I know that the board members of a homeschool groups are hard-working people. They not only homeschool their own children, but they organize support groups and co-ops to help other homeschool families. Sometimes a homeschool group would like to “reward” these generous individuals.
Is it OK to compensate your board members?
A homeschool co-op in the Midwest contacted me recently to apply for 501c3 tax exempt status. The Treasurer told me that her co-op had been paying their leaders anywhere from $200-$1,200 a year for their service on the board. I discussed why paying board members was not a typical practice. Here is some of what we discussed:
- Payments to board members can create a conflict of interest. Does the loyalty of the leader lie in herself or in the best interests of the group?
- Paying board members can call into question the duty of loyalty of the board member. Is she acting in the best interest of the group rather than a personal, financial interest?
- Payment could compromise the leader’s duty of care. A leader should act in good faith, with the care an ordinary, prudent person would exercise and with the best interest of the group in mind.
- Payments on nonprofit boards is not a typical practice. Charities do not usually compensate their board members. Their funds usually go back into the program. Board members serve because they have a passion for the mission and a concern for the members.
- Board payments can undermine the volunteer spirit of other members. Why should a member volunteer her time when others are paid for their efforts?
- Paying a board member can cause dissension and a sense of injustice or imbalance in the group. In this particular case the payments did not have member approval. The board voted themselves compensation, but never put the idea to a member vote. This could be considered inurement which is forbidden for 501(c)(3) tax exempt organizations and could put the organizations tax exempt status at risk.
- Paying board members involves correctly classifying them as employees (if they are officers) or independent contractors (board members at large). The classification is a matter of IRS law, not your choice.
This group has wisely decided to stop payments to board members. I think the group will be better served by an all-volunteer board and healthier in the long run.
You can pay board members, but the income is taxable income. My book Paying Workers in a Homeschool Organization explains the correct way to pay board members as employees or independent contractors and alternative tax-free ways to thank your hard-working board members.
Carol Topp, CPA
HomeschoolCPA.com
Very good information, Carol! I do think it is important, though, to compensate board members for expenses. We want the best to serve, not those best able to afford it.
Our local board was afraid to purchase a fast food meal for board members when we met at Chick-Fil-A for a board meeting. This resulted in some board members (those who could afford it) eating and those who couldn’t sitting there hungry. Could you address what is reasonable with regards to reimbursing expenses and buying meals at board meetings?
Melanie,
You are absolutely correct that reimbursement for expenses is a perfectly legitimate and leagl expense. Don’t let those hard-working board members go hungry! Feed them! Meals not only keep board members from being cranky, but they boost morale, and build relationships. A shared meal is like sharing life.
I highly recommend that homeschool groups include “board expenses” in their budgets. This can include meals for meetings or even paying babysitters or transportation costs.
I commended one homeschool group for paying the tickets and hotel costs so that their leaders to attend a homeschool convention. Others thank their leaders with gift certificates to restaurants. When I retired as treasurer, my co-op blessed me with a gift certificate to a day spa! Wow! I loved that! 🙂
All these are examples of reasonable expenses of running your homeschool organization and keeping those that serve happy!
Carol Topp, CPA
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