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A nonprofit board member may also be an attorney, accountant, consultant, contractor, or other professional whose services could genuinely benefit the organization.

Hiring that person is not automatically prohibited. The concern is that the board member now has a financial interest in a decision the nonprofit is making.

Under Georgia law, a transaction can still be approved when the conflict is properly disclosed and qualified directors make the decision.

What If the Board Member Really Is the Best Person for the Work?

Sometimes the most qualified professional is already sitting on the board.

A longtime attorney may understand the organization better than a new law firm. An accountant may already be familiar with its finances. A consultant or contractor may have specialized experience that would be difficult to replace.

The nonprofit generally does not need to prove that no other professional could perform the work. However, the board should be able to support why the arrangement is fair to the organization and why the compensation is reasonable.

The IRS defines reasonable compensation as what would ordinarily be paid for similar services by similar organizations under comparable circumstances.

Does the Nonprofit Need to Get Competing Bids?

A formal bidding process is not universally required simply because a board member is being considered for paid work.

However, competing proposals, market-rate information, or other comparable pricing can help the board evaluate whether the proposed fee is reasonable.

For certain tax-exempt organizations, the IRS provides a process that can create a presumption that compensation is reasonable when the arrangement is approved in advance by people without a conflict, based on appropriate comparability data, and documented at the time of the decision.

That means the goal is not necessarily to prove the board member submitted the lowest bid. The organization should instead be able to show that it made an informed decision based on appropriate information.

The Interested Board Member Should Not Control the Decision

Georgia law allows qualified directors to approve a conflicting-interest transaction after the required disclosure, and it defines qualified directors to exclude people whose own relationships could reasonably influence their judgment.

The nonprofit should also follow its own bylaws and conflict-of-interest policy, which may impose additional procedures.

Document Why the Board Approved the Arrangement

Good documentation can become important if donors, regulators, auditors, or future board members later question why an insider was paid.

Meeting minutes can identify the board member’s disclosed interest, the terms being considered, who participated in the discussion and vote, what comparability information the board reviewed, and why the remaining directors concluded the arrangement was reasonable.

Those are also the types of records the IRS looks for when evaluating whether a compensation decision was properly supported.

What If the Professional Relationship Came First?

The issue can also arise in reverse.

A nonprofit may have worked with the same attorney, accountant, consultant, or other professional for years and later decide that person would make a valuable board member.

Joining the board does not necessarily mean the existing professional relationship must end. It does mean future decisions about that professional’s fees, contract, performance, or continued engagement now involve a director with a financial interest.

The organization should establish clear procedures for handling those decisions and consider whether the dual role creates additional conflicts or oversight concerns.

When Can Paying a Board Member Become a Bigger Problem?

The risk increases when compensation is substantially above comparable rates, the board member does not disclose the relationship, disinterested directors do not meaningfully review the arrangement, or there is little documentation explaining why the nonprofit approved it.

For applicable tax-exempt organizations, compensation can become an excess benefit transaction when the economic benefit provided to an insider exceeds the value the nonprofit receives in return.

Repeatedly steering paid work to insiders without meaningful review can also create broader governance and reputational concerns even when the underlying service is legitimate.

Get Legal Guidance Before Paying a Nonprofit Board Member

The Law Office of Cameron Hawkins can help nonprofit leaders in Atlanta review potential conflicts, compensation arrangements, board approval procedures, meeting minutes, and conflict-of-interest policies before paid work is approved.



If your nonprofit is considering hiring a board member or asking an existing service provider to join the board, call us at (678) 921-4225 to discuss how to structure and document the relationship appropriately.