Legislation signed by Gov. Andrew Cuomo overhauls the laws governing New York’s nonprofit sector for the first time in more than 40 years, according to Attorney General Eric Schneiderman, who pushed for the Nonprofit Revitalization Act of 2013. He said the charities law will improve governance and oversight of charitable organizations while cutting red tape.
Nonprofits generate hundreds of billions of dollars in New York — more than any other state — and are responsible for one in seven jobs, he said.
“Our nonprofit sector is one of the jewels of New York State, providing a wide range of vital services to families and communities across the state,” Schneiderman said in a statement. “But for too long, outdated laws have burdened the sector in some areas, while providing too little oversight in others.”
The law will:
— Ensure sound financial management by requiring charities’ boards perform active oversight over financial audits, including retaining independent auditors and reviewing audit results. There are additional oversight requirements at charities with more than $1 million in annual revenue.
— Prevent conflicts of interest by requiring that transactions between a nonprofit and insiders who stand to benefit be fully disclosed and reviewed by the nonprofit’s board to determine whether they are fair, reasonable and in the organization’s best interests. In cases of substantial transactions with an insider, the board will have to consider alternatives and document the basis for choosing the insider.
— Strengthen the attorney general’s power to police fraud and abuse by granting clear power to bring judicial proceedings to look at interested-party transactions.
— Ensure a board’s independence by prohibiting any employee of a nonprofit from also chairing its board.
— Promote good governance by requiring all nonprofits to adopt conflict of interest policies. Those with more than $1 million in annual revenues and 20 or more employees have to adopt whistleblower policies.
The law also streamlines procedures for nonprofit mergers, property sales and corporate dissolutions so as not to waste money on unnecessary red tape; eliminating costly requirements for forming nonprofits in New York; and modernizing laws to allow charities to conduct their affairs more efficiently, such as permitting them to use email and video technology for meetings.
“The bipartisan proposals contained in the Nonprofit Revitalization Act strike the right balance in achieving comprehensive modernization of state law to assist charitable organizations, and requiring common sense Board of Directors oversight to ensure donor confidence,” Susan Hager, former CEO of United Way of New York State, said in a statement. “This process has been a model of policymaking transparency.”