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New York Nonprofit Act: Important Changes Effective Soon

Erica Rice, CPA 05.12.2014 | Client Alert

Most provisions of the New York Nonprofit Revitalization Act of 2013, signed by Governor Andrew M. Cuomo on December 19, 2013, are effective on July 1, 2014.  The Act represents the greatest overhaul to the laws governing New York’s nonprofit sector in over 40 years. It seeks to enhance governance and oversight of nonprofits while streamlining various processes.  Here are significant highlights:

Revised Annual Financial Reporting Requirements and Oversight

Reporting thresholds have been increased as follows:

Effective Date

Annual Audit Report

Annual Review Report

Unaudited Report


Required   for gross revenue and support >    $500,000

Required   for gross revenue and support ≥ $250,000 but ≤ $500,000

Required   for gross revenue and support < $250,000


Required   for gross revenue and support >    $750,000

Required   for gross revenue and support ≥ $250,000 but ≤ $750,000

Required   for gross revenue and support < $250,000


Required   for gross revenue and support >    $1,000,000

Required   for gross revenue and support ≥ $250,000 but ≤ $1,000,000

Required   for gross revenue and support < $250,000

The Act also stipulates that for nonprofits with revenue greater than $1,000,000 per year, the board or an appointed committee shall review with the independent auditor the scope and planning of the audit prior to its commencement.  When the audit is completed, the board or committee must review and discuss with the independent auditor: 

  • Any material risks and weaknesses in internal control;
  • Any restrictions on the scope of the auditor’s activities or access to requested information;
  • Any significant disagreements between the auditor and management; and
  • The adequacy of the nonprofit’s reporting processes.

The board or committee shall oversee the adoption and implementation of a conflict of interest policy and a whistleblower policy. Only independent directors may participate in any board or committee deliberations relating to these matters.  In addition, no employee of the nonprofit shall serve as chair of the board or have any other title with similar responsibilities.

Significant Transactions

The Act allows for the New York Attorney General to approve transactions such as mergers and consolidations, dissolution and disposition of substantially all assets. Previously, this required approval by the New York Supreme Court.  Additionally, filings and registrations may be made to the Attorney General electronically.

Right of Inspection

The Act clarifies that directors, officers, members, key employees, and agents of a nonprofit are subject to the visitation and inspection of the New York courts. If it is found there has been any misappropriation of funds and assets, they are subject to suit by the Attorney General.

Clarified Designations

Nonprofits are now classified as either Charitable or Non-Charitable. This replaces the current categorizations of Type A, B, C, or D nonprofits.

Real Estate Transactions

A nonprofit that wishes to sell, mortgage or lease real property no longer needs a two-thirds vote of the board of directors.  It now only needs a majority vote of the board.


Under the Act, no member, director, or officer of a nonprofit organization may participate in any board or committee deliberation or vote regarding their own compensation.

Electronic Communications

The Act allows for electronic notification of meetings and waivers of notice and consent to be delivered via email and fax. Additionally, participation in meetings may be via video screen communication, provided that all other meeting participants can hear each other simultaneously.

Related Party Transactions

A nonprofit shall not enter into any related party transaction unless it is determined by the board to be fair, reasonable, and in the organization’s best interest. Any director, officer, or key employee who has an interest in a related party transaction shall disclose this to the board. At that time, the board should consider alternative transactions to the extent available. The board must approve the transaction with a majority vote and document in writing the basis for its approval. No related party may participate in the deliberations or voting related to the  transaction.

Conflict of Interest Policy

Nonprofits are required to adopt a conflict of interest policy to ensure that directors, officers, and key employees act in the organization’s best interest and comply with the applicable legal requirements. At a minimum, the conflict of interest policy shall include the following:

  • A definition of the circumstances that constitute a conflict of interest;
  • Procedures for disclosing a conflict of interest to the audit committee or board;
  • A requirement that the person with the conflict of interest not be present to participate in board or committee deliberations or vote in matters that give rise to such conflict;
  • A prohibition against any attempt by the person with the conflict to improperly influence the deliberation or voting on the matter that gives rise to the conflict; and
  • A requirement that the existence and resolution of the conflict be documented in the organization’s records and procedures for disclosing, addressing, and documenting related party transactions.

The conflict of interest policy should also require that prior to the initial election of any director, and annually after the election, the director provides a written statement identifying any relationships that may be a conflicting interest.

Whistleblower Policy

Every organization with 20 or more employees and revenue in excess of $1,000,000 in the prior fiscal year must adopt a whistleblower policy to protect from possible retaliation, any director, officer, employee, or volunteer who reports suspected improper contact.  This policy shall include the following provisions: 

  • Procedures for reporting of violations or suspected violations of laws or corporate policies;
  • A requirement that an employee, officer, or director of the organization be designated to administer the whistleblower policy and to report the matter to the board or committee; and
  • A requirement that a copy of the policy be distributed to all directors, officers, employees, and to volunteers who provide substantial services to the organization.

New Playing Field on the Horizon

Ahead of the July 1, 2014 effective date, nonprofits should review and update their governing documents and internal policies to be prepared and in compliance. 

Questions: Contact Mel Ockner at 212.331.7519 | mockner@ or Joseph Reinhardt at 516.806.3440 |

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