The New York Nonprofit Revitalization Act

New-York-state3 Key Provisions That Affect Nonprofit Transparency

The Nonprofit Revitalization Act of 2013 was signed into law on December 18, 2013 by Governor Cuomo, after a unanimous decision by the New York State Senate and Assembly. This new legislation was introduced by the Attorney General Eric Schneiderman and officially took effect on July 1, 2014. Outlined below are three of the key provisions included in the law that directly affect Nonprofit organizations. Additional provisions of importance will be communicated at a future date.

  1. Nonprofit corporations and charitable trusts with 20 or more employees and annual revenue of more than $1 million must adopt a whistleblower policy to protect persons who report suspected improper conduct.

This requirement provides protection for volunteers, employees, officers, and directors against wrongful termination in the event that they report illegal or fraudulent activities in the company. The scope of the provision extends well beyond that of the whistleblower protections that already exist under New York law. Either the board of trustees or the audit committee must implement and oversee the fulfillment of this new whistleblower policy.

  1. Every nonprofit corporation and charitable trust must adopt a conflict-of interest policy.

The conflict of interest provision includes the mandatory procedures for disclosing conflicts of interest to the audit committee or board. This requirement applies to any directors, trustees, officers, and key employees. Not only does the act put the proper steps in place to disclose any conflicts of interest, it also establishes the guidelines to prevent individuals who do have a conflict from participating in any board related decisions in relation to their conflict.

  1. Every nonprofit corporation and charitable trust must take certain specified steps, to prevent improper self-dealing, before entering into a related-party transaction.

This provision requires that any director, officer, or employee who has an interest in a related-party transaction, to fully disclose their interest, and prevents this party from participating in any deliberations or votes related to the transaction. If an individual has a financial interest in a related party transaction, even more stringent requirements have been put in place to ensure that no improper self-dealing is committed.

Nonprofit organizations operating in New York generate more revenue than any other state in the nation, and emerging cases of unethical behavior have tested the public’s trust. The Nonprofit Revitalization Act has employed a number of key provisions that allow for nonprofits to operate more efficiently and provide more transparency to the public eye.

Craig Morris & Company would be happy to answer your questions on this Act, or assist you in its implementation. Stay tuned for more information on this topic in future communications.

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