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How does parent control branches?

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How does parent control branches?

How does a nonprofit with multiple unincorporated branches control its branches? I am particularly interested in branch non-compliance with bylaw requirements, failure to elect branch officers and directors (no one is willing), failure to prepare financial reports, and poor money management at the branch level. The organization offers workshops for people who make handmade jewelry, so these failures don't cause harm to needy beneficiaries. They mostly inconvenience and annoy the heck out of the corporate headquarters.

Probably the two best ways to get the attention of subordinate units of an organization (if you are not financially supporting their operations and threaten to withhold dollars) involve a group exemption and use of the name. If the subordinates are separate entities and are included in the parent organization’s group exemption, the threat to drop them from the group can be very effective. They may not have the scope of operations, or the desire to apply, that makes breaking off important to them.
 
Whether or not they are separate entities and whether or not they are under a group exemption, you should have some sort of agreement authorizing them to use your name. That use ought to be conditioned on their complying with your standards. So the failure to comply could cause them to be shut down entirely or at the least to lose their public identity. Those kinds of levers usually cause a subordinate to be more responsive.
 
It may also be possible to encourage or force a merger or consolidation of groups to create a larger local organization with more people willing to take governance seriously.
 
In some cases, the parent wants to maintain its presence in the local area more than it wants to assure absolute compliance with its standards. In that case, which sounds a little like yours, the parents simply put up with the annoyance and hope the subordinates don’t get into serious trouble.
Tuesday, June 3, 2014

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