the federal and state laws against embezzlement, however.
Comments
You may want to use your insurance guy. Approve the purchase of a blanket bond. Then in completing the application, you'll find most insurers will decline due to no dual signatures, etc.. The result would then be more controls instituted to be able to get the bond versus the appearance of displeasure/distrust of a person with 30 years of service and likely there before most or all of the current board.
The Questioner needs to submit a motion on the financial situation, and then have a recorded vote on the motion. If tabled (likely), get a recorded vote on both motions. The first motion might be as simple as the bylaws requiring an independent review, compilation, or audit every x years (beginning this year), or perhaps something more complex such as amending the bylaw's descriptions of the Chairman, Vice Chairman, and Treasurer to require that all three be bank signatories. The bylaws should not allow the Treasurer to establish a new bank/credit card/debit/square/payroll/etc account without the approval of the Board, and since there are few 30-year-old banks, this seems likely to have occurred during one of the recent banking panics. Once the bylaws are amended, then the Board can enforce the revised bylaws. But the Questioner does need immediate proof by way of a Board vote that she/he is NOT party to the lax governance that has gone 30 years without a review of the books. I'm rolling on the floor, laughing out loud on this question.
I would love to see what the outcome was on this 6 year old question.
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