good afternoon everyone my name is Alexis Alvarez I'm the director of Statewide training at Florida Legal Services I'm really happy to be here today with you all as I am every day that we have a webinar because I enjoy being in community and learning with you all today we have an exciting presentation on non-profit management 101. this presentation is brought to you by the public interest law section of the Florida bar and their non-profit subject matter work group anytime that I co-host anythin
g with the public interest law section of the Florida bar pills for short so if I say pills that's what it means I always want to give a shout out for folks to join because it's an incredible community of lawyers who are dedicated to Public Service who come together share their ideas and really do what they can to promote the public sector so if you are interested in in being in non-profit law work public interest work um or even if it's just something you want to just be a part of please consid
er joining pills I'm going to put a link into the chat for the the to get you to that webpage to help you join and as always you can always reach out to me directly if you have any questions so before we get into introductions of our speakers that we have here today I want to go over some housekeeping announcements uh first and foremost this webinar training was approved for Cle credit I will announce that CLE code at the end of the training so don't worry um it'll be put in the chat I'll also s
ay it out loud and it will also come to your inbox in 24 hours from an email from Zoom uh more on that Zoom email that Zoom email that will come to you within 24 hours we'll also have a copy of this recording we know that you're all busy putting out fires doing important things um and and sometimes you might have to hop off that's okay if you have to hop off early you will still get a copy of the entire recording along with the CLE information if you don't see that hit your inbox in 24 hours uh
just email me I'm going to put my email into the chat and you can just reach out to me for anything that you need uh second piece of housekeeping announcement maybe the last we'll see uh if you have questions and answers please put them in the chat or the Q a I know we're shy I know this virtual platform doesn't allow for the most interaction but your thoughts your feelings your comments your questions are important to us and it facilitates a good dialogue so please feel free to drop your questi
ons into the Q a or the chat our speakers are going to pause at certain points within the presentation to answer your questions as close as possible to the subject matter so don't be shy drop them in um I always forget something on housekeeping it's the most boring part I know so I'm going to move into introductions and if I remember something later on I will definitely uh bring it up at the end but so moving into introductions today we have with us Anna prashante Anna is co-founder of FC law sp
ecializing in providing legal services for tax exempt organizations Anna is also associate counsel at Citrus Health Network a non-profit federally qualified Health Center and Community Mental Health Center serving adults and children in South Florida prior to this Anna served as director and co-general Council of a non-profit organization that grew to become the largest women's shelter in the country and prior to her in-house work Anna was an attorney at legal services of Greater Miami we also h
ave Charlotte Cassell as co-founder of FC law Charlotte is dedicated to using her legal experience to support non-profits working to change communities for the better Charlotte began her legal career as an equal justice Works fellow at Florida Legal Services she also has extensive experience having worked for numerous non-profit organizations in both a legal and non-legal capacity in Miami Washington DC New York and San Francisco most recently Charlotte has worked with I'm sorry worked at health
information project and Lotus house women's shelter I'm incredibly honored to share this platform with Anna and Charlotte not only for you know the work that they they've done in the non-profit world and that they continue to do but I'm always always grateful when our legal aid Community or prior legal aid servants come and provide training and and be a part of this initiative so Anna thank you Charlotte thank you and the floor is yours thank you so much Alexis and thank you all for joining us
this afternoon um I want to thank you Alexis and Florida Legal Services for pulling this together and of course Jeffrey and pills for inviting us to speak and we really want to thank each of you for joining us we know that your days are busy and that's probably an understatement um so we're really grateful to have your time and look forward to a really engaging and fun conversation we will have our contact information at the end um so please like Alexis said ask questions throughout um but if th
ere is anything you want to reach out about after we would love the opportunity to talk more so I want to start with a quick poll so Alexis if you can help me here we just want to get a sense of what made you interested in joining us today for the CLE um is it that you work at a non-profit you're on the board you represent a non-profit you want to get involved and then of course we know that there are some people who want a CLE credit we've all been there um so just be honest we just want to kno
w who's in the room today and we'll give it a few minutes well not maybe about a minute or so let me know when when you think uh we should cut it off and thank you all for participating in the poll all right so it looks like most of you work at a non-profit organization um so hopefully we have some information that we can share with you today that you don't know or answer some questions you might have um I'd love to see that about 20 are interested in getting involved with a non-profit so hopefu
lly we can answer some of those questions that you might have about what might be um what you might be thinking as you decide about getting whether to get involved or not um so we will stop the poll thank you all for that all right did you see the results I'm so sorry I thought I shared that I saw the results so here we got 60 yes 60 work at non-profits about 20 are interested in getting involved handful of you who are here for the CLE credit um and then some of you who are on the board of a non
-profit or represent a non-profit so a good mix um pretty much what we were expecting and you know hopefully this is helpful for all of you would you like me to take the results down yes please Perfect so I'm sure each of you you know when you're reading the news or watching the news or on the Internet have seen the headlines about various scandals across the country um about non-profits that get in trouble so usually this is financially related not always um but there's usually some Financial c
omponent to the scandals or the problems that arise and just as an example of kind of how pervasive this issue is there's actually a landing page on the New York Times website where you can input information that you have about the mismanagement of nonprofit so clearly this is something that people are looking into there are Stories being written about it and it's not really surprising because these are public dollars essentially so these are dollars that have a very specific purpose the nonprof
