December 06, 2016
On November 28, 2016, Governor Andrew Cuomo signed into law a Nonprofit Revitalization Reform Bill that will strengthen the regulation and operation of nonprofit organizations in New York State in many ways while also helping the communities they serve. The timing could not be better. In the current national political climate, nonprofits are likely to be called to provide new levels of support in multiple areas, including protection of civil rights, delivery of social services, immigration enforcement, family planning, and more.
The new law will help by introducing major improvements in many areas of nonprofit governance. For example, it will help ensure that board members are more familiar with, and responsible for, their organization's policies and procedures around conflicts of interest and whistleblower complaints. It bars any person who is the subject of a whistleblower complaint from involvement in handling that complaint and creates new levels of legal liability for individuals who abuse nonprofit assets for personal gain, even when they do not serve as an officer, director, or employee of the organization.
The law creates an incentive for nonprofits to review and correct procedures related to conflicts of interest, particularly those that happen innocently. This will apply to a wide range of potential conflict situations, such as when a director is unaware that a relative has an interest in a transaction or when a board approves a transaction after considering alternatives but fails to document the basis for its approval. The law outlines both a mechanism for a board to ratify a procedurally defective transaction if it was in the organization's best interest and an incentive for the board to tighten up its procedures going forward.