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"Does it pass the public-trust test?" Dr. Robert F. Ashcraft discusses nonprofit boards in Arizona Republic story
February 19, 2019 (Phoenix, Ariz) – Dr. Robert F. Ashcraft, the executive director of the ASU Lodestar Center for Philanthropy and Nonprofit Innovation, was among the experts quoted in an Arizona Republic story on alleged impropriety by board members of the nonprofit Hacienda HealthCare in Phoenix.
For the story, Dr. Ashcraft discussed generally how a board of directors for any nonprofit organization can safeguard itself from potential conflicts, the legal obligations a board has, and why the "public-trust test" is so critical.
Robert Ashcraft, professor of nonprofit leadership and management at Arizona State University, said even the appearance of conflicts raises questions about a nonprofit board's ability to govern.
"Does it pass the public-trust test?" Ashcraft said. "Even on legal parameters, it might pass. But it just doesn't look good."
The purpose of a nonprofit board is to make sure the organization follows its mission and lives up to its tax-exempt status. Members aren't typically involved in day-to-day operations. But they are responsible for hiring a chief executive officer and setting financial and legal policies.
Ashcraft would not speak about Hacienda. He said the best nonprofits adopt "clear firewalls" that prohibit board members from doing business with the nonprofit. He said many impose term limits to prevent boards from becoming insular and to avoid acting out of self-interest.
Nonprofits often adopt rules against "private inurement" so members can't benefit financially from their service, he said.
That includes nepotism. Even when board members aren't involved in hiring relatives, the perception of favoritism can be damaging, Ashcraft said.
It becomes a question of transparency, he said. Was there an open employment process? Was the job posted? Was candidate recruited and vetted? Were other qualified candidates considered?
Self-enrichment among nonprofit boards is illegal in many states. Self-dealing and nepotism can lead to sanctions, including fines and revocation of tax-exemption. Ashcraft said dozens of states have specific agencies tasked with overseeing and investigating non-profits.
Arizona is not one of them, Ashcraft said: "We just don't have that here."