Schneiderman seeks new rules for nonprofits

ALBANY -- State Attorney General Eric Schneiderman proposed yesterday increasing the accountability of 103,000 nonprofits in New York through new board requirements and helping many financially by streamlining state contract payments, reporting and registration rules.

Schneiderman, whose office monitors all nonprofits, including 60,000 registered as charities, was endorsing the findings of the review committee he appointed last year. The legislative proposals would give his office and the nonprofits themselves new tools to police fraud and abuse.

With 1.2 million paid employees, the nonprofit sector represented 18 percent of New York's private workforce in 2010. The state had 22,000 active contracts with nonprofits totaling almost $17 billion as of last October for services like legal aid, child welfare, affordable housing and drug counseling, according to the review committee composed mainly of nonprofit officials and some attorney general staff. Their total revenue was about $200 billion, topping all other states.

"In these difficult economic times, it is more important than ever to make New York a hospitable environment so nonprofits can continue to carry out their vital work," Schneiderman said. "At the same time, we must maintain the public's trust by ensuring that nonprofits are governed effectively, and with meaningful oversight."

Michael Clark, president of the Nonprofit Coordinating Committee of New York and a member of the review panel, called their report "a blueprint for modernizing a critical sector of our state's economy to improve services and reduce waste."

Schneiderman's panel recommended state law revisions to require nonprofit boards annually determine that the total pay of their chief executives, top financial officers and other key employees is "reasonable, justified and commensurate with services provided." That review would have to include all benefits and perks and document their justification. Also, boards would have to adopt conflict-of-interest and whistle-blower policies.

In January, Gov. Andrew M. Cuomo signed an order to limit administrative costs and executive pay at state-funded service providers with a $199,000 salary cap for executives.

The legislation would prohibit chief executives or other paid employees from serving as board chairmen to ensure the board has the oversight role and isn't simply being led by the executives. It would grant the attorney general new authority to specifically challenge improper self-dealing. "Central to maintaining trust in the charitable sector is public confidence that insiders are not exploiting their positions for personal gain," the report said.