Following is a blog-post that I strongly suggest that you, your colleagues and friends associated with nonprofit or trustee organizations read carefully. As you read it, please keep the material below the link in mind.
I think the situation presented above is more common than most directors/trustees think. As a layperson, I am surprised that the court did not spread the fine among all the directors.
The chairman was clearly trying to support a nonprofit in trouble. Perhaps he was so dedicated to the mission that he was trying to do everything possible to save it? Not Shown here is the fact that, “[T]he chairman is burdened with proving that they (the IRS) are not correct. … The law does not require the individual to have complete control over the finances, only what the court calls significant control.”
Directors’ fiduciary responsibilities can also be highlighted in scenarios like the following:
“According to a Washington Post analysis of the filings from 2008-2012 … of more than 1,000 nonprofit organizations, … there was a ‘significant diversion’ of nonprofit assets, disclosing losses attributed to theft, investment frauds, embezzlement and other unauthorized uses of funds.” The top 20 organizations in the Post’s analysis had a combined potential total loss of more than a half-billion dollars.
One estimate, by Harvard University’s Houser Center for Nonprofit Organizations, suggests that fraud losses among U.S. nonprofits are approximately $40 billion a year. **