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Ask Dimitry K., Esq. Your Own Question
Dimitry K., Esq.
Dimitry K., Esq., Attorney
Category: Legal
Satisfied Customers: 41221
Experience:  Multiple jurisdictions, specialize in business/contract disputes, estate creation and administration.
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I live in a retirement community that is a not-for profit corporation.

Customer Question

I live in a retirement community that is a not-for profit corporation. We have a social committee that is separate and apart from the corporation, that runs entertainment and dinner functions and keeps any money that is over and above the costs in their own bank account. These funds are used to purchase items for the social committee to use in their functions and once or twice a year put on a free program for all residents. Our new president declared that it is illegal for the committee to keep those funds for its own use and demands that they be turned over to the corporation for their use on other things, even though no salaries, dividends or any other personal use of these funds has ever been directed. Can they accumulate these funds and do what they want to with the money that is accumulated over expenses as long as it’s spent for the good of the community? The amount is generally less that $1,000.00 and more often only in the low hundreds. Is there a limit as to how much can be accumulated in a “slush” fund? They like to keep some funds available for emergencies and since they are charged with maintaining the kitchen and sound equipment, anything can happen.
Submitted: 3 years ago.
Category: Legal
Expert:  Dimitry K., Esq. replied 3 years ago.
Thank you for your question. Please permit me to assist you with your concerns.

You mentioned that this 'social committee' is not really part of the corporation. Could you explain a bit? Is this social committee just a separate and a stand-alone group of homeowners, or are the members put forth by the Board of the retirement community?
Customer: replied 3 years ago.

They are residents of the community who volunteer to provide for the entertainment of other residents in a community clubhouse. They appoint their own chairman and committee members. The Board of officers for the community corporation do not get involved in any social activities.

Expert:  Dimitry K., Esq. replied 3 years ago.

Thank you for your follow-up, Bob.

If this is wholly separate, then the Board has no right or basis to exert any control over the committee, or demand that they provide the funds over to the Board. The Board would have a basis if they appointed some or all of the committee members (as then it becomes an extension of the corporation), or if the corporation formally put in place via bylaws that any committees are part of the corporation umbrella. Otherwise they have no basis of control and no basis to demand funds. These funds appear to not be dues but independently raised, which means that the corporation has no right to those assets.

Good luck.