By James D’Ambrosio
On June 21, the New York State Legislature passed The Nonprofit Revitalization Act of 2013, the first major changes to the State’s charity laws in 40+ years. The legislation is designed to reduce red tape, enhance oversight/governance, and make New York competitive with other states in attracting, retaining and growing a vibrant nonprofit sector. At this writing, it awaits the Governor’s signature. If approved, it takes effect January 1, 2014.
The Act was a collaboration between Attorney General Eric T. Schneiderman, elected officials, and the Leadership Committee on Nonprofit Revitalization — a group of 32 nonprofit leaders statewide convened by the attorney general. Last year the Committee presented the AG with a report including 38 recommendations to boost the nonprofit sector, providing a framework for the legislation.
NONPROFIT LEADERS WEIGH IN
Michael Clark, president of the Nonprofit Coordinating Committee of New York, noted: “Attorney General Schneiderman’s bill benefits from having been fully informed by the best ideas of New York’s nonprofit professionals, including those of us who served on his Leadership Committee for Nonprofit Revitalization.”
Doug Sauer, CEO of the New York Council of Nonprofits, noted, “Many of the reform measures passed were long needed and the AG’s Office is to be congratulated for their vision and perseverance.”
HIGHLIGHTS OF KEY PROVISIONS
♦ FISCAL OVERSIGHT: Nonprofit boards have to retain independent auditors and examine the audit’s results. Larger agencies — those with over $1 million in annual revenue — will need additional oversight procedures. Boards must know of and take action on risks identified by auditors.
♦ CONFLICTS OF INTEREST: Boards/board committees must conduct an independent review of transactions between an agency and related entities and determine if such transactions are in the best interest(s) of the nonprofit. Amendments provide clearer authority for the Attorney General to remedy self-dealing.
♦ BOARD INDEPENDENCE: Prohibits any employee of a nonprofit from also serving as chairperson of its board. This provision aims to ensure clear lines of accountability between management and the board, and promote independent board leadership.
♦ GOVERNANCE: Requires all agencies to adopt a written conflict of interest policy. Nonprofits with $1 million+ in annual revenue and 20 or more staff must also adopt whistleblower policies.
♦ COMMUNICATIONS: Allows electronic/facsimile transmission of board and membership meeting notices, waivers of notice, and votes requiring unanimous written consent. Amendments allow board members to take part in meetings via videoconference, Skype and other types of video communication.
♦ ATTORNEY GENERALS’ ENFORCEMENT POWERS: A) Permit the AG to begin proceedings to reject a related-party transaction, including compensation for an officer, director, trustee or key employee if it violates any law or is judged not in the best interests of the organization; and B) grant specific authority to find other means of dealing with related-party transactions, i.e., damages, restitution, removal/accounting, etc.
MAKE YOUR OWN CONCLUSION
To be sure, some nonprofit leaders have concerns about the expanded powers of the Attorney General and provisions not included in the bill. That’s understandable. But on the whole, I believe the legislation benefits New York nonprofits far more than it detracts. As with any piece of legislation, there’s compromise — rarely does one party get everything they want. Make your own informed assessment by learning more:
READ A MORE DETAILED SUMMARY HERE
READ THE COMPLETE LEGISLATION HERE
QUESTIONS TO READERS:
A) What is your take on this legislation? B) If signed into law, how will it impact your agency?
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