How to proceed with a motion that has carried that violates bylaws

[Guest President Scott]

At our local non-profit organization a member motioned to place some of our funds (cash) into our Permanent Endowment.  The motion was seconded and a small amount of discussion/debate and was then voted on and passed.  After the meeting I (president) reviewed our bylaws as our bylaws state organization funds “must remain in control of the organization”.  Our permanent endowment gives up all rights to the funds permanently (with the interest provided to us) which equals “no control” forever.

Question here is:  How do I proceed with this?   Since the motion violates the bylaws is it null and void?  I know that topics that are outside the mission of the organization or are illegal ect do not have to be allowed to proceed.  However, how does this work with motions that are carried?   I really cannot allow us to violate the bylaws.  They are there for a reason and yes, I need to be more up on them ahead of time.

Thank you.

[Hieu H. Huynh]

Generally, motions that are adopted in conflict with the bylaws are null and void. At the next meeting, raise a point of order on the adopted motion.

[Richard Brown]

I agree Mr Huynh, but I don't know that I agree with your interpretation of your bylaws. I hasten to add, however, that we do not interpret bylaws on this forum. Only your organization can do that. My opinion really doesn't count except for suggesting that you reconsider your position. 

We don't know the purpose of your organization or its permanent endowment fund or the usual manner of funding it. I question whether that fund should really be considered funds of the organization. Putting money in that fund seems rather similar to making a donation to a charity, a relief fund or college fund.

If all organization funds must remain in the control of the organization, you could never pay any bills or donate money to anything.  That bylaw provision seems rather strange to me and perhaps needs to be interpreted by the organization as to whether it is intended to prevent donations to the permanent endowment fund.

The normal way of doing that is for a member (or you) to raise a point of order that the transfer violates the bylaws and is prohibited. You can rule on it or submit it to assembly for a decision. If you rule on it, your ruling can be appealed to the assembly. It requires a majority vote to overrule your decision.

[Kim Goldsworthy]

7 hours ago, Guest President Scott said:

I know that topics that are

(a.) outside the mission of the organization

or

(b.) are illegal, etc.,

do not have to be allowed to proceed.

Letter #a has an exception to the rule.

RONR does allow for motions to be entertained which nominally would have fallen outside the organization's "purpose" or "object".

See page 113. It is related to the motion, "Suspend the Rules."

Quote

A main motion that proposes action outside the scope of    
the organization’s object as defined in the bylaws or cor-
porate charter is out of order unless the assembly by a
two‑thirds vote authorizes its introduction.

 

 

 

[Kim Goldsworthy]

7 hours ago, Guest President Scott said:

[...] our bylaws state organization funds “must remain in control of the organization”.

That rule does not imply, "once a deposit is made, no withdrawal is possible."

An organization is free to control its funds. That means, "How to spend its own money."

It doesn't mean, "Hoard until you die."

You are mis-reading your own rule.

***

You've heard of the inventory practice, "First in, first out," and "Last in, first out." You have an interpretation which implies, "First in, never out."

That does not make sense.

[Guest President Scott]

thank you for the feedback.

hello   a bit of clarification on the topic.  The item is fund management not spending funds on legitimate expenses.

I interpret the last sentence to mean the funds must be managed so they remain completely in our control thus easy access and liquid when needed in the future.  Our endowment is somewhat like a permanent donation to another non-profit to our benefit with the earned interest only being available back to us.  Thus absolutely no control and no access.  Yes i still need to review this with other officers.  Just trying to do some homework before we get that far.

Section 6.5 Fund Management

The corporation may solicit and accept any contribution, grant, bequest or devise consistent with is general tax-exempt purposes, as set forth in the articles of incorporation.  All funds received shall be held in the name of the corporation and not in the name of any individual.  Such funds shall be deposited with one or more financial institutions designated by the board of directors.  The corporation shall retain sufficient control over all donated funds (including designated contributions) to assure that such funds will be used to carry out the corporations tax-exempt purposes

[Kim Goldsworthy]

Hmmmm . . . .

I don't get that interpretation at all.

***

(a.) "Easy access" and "liquidity" (your interpretation)

has nothing to do with

(b.) "usage exclusively toward tax-exempt purposes only" (your rule's teleological goal).

***

You are thinking, "speed".

Your rule is thinking, "consistency" (with the laws of tax-exemption).

***

"Fast access" has nothing to do with "compliance with the laws of the land".

• You can comply with IRS and state tax laws, and have slow, convoluted methods of retrieval of money.

• You can violate IRS and state tax laws, and have rapid same-day withdrawals.

One has nothing to do with the other.

***

Your rule's last sentence says that "control" is only for a single purpose. -- To assure X.

So, if you assure X, it makes no difference how liquid anything is.

[Guest President Scott]

clarification,  by easy access I meant we can simply go and withdraw funds as needed.  not necessarily how fast

What I question in our bylaws is really on "control" meaning any access to the funds.  If we would deposit into the endowment the funds actually would then belong to the local Foundation not us and are permanently locked up.  To me a self-funding deposit into our own endowment with our funds removes control of said funds.    In other aspects since we will never recover the "cash value" of the deposit, even with compound interest,  we would not be able to use the funds for our mission.

Thanks again

[Kim Goldsworthy]

12 hours ago, Guest President Scott said:

. . . if we would deposit into the endowment . . .

Ah-ha!

Q. Who is "we"?

Q. How would "we" "authorize" such a "deposit"?

If your answer is "Via a main motion, properly adopted," then you are in control of your funds. -- YOU HAVE SPENT THE FUNDS.

If you want to keep 100% control of your funds, then defeat all motions like "To deposit $N into the endowment." Just as you would defeat a main motion, "That we replace the leaky roof of the clubhouse."

(Don't tell me you want to "control" the funds spent on the maintenance of the clubhouse roof. The contractor doing the repairs will NOT return the "funds" to your "control". You authorized the withdrawal. You were in control. Until you weren't.)