Challenging Nonprofit Leadership: The Mechanics

The Pattern

The lie you were told

“The board has full confidence in the executive director.”

This is the sentence nonprofits use to close a conversation. It appears in a press release, a letter to donors, or a staff meeting, and it is designed to do one thing: make you believe the governance structure has already reviewed the concern and found nothing. In most cases, the board has not reviewed anything. The executive director told the board chair, the board chair told the rest of the board, and the board ratified the summary without asking a question. The sentence is not a finding. It is a firewall.

A nonprofit is a public trust. It is incorporated under state law, exempt from federal taxes under a social compact, and governed by a board that has a legal fiduciary duty to the organization’s mission and the public it serves. The board does not work for the executive director. The executive director works for the board. When the structure inverts, the mechanism for accountability is not the board. The mechanism is the state attorney general, the IRS, the donors, and, if the conduct is criminal, the district attorney.

The mechanisms

1. The board of directors

The internal mechanism. The board has a fiduciary duty to oversee the organization’s finances, programs, and leadership. If the board is functional, a written concern submitted to the board chair (not the executive director) will trigger a review.

How: Submit the concern in writing to the board chair, with a copy to the board secretary. Address the board, not the staff. State the specific concern. Do not editorialize. “I am writing to the board regarding the use of restricted grant funds for purposes outside the grant agreement, based on the following observations.” Attach documentation. Keep a copy.

If the board dismisses you: You now have evidence that the internal governance mechanism failed. This strengthens every external complaint. A board that refused to investigate a documented concern is a board the attorney general will be interested in.

2. The state attorney general (charity division)

Every state has a charity regulator, usually within the attorney general’s office. They have jurisdiction over nonprofit financial misconduct, self-dealing, excessive compensation, and misuse of restricted funds. This is the most powerful external mechanism for a nonprofit that is not a church.

How: Search “[your state] attorney general charity complaint.” Most states have an online form. Describe the financial concern. Attach documentation. The AG’s office can audit the organization, demand records, remove board members, and refer to criminal prosecution.

Why it works: The AG does not care about the organization’s mission statement, its political connections, or its emotional appeal to donors. They care about whether a registered nonprofit is misusing charitable assets. A nonprofit that says “we are doing good work” while misusing funds is exactly the case the AG exists to pursue.

3. The IRS (Form 13909)

If the nonprofit is engaging in financial self-dealing, excessive compensation, private inurement, or political activity that violates its tax-exempt status, the IRS Exempt Organizations division accepts complaints via Form 13909.

How: Download Form 13909 from irs.gov. Fill it out. Mail it. The IRS does not notify you of the outcome, and they do not investigate every complaint. But a pattern of complaints triggers review, and the IRS can revoke tax-exempt status, which ends the organization.

Limitation: The IRS is slow and under-resourced. This is a long-game mechanism, not a fast one. File it alongside the AG complaint, not instead of it.

4. Donors and grantmakers

Nonprofits depend on funders. A documented concern sent to the organization’s major donors, foundation grantmakers, and corporate sponsors is a mechanism the board cannot ignore. Funders do not want their name attached to a scandal. The threat of funding withdrawal is often faster than any government mechanism.

How: Send the documentation to the program officer at each foundation that funds the organization. Do not send allegations. Send facts. “I am writing to inform you that the organization you fund is using your grant for purposes outside the grant agreement. Here is the documentation. I have filed a complaint with the state attorney general.” Keep it professional. Do not threaten. The facts are the threat.

Limitation: This mechanism has a short half-life. If the organization can convince the funder that the concern is a personal dispute, the funder will stay out. Documentation is the defense against that.

5. Civil authorities

If the conduct is criminal (fraud, embezzlement, theft, wage theft), the mechanism is a police report or a call to the district attorney. This is not an internal matter. The organization’s preference to “handle it internally” has no legal weight. A nonprofit that embezzles grant funds is committing a crime against the public, not against its own staff.

Building the coalition

You cannot do this alone. The organization is designed to make a single complainant look like a disgruntled former employee. Three complainants look like a pattern.

Step 1: Identify one other person who has seen the same thing. You do not need a group. You need one conversation. “Did you notice X?” is the entire opening.

Step 2: Agree on what you observed. Not what you feel about it. What you saw. Dates, facts, witnesses, documents.

Step 3: Decide together what mechanism to use. Internal board first, then external if the board fails.

Step 4: File together. A complaint signed by three people is not three times as powerful as one signed by one. It is categorically different. It cannot be dismissed as one person’s grievance.

What they will do when you file

• Call you a disgruntled former employee or contractor.
• Suggest you are motivated by a personal dispute or a failed ambition.
• Offer a private settlement or separation agreement that requires you to sign an NDA.
• Contact your professional network to damage your reputation.
• Tell the board and staff that the concern has been “thoroughly reviewed and resolved” when no review occurred.

None of this is evidence that you are wrong. All of it is evidence that the complaint landed.

What this will cost

You may lose your job. You may lose your professional network. You may be asked to sign an NDA in exchange for a severance payment. Do not sign the NDA. The severance is a one-time payment. The silence is forever. The cost of speaking is real, and the institution is counting on the fact that the cost is higher than your willingness to pay it. Go in with your eyes open, your documentation complete, and at least one other person beside you.

Next steps

• How to Document Abuse So It Actually Counts: the evidence foundation everything else depends on.
• What Happens After You Speak Up: the five-phase retaliation sequence and how to survive it.
• Challenging Church Leadership: The Mechanics: the parallel playbook for religious organizations.