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 17 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 corpo- ration 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 direc- tors 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 Email delivery.

Section seven amends NPCL 711, notice of meetings of the board, to allow for Email 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 and ten amends NPCL 713, to disallow officers from receiv- ing compensation and to disallow them from holding more than one office.

Section 11 amends NPCL 713, to disallow relatives from receiving compen- sation.

Sections twelve and thirteen 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 disal- low the compensation of officers at public charities.

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

Sections fifteen and sixteen 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 reimburse- ment or penalty.

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

Section eighteen adds a new section 727 to the NPCL. It defines compen- sation to match the IRS definition surrounding "excess benefit trans- actions," while also matching the testing analysis and the individuals subject to the test who are paid by the corporation, while also exempt- ing 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 AG or if there is a lawsuit alleging payment of excess benefits.

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

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

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

Section twenty-three provides the effective date.

Justification

This legislation will enhance public trust and account- ability in New York State's public charities, and improve their sustain- ability in serving our communities. It takes a targeted, balanced and fair approach to the issues associated with public charities' compen- sation 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

2011-12: S. 7565 Investigations and Government Operations/A. 10508 Government Operations

Fiscal implications

None.

Effective date

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