NY AG Schneiderman Proposes Overhaul of Nonprofit Laws

New York State Attorney General Eric Schneiderman warned the rules governing New York's nearly $200 billion a year nonprofit sector are outdated and overly burdensome, calling on Thursday for a a broad overhaul of the state's nonprofit laws, aimed at reducing paperwork and strengthening oversight.

"Millions of New Yorkers give their money, give their time, serve on boards, volunteer in not for profits," Schneiderman said at a breakfast hosted by Crain's New York Business at the Roosevelt Hotel in Midtown.

He said that although the sector has grown, oversight and support have not always kept up.

"There have been cutbacks because of [the] economic downturn,” he said, “but also there are problems caused by the administrative burdens that are caused by New York's failure to modernize our not for profit laws in recent decades."

The Attorney General also made public a report, “Revitalizing Nonprofits, Renewing New York,” prepared for him by a task force made up of nonprofit leaders, including representatives of the Better Business Bureau, the Children's Aid Society and the Greater New York Hospital Association. Schneiderman commissioned the report last June.

Among its recommendations:

  • Simplify the process for new nonprofits to officially incorporate.
  • Capitalize New York's revolving loan fund to help nonprofits with cash flow problems which provide essential services.
  • Clarify and strengthen the law empowering the Attorney General to investigate fraud such as self-dealing.

In the next few weeks, Schneiderman will propose a bill acting on these and other recommendations.

A particular area of focus is likely to be Albany's 22,000 active contracts with nonprofits for services like disaster aid and shelter for the homeless. Schneiderman said too often those companies are not paid promptly.

Governor Andrew Cuomo recently issued an executive order limiting pay for executives whose nonprofits contract with the state to $199,000 from public funds (they could earn more from private revenue streams.)

Asked by a reporter whether he favors the pay cap, Schneiderman said "we all support the same goal. I would like to add our more comprehensive approach to the expenditure of not for profit dollars into the mix, and I think we'll come up with a workable solution."