But It’s Just a Little Fraud…

with Joshua Studor, office of the Washington Attorney General

Improper management of charitable assets – especially restricted assets- is one of the easiest ways to end up on the wrong side of a lawsuit. Misuse (sometimes called fraud) can take many forms including straight-forward illegal payments to insider; conflicted transactions that are not fair to the charity; and improper use of a charity’s resources. Misuse of charitable funds can lead to legal action and internal financial challenges including loss of future income, public trust, and tax-exempt status. Sometimes, directors on boards can be found individually liable for misconduct they didn’t even participate in if they failed to exercise due care. But not all distributions are illegal, and not all conflicts of interest are problematic. This presentation will present the basics of Washington law as it relates to the responsible management of charitable assets from the perspective of one of the assistant attorney generals tasked with enforcing those laws. Attendees can expect a summary of Washington law, including an outline of the scope of directors’ and officers’ duties, and some suggested best practices for dealing with conflicts of interest. The presenter will also cover what to do if a director or officer detects fraud occurred in their organization. This presentation will not address tax law implications.

I would like participants to understand that even the most well-intentioned people can end up running afoul of the law leading to significant consequences but that they can avoid problems by proactively adopting policies and procedures related to charitable assets, having an engaged board, and relying on internal controls that amount to more than just “trust me.”