I was added recently to a group chat of accountants looking for a new treasurer for their organization. Finding no immediate volunteer among the members, someone asked AI whether a nonprofit could hire a financial services firm to serve as its treasurer. “Yes” said AI. “A nonprofit can hire a financial services firm to serve as its board treasurer, but the arrangement must be structured so that the firm acts as a board officer rather than a direct employee.” Once again, AI was close but not necessarily correct? —By email.
This is a question of state law, and states could differ on the answer. But for the Pennsylvania nonprofit involved in the group chat, it shows again the limits of AI. None of the accountants on the chat reported ever having heard of an entity serving as the treasurer of a nonprofit. Another said he did not believe his CPA firm would take such a role. In fact, his CPA firm would not be permitted to serve as treasurer under the Pennsylvania Nonprofit Corporation Law. Section 5732 of the NPCL, modified in 1972 to recognize the occasional practice of a bank serving as treasurer, provides that “a corporation” may be the treasurer of a nonprofit corporation. The writer’s CPA firm lists itself as an LLP, a limited liability partnership that is not a corporation. So much for the reliability of AI.
The provision apparently harkens back to “the old days” when local banks were eager to assist local nonprofits and were willing to provide their financial expertise by serving as the treasurer (and presumably keeping the organization close as a continuing customer). In my many years of practice, I don’t remember ever seeing a bank actually serve as treasurer. And can anyone imagine that a bank, now subject to so much more complex compliance regulation than it would have been more than 50 years ago, would be willing to serve as treasurer today? Please let me know if you know anywhere a bank is currently serving as such.
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