its are set up to serve a specific purpose so different entities want to make sure that they're being regulated appropriately so our goal today is not to scare anyone but really to give you the highlights of what you should be on the lookout for or what you should know when it comes to non-profit management we know in our work both working at non-profits and with non-profits almost everyone if not everyone is there for the right reason so the people who found non-profits the people who work at n
on-profits um the people who are on Boards of nonprofits are there because they care about the mission they care about what that organization is doing but because these dollars are so closely scrutinized it's really important that um someone is overseeing what is happening and what happens when when problems arise is that it erodes public trust so as you can see in the slides here um there really is an issue and it seems to be growing with the public trust in non-profit organizations so in this
first report here only about 20 percent of Americans report having a high level of trust in nonprofits which of course means about 80 do not have a high level of trust and about 16 of respondents said that the financial responsibility of nonprofit serves as a deterrent so that might be with them donating or getting involved in some other capacity and then in another recent study that looked at that took surveys of people between 2020 and 2022 saw a drop in Trust of non-profits from 59 to 56 and
while that may not seem like a huge job it was actually a statistically significant number so I think there's just shows that uh there are issues with non-profits but with the proper oversight and management you know a lot of these issues really can be avoided so I'm going to turn it over to Anna now to give us our first example of a non-profit that went a little bit awry thank you Charlotte so um yes we are going to go into a few I'm not I wouldn't exactly call them case studies but some of the
stories that have been in the news as of late featuring non-profits to highlight some of the topics we're going to talk about so first thing we're going to talk about is some of the basic duties of a non-profit board we realize many people on the call are not on the board necessarily but maybe you get questions about this um if you work with the board a lot um and for those of you who are on the board just to cover some of the basics we're going to start with a non-profit you may or may not hav
e heard of called Wildlife In Need and Wildlife indeed Inc this is also known as win and the founder of women is a man named Tim Stark who may know as a supporting cast member in the American classic Tiger King documentary um this he had a a non-profit that purported to be a rescue for animal he had over 300 animals many of them exotic animals on his property there were a number of issues with the actual like substance of the work he was doing he was a wildlife training partner with the actual T
iger King Joe Exotic um and then he was accused of animal mistreatment on numerous occasions but that is not why we were talking about when um what really happened with win is that he was operating this non-profit on his own personal property which is not necessarily in and of itself a problem but he was using the money Tim Stark was using the money from win to pay for house repairs his own personal utilities bills his personal credit card bills um and it eventually turned into in essence a priv
ate slush fund for Tim Stark um you know I think all of us can easily agree that that's not appropriate and we wouldn't want to be involved with any organization who's doing something like that um but the challenge came in because it turns out that the board of win was really not involved at the level they should be and that is what kind of allowed a number of these things to go on for years actually so the state of Indiana which is where this nonprofit was located ended up becoming involved and
um tried to dissolve the organization and we'll talk a little bit about exactly what the board was and was not doing at the end but we just kind of wanted to tee that up to talk about some of the basic duties of a non-profit board and we'll use Florida for the law for our starting point here chapter 617 of Florida Statutes covers not-for-profit corporations um there's a lot of overlap with Florida law on like in terms of the substance of a lot of the things mentioned here are the same as the fo
r-profit statute but a number of things are different so the board of directors is a group of persons vested with the management of the Affairs of the corporation irrespective of the name they're designated by so you know it could be trustees managers some places might call it members but essentially the board is charged with the governance of the organization and and non-profits typically the boards are volunteer boards and the board members have fiduciary duties to the organization so that's h
igher you know of course everyone on the call is a lawyer you know that's a higher Duty than just your regular Duty um person to person so the duties of care and loyalty on the board has to the organization and then sometimes they'll break out something called the duty of obedience and that's really being aware of the laws that govern the organization being aware of the organization's own policies and and having your eye out to make sure that they're actually complied with so the IRS has they'll
look at the governing board quite a bit actually um if an organization is applying for non-profit status a lot of questions will be asked about the board any interests the board members might have any anticipated agreements the board might enter into with the organization and the IRS has published quite a bit of guidance on what um on some guidelines in terms of how a board should be comprised and and the general duties of the board so a few things we wanted to highlight the IRS has said in one
of its Publications on non-profit organizations that governing boards should be composed of persons who are are informed and active in overseeing a Charity's operations and finances if a governing board tolerates a climates of a climate of secrecy or neglect we're concerned the charitable assets are more likely to be diverted to benefit the private interests of insiders at the expense of the public and charitable interests so um for those of you who have been involved in non-profit management y
ou'll know that when it comes time for a non-profit to file their tax return every year the 990 I'm sure there's a lot of financial information that goes into it your accountants prepare it but on top of that there are a lot of questions actually about the governing body the board of directors or you know if you have trustees or whoever it might be they actually will ask you questions about your board each year so that's something to keep in mind as we run through this um one thing one topic tha
