It’s not about the money, money, money
We don’t need your money, money, money
We just wanna make the world dance
Forget about the price tag.
Jessie J., Price Tag
Is there a price tag in forming a not-for-profit corporation?
Well, to make the world dance.
Increasingly, however, a lot of not-for-profit corporations are established as conduits in committing fraud by officers, directors and members all in the name of money.
They do it in California, New York, Chicago, Surrey, and Toronto.
As a result, not-for-profit corporations lost thousands and even millions of dollars and eventually bled dry.
This malaise is becoming endemic and it causes corporations to disintegrate to the chagrin of unsuspecting and naive members but only to find new entities coming out into the open like mushrooms sprouting from decayed grasses or leaves after a heavy rain. Then the vicious cycle continues. Fresh corporations run by fraudsters.
For sure, a lot of not-for-profit corporations are exemplary in pursuing their social objectives. They are transparent and their funds are subject to periodic audits up to the last penny. And they make the world dance. That’s the price tag.
While legislation exists to govern not-for-profit corporations, fraud arises because there is no check and balance and the members are not aware of their rights and obligations. With manipulative, scheming, and egoistic managers, the corporation is treated as a private enterprise.
As is the usual practice, the president runs the show and assumes that he has the sole prerogative to direct the organization strategically and financially as he sees fit and best. The board of directors is a mere rubber stamp. Even if the board sees it coming, it prefers to act deaf and blind. As the highest policy making body in the organization which has the power to remove the erring president, the board remains in the back seat and waits for the instruction of the president. Why, all transactions do not even go through the board where they should have been
discussed or canvassed, approved or rejected. What a fiddlededee? Worst, the president doesn’t even report the transactions or present documents to the board. Sometimes, a mere self-serving report, without receipts or vouchers, is made to the board and ratified by the members without question and without understanding. Some prepare financial reports, some none at all. Some are audited by independent auditors, some are audited by insider hooligans.
Not-for-profit corporations make money through solicitations, donations and fundraising.
If the timing is right, an avalanche of money keeps rolling and coming. But without control, the manna from heaven goes to hell or hell or him and him alone. Often, money goes to where it should be. Sometimes, it goes where it should not be. The funds become a private asset.
A lot of officers or directors run afoul with the law. And no one raises a finger. Members keep mum on the issue and let the problem swept under the rug. They may have been powerless or they shrug it out of fear. Or they are just nonchalant.
The officers and directors have a fiduciary duty to the corporation. They should act in good faith and in the interest of the corporation. Either they are ignorant of these duties or they have the predilection to circumvent the law. Often, they breach the trust and aggrandize themselves.
In Ontario, the Corporations Act regulates not-for-profit corporations.
Mismanagement of the corporation or failure to account corporate funds can be remedied by a court application under section 332 of the Corporations Act. The court can order the restitution of corporate funds and accounting of all moneys. Where evidence is strong that fraud has been committed, the police can be engaged to determine the charging of criminal action in court.
Running a corporation is different from running one’s private affairs. It is not an empty exercise. Good intentions are not enough. The law ought to be observed.
Make the world dance. That’s the price tag.