If board members incur expenses for a charity without the Executive Director’s knowledge or consent, is there any recourse for the organization? Can the ED refuse to pay the debt? Similarly, if board members demand payment for services after the fact, can the ED refuse to pay and demand that they be removed from the Board? The ED is not a Board member and is afraid to contact the Attorney General. —From the Website.
These are really questions for the board as a whole. If the board does not want to allow board members to incur obligations on behalf of the organization without advanced approval, it can make those rules clear and discipline anyone violating them. As to third party vendors who have already provided goods or services, the ED should not simply refuse to pay. If the costs are not for goods that can be returned, the legal issue would be one of “apparent authority” for the board member to enter into the purchase. It is probably not worth the loss of reputation to make a vendor sue to get paid or suffer the loss. As to board member services, the board can decide whether to pay for them or not.
There is nothing inherently illegal, and nothing to complain to the AG about, in allowing board members to incur expenses or be paid for services, so long as the prices are reasonable and for the benefit of the organization. It does make it very difficult, however, to maintain the organization’s budget without knowing when unanticipated costs are likely to arrive. If the ED does not get a tighter policy when raising it with the full board, the ED will have to decide whether to live with the chaos or to look for employment elsewhere.
As an ED with considerable experience of random spending I would not be inclined ever again to live with the chaos. It's a lot of extra work, it creates a bad reputation, and the anxiety isn't worth it. If the ED cannot get things considerably tightened up I would second the opinion to move on to an organization which will be more appreciative of his services.