On December 18, 2013, Bill A8072 was signed into law affecting all not-for-profit organizations in New York. The purpose of this act, known as the “Non-Profit Revitalization Act of 2013,” is to improve governance and to reduce unnecessary procedures and requirements of nonprofits. The law takes effect on July 1, 2014.
The first thing your organization should do is revisit its by-laws and revise them to conform to the new law. Be sure to check for the following major changes:
- All organizations need to adopt conflict of interest policies regardless of the size of the organization.
- Any transactions between the organization and related parties (e.g. executive directors, officers, employees) must be fully disclosed. The boards of directors should determine if they are fair, reasonable, and in the organization’s best interest.
- Not-for-Profit organizations with 20 or more employees and an annual revenue in excess of $1,000,000 need to adopt a whistle-blower policy.
- Any organization subject to an audit or a review must have an audit committee overseeing the audit process. The organization must determine that their audit committee’s number and qualifications of members comply with the new law.
- Paid executives, employees, and directors can no longer be the chair of the board of directors. Also, they are prohibited from attending board meetings related to their own compensation unless requested to answer questions or provide information.
Another noteworthy change is in regards to determining the requirement of an audit or a review based on the organization’s revenue. From July 1, 2014 to June 30, 2017, organizations with gross revenues from $0 to $250,000 do not need to file an audit or a review report. Organizations with gross revenues from $250,001 to $500,000 are required to file a review report. Lastly, organizations with gross revenues of more than $500,000 are required to file an audit report.
Regardless of this requirement by the New York State Department of Law, the boards of directors should discuss the organization’s specific needs. Many grantors require an audit as conditions of their grants. Generally, potential donors want to donate to organizations that have good financial practices. An audit is a way to show the organization’s commitment to financial transparency and would help to reassure the potential donors that the funds/contributions would be used in accordance to the organization’s mission or donor’s intent.
To view the Non-Profit Revitalization Act bill in its entirety, go to the following website: http://open.nysenate.gov/legislation/bill/A8072-2013 . If you have any questions or need consultation from NE Kelly & Associates LLC, please contact us via email at firstname.lastname@example.org.