[Chapter-delegates] Why can't one be a Trustee and Chapter leader at the same time? (was Re: Message from Internet Society Audit Committee Chair)

[Carlos Afonso]

Well put, Veni.

frt rgds

--c.a.

On 05/11/2020 16:16, Veni Markovski via Chapter-delegates wrote:
> Oh, wow.
> That's something new, but the way I read it, there are two, or may be
> even three options:
> 
> 1. A chapter leader runs for ISOC Trustee and (s)he is not elected.
> Nothing to do here.
> 2. A chapter leader runs for ISOC Trustee and (s)he is elected. Options:
> 2.1. (S)he steps down from the chapter leadership role (as per Andrew's
> email)
> 2.2. (S)he doesn't step down, but the chapter discontinues getting *any*
> funds from ISOC
> 2.2.1. (S)he doesn't step down, the chapter continues getting - at some
> point in the next three years - some funds from ISOC. The statement of
> interest is declared by that Trustee (correct me if I am wrong, but this
> should not be CoI, Conflict of Interest, as the Trustee is not the one,
> who decides what money ISOC gives to what chapter), and ISOC risks a
> potential check by the IRS, and may be an audit.
> 
> Just to put this in perspective - if that rule existed few years ago,
> some of the Trustees would have never made it to the BoT (unless they
> would give up their chapter leadership position), and this would be
> unfortunate. I may be wrong, but I remember a lot of chapter leaders,
> who have served on the Board, starting with myself.
> 
> But, Andrew, you are not saying that this is the only possible way; you
> actually said if a chapter leader is a Trustee, that puts extra burden
> on ISOC in case it is to be audited by the IRS. An audit doesn't mean
> ISOC is doing anything wrong, or that the chapter leader cannot be a
> chapter leader; it seems like by asking the chapter leaders to make that
> choice, you're just making it easier on ISOC with regards to a possible
> audit. And it's a possible audit, right, it's not that there's a "must
> audit" in this case? Because the IRS might investigate, and find out
> that, well, it's normal for a small country in Asia, LAC, Africa or
> Europe, to actually get $ 2,000 from ISOC as administrative support, and
> that does not threaten the tax exempt status of ISOC (the 501(c)(3) that
> you quote), right?
> 
> Further to that, in some cases ISOC chapters don't have 'officers', as
> in the US legal world. They may not have a "president/ceo", but just a
> chairman of the board. These could be non-paid positions, and there's a
> difference between the responsibilities of board members, who are
> compensated for their work, and those, who work pro bono.
> 
> 
> Kind regards,
> v/
> 
> On 11/5/20 12:48, Andrew Sullivan via Chapter-delegates wrote:
>> Hi,
>>
>> I will leave the discussion about why the CoI rules for the Board are
>> as they are for the Board, because it is a governance issue.  But
>> there is a straightforward tax answer to the question below:
>> On Thu, Nov 05, 2020 at 01:56:39PM -0300, Flávio Rech Wagner via
>> Chapter-delegates wrote:
>>
>>> And I am very surprised to know that Chapter leaders should not serve
>>> as Trustees. This does not make any sense. Chapters elect four
>>> Trustees exactly to bring their perspectives to the Board, and their
>>> leaders are the persons that best understand and represent those
>>> perspectives.
>>
>> Chapters are, legally speaking, separate organizations from the
>> Internet Society (i.e. the corporation incorporated in the District of
>> Columbia in the US).  The US Internal Revenue Service requires that
>> Trustees disclose, in the annual 990s we file with them, any case
>> where they have an interest in another organization that receives
>> money from the Internet Society.  In principle, any Chapter can be in
>> receipt of money from ISOC because of the admin fund, because of the
>> money that flows through the Internet Society for Beyond the Net, and
>> because of the Chapterthon.  If an officer of a Chapter were to be in
>> a Chapter that receives any of that money, then we would have to
>> report it to the IRS and undergo a bunch of additional investigation
>> and audits and so on (because, as an officer of such a Chapter they
>> have a fiduciary relationship to the Chapter and so are deemed to have
>> an interest).  It would be a risk to the organization and our
>> 501(c)(3) status.  That is why it is important that nobody in a
>> Chapter leader position be a Trustee at the same time.
>>
>> That is not to say, of course, that people who have been leaders in a
>> Chapter should be excluded from selection as a Trustee.  We often have
>> people who become Trustees while they are Chapter leaders.  They
>> simply have to give one up or the other.
>>
>> I hope that provides the information you need.
>>
>> Best regards,
>>
>> A
>>
> 
> 
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-- 

Carlos A. Afonso
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