Nonprofit Treasurer Failed To Do His Job

[aaronagel]

The volunteer Treasurer for our nonprofit organization failed to pay our federal, state and city taxes for three years. We have incurred over $50,000 in penalties and have finally caught up in paying the the back taxes as well. Do we have a right to take him to court?

 

[Antigone*]

The volunteer Treasurer for our nonprofit organization failed to pay our federal, state and city taxes for three years. We have incurred over $50,000 in penalties and have finally caught up in paying the the back taxes as well. Do we have a right to take him to court?

So what happened when the board-authorized audit of the financials discovered the errors in the year they were made? Why weren't they corrected them?

 

[davew128]

So what happened when the board-authorized audit of the financials discovered the errors in the year they were made? Why weren't they corrected them?

Sorry, but the vast majority of nonprofits don't have the money or need for a full blown financial audit....which usually costs about $10k+ a year....especially when you have volunteer offiers.

 

[aaronagel]

That's the thing. I took over as Executive Director in January 2009 and this had already been going on for a over two years and no one had noticed or asked. The board had never asked to audit the books, they just assumed everything was on track. The gentleman that was our volunteer treasurer currently works as a financial advisor as well. The nonprofit I work for is very relaxed and put a lot of trust into this gentleman. That's maybe why we are not pursuing heavily to take him to court, it could be our own fault for not following up with what he should have been doing.

 

[Antigone*]

Sorry, but the vast majority of nonprofits don't have the money or need for a full blown financial audit....which usually costs about $10k+ a year....especially when you have volunteer offiers.

I didn't say it had to be a CPA who audited their financials; I worked for a non-profit for many years that had a committee perform their own annual audit. The purpose of the audit was to catch mistakes such as these and to ensure that funds being dispursed appropriately.

I should have clarified my statement.

The little 600M a year church I sit on the board for now, audits each year as well.

 

[tranquility]

It is a complex question, but I agree with what the others are alluding to, all on the board probably breached their duties and have some liability. If you have errors and omissions insurance, you may be able to go against that depending on the facts.

 

[davew128]

I didn't say it had to be a CPA who audited their financials; I worked for a non-profit for many years that had a committee perform their own annual audit. The purpose of the audit was to catch mistakes such as these and to ensure that funds being dispursed appropriately.

I should have clarified my statement.

The little 600M a year church I sit on the board for now, audits each year as well.

Ok but thats not a financial audit, it's an internal control mechanism and yes EVERY non-profit should have one. I am dealing right now with a collection case VERY similar to OP's and its all too often that even a paid internal accounting person or even someone with control of the checks can do this because of the honor system. Of course in my client's case it was phony bookkeeping, not sure what the story is in OP's case.....simple negligence?