The Nonprofit FAQ

Can Members Review the Books & Financial Records?

In September 2001 a reader wrote to the Editor of the Internet Nonprofit Center: In our group, there is an ongoing debate over what rights members have. Some members are saying that they have the right (as paid, voting members) to view the books of the organization. Others however (who have in the past sold services to the group) say that such a right would violate their privacy. Two lawyers have given two conflicting answers. Who's right? Or better: what is the norm? The reply: As a procedural matter, I would look to your by-laws. If your by-laws are silent on the question, then to the state corporations statutes under which you are incorporated. If lawyers have been involved, though (I'm not one), these steps have probably already been taken. As an organizational norm, I would favor open books. If there are specific transactions in the past where people might legitimately claim their privacy would be compromised by disclosure, then those bits of the statements can be "blurred" (usually by creating larger categories which lump several transactions of varying sorts together) to conceal individual identities. (That's what the Employment Service does, for example, to conceal employers' identities when one is dominant in a specific community.) More generally still, it sounds as though your organization is burdened by a climate of mistrust. Addressing that issue directly would seem to me a more urgent task than settling a legalistic confrontation over "rights." Whatever you do to solve the current disagreement, I hope you will put procedures in place that prevent a repeat occurance. Posted 2/16/02 -- PB