The New York Non-profit Revitalization Act of 2013March 25, 2014
Michelle Y. Hatch, CPA
New York state laws governing non-profit organizations have been overhauled. The Non-profit Revitalization Act of 2013 (the Act) includes substantial reforms that will reduce red tape while enhancing governance and oversight of non-profits. Under the new laws, non-profit organizations will now be able to incorporate, dissolve and merge more easily, communicate and hold meetings using modern technology and enter transactions without having to go to court.
The Act also includes oversight and governance reforms that will require non-profit boards to perform stricter oversight of insider deals and allow the Attorney General to hold insiders accountable for abuse. The bill requires the adoption of more robust financial oversight requirements and conflict of interest and whistleblower policies to protect nonprofit employees from retaliation when they identify wrongdoing.
Key changes are noted below:
Annual reporting requirement changes: the threshold revenue levels for obtaining an independent CPA audit or review report for non-profits registered with the New York Attorney General will change beginning July 1, 2014. The new requirements are as follows:
Streamlined and simplified administrative procedures:
Streamlining procedures for non-profit mergers, property sales and corporate dissolutions
Modernizing laws to allow non-profits to conduct their affairs more efficiently, such as permitting non-profits to use email and video technology for meetings and allowing boards to delegate the approval of small transactions to committees
Eliminating unnecessary and costly requirements for non-profits forming in New York, saving nonprofits money and time and allowing them to commence charitable programs more quickly
- Streamlining procedures for non-profit mergers, property sales and corporate dissolutions
Enhanced governance procedures, policies and prohibitions:
Requirements for charities’ boards to perform active oversight over financial audits. Boards will be responsible for retaining independent auditors and reviewing results of the audit. The board or audit committee of larger charities (over $1 million in annual revenue), will be required to follow additional oversight procedures.
Requirements that transactions between a nonprofit and insiders who stand to benefit be fully disclosed and that non-profit boards determine they are fair, reasonable, and in the organization’s best interest. When a charity engages in a substantial transaction with an insider, the board will have to consider alternatives and document its basis for choosing the insider transaction.
The Attorney General’s powers have been strengthened to police fraud and abuse by granting clear power to bring judicial proceedings to unwind interested-party transactions.
Prohibiting any employee of a non-profit from also serving as chair of its board to ensure board independence.
Requirements for all non-profits to adopt conflict of interest policies and those with over $1 million in annual revenue and 20 or more employees to adopt whistleblower policies.
- Requirements for charities’ boards to perform active oversight over financial audits. Boards will be responsible for retaining independent auditors and reviewing results of the audit. The board or audit committee of larger charities (over $1 million in annual revenue), will be required to follow additional oversight procedures.
If your non-profit organization is registered in New York, make sure you and your board are aware of and implementing these new requirements.
If you have additional questions, please contact Michelle Hatch at email@example.com or 781.610.1231.
Michelle Y. Hatch, CPA, is a partner with BlumShapiro, the largest regional accounting, tax and business consulting firm based in New England, with offices in Massachusetts, Rhode Island and Connecticut. The firm serves as business advisors for today’s leading companies, non-profit organizations and government entities, working to strategically tailor and consistently deliver tested solutions for unlocking an organization’s full potential. For more information about BlumShapiro, visit blumshapiro.com.