t comes up a lot in the context of non-profit boards is conflict of interest and we're not saying that boards are Rife with conflicts that's not what we mean it's just that in in bringing you know volunteerism and and a spirit of philanthropy as board members a lot of times organization our people can bring things like resources on maybe they can offer services either for free or at a discount or connections that can benefit the organization and those are great but in some cases they can border
into what's called a conflict of interest so you know conflicts are something that could be talked about for a long time you could do a Whole Net webinar on that we won't we will spare you that um but we wanted to just highlight a few things that that are important to keep in mind when you are either acting as a board member or maybe you're just putting up in place a board or maybe you're um now leadership at a non-profit so some things to keep in mind one is that you want to of course have your
conflict of interest policy and you want to make sure every board member has read it um this might sound obvious but sometimes in the day-to-day hustle and bustle that can get lost in the State of Florida we the charitable registration requirements for any non-profit actually require that your boards sign every year saying they've read the policy so you just want to actually make sure that you have seen it um in case these issues come up and some things to keep in mind you know a conflict a pot
ential conflict or the appearance of a conflict is not necessarily disqualifying it's not necessarily horrible it you know might ultimately be something that is beneficial for the organization but the key here is really transparency and documentation so all the policies require it you want to make sure for you or anyone you're aware of who might have a conflict it's the key is really disclosing it and then addressing it so a good conflict conflict of interest policy will have a policy for addres
sing the conflict um and a procedure so we want to make sure these are disclosed that the right to the right person or body and that the procedure for addressing it is is dealt with so there's some factors um they might may or may not be in your policy if someone has specific questions about that we can talk about that at the end but we just want to emphasize that if someone discloses a conflict you want to follow the procedure and then you want to document it either in your meeting minutes that
's where it comes up or um you could have a separate thing in writing where you say you know this was addressed it's determined this was in the best interest of the organization or you know the following steps were taken to protect the organization but you just want to make sure that that documentation is happening um and then in terms of the board outside of conflicts there's a few things that come up and and this is going to tie back to our story of the wild animal rescue in Indiana but there'
s some Basics on meeting requirements and organizations have a lot of flexibility to decide when how often how notice goes out who can attend can you attend electronically or not all that kind of stuff organizations have a lot of flexibility to decide and how many people constitute a quorum things like that there are some defaults set by sport a statute but your own bylaws and articles incorporation might cover them so Florida statute 6170701 subsection one gives that flexibility to the organiza
tion there are some best practices so we think it's best that there's an annual meeting of the board where officers are appointed or elected every year that you adopt a budget every year that shows that the board is has an active role in looking over the finances and then at a minimum having quarterly meetings you might have them more often but at least quarterly will show that the board has reviewed things periodically let's say an issue ever does come up that's you know not great maybe someone
does something people didn't know about before if you had your board meetings happening regularly and it was something that was you know picked up it that at least shows that sort of oversight and active participation um minutes of board meetings are required I realize that sound may be very very basic but again it's one of those that you might start with the best of intentions and maybe the person who started with the best of intentions just doesn't know that so you want to make sure that you'
re recording what's happening at your board meetings so I'm going to turn it back to Charlotte to just touch on some of the things that happened at when where the board um maybe could have or definitely could have done better thank you Anna and just one quick point to kind of really reiterate what Anna was just talking about with board meetings we have heard um people say you know we want to keep things formal we don't want to have formal meetings um we want this to be fun and easy for the board
members but these really are you know some basic requirements that have to be met um so that doesn't mean that it has to be you know sitting around a conference table in a very formal setting but you do have to have the meetings and you do have to keep the minutes so kind of returning to win and how the board of directors failed so Stark was the president of the board and he very clearly breached his fiduciary duties um and there were tons of conflicts in all of his actions um but it's also imp
ortant to recognize that the board really failed in a number of ways as well so the fact that they rarely held formal meetings they did not take notes of any meetings that occurred and they didn't prepare or review the budgets or financial statements um was really a failure on their part to uphold their responsibility to the organization once they learned of the misappropriation of funds they didn't do anything to recover the funds so again a failure to abide by their fiduciary duties and ultima
tely when the Attorney General was deciding what to do with this case they decided not to name the board of directors as plaintiffs but they did require them to file articles of dissolution and turn over all of the non-profits assets to another organization that was also working in the wild animal rescue space so at Stark as president they really failed you know he failed and the board as a whole failed to live up to their responsibilities to protect the organization um so I will pause there for
a second and Alexis if you have any questions about boards specifically um we can take those now okay in advance um I'm not sure if this is due to boards I apologize but I'm going to read it out loud because it came in please discuss the benefit of requiring the organization to provide dno insurance for officers and directors if that's something that you want to address now or or later um I'm happy to just touch it yeah and if you want to can you repeat it one time Alexis just to make sure yes
of course can you please discuss the benefit of requiring the organization to provide dno insurance for officers and directors thank you sure um there's a few benefits we are I think probably a lot of people on this call feel similarly as lawyers um we're very in favor if you can insure something and it's affordable to do it a lot of times directors and officers insurance is Affordable um it's really you know it's a kind of rainy day situation um you hope it's not something that you have to use
