Nonprofit Revitalization Is Here. Is Your Organization Ready?

By Michael McNee  |  July 16, 2013  |  Download PDF

New York State Attorney General Eric T. Schneiderman’s initiative called the Nonprofit Revitalization Act (the Act) represents the most sweeping changes in New York State’s nonprofit law in 40 years. The law is a balance between less red tape and more oversight by the Attorney General. It considerably increases liability of Board members and scrutiny of Board actions. With the new Act, it’s time for a routine checkup of your organization’s governance policies.

NONPROFIT REVITALIZATION IS HERE. IS YOUR ORGANIZATION READY?

NONPROFIT REVITALIZATION IS HERE. IS YOUR ORGANIZATION READY?

As you may know, New York State Attorney General Eric T. Schneiderman’s initiative called the Nonprofit Revitalization Act (the Act) has been about two years in the making. On June 21, 2013, it passed the New York State Assembly and Senate. It is presently with Governor Cuomo for his consideration and signature to make it law, effective January 1, 2014.

Now is the time for a routine checkup of your organization’s governance policies. Please reach out to the specialists in the Nonprofit and Government Services Group at Marks Paneth LLP . We have a diagnostic tool that will help alleviate any concerns you might have regarding compliance with the new law -- and with good governance in general.

The Act represents the most sweeping changes in New York State’s nonprofit law in 40 years. We encourage you to read the summary prepared by the Attorney General’s office. The law is a balance between less red tape and more oversight by the Attorney General. It considerably increases liability of Board members and scrutiny of Board actions.

A very significant aspect of the law is that it establishes new rules for transactions involving an “interested” Director, Officer or Key Employee of the organization and gives the Attorney General power to interpret actions by the Board and the organization in a subjective manner. In addition, it gives the Attorney General broad powers to bring judicial proceedings against the organization, the Board and management where the Attorney General believes abuses have occurred.

Many of you have adopted best practices in conjunction with the IRS Form 990 revision that occurred in 2008. This is good news. With the new Act, it’s time to take a closer look at how you do things. This communication does not pretend to summarize the entire legislation. Our goal here is to encourage you to familiarize yourself with the Act and your responsibilities therein.

Items to consider are:

  • Do you have a conflict of interest policy? Are conflict statements signed by all Board members and management and even the personnel associated with your procurement process?
  • Where conflicts exist, have you ensured the conflicted party is recused from any decision making? Have you documented that you looked for alternative arrangements where a conflict exists? Does your documentation describe how the transaction is in the “best interest” of your organization?
  • Does your organization have the appropriate audit oversight in place to satisfy the new rules under Section 712-a of the Not-for-Profit Corporation Law (N-PCL), as it relates to the external audit?

These are just a few things to think about. If you feel you need a helping hand in determining your organization’s compliance with the legislation, please contact one of our specialists.


About Michael McNee

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Michael McNee, CPA, is the Partner-in-Charge of Attest Services and Co-Partner-in-Charge the Nonprofit, Government & Healthcare Group at Marks Paneth LLP. He is also a member of the firm’s Executive and Management Committees. In these roles, Mr. McNee is responsible for overseeing the execution of the firm’s audit and attest services and directing the operations of the Nonprofit, Government & Healthcare Group. He develops strategy, sets policy and acquires and develops talent. In addition to his managerial... READ MORE +


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