Charities, Nonprofits & Fundraisers
A board member is entitled to inspect the charitable corporation's books and records. The board member may ask to see its financial reports.
The board of directors must approve the compensation of officers by the affirmative vote of a majority of the entire board, unless the charitable corporation's bylaws provide that it may be approved by a committee of the board. A charitable corporation is authorized to pay reasonable compensation commensurate with the services performed.
While there is no set process that boards must follow in approving compensation, the best practice is for compensation to be determined by an authorized body, such as a compensation committee. This body should be composed entirely of people who are impartial and do not have a financial stake in the outcome. This authorized body should obtain and rely on information as to comparability of an officer's salary to salaries paid to officers in similar positions at comparable charitable corporations. The authorized body should document the process and basis for its determination.
Compensation includes all forms of benefit provided by the charitable corporation — not just salary. The board should be sure to look at the officer's entire compensation package. The Internal Revenue Service (IRS) encourages charitable corporations to follow the procedures set out in section 4958 of the Internal Revenue Code and Treasury Regulation section 53.4958-6. Read a general discussion of these procedures for charitable corporations on the IRS website.
A charitable corporation formed in New York must have at least three board members.
This pertains to other types of organizations, in addition to charitable corporations. New York law provides that willful failure of a charitable organization to file a report required by law shall constitute a breach of the governing body's duty to the organization. The governing body should make sure that the organization is filing all its required reports, including its filings with the Charities Bureau of the Office of the New York State Attorney General, including both its Form 990 and employee-related reporting, regardless of the organization's tax-exempt status.
A charitable corporation is obligated to keep, at its office, correct and complete minutes of all meetings of its members, board, and executive committee (if the board has an executive committee). This applies to meetings conducted face to face and via telephone or teleconferencing,
Charitable corporations, other than those established as education corporations, are not permitted to lend money to their officers and directors, even if they have good business reasons for wanting to make the loan.
This applies to other types of organizations in addition to charitable corporations. Now that you have learned about the embezzlement, you are obligated as fiduciaries to make reasonable efforts to recover money from the embezzler and to refer the matter to the criminal authorities for possible criminal prosecution. If the organization has insurance, report the loss to your insurance carrier. As fiduciaries responsible for the fiscal administration of your organization, the board should review its internal controls and investigate how the embezzler got away with the embezzlement. You may have to institute changes to ensure that the organization will not be a victim of embezzlement in the future. We encourage you also to report the embezzlement to the Office of the New York State Attorney General's Charities Bureau.
This applies to other types of organizations in addition to charitable corporations. The board must apply all assets received in accordance with the provisions set out in the gift instrument. The board must ensure that accurate accounts are kept of such assets, separate and apart from the accounts of other assets of the organization. Unless the gift instrument provides otherwise, the organization's treasurer must make an annual report to the board, or to the members of the organization, if there are members, concerning the restrictions, the use made of such assets, and the income thereof. The board should also ensure that the assets are invested in a manner that is appropriate to the purposes of the gift, taking into consideration the organization's overall investment policies and financial situation.
No. Organizations that are exempt from taxation under section 501(c)(3) of the Internal Revenue Code are prohibited from contributing to a candidate for office, a political party, or a political action committee. An organization that violates this prohibition risks losing its tax exemption and may also be in violation of state law. See detailed information concerning the prohibition on the Internal Revenue Service's page about tax-exempt charitable organizations.
Prohibited political contributions for 501(c)(3) entities include:
- making a monetary contribution to a political candidate, party, or political action committee
- purchasing tickets to a fundraising event sponsored by a political candidate, party, or political action committee
- paying for ads that support or honor a political candidate
- donating non-monetary items to a political candidate, party, or political action committee
- donating the use of an organization's services, premises, cars, or equipment to a political candidate, party, or political action committee
- allowing employees to volunteer for a political candidate, party, or political action committee during their working hours (they may, however, volunteer on their own time
- reimbursing an officer, director, employee, agent, volunteer, or other individual or entity for any political contribution
The organization should adopt a policy and procedures to make sure that it does not make any political contributions. It should ensure that its staff understands the prohibition and follows the procedures.
Organizations that are exempt from taxation under section 501(c)(3) of the Internal Revenue Code are also prohibited from engaging in political activity that directly or indirectly supports a political party, political action committee, or candidate for office. That prohibition includes supporting a particular candidate or party in an election, urging others to support such candidate or party, or hosting an event at which only some candidates for a particular office are offered an opportunity to speak.
501(c)(3) organizations may participate in non-partisan voter-education programs, as long as those programs are consistent with the organization's charitable purposes. For example, a 501(c)(3) organization may host a "meet the candidates" program, as long as all candidates for a particular office are given the opportunity to participate.