of course but let's say something did happen at the organization that uh somehow implicated the board it doesn't necessarily mean the board did something wrong but you want to have insurance in place to address even the allegation that the board did something wrong so substantively it can be beneficial because let's say someone who's not on the board the media staff member did something that ultimately results in a claim and somehow the board were named um it would be great to have insurance to
cover that even if it's ultimately not something that the board like should be liable for um and then secondarily that having director and officers Insurance can really help in recruiting for your board so some of your more like Savvy or seasoned people who have been involved in non-profits you know that's probably or maybe one of the first questions they ask people want to know like hey I'm doing this as a volunteer I really care about your cause but let's say something does happen that I could
n't foresee or couldn't prevent they want to know that they're not personally going to have to be you know defending a lawsuit and conceptually I think that kind of makes sense so I'm not sure you know there's all kinds of like little particulars we could get into on what the policies cover um you want to ask some questions it would be great in like that's something maybe talking about offline because that can get like Insurance coverages in that area can get pretty nitty-gritty but those are so
me of the basic reasons you'd want to have it awesome thank you Anna and there weren't any other questions I just want to say I'm loving the Tiger King uh case study um yes it feels you know as we're all emerging from our coveted years to bring back the Tiger King for a minute um so I'm now gonna move into another story now that we've talked about the board and really important role that they play in providing guidance and oversight for the organization we want to talk about financial compliance
more broadly um so I'm going to share a story out of Massachusetts um I will share the details and then we'll kind of get into what web Roi in this situation so in July 2021 a woman in Boston was sentenced to six years in prison five years of supervised release and order to make restitution to two non-profits that she had previously worked at and defrauded so for five years between 2013 and 2018 this individual stole almost one and a half million dollars from a non-profit she did this through u
nauthorized wire transfers unauthorized checks and some of those chaps she made out not only to herself but to her husband and other people that she knew um she pled guilty to the charge and was ultimately released but by the time that happened she had already applied for a position at another non-profit in an administrative capacity with access to financial documents um and she did not disclose her prior indictment you know unclear as to what sort of background check they ran or didn't run um b
ut she did intentionally use her maiden name and not her married name when applying for that position at the second non-profit she stole 57 000 again through unauthorized wire transfers um changing the name of pay use on checks and cash transfers to herself um in December 2020 she was charged with embezzlement from the second non-profit um and as I mentioned you know had some pretty significant charges as well so of course the impact of this on the nonprofits was huge you know in particular the
one where she stole a million and a half dollars um even large non-profits losing a million and a half dollars really impacts the services you're able to provide um so clearly this was a negative impact on the organization she was working at because they didn't have the resources to do what they wanted to do it was clearly criminal behavior on her part but it also highlights how either not having the right policies or not following your policies could have some very serious negative consequences
for the organization so we don't know what policies and procedures these two nonprofits had in place we don't know um if she was you know if they had nothing in place and she just was doing this on her own but it is clear that you know she was able to get away with this for quite some time before it Rose to the level where it was brought to the attention of management and uh you know outside individuals so I'm going to turn it back over to Anna to talk a bit more about financial controls and ho
w organizations can protect their funds so a few things just at the outset here I want to be clear I am not an accountant and so we're not endeavoring to give you know detailed accounting advice but there are general policies that should be in place that can help protect organizations there are some things you want to look out for um and and in the world of nonprofits the overlap between funding and actual Services is so deep because um a lot of the funding received in order to do the good work
as either contracts that govern it or regulations that govern it so they really go kind of hand in hand in the world of nonprofits so some of the things that we want to talk about are just like what are you kind of looking for when you are managing your finances um in the for-profit world maybe you have a small for-profit company maybe you have your own Law Firm something like that I mean many times no one's going to look at your books um no one cares if you have a receipt from your you know lun
ch or the table cost you bought or whatever it might be but in the non-profit World um the finances of an organization can be looked at many times over by many different organizations so for those involved with organizations that receive government contracts State local or federal a lot of those funding sources involve actual audits um where the the expenses will be reviewed in detail other times it might be the board asking questions and you know that's a good thing so it's it's great to have a
n active board who you know is is another set of eyes but you want to actually have things to substantiate what is in your books so a few things that are tend to be more common in the non-profit world and they really are best practices are one that you want to have back up for the various expenses and revenues that you're receiving so you want to have those receipts it's not you know never an easy thing to you have a lot of staff to get them to turn in receipts and things like that but but nonpr
ofits do it for a reason those who have been around a long time know that you really you might actually need that to qualify or to receive some Grant funds you you are entitled to um and otherwise you might need it for just regular Audits and things of that nature so keeping your backup is important and another thing that happens with non-profit accounting that is kind of unique to the industry is that the expenses get um tracked by their funding source or the program that they they were used fo
