During the 14 years the Sanger School Foundation has existed, its board has never met.

Three of the organization’s six leaders have resigned, and a fourth said he will quit soon.

Those facts call into question whether the board can comply with state requirements. Texas law requires nonprofit organizations to have a minimum number of board members and to meet regularly.

The Sanger School Foundation is locked in a battle with the city of Waco over the burned-out historic school building.
Rod Aydelotte/Waco Tribune-Herald, file

Ordinarily, whether the board is operating legitimately might be of little interest. But now, the foundation is in a legal battle with the city of Waco.

Safety hazard

The city wants to demolish the old Sanger Avenue School building the foundation owns. Arson ravaged it in October 2008, and the city said the remaining shell is a safety hazard.

An attorney on the board has filed an appeal to stop demolition. But the city is trying to get the appeal dismissed, arguing the foundation as a whole has not authorized it.

Based on information reviewed by the Tribune-Herald , the city’s claim seems to have merit. But whatever happens in this case, experts said, the underlying issues that allowed the situation to develop aren’t likely to disappear.

Regulation of nonprofit organizations is lax, and there are no easy solutions to improving it, they said.

Hard to monitor

“Both at the state level and the federal level there is just not sufficient resources and manpower needed to effectively keep track of and monitor” nonprofits, said Matt Kouri, executive director of Austin-based Greenlights for NonProfit Success.

The Sanger School Foundation was formed in 1996 by John McNamara and LaNelle McNamara. The Waco attorneys were married to each other at the time but have since divorced.

The purpose of the foundation was to restore the old school building, located at 622 N. 17th St. Its architecture is historically significant, and foundation officials have said they want to restore the building for use as a school.

But no progress was made toward that goal even before the fire. Now, experts consulted by the city say the building cannot be salvaged.

LaNelle McNamara disagrees and is intent on saving at least some of the structure.

Though she acknowledges she cannot remember the last time the foundation’s board met, she said she has the right to try to stop demolition, in part because she has paid taxes on the property.

Records show the taxes have alternately been paid by her, her ex-husband and the foundation in recent years.

Court inquiry

Waco’s 10th Court of Appeals, which is considering the case, recently asked the foundation for more information about its management. The court inquired whether the foundation could present a resolution, signed by the board, spelling out who can act on its behalf.

Such a document may be impossible for the foundation to produce.

Paperwork filed when the foundation was incorporated indicates it had five board members.

They were listed as LaNelle McNamara, businessman Roane Lacy Jr., banker Monte Hulse, real estate broker Lonnie “Mack” Hardin and Alethea Bateman, a photographer who is now retired.

John McNamara was listed as president of the foundation, but he was not designated as a board member.

Subsequent filings list the same board members. But in some reports, John McNamara is listed as a board member.

Important role

The nature of his role is important because state regulations require nonprofit corporations to have a minimum of three board members. If he is not one, then the foundation is out of compliance. Bateman, Hardin and Lacy have resigned.

John McNamara did not return repeated calls seeking comment. However, he previously told the Tribune-Herald he is not a board member.

Even if John McNamara is a board member, the foundation appears to have a governance problem. State code says nonprofits should continue to have the number of board members they started out with, unless they amend their bylaws.

Beside the McNamaras, Hulse is the only other listed board member who has not resigned. But he said Friday he will soon do so.

Hulse agreed to be on the board at the request of John McNamara, whom he described as a good friend. But the board has never met or otherwise conducted foundation business, he said.

Bateman, Hardin and Lacy also said they never attended a foundation meeting. Lacy and Hardin weren’t even aware they were on the board at first.

In Hardin’s case, the McNamaras asked him if he would be willing to serve if a foundation were formed, he said. But he never heard another word about it — until the city sent him notices after the fire. That prompted him to send an official resignation letter, he said.

Lacy said he learned he was on the board a few years back when John McNamara made an offhand comment. He soon resigned, about three years ago, because he didn’t want to be on an inactive board.

“Nothing good comes of that,” Lacy said.

Bateman said she sent her resignation several months ago.

“I didn’t really want to be a part of the controversy,” she said.

Glen Yale, a San Antonio attorney who works with nonprofit organizations, said if he were representing the foundation, he would advise it to quickly assemble a functioning board because that’s the only way to determine the will of the foundation.

Without that, the city likely has a better chance of getting the appeal dismissed, he said.

Texas Attorney General

The Texas Attorney General’s office has the authority to intervene on the public’s behalf if a nonprofit organization is not functioning properly. But it typically does not get involved unless the nonprofit is worth $1 million or more, Yale said.

A spokesman for the attorney general’s office said it had received no information about the legal battle between the foundation and city.

The other state agency with some oversight authority is the Secretary of State’s office. But its regulation is limited to making sure nonprofits file periodic reports, Yale said.

It can dissolve nonprofits that fail to file such reports, but that’s about the extent of its power.

Combine that lax regulation with the relatively easy process for forming a nonprofit organization, and the odds that dysfunctional groups will go undetected is high, Kouri from the Greenlights group said.

“The barriers of entry into the nonprofit sector are low,” Kouri said. “If you’ve got two friends, a couple hundred bucks and a passion for something, you can pretty much fill out the paperwork.

“. . . And there are high barriers to exit. Nonprofits are not really required to close their doors in a formal way. They can just fizzle out and anyone may or may not care.”

cculp@wacotrib.com

757-5744

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