New York Nonprofit Revitalization Act Compliance and Policy Planning Guide

New York Nonprofit Revitalization Act Compliance and Policy Planning Guide

The purpose of this article is to assist your organization with compliance with some of the key provisions of the Act by identifying areas you may need to take additional action on. We have provided underlined section references to the Act for your convenience.
As discussed in a previous WS+B article, New York Revitalization Act Signed Into Law, the New York Nonprofit Revitalization Act (“the Act”) was signed into law December 18, 2013, and its provisions are generally effective July 1, 2014. The New York State Assembly and Senate are now considering legislation to extend the effective date for certain provisions of the Act to March 31, 2015.

New York Nonprofit Revitalization Act Compliance and Policy Planning Guide

1. 1. Have you adopted a conflict of interest policy that includes the following provisions? S 715-A
      1. A definition of the circumstances that constitute a conflict of interest
      2. Procedures for disclosing a conflict of interest to the audit committee or board if an audit committee does not exist
      3. A requirement that the person with the conflict not be present at or participate in board or committee deliberation or vote on the matter giving rise to the conflict
      4. A prohibition against any attempt by the person with the conflict to influence improperly the deliberation or voting on the matter giving rise to the conflict
      5. A requirement that the existence and resolution of the conflict be documented in the corporate records including the minutes of any meeting where the conflict was discussed or voted on
      6. Procedures for disclosing, addressing and documenting related party transactions
      7. A requirement that prior to the initial election of any director, and annually thereafter, the director shall complete, sign and submit to the corporate secretary a written statement identifying any entity that the director is an officer, director, trustee, member, owner or employee of and with which the organization has a relationship and any transaction in which the organization is a participant and in which the director might have a conflicting interest
      8. A requirement that the corporate secretary provide a copy of all completed statements to the audit committee chair or chair of the board if no audit committee exists
   2. Do you require that the written statement discussed in 1g above be resubmitted annually?
      S 715-A (C)
      The Act states that if you have adopted a conflict of interest policy that pursuant to other laws that is “substantially” consistent with the above provisions then you are deemed in compliance.
   3. Do you have a policy in place that states you will not enter into any related party transaction
      unless it is determined by the board to be fair, reasonable and in the best interests of the corporation? S 715 (d)
      1. For related party transactions involving a charitable corporation and a related party with a substantial financial interest, do you have a policy in place that the board or authorized committee will: S 715 (B)
      2. Prior to entering into the transaction consider alternative transactions to the extent possible
      3. Approve the transaction by not less than a majority vote of the directors or committee members present at the meeting
      4. Contemporaneously document in writing the basis for the board or authorized committee’s approval including its consideration of any alternative transactions
      5. Ensure officer salaries, if not set pursuant to the by-laws, shall require the affirmative vote of a majority of the entire board unless a higher proportion is set by the by-laws

A related party may not participate in deliberations or voting relating to matters in this section; however the board or committee is not prohibited from requesting information from the related party at a board or committee meeting prior to deliberations or voting. The Act states that you may have corporate policies and procedures concerning related party transactions that are more restrictive.

1. If you have twenty or more employees and in the prior fiscal year had revenue greater than one
   million dollars, have you adopted a whistleblower policy that includes the following provisions?
   S 715-B
   • a. Procedures for the reporting of violations or suspected violations of laws or corporate policies, including procedures for preserving the confidentiality of reported information
   • b. A requirement that an employee, officer or director of the corporation be designated to administer the policy and to report to the audit committee or other committee of independent directors, or if there are no such committees, to the board
   • c. Requires that the policy be distributed to all directors, officers, employees and to volunteers who provide substantial services to the corporation

   The Act states that if you have adopted a whistleblower policy pursuant to other laws that is “substantially” consistent with the above provisions, then you are deemed in compliance. If the organization is subject to other policy requirements of law or rule, you still must comply with those requirements as well.

2. Do your by-laws or corporate policies prohibit an employee of the corporation from serving as the chair of the board or any position with similar responsibilities? S 73 (F)
3. If your organization is required to file an audit with the attorney general, do you have a policy orprocedure in place that the board or audit committee of the board, consisting solely of independent directors, is responsible for the oversight of the accounting and financial process as well as the audit and will annually retain the auditor?S 712-A
4. If your organization in the prior fiscal year had or in the current fiscal year reasonably expects to have revenue in excess of $1,000,000, do you have a policy or procedure that incorporates the requirements of 6) above and in addition requires: S 712-B
   • a. The board or audit committee to review the scope and planning of the audit prior to the audit’s commencement
   • b. Review and discuss the following upon completion of the audit:
     • i. Any material risks and weaknesses in internal controls identified
     • ii. Any restrictions on the scope of the auditor’s activities or access to requested information
     • iii. Any significant disagreements between the auditor and management
     • iv. The adequacy of the corporation’s accounting and financial reporting process
   • c. Annual consideration of the performance and independence of the auditor
   • d. If the duties required by this section are performed by an audit committee, the committee’s activities are reported to the board

   Only independent directors may participate in any board or committee deliberations or voting related to audit oversight. Independent Director S 29 (21) is defined in the Act as follows:

   • a. Is not and has not been an employee of the organization or an affiliate of the organization within the last three years and does not have a relative who is or has been a key employee of the organization or affiliate of the organization within the last three years
   • b. The director or a relative of the director has not received more than $10,000 in direct compensation from the organization or affiliate of the organization in any of the last three fiscal years. (Other than reimbursement for reasonable expenses or services as a director)
   • c. The director is not a current employee of or does not have a substantial financial interest in, and does not have a relative who is a current officer of or has a substantial financial interest in, any entity that has made payments to or received payments from the organization or an affiliate of the organization for property or services in an amount which, in any of the last three fiscal years, exceeds the lesser of $25,000 or 2% of the entity’s consolidated gross revenues. “Payments” for the purposes of this paragraph does not include charitable contributions

   Affiliate means any entity controlled by, in control of, or under common control with the organization. S 29 (19)

   Relative includes spouse, ancestors, brothers and sisters, children, grandchildren, great-grandchildren, spouses of brothers, sisters, children, grandchildren, great-grandchildren and domestic partner as defined in the Public Health Law. S 29 (22)

   Key Employee is generally any person who is in a position to exercise substantial influence over the affairs of the organization and would typically include Presidents, Chief Executive Officers, Chief Operating Officers, Treasurers and Chief Financial Officers. See the Act for more details. S 29 (25)

5. Does your board or audit committee oversee the adoption, implementation and compliance with any conflict of interest policy or whistleblower policy adopted by the organization if not otherwise performed by another committee of the board comprised solely of independent directors? S 712 (C)
6. Do you have a policy in place to ensure that members, directors and officers are not present or otherwise participate in any board or committee deliberations or vote affecting their own compensation. S 58. (b)
7. Do you have at least three voting board members? S 67.(a)

You should also review the complete text of the Act at https://open.nysenate.gov/legislation/bill/A8072-2013. We of course cannot contemplate the Act’s effect on your specific organization and offer no assurances that other provisions of the Act could impact your organization as well. We recommend having an attorney review your by-laws and policies for compliance with the Act.

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The information contained herein is not necessarily all inclusive, does not constitute legal or any other advice, and should not be relied upon without first consulting with appropriate qualified professionals for your individual facts and circumstances.

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