r so um if you if your organization receives federal funds or maybe it's County or state funds that originated from the federal government that's actually a requirement in applicable federal regulations that your expenses are or that your revenues and expenses are tracked by the program and the funding source um this for some it might sound obvious and for others this is really not something you might do at the outset what we think is really helpful is not to necessarily get into like how you're
going to keep your books but to just say if you have access to an accountant or a bookkeeper with experience and non-profits that can go a long way um another thing that can go a long way is doing this at the outset so you might say like it's all private donations there's nothing to really track that basically could be true but a bookkeeper or an accountant with non-profit experience will be able to get your book set up so that if you do get some of those bigger grants or contracts you'll you y
ou'll easily be able to kind of drop them into your accounting methods um and then another thing you want to look at is what rules are even covering the funding that you're getting so a few things if you get money from the state there's going to be the State of Florida there's going to be a certain set of rules different state agencies have their like very specific rules on how the funding can be spent so the key is to look at your contracts or your grants and see what they say on that topic ano
ther thing we want to say and this is we've just seen it happen a number of times is having a contract and this is again very often with like a County or a state or a Federal grant where the grant just says provider will comply with let's say two CFR part 200 and that seems like a very fairly innocuous statement it's one line in a very large contract um doesn't seem like much all we would say is you want to make sure that if you're especially if you're just starting out with government grants th
at you take a look at the contract and actually look up the regulations or have someone you know who involved with the organization or an attorney look them up to tell you what you're agreeing to because what you don't want to do is have agreed to you know certain Financial Financial or accounting practices at the outset that you aren't actually in place and then um have to deal with the Fallout from that later so please keep your eye out for things like that um and then a couple a few practices
that can be helpful to keep in mind and again this can be something where maybe you didn't start at the outset like this but as your organization grows you want to have them in place um and this is kind of helpful when you're looking at the the case that Charlotte brought up um having someone who was able to issue wire transfers to the tune of millions of dollars that somehow were not picked up for years um so as you grow you want to have the the payment process Diversified among different staf
f so you don't want one person who can write checks sign checks and then review the financial statements every month to make sure things look okay um that would be problematic because that person could easily or or maybe not even that person but something that is inappropriately done could easily be covered in that situation um another thing that you want to look out for is uh making sure that you have a system of checks and balances with reviewing the statements so you know maybe two people rev
iew statements every month or maybe one person does reconciliations and another person is kind of looking at at the profit and loss and seeing the financial activity and then you want to make sure that the finance financial statements go to the board so that's one of the key things the board will be doing it's not that the board is expected to look at every transaction we don't want to you know create an unreasonable impression here for what the board is supposed to do but it is important that t
hey're receiving reports and that these reports do have some explanations attached to them um and then another thing you want to look out for is and this is again where you might see some variance from the for-profit world is getting the expenses actually booked and I know that sounds very silly but again non-profits tend to operate on thin margins they don't have a ton of administrative space to you know pour over the books every month but what can happen is that time flies and things expenses
that might not get booked timely can result in these large accounts either stuck in suspense or maybe they were put into an account called other or something like that and and the issue is with that is that as time goes on maybe you know maybe your board takes a look at the books and says that looks weird you know why do you have all of that money and other what is other and if you don't have notes over time you might not even remember what it is um so you want to make sure that things like that
are happening and so um we want to just bring up another another current event in the world of nonprofits that just arose very recently this is the shelter um for people experiencing homelessness in San Francisco and they have been doing work for many years um what happened is I guess that the city started they received many they received millions of dollars in state and city funds for providing shelter and food and over time um there were some questions about their books some of their 990s sta
rted showing expenses like let's say almost 500 000 in you know were booked as other with very little explanation um and so there were requests for financial documentation and instead of kind of trying to tackle it head on and either addressing any issues or um providing the detail that was needed they didn't respond to these requests and so without responding to the requests the issues sort of snowballed and so they ended up having their non-profit status revoked it looks like the city is you k
now they're not they're still operating but they have a really really big headache ahead of them now um and a lot of this with some stricter Financial practices could have been avoided um the Matter's even been been addressed for criminal criminal investigation but um anyway we're going to talk a little bit more about this organization because they also got audited for their programmatic documentation um but we'll talk a little bit more about that later so um I think that's it on some of the jus
t basic concepts on non-profit accounting Alexis I don't know if there's any questions on that the only question that I saw that came in I think it was something that you had mentioned was what is the Florida green book so um well there's we've seen a few different versions of this but sometimes if you receive a grant from a particular state agency they might have a um you just want to look out for it in the contract or in some of their training requirements they might have some some of their fi
nancial guidelines in something called the green book there's also some programmatic guidelines that are in there's something referred to as the green book so we don't want to get too in the weeds but we brought that up to say that in Florida if you get a state Grant or state funding you want to look out for that phrase because if you say that you're going to comply with it there's usually a training the agency has on that um and it just has some some guidelines for operating your Grant and in m
