BOYS & GIRLS CLUB SCANDAL: BOARDS TAKE NOTICE!

The Gloria Wise Boys & Girls Club in the Bronx neighborhood of Co-op City, is involved in what promises to be a growing scandal. According to press reports, New York City’s Department of Investigation has discovered that officials of the agency “approved significant inappropriate transactions and falsified documents that were submitted to various City agencies.” The City has transferred its funding to other local agencies so that programs will continue, and the executive director and assistant executive director have resigned. But what of the board?
Many board members think that if they attend meetings, attend a few events, sit on a couple of committees and make the occasional donation that they have executed their responsibilities. Not so. According to the Revised Model Nonprofit Corporation Act, “a director shall discharge his or her duties… (1) in good faith; (2) with a care an ordinarily prudent person in a like position would exercise under similar circumstances; and (3) in a manner the director reasonably believes to be in the best interests of the corporation.” What does this mean?
It means that board members must ask questions. They must know what is happening. They must review the decisions of the executive. They must approve expenditures and review all financial dealings with the utmost scrutiny. They must make certain that all decisions are in the best interest of the agency. They must assure that the mission of the agency is not being forsaken in favor of any individual or cause other than its own.
What happened at Gloria Wise? It is unclear. For less than six months in 2002 I was their director of Development. My contacts allege that monies received from the City, and possibly other sources, were diverted to the liberal radio station Air America, by the director of Fundraising and the executive director. Depending on the source, the amount ranges from $80,000 to $800,000. The transfer of funds may have been made by the use of a rubber stamp of a board member’s signature on a check.
As we all know, if we are lucky there are only three sides to every story. The truth has yet to come out. But let’s assume that monies were transferred to Air America, without the knowledge of the Board, using a signature stamp.
First, non-profits are, by definition, non-sectarian. For an agency to invest in a political media organ is foolish at best, criminal at worst. It brings into question its non-profit status under IRS regulations. Second, board members have a fiduciary responsibility to assure that their agency’s finances are in order. Providing a rubber stamp signature means transferring that responsibility to others and therefore should not be allowed.
Most importantly, if the Board did not ask questions about the agency’s finances, and did not request independent audited reports, they did not exercise their responsibilities. If considered “gross negligence,” they could be held personally liable for the results of their apathy.
And let’s not forget the auditors. Who were the accountants that missed whatever happened at Gloria Wise, be it $8 or $800,000?
There are well over one million non-profits. That number grows every year as the IRS approves more applications. Most non-profits never amount to anything. They are formed by individuals who care about a cause, want to raise money for it, but don’t have the wherewithal to succeed. They ask some friends to sign the paperwork, agreeing to be board members. They do so out of friendship, never realizing that there are real responsibilities that go with the title.
If anything good is to come out of the Gloria Wise situation it will be a wakeup call to board members that they are responsible for what their agencies do, and can be help criminally liable if they replace due diligence with apathy.