Section 122(b) – The “$500 Rule”  Officers Desk Reference

Council Expenditures and the “$500 Rule” in Section 122(b)

The baseline rule for the disposition of council funds is that any expenditure of funds must be authorized. Neither the Grand Knight nor any other council officer may disburse council funds without some type of authorization. The expenditure of council funds is governed by the Laws of the Knights of Columbus and the ordinary rules of parliamentary procedure.

These laws and rules are intended to ensure accountability and transparency. The ordinary procedure for authorizing the expenditure of council funds is a vote of the members present at a regular business meeting.

Section 122(b) of the Laws of the Knights of Columbus, also known as “the $500 Rule,” is intended to ensure that major council expenditures are authorized by the members.

This rule is intended to supplement the ordinary rules of parliamentary procedure, which require formal advance approval for all council expenditures. This approval may be in the form of a motion at a council meeting or an annual budget passed at the beginning of the fraternal year.

Under Robert’s Rules of Order and the Laws of the Knights of Columbus, all expenditures, regardless of the amount, ordinarily must be presented to and approved by the council. As a general rule of parliamentary procedure, subject to certain specified exceptions in the Laws of the Knights of Columbus, council expenditures must be authorized by a vote of the members at a regularly scheduled business meeting. Section 122(b) provides that an expenditure that exceeds $500 requires advance notice and a two-thirds majority vote of the members present and voting at the next regular business meeting:

No money in excess of $500.00 shall be paid or transferred from the treasury, of any council (except such moneys as the council is called upon to regularly pay for its current expenses and as provided by the laws of the Order, or for purposes approved by the Supreme Council, or Board of Directors) unless by a two-thirds vote of the members present and voting at a regular business meeting held subsequent to a regular business meeting at which notice in writing of a resolution of intention to pay or transfer such money and the purposes and amount to be paid or transferred shall have been given and regularly read.

Councils are permitted to write stricter council bylaws to require a two-thirds majority vote when authorizing an expenditure that is lower than $500. So, for example, a council could approve a bylaw providing that no money in excess of $200 shall be paid or transferred from the treasury unless authorized by a two-thirds majority vote.

Section 122(b) applies only to funds that are held in the treasury of the council. To the extent that a council raises funds for a specific cause or a recognized charity (e.g.,Special Olympics), the council may, by a simple majority vote, and regardless of whether the donation is over $500, direct that the funds be paid directly to the selected charity or recipient.

Although it provides additional procedural requirements for expenditures exceeding $500, Section 122(b) does not imply that expenditures up to $500 may be authorized without a vote of the council. Neither this section nor any other section authorizes a Grand Knight to make discretionary “petty cash” expenditures of council funds without prior approval, as set forth above.

Accordingly, in order to ensure accountability and transparency, every expenditure must be authorized by vote of the council.

See The Process of Receiving and Expending Council Money for more detail.

But what if the Grand Knight wanted to spend $50 or $100 of the council’s money to purchase an item he knows the council needs? Couldn’t he just make that decision on his own and pay out this small amount of cash? No.

The council would have to approve the expenditure by a simple majority vote. Consistent with parliamentary procedure, a member makes a motion to spend the money, it is seconded, and there is discussion, followed by a vote.

Annual Budgets Satisfy the $500 Rule

To avoid voting on multiple expenditures throughout the year and to satisfy the requirements of Section 122(b)for expenditures exceeding $500, councils should consider scheduling a single vote on one budget resolution at the start of the fiscal year. In such a case, advance notice of the budget resolution would be sent to councilmembers, and then two-thirds of the members present and voting at the next regularly scheduled business meeting would have to approve the budget resolution.

Every council is encouraged adopt a budget resolution as one of the first orders of business at the beginning of each fraternal year. The budget should be made available to every member (not only those attending a particular meeting) and should be placed on the agenda, along with all other matters scheduled for a vote.

Budgets ensure accountability and transparency. Indeed, reporting the actual figures of the budget is good for transparency and for future planning. Moreover, once a budget has been approved, that approval satisfies the requirements of Section 122(b) with respect to every item listed in the budget.

It is permissible for councils to approve a budget resolution that contains a line item giving the Grand Knight discretion to pay up to $X per budget year on specific goods or services without having to seek additional authorization. While such discretionary authority may be included in a council’s budget, members are cautioned to limit the discretionary spending ceiling to a simple amount that would not stretch common sense or reason. When an authorized discretionary amount is paid by the Grand Knight, the Grand Knight must report his action at the subsequent council meeting in order for the expenditure to be properly recorded in the council’s books.

Council budgets need not be the final word on annual expenditures. Provided that a council follows the procedures in Section 122(b) and Robert’s Rules of Order, it retains the flexibility to respond to unforeseen financial situations by considering additional funding resolutions or budget amendments during the fraternal year.

Any item in an approved budget may be considered to be authorized by the council. However, the Treasurer may not write a check or make any other kind of payment for this item unless and until a voucher (also known as an Order on Treasurer or a Warrant Voucher) has been signed by the Financial Secretary and the Grand Knight.

See The Process of Receiving and Expending Council Money for more detail.

Notice Requirement for Expenditures over $500

If a council expenditure is $500.01 or more, then the notice of its proposed payment must be sent to all the members of the council. The notice, in the form of a written communication, should be part of the broader announcement to council members of the next meeting date and the meeting agenda. If the agenda includes an expenditure of funds not previously approved as part of an annual budget, that expenditure would need to be identified in the written notice. If members wish to receive their written notice by e-mail, that is permissible. However, members who do not consent to email notice because they do not have access to the internet or because they would prefer to receive it in the mail should receive a hard copy. Posting the notice on a home corporation or parish bulletin board alone is not sufficient.

 

4 The Order recommends using

Robert’s Rules of Order Newly Revised (11th Ed.).

5 Refer to Method of Conducting Council Meetings

(Knights of Columbus Publication #10318) for a summaryabout how a motion is made, debated, and approved.

6 For the Fourth Degree, the parallel rule is found in Section 24(k)(ii) of the Laws and Rules Governing theFourth Degree.