any cases on the finances all right and I did see that there was another question that came in through the Q a that was from the chat this one's from the Q a uh what procedures do you follow if you suspect funds may have been misappropriated by an employee at what point do you refer the matter to the state attorney um that's a great question I can't speak on when it might go to the state attorney um I you know it depends what angle you're looking at this from so if you're a board member who star
ts having questions you have a lot of ability to ask for things as a board member if you're not getting things or you're not getting responses that could be a red flag if you are within the organization and you're saying you know you're looking at the books and you're like maybe something was a little off one month but over time you're going like this just does not look right I don't understand this um you definitely want to be asking questions of the folks who helped put the reports together if
you're the person putting the report together and it doesn't look right um I would speak with leadership meaning like you're either executive director or whoever Operating Officer um what you could do is having and try to get a recommendation on this another like a third party start looking at the book so this would fall maybe short of something like a full-blown forensic audit um that's something that you can get privately but you might start out with someone who you know has experience in the
area who isn't already involved saying like where is the issue like what is the issue what do you see um so I would start there and then you know I think it would be very fact dependent on whether someone within the organization or on the board felt like something needed to be alerted to the authorities so I wouldn't want to kind of give a like any kind of general statement on that sure and no other questions uh just a comment great stuff thanks for this so back to you perfect thank you um so I
'm sure everyone here saw the headlines you know not too long ago about Brett Favre and the volleyball stadium that he had built at the University of Southern Mississippi where his daughter was a volleyball player um we're not going to get into his specific role in the incident he has denied knowing where the funds came from there's ongoing litigation there but we do want to talk about what can happen when Grant dollars are not used for their intended purpose and this especially comes into play
when we're talking about government dollars you know it applies to all all funds but of course there is additional scrutiny when we're talking about federal state removal dollars so this was the largest public corruption scandal in Mississippi's history so in a very quick summary what happened was the executive director of the Mississippi Department of Human Services provided federal funds so these were the temporary assistance for needy families also known as TANF dollars to two non-profit orga
nizations in the state um so that in and of itself is fine but where it became problematic is he then ordered those diet those non-profit organizations to fraudulently award contracts to various entities and individuals across the state for social services that either weren't in line with the intended use of the funds or services that were never provided so one of these funds was the Mississippi Community Education Center and it used five million dollars of TANF dollars to help build this volley
ball facility at the University for those of you who don't know TANF are federal dollars that are given to States municipalities or nonprofits and they're to support various services for low-income families with children um so it's a pretty specific purpose or group of people who should be receiving them and volleyball facilities at universities would not fall within that intended purpose so not it probably and I would hope sounds obvious to most of you on this call that Grant dollars when they'
re given for a specific purpose must be used accordingly they must be used for that purpose so if an organization receives a grant for a specific purpose and no longer needs the funds for that um it's okay to talk to the funder and say you know can we reallocate this can we do a budget modification you know there are reasons when that is appropriate um but the key here is that you have that conversation with the funder before you decide to reallocate those funds um so I would say don't go with t
he adage ask forgiveness not permission you really want to be asking permission and having that all documented in writing um you know through uh normally it's through a formal budget modification process where the funder is allowing you to use those dollars in a different way of course there are times where you get unrestricted funds or you might get a donation for something like operations and you can use it you know pretty widely but the reality is is that most grants and especially government
grants have a very clear purpose and when you sign the contract um receiving that award you are agreeing to use them for that purpose when this doesn't happen properly when you don't get the permission to use them in a different way a lot of bad things can happen as a result so this can result in determination the immediate termination of that contract it can result in not renewing future contracts it can have um they can ask for those dollars back so they can claw back the funds and it could e
ven result in jeopardizing your non-profit status or criminal charges yeah so back to our volleyball court um thinking about what happened in Mississippi as a result of the misappropriation of funds multiple people ended up pleading guilty to some pretty significant charges so as you'll see in the first bullet here the founder of that non-profit that awarded the five million dollars pled guilty to bribery fraud male fraud and racketeering her son who was the assistant executive director also ple
d guilty and the accountant for the non-profit pled guilty so it's just important to remember that it's not just the executive director who's on the hook for these things it is really anyone who's involved anyone who has knowledge of what's Happening um and you know had an opportunity to report it or fix it and did it um and then the former executive director of the Department of Human Services pled guilty to theft and conspiracy concerning programs receiving federal funds um not only did he giv
e those funds to these organizations but he was very explicit in requiring them or directing them to use them for an unintended purpose so now that we've talked about what happens if you don't use your Grant dollars right we want to talk a little bit about how you get those dollars in the door in the first place um so in Florida you have to submit What's called the solicitation of contributions application to the Florida Department of Agriculture and consumer services you can only do that after
you've Incorporated in the state the application itself is pretty straightforward it's a few pages um it asks basic information on you know who's starting or who's running the organization some contact information for the board members oftentimes those are one in the same it asks information about your intended activities what the mission of the organization is as well as some financial information once the budget is approved or what the application is approved that's when you can actually begin
