Conflict of Interest with Potential Business Partners

Tuesday March 16, 2021 comments Tags: nonprofit, accounting, shenanigans, audits, investigation

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Hey everyone, it is Chyla Graham, CNRG Accounting Advisory here for the last episode of this season. So this season has been all about shenanigans that means misappropriation, mishandling and mismanagement, as reported in the news. We're not digging into the news article to see how accurate this is, we're just saying, how do you not end up being in the news for the same thing. So I just want to bring out the high points and say like, Hey, this is what was reported. And this is how you prevent it from being you. So this case, because I want you guys to start revving up for your preparation of your IRS 990, is about someone who has issues with their 990. So this is WDSU Investigates: Few records available for Nyx subsidiaries, travel spending. So that's not really helpful, right. But what is going on?

There is an organization that is in the New Orleans area, I'm actually not even sure what the organization's called, because it's going by multiple names. So this is an organization The Nyx x, which is one of the nonprofits. So the Nyx x does work with Crescent City innovations. But what's wrong with that? Like what this nonprofit does work with this for profit organization? No big deal. Not at all. What is the big deal, though, is that the founder of the Nyx x, and the President of the for profit company are married. So that means they're considered to be the same person and because they are working together, that husband, that company needs to be disclosed in the IRS Form 990 as, hey, we have dealings with someone who's related to us. And we want you to be aware why because donors and funders care, nonprofits are public entities, their records are public entities and so that is going to be helpful information for any board, anyone who's looking at them to see like, How well are they doing? This is definitely one of the things I do think that you should be looking at for nonprofits.

I know I say a lot, don't worry, not, don't worry but you shouldn't tell them how to spend their money like they understand the work that they do. They know how to spend the money, but you should be concerned with who they are spending money with. So are they spending money with someone who is related to them? Are their consistent conflicts of interest? That means that, hey, you're doing this for your own personal benefit, and not really for the community. So how do you prevent this? How do you decide that, hey, this is not going to be something, this is going to be something that we are not going to end up in the news for?

Board, we're talking to you again, you guys need to oversee the process. So when there is a case, that's a board member or key employee, they have a business, their partner has a business, their mother has a business, a close relative to them, is doing work that puts them like hey, maybe we can use this person as a vendor. What you want to say is Hi, thank you for your bid. We will look at that in conjunction with reviewing other bids, so that you're not only you're not just giving it to them. So this is something you're going to do internally to say we are not just handing out contracts to people we like but we're actually handing out contracts based off of those quality of the proposal based on the expectations that were established based on our belief in their competency. 

And then the second thing is, so the board is gonna review it, anyone who's related to them is not going to be part of that board conversation. They're not going to vote and say, I think you should vote for my IP. No, no, I don't, I'm not going to be here for this conversation. And finally, the review of the IRS 990. So the board should be reviewing the IRS 990. These are the types of things that the board should be looking out for as they review it. They should look out for it and say is there anything that I know we talked about during the year that might need to be disclosed? Is it in here? Did he mention this? No. Why not? And maybe it's not just oh, we forgot? Cool. Let's go fix that before we submit it. If it's Oh, we don't want to? That's not a good answer. I don't care what you want to do. Is this accurate and appropriate? Yes, that is what we will do. 

So if your organization is thinking about like, wow, we really want to make sure our 990 is going to be accurate. We CNRG does not do one off. So if you're interested in help, we are happy to offer that as part of one of the ways we can consult to make sure we're not just doing the filing but we can help support you as the organization grows and implement maybe smarter recommendations from your filing. We do offer referrals, though to organize other firms who can help you with your 990. And if you're an organization that feels like we're not yet ready for that. Maybe you heard my ad, you should check out the DIY 990 workshop that we will be hosting soon. All right, you have a good day. Please do not end up in the news for any of the things you mentioned in our episode. Bye. Thanks for tuning in to another episode of The Nonprofit Nuggets Podcast.

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Link to Article: WDSU Investigates: Few records available for Nyx subsidiaries, travel spending