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Attorney General Proposes Partnership with Nonprofit Sector

Joanne S. Barry

New York State Attorney General Eric T. Schneiderman announced in February an ambitious plan to bring the state's nonprofit law up to date by eliminating outdated and expensive regulatory burdens placed on nonprofits, streamlining unnecessarily complicated processes, and strengthening oversight and accountability. CPAs who work with New York nonprofits should quickly become acquainted with the proposed changes.

Released on the heels of Governor Cuomo's executive order placing a $199,000 cap on state funds that can be used for executive pay, the plan—a response to a set of recommendations put forward by the attorney general's Leadership Committee for Nonprofit Revitalization—recommends requiring that nonprofit boards provide enhanced and independent oversight of executive compensation and gives the attorney general additional tools to police self-dealing and other forms of corruption. It also proposes to modernize the state's laws to make New York more nonprofit friendly, increase board responsibilities to oversee financial audits, and streamline bureaucratic processes to expedite approval of key nonprofit transactions.

The committee's 46-page report highlighted what many nonprofit organizations in New York already know: the sluggish adoption of modern technology systems and procedures by the state has left nonprofits struggling to meet the state's own mandates, forcing them to expend time and money on archaic, inefficient processes that take the focus (and funding) away from mission-critical efforts. The committee recommends amending outdated laws, upgrading the state's technology infrastructure to allow electronic transmission of board and membership meeting notices, and creating a centralized database for nonprofit filings—all of which will be embraced by nonprofits in New York State, including the NYSSCPA. As a nonprofit, we have firsthand knowledge of the many ways that outdated technology and inefficient methods create roadblocks to the implementation of our mission.

Like many nonprofits, the Society already posts its annual report, bylaws, meeting notices, and other critical information to its website, where it is easily and readily available to its members and the public. Yet, New York State law currently requires board and membership meeting notices and waivers of notice to be sent by mail. To illustrate the excessive cost and resources that a nonprofit faces to satisfy the mandate, consider the April issue of the Society's own Trusted Professional. The issue included several pages of proposed bylaws changes, the nominating committee report and nominee biographies, and a formal notice of the annual election meeting. Each issue contained a paper ballot and return envelope that, to ensure safe delivery of these materials, was bagged in plastic. These additional expenses cost the Society thousands more dollars than the typical monthly printing and postage costs. E-mailing these notices to the membership—and even more importantly, accepting votes electronically—would save time and money that could be better spent on upgrading our own technological infrastructure and implementing additional programs that benefit the membership.

Currently, New York State law requires nonprofits that hold charitable assets in New York, solicit New Yorkers for donations, or receive government grants to register with the Attorney General's Charities Bureau and file annual reports—totaling more than 100,000 paper filings a year, according to the committee's report. While the IRS will accept an e-filed Form 990, New York will not, placing an additional burden on nonprofits to print and mail the forms—and an even heavier burden on the bureau to process that paper filing, which then ends up getting scanned and posted online anyway. The committee recommends amending that portion of the nonprofit law to allow for electronic filing with the Charities Bureau—another slam dunk for nonprofits and the taxpayers whose money funds them.

Under the committee's proposal, filed documents would be posted in a “data vault,” a centralized electronic repository through which nonprofits and state agencies could file documents. No longer would nonprofits file the same documents to multiple agencies; instead, the centralized database would be shared across agencies and organizations to improve oversight and eliminate redundancies, reducing costs and allowing nonprofits to better distribute resources.

Many of the other changes proposed by the committee echo those that the NYSSCPA has already recognized and worked independently to address. For example, the “New York on Board” and “Directors U” initiatives establish a database to match potential directors with nonprofit boards and provide an online resource of educational materials for training new directors. The concept is a welcome one and an opportunity for the NYSSCPA to reprise its CPAs on Boards program, which matched CPAs with New York nonprofit groups seeking to enhance their board's financial integrity. As stewards of the public interest, CPAs are the most qualified professionals to give board members guidance on taxation, compensation, and state and federal regulation, making the NYSSCPA a natural facilitator of this project.

A major thrust of the committee's proposal is to use technology to create system uniformity across the state's agencies and nonprofits, remove unnecessary roadblocks that impact their ability to achieve their missions, and build more professional nonprofit boards. The report recommends more than just technical upgrades for outdated modes of communication, but given the importance and size of the sector—New York nonprofits earn more than $200 billion in revenue, more than any other state, and employ more than 1.2 million people—we cannot afford to ignore the easy solutions that these upgrades provide.

Joanne S. Barry. Publisher. The CPA Journal Executive Director, NYSSCPA, jbarry@nysscpa.org.

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