going out and soliciting donations in Florida but every solicitation that you have including on your website has to have this very specific language um the all caps here in the middle um letting people know that you have registered properly with the state you also have to give everyone that phone number or the website um so that if someone does want to reach out to the department and get confirmation or get more information about your registration they can do so a few additional points this is
State specific so this is how it works in Florida but Most states have something very similar where you have to apply um the various State entities to be able to solicit contributions so this is the process in Florida but just because you do this here does not mean you can go you know host a fundraiser in New York and start soliciting donations there um and then the second is that this application has to be renewed annually so it is not uh one and done and you can solicit forever you do have to
fill out this documentation every single year and Anna mentions at the beginning this is where they ask to confirm that your board has read your conflict of interest policy um so it is you know a very important document that you you maintain over time um there can be some pretty significant consequences if you are found to be soliciting donations without this approval in place I'm now going to turn it back to Anna to talk about some more conflicts of interest so we talked about conflicts when it
comes to being on the board or in a leadership position at an organization but there's also a broader kind of context of conflicts where you know maybe it doesn't even implicate your conflict of interest policy um some large organizations might actually have written policies that address this but you just want to conceptually in think about when you have um either receiving donations or you're otherwise getting public support as a charity you want to just think about the idea of organizational
conflicts so this story came up very recently um and this is the national academies of Sciences engineering and medicine they do a lot of work in science and research and policy reports or reports that influence policy and in this particular instance they had received about 19 million dollars in donations from the Sackler family which will sound familiar to many but in case anyone doesn't know them they had they were in charge of Purdue Pharma which had created the had created Oxycontin and um t
hey ended up having Myriad investigations for their role in what ended up becoming the opioid epidemic um without getting into any of the you know details on that this donation to the National academies had come to light recently because the national academies had issued two in-depth reports on um opioid policy and on opioid use the reports included data and research on how many people were enduring chronic pain and the need for pain pills um and then it now has come out years later that they ha
d received this large donation and it was at the least an appearance of a conflict on the national academies has issued a long statement about receiving the donation saying that none of that money went toward the the development of these reports um or their work in opioid policy nationally um you know you really don't want to be in a situation where you are having to issue those kind of statements and then there a number of people have opined on this issue there's someone who studies ethics and
um in science and research had said accepting millions of dollars while advising from the Sackler family while advising the federal government on pain policy would be considered a conflict of interest under almost any conflict of interest policy so we've seen things on a much smaller scale where maybe someone who you know has been in the news for some serious typical or criminal issues wants to do some um you know maybe publicized work with an organization that's not necessarily a problem but yo
u just want to see that things that donations that are coming through and other support are it doesn't come up often but maybe it's something that you're that shouldn't raise a red flag um so we did want to bring that up and now we would like to Pivot from some of the more nitty-gritty Financial regulation aspect of non-profit management to some other risk management considerations that come up um there's a ton that could be talked about in this area we wanted to highlight some things that just
come up a lot one of those is documentation so now we're instead of talking about financials we're talking about the services an organization provides so this could be direct services for organizations that are actually providing whatever it might be if it's Goods if it's Services if it's support if it's shelter whatever that is um this also includes documentation for organizations that maybe don't provide Direct Services but provide funding for other organizations or for people maybe your organ
ization is dedicated to providing financial support for people who have certain medical conditions maybe the organization is designed to provide grants to other non-profits um what you want to do is make sure that whatever the organization is designed to provide has the appropriate documentation behind whatever it's doing um so what are some examples of this in the world of Direct Services and again for many this might sound obvious but it's not always so clear you want to make sure that you hav
e a record of Who You served maybe who you served when you served and what you did for them let's say someone came back you know later and said something I didn't get this and you were supposed to do this for me or this thing you provided caused me this issue well the last thing you want to do is not even have a record of what you did for the person um and that you know that can come up because sometimes the people providing the Direct Services might not be aware of of the potential for these is
sues to arise later so you want to make sure that's in place that could be things like let's say you're going to start providing um some air coordination services or maybe you help you you help children visit with certain family members or something you want to make sure that you have let's say like a basic form where the person says I understand this is what this organization does and I consent to participating in the program like something even basic as that where then you can say people were
informed about what it is we were trying to assist them with doing for organizations that are not doing direct service some documentation requirements might be let's say you're providing scholarships or you are providing that financial assistance for for people with certain illnesses you want to have documentation of Who You supported with the fine with the funds and how they qualified for those funds so if you said to let's say you said in your IRS filings we provide financial assistance for pe
