Adirondack nonprofit leaders applaud passage of bill to overhaul their governance

LAKE PLACID – Nonprofit leaders from across the Adirondacks are applauding the recent passage of the Nonprofit Revitalization Act, which represents the first major overhaul of New York state’s charities laws in more than four decades.

The bipartisan legislation, authored by Attorney General Eric Schneiderman, is meant to enact substantial reforms to cut red tape and enhance governance and oversight of nonprofit organizations. The bill was passed by both houses of the Legislature in June. It has since been returned to the Assembly and is awaiting Cuomo’s signature.

Cali Brooks is executive director of the Adirondack Community Trust, a Lake Placid-based group that supervises a number of foundations and works with nonprofit groups all over the Adirondack region. She was a member of Schneiderman’s Leadership Committee for Nonprofit Revitalization, a group of 32 nonprofit and legal representatives that helped create the bill, and she praised the AG’s office for giving nonprofit organizations a chance to make their voices heard in the process.

“After 40 years, it is exciting to see that Attorney General Schneiderman, the Legislature and Governor Andrew Cuomo have modernized the oversight system for nonprofit governance,” Brooks said in a press release. “The Nonprofit Revitalization Act will serve to strengthen the entire nonprofit sector not only through streamlined and modernized processes, but through a heightened focus on effective and accountable governance.”

“Nonprofit organizations are the backbone of many services throughout the North Country,” said state Assemblywoman Janet Duprey, R-Peru. “The taxpayers simply could not afford to provide all of the services to thousands of people who benefit from the various agencies. I was pleased to vote for the Nonprofit Revitalization Act, which amends several outdated sections of several current laws. While increasing oversight to prevent fraud, the bill also reduces unnecessary requirements which should ultimately lower the cost of doing business, allowing more money to go to direct services.”

“The goals of the Nonprofit Revitalization Act include reducing outdated and unnecessary burdens on nonprofits and expediting the application process, improving both transparency and governance in the name of improving public trust in charities,” said Hannah Hanford, executive director of the Adirondack Health Foundation. “The Board of Trustees of the Adirondack Health Foundation believes strongly that charitable boards take their oversight role seriously because a nonprofit’s integrity is its most important asset. This new law reflects their philosophy and practice while it recognizes modern communication methods to streamline board e-communications to allow business to be accomplished in a timely manner.”

The Nonprofit Revitalization Act would enhance nonprofit governance and oversight to prevent fraud and improve public trust in the following ways:

-Ensure sound financial management by requiring that charities’ boards perform active oversight over financial audits. Boards would be responsible for retaining independent auditors and reviewing results of the audit. At larger charities (with more than $1 million in annual revenue), the board or audit committee would be required to follow additional oversight procedures.

-Prevent conflicts of interest by requiring that transactions between a nonprofit and insiders who stand to benefit be fully disclosed and that nonprofit boards determine they are fair, reasonable, and in organizations’ best interests. When a charity engages in a substantial transaction with an insider, the board would have to consider alternatives and document its basis for choosing the insider transaction.

-Strengthen the attorney general’s power to police fraud and abuse by granting clear power to bring judicial proceedings to unwind interested-party transactions.

-Ensure board independence by prohibiting any employee of a nonprofit from also serving as chair of its board.

-Promote good governance by requiring all nonprofits to adopt conflict-of-interest policies and those with over $1 million in annual revenue and 20 or more employees to adopt whistleblower policies.

The bill also would reduce burdens on nonprofits in the following ways:

-Streamline procedures for nonprofit mergers, property sales and corporate dissolutions, so funds needed for ongoing charitable programs are not wasted on unnecessary red tape.

-Modernize laws to allow nonprofits to conduct their affairs more efficiently, such as permitting nonprofits to use email and video technology for meetings and allowing boards to delegate the approval of small transactions to committees.

-Eliminate unnecessary and costly requirements for nonprofits forming in New York, saving nonprofits money and time and allowing them to commence charitable programs more quickly.

New York’s nonprofit sector generates hundreds of billions of dollars in annual revenue and is responsible for one in seven jobs, according to Schneiderman’s office. The bill is intended to make New York a more attractive destination for nonprofit organizations and a model for governance and oversight.