Most nonprofit executives are aware of the prohibition against private inurement. Generally, nonprofit directors and executives — and their family members — aren't allowed to personally benefit from their positions while putting their organization at a disadvantage.
Penalties for violating the private inurement mandate could include financial sanctions for violators and, in the rare worst-case scenario, loss of the organization's tax-exempt status.
Usually, violations involve large organizations, yet smaller charities aren't immune. But whether a nonprofit is large or small, there are three areas where private inurement violations typically occur.