ople with this type of illness and who are low income what you need to have then a record that shows that you people actually actually met those qualifications who you provided financial assistance for what you don't want is that you have a lot of money going out to either people or other organizations and then you're not able to show that there was a process followed so that it looks like you know that money could have gone to really anyone I mean it was sort of indiscriminately given so if we
look back at some of the things we've talked about today the group out of San Francisco um the homeless shelter that had not responded to audit requests and had not booked uh their money in a transparent way well they also were audited on their actual programs and so for those of you who have been receiving government grants you know that audits are not only financial but the audits might actually include your program so you might have an auditor who literally comes in and looks at program files
and looks at the eligibility requirements of the program and says hey are the people you're serving the people you set out to serve um and in the case of this shelter in San Francisco that an audit was done and they found that 83 of the participants did not have documentation that they actually met the qualifications to receive Services um doesn't mean that they didn't meet the requirements it's just you want to actually have that documentation in place um a few other areas of documentation tha
t you might want to look out for sometimes it's appropriate to get things like releases or waivers if you're doing highly dangerous activities um or risky things um you might want to have that in place sometimes you can't for those of us or at Legal Services organizations you know you can't actually ask for a waiver in order to provide legal services so we're not saying it's appropriate but it might be um and then things like let's say you post a lot on the work your organization does if that's
direct service with people your organization serves you don't want to be posting people on your social media pages and whatnot without either consent from them or following the right process you don't want someone to come back later and say you know I really I really didn't agree to have my family out there um to the public in that way so um the another thing you want to look out for is with the IRS sometimes they prescribe the documentation requirements so so for organizations that give scholar
ships the IRS actually has like a significant number of requirements that organizations must be in terms of documentation organizations must be keeping um and then a few other risk management things we want to bring up um it's kind of related to documentation but this is privacy procedures again this is an area there's all kinds of laws that govern privacy um a common one of course is HIPAA but there's many others and so we're not endeavoring to get into like Privacy Law itself but we want to sa
y that many non-profits handle personal and confidential information of people at the very least you might handle sensitive information you know birthdays information about children names things like that that if if that information was somehow in the wrong hands people might not be happy about that um so you want to have policies in place for handling private information and for many organizations they already have this but you know a lot of times places don't have it kind of everyone's on the
same page on how you're going to keep information confidential but it's not actually written down so we want to have a privacy policy you want to have this be a policy where your staff members say in writing I've read this you know you have a forum that they acknowledge they've read it um and then the key there is that you actually have a training or staff maybe when they start or you do it each year where people are oriented on how you're going to handle sensitive information and along those sa
me lines um in terms of Human Resources this is that is a whole other topic but we want to make sure your organization has an employee manual that people acknowledge that they have read it and they sign something saying they've read it at higher so I think with that Alexis I don't know if there's any questions but we've kind of covered the basics that we wanted to get through yeah a couple things did come in through the Q a um first question was is there a checklist resource or website that you
can recommend that can be used to ensure that a non-profit is complying with relevant Florida Statutes we do not have are not aware of a checklist um if there is one I you know that's something we can look at but I'm not aware of an actual checklist a lot of organizations um what we've seen is they'll at least at the outset you know especially when it's not easy to pay for services if they might have a volunteer board member or someone who's willing to donate their time to kind of do that kind o
f a review but not a checklist that I'm aware of would be a great resource if it's out there if anyone has one send it to us um and then the other question that came in is what is the duty of foreign non-profit corporations to get a certificate allowing them to seek donations from the Department of Agriculture and consumer affairs let me know if you need me to reread that um I would have to look at the statue on this it's not a long statue it's actually it's fairly reasonable on solicitation of
contributions for foreign organizations I'm not I am not positive because this just hasn't come up in a while for us but I'm not positive that they have to be registered first with the Division of Corporations in order to get that registration to solicit so um I don't know who that you know who asked the question but um Alexis if you can connect us that's something we can get the answer to offline I definitely can question was asked by a good friend to the training initiative happy to do so um s
o with that said is there is there anything else before we go into the remainder of the housekeeping CLE stuff no I think we're good thank you awesome no well thank you it was such a pleasure to learn from you both you know you both clearly have a lot of passion to make non-profits successful and you know to keep them within you know doing the right thing in and um this was really informative not only I'm saying that but through the chat um there's lots of great stuff very informative and thank
you um so thank you both Anna and Charlotte for being here and teaching us today and with that being said I'm going to drop the CLE code into the chat uh that CLE code is 7510 uh and we were approved for one General CLE credit again that uh CLE code along with a copy of the recording um a copy of the PowerPoint um and again the CLE code I think I said that will come to you via email from Zoom don't look for my name it'll be a zoom email uh if you don't get that in your inbox you know you can alw
ays reach out to me and through the chat uh Anna and Charlotte there's just a lot of very helpful thank you thank you thank you thank you great job um and so with that being said unless there's anything else you all want to add I think I'll let you go and and enjoy the rest of your day and the theme for our audience thank you everyone for your time all right thank you so much all right bye Anna and Charlotte
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