Nonprofits' fiscal issues investigated by state Attorney General Kane
By Melissa Daniels
Published: Monday, Dec. 2, 2013, 12:01 a.m.
Two Western Pennsylvania nonprofits are tangled up in court, where tax delinquencies and alleged mismanagement of millions of dollars have volunteer board members under Attorney General Kathleen Kane's scrutiny.
Kane aims to oust trustees at Conneaut Lake Park in Crawford County, which failed to pay taxes and keep fire insurance on its Diamond Ballroom, destroyed in a fire in 2007.
In Pittsburgh, the August Wilson Center for African American Culture fell behind on mortgage payments for a $40 million building constructed without a clear revenue plan, ending up in foreclosure.
Joe Peters, spokesman for Kane, said the office has a responsibility to hold board members to their fiduciary duties under the Commonwealth Attorneys Act.
“When someone takes a position on a board, they knowingly take on that fiduciary obligation,” Peters said.
Pennsylvania has no shortage of nonprofits, with board members managing billions of dollars.
Pennsylvania has about 68,500 nonprofit organizations. Collectively, the industry generates $96.8 billion in annual revenue, employs about 13.3 percent of the state's workforce and holds $208 billion in assets, according to Independent Sector, a nonprofit advocacy group.
In the past 11 years, Tish Mogan has trained more than 3,000 board members on the financial workings of nonprofits.
“Board members get on boards mostly because they're committed to the mission, or somebody asks them,” she said. “But there hasn't been a lot of emphasis on this legal fiduciary role.”
Mogan runs the Standards of Excellence Program at the Pennsylvania Association of Nonprofit Organizations, offering financial and legal education useful for navigating boardroom discussions and votes. Basic financial literacy is a main component. Board members, Mogan said, should not gloss over statements from administrators.
“That is a big mistake,” she said. “It could be the people looking at the numbers are the ones trying to hide something.”
The state's nonprofit corporation law spells out that directors have a responsibility to make decisions based on the best interests of the nonprofit and to stay informed about the nonprofit's affairs. Kevin Kearns, a professor of nonprofit management at University of Pittsburgh, said when board members are held legally responsible for their actions, at issue is often whether they've lived up to their “duty of loyalty” or “duty of care.”
In the Conneaut Lake case, Kane's office argues the court should remove the trustees for breaching “their fiduciary duties of loyalty, care and good faith by failing to maintain fire insurance on the Conneaut Lake Park property.”
Crawford County President Judge Anthony Vardaro ordered the board to turn over its financial records and a list of members to Kane.
In the past 10 to 15 years, serving on boards has become much more than what was traditionally an honorific role, Kearns said. Scandals at large national nonprofits such as the American Red Cross have caused smaller organizations to pay more attention to detail, he said.
“People began to ask where the board was, why wasn't the board more deeply involved in those decisions,” Kearns said. “Since then, there's been a lot of progress in improving board members' preparation, and I think members are increasingly aware and cognizant of their responsibilities, professionally and ethically.”
Those responsibilities don't mean you have to be a CPA or understand all the inner workings of a hospital to sit on its board of directors. Rather, the legal standard is often what “an ordinary, prudent person” would take from the situation, Kearns said.
Most nonprofits' boards are made up of volunteers.
“They're not being paid for this,” Kearns said.
Melissa Daniels is a staff writer for Trib Total Media. She can be reached at 412-380-8511 or email@example.com.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Obama hopes to replicate CCAC job training efforts across United States
- Crisis nursery in Larimer will fill a need, founders believe
- Would-be drillers quizzed by Allegheny County Council committee
- South Fayette parents express dissatisfaction with handling of bullying
- District attorney’s office takes paperwork from Wilkinsburg Middle School
- Legal experts question prosecuting South Fayette boy for recording bullies
- South Fayette mother wants case against bullied son to be dropped
- Ex-detective picked for Pittsburgh’s Citizen Police Review Board
- Foundations team to make offer for August Wilson Center
- Several Duquesne homes damaged in fire
- Leader guided changes at Robert Morris