Keelan: Time for nonprofits to do some introspection

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It has been about a year since the Vermont Attorney General's Office published "Understand Your Responsibilities: Guidance for Board Members of Charitable Nonprofit Organizations in Vermont." I sincerely hope that trustees of nonprofits have downloaded the guidebook from the AG's website, www.ago.vermont.gov.

Vermont has approximately 5,000 active nonprofit organizations. Each is required to have a minimum of three board members - around seven is the average number serving. Since November of 2015, I have asked a dozen or so board members what they thought of the publication. Unfortunately, most, had never heard of it. And that is truly unfortunate, because, in addition to being very helpful and practical, the publication is timely.

In 2016, there has been a series of unpleasant events that have occurred within Vermont's nonprofit community. They range from disappointment in board governance to embezzlement.

One notable failure of a nonprofit organization's board occurred last spring in southwestern Vermont. Specifically, The Manchester and the Mountains Chamber of Commerce closed its operation and filed for bankruptcy protection. The organization had been in business for decades and was governed by a board of 20 or so local business and professional individuals. The nonprofit had to cease operations for one simple reason; it ran out of cash to pay its vendors and employees. A huge vacuum has been created in regard to how to maintain a vital tourist service for the many visitors who frequent this recreational, cultural, and shopping sector of Vermont.

What many locals are asking is why did the board, made up of business owners, allow for the long-standing nonprofit to fail? A partial response can be found on page two of the AG's booklet, where it states, "Board Members have a legal Duty of Care, which requires [a trustee] to act with the care an ordinarily prudent person in a like position would [act] under similar circumstances." Unfortunately, this was not the case for M&M Chamber of Commerce.

Last spring, in Burlington, Vermont, a more egregious failure of a nonprofit board took place. This particular malfeasance of the board saw the collapse of Burlington College. The board's neglect in scrutinizing a multi-million dollar real estate transaction aided in causing irreparable harm to that institution's staff, faculty, students, vendors, and financial lenders.

In an August 2016, article in the Chronicle of Higher Education, the college's current president, Dr. Carol Moore, who is presiding over the liquidation of the college's remaining assets, placed the blame for the collapse squarely on the institution's former board and president.

Based on my review of the financial documents obtained from Burlington College and the Manchester Chamber of Commerce, the two entities could be viable today had their trustees exercised their Duty of Care.

Poor governance was not the only indictment that can be attributed to the failure of several nonprofits last year. Lack of internal financial control was also present in the long-running frauds that took place at Burlington's Hunger Free Vermont and Arlington's Lions Club. The former had a fraud in the hundreds of thousands of dollars while the latter was closer to $20,000. What is tragic here is the length of time the individual fraudsters were able to get away with stealing from their employers. Page 10 of the AG's booklet details the duties of a board member when it comes to the organization's finances.

With many nonprofits commencing a new fiscal year, maybe it is as good a time as ever for Vermont's nonprofit boards to determine, as serving trustees, if we understand our responsibilities. And if so, are we doing all that we can in carrying them out? It would also be helpful if the AG's office would send its publication to every nonprofit in Vermont.

Don Keelan writes a bi-weekly column and lives in Arlington

The opinions expressed by columnists do not necessarily reflect the views of the Bennington Banner.


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