NY Nonprofit Revitalization Act: Governance Requirements for Large Organizations

At the end of 2013, New York signed into law the Nonprofit Revitalization Act (NPRA), which is designed to reform the statutory governance requirements for nonprofit organizations. This is one of the most sweeping pieces of nonprofit legislation in recent history. Most of the law will take effect beginning July 1, 2014, whose provisions affect not-for-profit corporations and wholly charitable trusts.

This post will discuss the governance requirements for larger organizations, beginning at $500,000 in annual revenue. Please keep in mind that these requirements are in addition to those affecting all organizations, regardless of size. You can review them in my previous post.

New Governance Requirements for Large Organizations:

Large organizations must take additional steps to run a compliant organization. Most of the steps are internal checks and balances, which ensure that decisions made are legal, and in the best interest of the organization. These provisions begin at a certain level of the organization’s revenue, which are presented below:

Over $500,000: Mandatory Audit Oversight: Each organization must have an audit committee consisting of independent directors.

An Independent Director is defined by the following:

1)   Not an employee or the organization or an affiliate, nor has a relative who is.

2)   Has not received more than $10K in compensation from the organization.

3)   Does not have financial interest in any entity that made payments to, or received payments (more than $25,000) from the organization or an affiliate.

This committee oversees accounting and financial reporting, annually selects an independent auditor, and reviews the financial result with the auditor.

Over $1,000,000: The audit committee is responsible for all of the above plus the following:

1)   Review the scope and planning the audit with the auditor.

2)   Discuss any weaknesses of, disagreements on, and restrictions on the internal audit process.

3)   Consider the auditor’s performance.

4)   Report to the board.

Over $1,000,000 and 20 employees: Mandatory Whistleblower Policy:

Organizations of this size are required to have a whistleblower policy. A whistleblower policy protects an individual who, in good faith, reports fraudulent or illegal activity, from certain repercussions. Those repercussions include discrimination, retaliation, harassment, intimidation, and adverse employment consequences.

The policy must include procedures for reporting violations (including a confidentiality provision). An employee, officer, or director must administer and deliver the Policy and Report to the Audit Committee for review.

Lastly, all officers, directors, employees, and volunteers must receive a copy.

Summary:

Because of their size and influence, large organizations have additional responsibilities for staying compliant. However, the reward is running an organization primed to maximize its social benefit.

This concludes our series on the NY Nonprofit Revitalization Act. If you missed the post on New Financial Reporting Rules, you can check it out here.

If you have questions about setting up or running a compliant nonprofit in New York or any other state, ask them below or give us a call!

Sources:

Bill No A08072 (New York Nonprofit Revitalization Act)