Beginning July 1, 2014, New York State will require non-profit organizations to institute certain internal governance controls. The Non-Profit Revitalization Act (N.Y. N-PCL §§ 715-a, 715-b (2014)) imposes new requirements on whistleblower and conflict of interest policies, as well as financial reporting and audit procedures.
The required whistleblower policy, designed to promote an employer’s zero tolerance against retaliation for reporting suspected improper conduct, covers any non-profit with at least 20 employees and annual revenue in excess of $1 million in the prior fiscal year.
By statute, the policy at a minimum must include: (1) procedures for reporting violations and suspected violations of laws or policies, including for preserving the confidentiality of reported information; (2) a designated employee, officer or director tasked with administering the policy and reporting to the audit or other committee of independent directors or, if no such committee exists, to the board; and (3) a requirement that copies of the policy be provided to employees, officers, directors and volunteers.
Separately, the law requires a conflict of interest policy covering the non-profit’s directors, officers and key employees who must act in the non-profit’s best interests. As one would expect, the law requires the policy to include: (1) a definition of what constitutes a conflict of interest; (2) procedures for disclosing a conflict of interest to the audit committee or board; (3) a prohibition against any attempt by the person with the conflict of interest to influence improperly the deliberation of or voting on the matter giving rise to the conflict; and (4) a requirement that the existence and resolution of the conflict be documented in the non-profit’s records, including the minutes of any meeting at which the conflict was discussed or voted upon.
These policies should be designed and drafted to account for the make-up of the organization to ensure effectiveness and be distributed to the employees, officers, directors and volunteers. Every organization should understand and take into account its strengths in developing a whistleblower policy to ensure individuals have multiple avenues in which they can raise concerns, including an option that ensures anonymity.
Proper roll-out will be the key to effectiveness. Train all directors on the policies, even if they are not part of the process, in the event an employee or volunteer contacts them with a concern. Finally, training employees is important to ensure they understand the organization’s commitment to a zero tolerance for retaliation and the highest of ethical standards.