Q&A #49 – Can a nonprofit Board of Directors vote to temporarily suspend a provision in the Bylaws?
Question: My nonprofit organization’s Bylaws have a provision requiring the organization to have annual financial statement audits. However, cash flow is tight and our revenue has decreased dramatically. We would like to temporarily forego a financial statement audit this year, but we are wary of creating a permanent change to our Bylaws that would encourage this to become a habit in the future. Can the Board vote to temporarily suspend the annual financial statement audit requirement in lieu of amending the Bylaws?
Answer: The short answer is that the Board of Directors generally does not have the power to vote to suspend a provision in the Bylaws apart from the formal Bylaws amendment process (although you should check the applicable state nonprofit corporation statute to be sure). The Bylaws are binding and must be followed, even under extenuating circumstances. However, there are creative approaches you could explore to avoid making the amendment more permanent than is desired.
First, you could have an amendment that applies only for a specific time period. If you envision that foregoing an audit will be a one-time occurrence, the Board can adopt an amendment that applies only to the fiscal year at issue.
Second, you can explore language that is triggered only under specific circumstances. For example, the Bylaws could be amended to provide that an audit is only required when the organization has exceeded a certain gross revenue threshold , or as otherwise required by law or the organization’s funders.
Lastly, you could consider an amendment that builds in more discretion on this matter, perhaps accompanied by a higher voting requirement for the Board to depart from its normal practices. For example, your Bylaws could provide that an audit is required unless the Board determines by a supermajority vote (which typically means two-thirds or three-quarters of all Directors then serving on the Board) that an audit would be unduly burdensome on the organization’s finances that year.
Planning Tip – Remember that any change to the Bylaws must follow the same process as any formal amendment, which might include a longer notice period, higher vote threshold, and/or member approval, if applicable. This can present challenging obstacles. Consider modifying the provisions related to amendments to make sure that the Board has the flexibility to act quickly on amendments when extenuating circumstances arise, subject to any requirements specified in the applicable state nonprofit corporation statute.
An organization must always comply with its Bylaws and cannot make exceptions when the Bylaws suddenly become burdensome or inconvenient. Fortunately, Boards generally have a large degree of freedom and deference as to how the Bylaws are drafted, so with some thought and creativity your Bylaws can almost always be written and amended to serve the organization through all types of situations.
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