The newly installed board of the Art Alliance of Idyllwild, one of the leading and most visible nonprofits in Idyllwild, faced a divided room at its Friday, Jan. 23, General Membership Meeting and Social. Even though new President Marc Kassouf attempted to deflect questions, repeatedly reminding audience members that questions would only be answered at the end of the board’s presentation, many in the audience refused to be bound by that stricture.
Key questions centered around the “duty of care” any board member of a 501(c)(3) nonprofit must exercise in order for the organization to retain its nonprofit status. Shanna Robb, an AAI volunteer who has led some of the most successful of AAI’s recent projects, including the “Deer Sightings” and “Banner Projects,” cited the following as critical responsibilities of the board (as outlined by the California Attorney General Guide for Charities): checks and balances, separation of duties, preparation of yearly and event budgets, term limits and staggering of terms, financial transparency (yearly and event), sales tracking procedures, cash receipt handling procedures, dual signatures on checks, periodic financial reviews throughout the year by a third party accountant, as well as audit reviews, if the organization’s finances permit.
Robb said she had been frustrated in not being able to obtain, when requested, financials broken out by event. She said it was impossible to run an event if expenses and income were not promptly and adequately tracked and available to those running the event. She observed the real value of AAI is its members, their expertise, goodwill and willingness to volunteer and work for the common good.
“It’s ludicrous that you’re not sharing the financials for every single event,” she said. “Financial transparency, to a membership organization, is critical.” Robb said she stepped back from running events when she could not get event-specific financials when asked for.
Robb said she was not saying anyone had done anything incompatible with serving as a director, just that they did not understand their responsibilities for board membership.
Reba Coulter, AAI treasurer, said, in a subsequent phone call, she had provided financials requested by Robb to Kassouf, although not directly to Robb.
The California AG charity guidelines specify that financial controls, for which each board member is responsible, must be in place to guard against fraud. Among those controls are separation of function (recording of cash receipts from control of those dollars — making bank deposits), two signatures on every organization check and constant review of financials throughout the year. Guidelines advise that unless these kinds of controls are instituted, directors could face liability for negligence.
Others in the audience raised additional questions about the existing AAI bylaws, that they were not in keeping with state law and that some directors and officers were serving past their terms.
AAI bylaws are posted on their website, www.artinidyllwild.org. A review of posted bylaws, specifically Article V, D, seems to indicate that bylaw terms are in conflict with state law. Article V, D states, “The term of each board member will be two years ending on January 31 of the respective year. Any board member may request an extension of their term. The extension of any term will be at the discretion of the executive board members.”
That seems to indicate a board member could serve for more than four years, at the executive board’s discretion. California State Statutes, Corporation Code 5220 (d) states that directors of a “membership” organization, as AAI is, can only serve for four years — if it is a non-membership organization, the term could be up to six years.
Directors said they are a new board, in transition, and need time to review and respond to the questions raised.
Kassouf said directors would be reviewing bylaws, terms of service and other matters raised at the meeting and that members would receive information they were seeking.
The breakout session Kassouf had scheduled for the end of the meeting did not occur and the meeting ended with more questions still on the table than had been answered in the session.
AAI, in the absence of a Chamber of Commerce, is often characterized as the public face of Idyllwild — given its public art projects designed to expand Idyllwild’s reputation as one of the top art towns in the United States and the widespread coverage those projects have received. It is also not, as some other local nonprofits are, one that operates on a shoestring budget. Last year, based on a profit and loss statement for 2014 provided at the meeting, AAI showed total income for the year at $82,907.88, cost of goods sold at $15,257.43 for gross profit of $67,650.45 with total expenses of $64,518.88, for net income of just under $4,000.