During a recent public forum of our community theater group, two former board members accused the current board of violating Robert’s Rules of Order in our protocols, and of making decisions to benefit board members and their families financially. They said this could jeopardize our 501(c)(3) charity status and might constitute a crime. We pay our small production staff an honorarium of no more than $500 for the run of a play. Is there any validity to this charge, and/or should we be concerned?
I wouldn’t get very worked up about these issues if I were on your board. Obviously you don’t want former directors bad-mouthing the current board in public. It isn’t good for fundraising (unless the former directors are so disliked that their criticism generates a backlash in your favor) or for your general status in the community. But no one is going to go to jail and you are not likely to lose your (c)(3) status because of these alleged violations.
Robert’s Rules are not a statute and violating them is not a crime. Robert’s Rules are a detailed set of parliamentary procedures developed for governing the proceedings of large membership assemblies. They are quite detailed and complicated. I have never found them particularly useful for board meetings and don’t recommend them for non-member nonprofits. But even if you have adopted them in your bylaws as the standard for your operations, violating them would be a civil matter. Absent fraud or bad faith, it would be a very rare event for someone to go to court to challenge your board’s decisions for failing to follow Robert’s Rules or for an attorney general to intervene in internal procedural issues. The IRS won’t revoke our exemption on a procedural issue so long as you are continuing to pursue your charitable mission.
If any member of your production staff is a “disqualified person” by reason of serving on the board or being related to a member of the board, you should assure yourselves that you are not providing an “excess benefit” by paying them “too much” for their work. Be sure that you document some comparable payments, but it is hard to believe that $500 is excessive for the work involved in preparing and mounting a theatrical production. (See Ready Reference Page: “Charities Must Avoid Excess Benefit Transactions”) The IRS is not likely to challenge the reasonableness of the compensation or determine that there is an improper private benefit when such a small amount is involved and you are pursuing your mission. It doesn’t have the staff to deal with real violators and wouldn’t be likely to pursue your organization on these facts.