What type of activities constitute self-dealing by a nonprofit organization?

Self-dealing is an illegal practice in which an individual or business involved in a nonprofit organization uses their position as a representative of the organization to gain personal benefit or advantage. In California, self-dealing by nonprofit organizations is considered a breach of fiduciary duty and is prohibited under the Nonprofit Organizations Law. Examples of self-dealing activities include taking advantage of the organization’s assets for personal gain, such as transferring assets for inadequate consideration, borrowing funds from the organization, or awarding contracts to related parties. Other activities from which an individual could personally benefit include making decisions regarding benefit plans that favor certain individuals over others, and providing goods or services at a reduced cost if the organization stands to gain from the transaction. Additionally, if an individual obtains a benefit from an outside organization or person as a result of their position within the nonprofit, such as obtaining a loan on more favorable terms, this constitutes self-dealing. Self-dealing does not just apply to individual members of a nonprofit, but also applies to affiliated organizations. Such affiliated organizations can include a business operated by the nonprofit, or another nonprofit that is financially related to it. In California, self-dealing carries serious penalties. In addition to possible criminal sanctions, the individual or organization engaged in self-dealing can be ordered to return any assets or funds received as a result of self-dealing. Any damages suffered by the nonprofit organization due to self-dealing may also be awarded.

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What type of activities constitute self-dealing by a nonprofit organization?

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