Prohibits certain individuals from receiving compensation from public charities; requires reasonable compensation when allowed; establishes the state board training

Summary of provisions

Section one adds a new subdivision 16 to section 63 of the Executive Law to authorize the Attorney General to make inquiry into any documents prepared for compliance with section 727 of the not-for-profit corporation law, relating to the compensation of executives.

Section two amends subparagraph 12 of subparagraph (a) of the Not-For-Profit Corporation Law ("NPCL") to state that compensation is subject, where applicable, to section 727 of the Not-For-Profit Corporation Law.

Section three amends section 701 of the NPCL to disqualify employees and their relatives from sitting on the board of the directors of the corporation where they are employed.

Section four amends paragraph (a) of section 702 of the NPCL to provide that not-for-profit corporations with annual gross receipts in an amount that would trigger an audit and not-for-profit corporations with annual gross receipts equal to or above $250,000 must have at least five directors on their board.

Section five amends paragraph (a) of section 706 of the NPCL to clarify that removal of directors for cause is to include violations of NPCL 717, duty of directors and officers, or violation of the bylaws or violation of the conflict of interest policy contained in the bylaws.

Section six amends NPCL 708, action by the board, to allow for Unanimous Consent in Lieu of a Meeting to occur via e-mail delivery.

Section seven amends NPCL 711, notice of meetings of the board, to allow for e-mail delivery.

Section eight amends NPCL 712 to disallow the Executive Committee from fixing the compensation of directors, officers, staff or agents of the corporation, making this a full board function.

Section nine amends NPCL 713, to disallow officers from receiving compensation and to disallow them from holding more than one office.

Section ten amends NPCL 713 to law to disqualify employees and their relatives from being compensated for fulfillment of their duties toward the corporation.

Sections eleven and twelve amend NPCL 715 to allow the board to fix director compensation for private foundations only and to disallow the fixing of compensation for directors for public charities, and to disallow the compensation of officers at public charities.

Section thirteen amends NPCL 717 to mandate that if there is compensation that said compensation must be reasonable and be subject to the new Section 727.

Sections fourteen and fifteen amend NPCL 719 to append joint and several liability to directors who vote for excess compensation and to call for subrogation of their rights to the corporation if there is a reimbursement or penalty.

Section sixteen amends NPCL 720 to make it actionable against the director for not following the new Section 727.

Section seventeen adds a new section 727 to the NPCL. It defines compensation to match the IRS definition surrounding "excess benefit transactions," while also matching the testing analysis and the individuals subject to the test who are paid by the corporation, while also exempting from the testing any paid staffer at a nonprofit who paid at or below the Level I of the Rates of Basic Pay for Executives Schedule promulgated by the US OPM. It also calls for testing as to whether compensation is reasonable or not for any salaries over this standard, with the testing being done in-house and only made available upon request of the Attorney General or if there is a lawsuit alleging payment of excess benefits.

Section eighteen amends section 104-A of the NPCL to increase various filing fees by ten dollars.

Section nineteen amends section 116 of the NPCL to create the state board training consortium.

Section twenty amends section 97-j of the state finance law to create the state board training consortium fund.

Section twenty-one provides the effective date.

Justification

This legislation will enhance public trust and accountability in New York State's public charities, and improve their sustainability in serving our communities. It takes a targeted, balanced and fair approach to the issues associated with public charities' compensation and promotes self-regulating accountability by public charities' boards. It imposes workable, necessary restrictions on public charities' staff expenditures and enhances board responsibilities, while avoiding the imposition of undue burdens on small public charities.

Legislative history

New Bill.

Fiscal implications

None.

Effective date

This act shall take effect on the one hundred eightieth day after is shall have become law.