You are here:

Nonprofit Law/Donations collected

Advertisement


Question
QUESTION: My 501 c 3 recently merged with another rescue group that is not a 501 c 3 and we changed the name of our 501 c 3 hoping to team up. Each organization had their own bank accounts and dogs.
Question 1: Shouldn't all of the donations from the merging point on been reported and recorded to the treasurer of the merged organization?
The President of the non-501 c 3 part continued to put donations into her personal account and had sole control over it. She claims all donations were used toward the dogs and the organization but we have no record of that.
So questions 2: How to we get her investigated.
The bank account that belonged to the original 501c3 is still active.

ANSWER: The word "merge" is not appropriate unless two organizations become one organization and then, onward, only use one organization and that organization's EIN (Employer Identification Number, also known as the taxpayer identification number) on all bank accounts. http://www.investopedia.com/terms/m/merger.asp The merger would be legally approved by the Secretary of State.

Therefore, before I could answer your question properly I would need to know if there was a merger or, if not, what was the written agreement you had with the two organizations. You can send me a copy if you wish. If you only had an oral agreement, you would need to give me the exact wording of that oral agreement.

Harvey Mechanic, Attorney at Law -
Harvey108@hotmail.com

P.S. This response is intended to be a general statement of law, should not be relied upon as legal advice and does not create an attorney/client relationship.    



---------- FOLLOW-UP ----------

QUESTION: We never had a written agreement. I know, and I kick myself everyday.
Oral agreement was that we would merge our two groups together, forming a new name and operate under that name as one organization. The problem is that the entities never trusted each enough to share funds and now it is very hostile.
Question 3: If the treasurer resigns must they turn over the books to the President or only to the new treasurer?
thank you

Answer
Well, absent a written agreement (or even if there was an oral agreement) any funds solicited for the 501(c)(3) organization would need to go to that 501(c)(3) organization's bank account and not into the bank account of an individual solicitor. As you wrote, "The President of the non-501 c3 part continued to put donations into her personal account".

Complaints could go to your State's Attorney General's Office as
that office generally oversees charities within the state. If the
action is criminal then your local district attorney may be
interested in prosecuting as at:
https://docs.google.com/open?id=0B4xNuGSpiyzgT3BybmZKSGxNa1U
which is a pdf file of 4 different news stories.

You would look to your bylaws to see what arrangement would be when a Treasurer resigns, but, generally, if there is no specific provision, the exiting treasurer could turn over the financial records to either the CEO or the new treasurer.

The Texas Code sections for "Nonprofit Corporations" are available at:
http://www.statutes.legis.state.tx.us/Docs/BO/htm/BO.22.htm and you can see that there is only one reference to "treasurer" and that does not answer your specific question. On page 2 of a 39 page pdf file from the Louisiana PTA we see, "the financial records are the property of the PTA, not an individual officer. A treasurer should never refuse to turn all records over to a successor or to an auditing committee."
http://www.louisianapta.org/PTAsection5.pdf

Harvey Mechanic, Attorney at Law -
Harvey108@hotmail.com

P.S. This response is intended to be a general statement of law, should not be relied upon as legal advice and does not create an attorney/client relationship.  

Nonprofit Law

All Answers


Answers by Expert:


Ask Experts

Volunteer


Harvey Mechanic

Expertise

I am an attorney and I volunteer time to answer general questions about U.S. Federal income tax issues of nonprofit 501(c)(3) public charities only. Those questions could be about establishing and maintaining legal requirements for such non-profit organizations in the United States, including Internal Revenue service filings and requirements. I will not be working on this free forum to answer questions about Nonprofit's possible unrelated or for-profit businesses or how to fill out forms. This forum is only for general questions about federal tax law, not as the law applies to your specific situation. If you do not make your question public then I will not be spending much of my donated time on answers that would not benefit the public. If you have other questions, please contact me at Harvey108@hotmail.com I will reply from my email. In any case, do not reveal confidential information to me until after I have contracted with you to provide personal legal services. My responses on this forum are intended to be general statements of law, should not be relied upon as legal advice, and do not create an attorney/client relationship. For me to consider your individual situation and how the law applies, I would need to gather extensive information about the situation. To search my previous answers you can do a Google search by "site:allexperts.com/q/nonprofit" without the quotes and then add your search terms before hitting enter.

Experience

I have been practicing law and especially the law of nonprofit organizations since 1990 when I was admitted to the New York Bar and I have maintained my status with the Bar since that time.

Education/Credentials

B.S. Columbia University in New York City, 1970

J.D. (Law Degree) Brooklyn Law School, 1990 -- Cum Laude.


©2016 About.com. All rights reserved.