Just recently we highlighted three provisions from the N.Y Revitalization Act that affected nonprofit transparency. Following up on that post, we’d like to outline three more changes that have been put in place that affect the way nonprofit businesses are regulated.
1. Board and committee decision on compensation for employees of nonprofit corporations cannot be improperly influenced by recipients of such compensation.
Under this rule, no employee may be elected to serve as a chair of the board of a nonprofit corporation. This prevents anyone who benefits from a compensation agreement from voting or deliberating on the issue.
2. Charitable corporations and trusts that are required to file an independent CPA audit report or review with the attorney general’s office must designate an audit committee to provide certain oversight of the audit function.
There are five requirements of the audit committee:
- It must consist of independent directors
- It must oversee the accounting and financial reporting processes
- The committee must annually retain or view the retention of the independent outside auditor.
- It must review the results of the audit and any management letter
- It must oversee the implementation of and compliance with the whistleblower and conflict policies.
If the nonprofit organization has annual revenue great than $1 million then more responsibilities apply such as discussing material risks and weaknesses in audit controls, considering the performance of the audit, and annually reporting to the board.
3. For organizations required to file an independent audit report with the attorney general’s office, the threshold is increased over time from the current amount of $250,000 in revenue to $1 million.
The amount that triggers a requirement to file an audited financial report is based on gross annual revenue. It’s increased to $500,000 between July 1, 2014, and June 30, 2017. From there it goes up to $750,000 between July 1, 2017 and June 30, 20121, and to $1 million after that. Any organization that has annual revenue under $250,000 must file an unaudited financial report with the AG, and those over $250,000 but below the full audit requirement must file an independent CPA review report.
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.