Non-Profit Revitalization Act (2013) and NYS Libraries and Library Systems

View Frequently Asked Questions about the Non-Profit Revitalization Act (2013).

The State of New York enacted §715-a and §715-b of the Not-for-Profit Corporation Law (NPCL) as part of the Non-profit Revitalization Act of 2013 (Chapter 549 of the Laws of 2013). The Act applies to corporations subject to the Not-for-Profit Corporation Law, including those incorporated with the Department of State or formed as education corporations by Regents Charter or by Special Legislative Act, and as such, library and library system boards of trustees are now required to adopt a “conflict of interest” policy and, in some instances, a “whistleblower” policy. These requirements became effective on July 1, 2014.

The “conflict of interest” policy requirement applies to:

association libraries,
public libraries,
public library systems, and
reference and research library resources systems.

The “whistleblower” policy requirement applies only to those above libraries and systems that meet BOTH of the following requirements:

have twenty or more employees, AND
in the prior fiscal year had annual revenue in excess of one million dollars.

A brief description of the minimum requirements for each such policy is as follows:

Conflict of Interest policy that includes, at a minimum:

a definition of the circumstances that constitute a conflict of interest;
procedures for disclosing a conflict to the audit committee or, if no audit committee, to the board;
a requirement that the person with the conflict not be present at or participate in board/committee deliberation or vote on the matter giving rise to the conflict;
a prohibition against any attempt by the person with the conflict to influence improperly the deliberation or voting on the matter giving rise to the conflict;
a requirement that the existence and resolution of the conflict be documented in the corporation’s records, including in the minutes of any meeting at which the conflict was discussed or voted upon; and
procedures for disclosing, addressing, and documenting related party transactions in accordance with NPCL §715.

Whistleblower policy that includes:

A provision that no director (or trustee), officer, employee or volunteer of a corporation who in good faith reports any action or suspected action taken by or within the corporation that is illegal, fraudulent or in violation of any adopted policy of the corporation shall suffer intimidation, harassment, discrimination or other retaliation or, in the case of employees, adverse employment consequence;
Procedures for reporting violations or suspected violations of law or corporate policies, including procedures for preserving the confidentiality of reported information;
A requirement that an employee, officer or director of the corporation be designated to administer the policy and report to the audit committee or other committee of independent directors, or if none, to the board; and
A requirement that a copy of the policy be distributed to all directors, officers, employees and to volunteers who provide substantial services to the corporation.

For helpful information on developing new policies, libraries are encouraged to contact their public library system. In addition, ALA’s United for Libraries has sample policies.

Frequently Asked Questions

Q: Are public and association libraries and library systems subject to the financial reporting and auditing requirements outlined in the Non-Profit Revitalization Act of 2013?

A: No. The Non-Profit Revitalization Act of 2013 added a new Not-for-Profit Corporation Law §712-a that requires a board of trustees, or a designated audit committee of the board comprised solely of independent directors, to oversee the accounting and financial reporting processes of a corporation and the audit of the corporation’s financial statements, and to annually retain or renew the retention of an independent auditor to conduct the audit. However, this provision applies only to a corporation that is required to file an independent certified public accountant’s audit report with the Attorney General under Executive Law §172-b(1), which applies to organizations registered with the Attorney General’s Charities Bureau.

Public and association libraries, public library systems and reference and research library resources systems that file annual reports with the State Education Department (SED) are NOT required to register with or file audit reports with the Attorney General’s Charities Bureau and therefore are NOT subject to the financial oversight / audit requirements of the Not-for-Profit Corporation Law §712-a.

Executive Law §172-a(2)(g) exempts from Charities registration: "An educational institution which files annual financial reports with the regents of the University of the State of New York as required by the education law or with an agency having similar jurisdiction in another state or a library which files annual financial reports as required by the state education department."

This long standing exemption was not changed by the Non-Profit Revitalization Act.

Q: Which takes precedence for public and association libraries and library systems: Open Meetings Law, or the Not for Profit Law, as amended by the Non Profit Revitalization Act of 2013?

A: The Committee on Open Government issued an opinion on September 15, 2014, to the State Education Department, stating that Open Meetings Law takes precedence. All public library systems, cooperative library systems, public libraries and association libraries are subject to Open Meetings Law under the provisions of Education Law 260-a Meetings of board of trustees.

Q: Which conflict of interest policies are library boards mandated to adopt: the one mandated by the General Municipal Law, or that mandated in the Non-Profit Revitalization Act?

A: Pursuant to Not-for-Profit Corporation Law (NPCL) §715-a, as added by the Non-Profit Revitalization Act, libraries that are subject to the NPCL (i.e., libraries incorporated by the Board of Regents as education corporations and libraries that are incorporated with the Department of State as not-for-profit corporations) must adopt a conflict of interest policy that meets the requirements of NPCL §715-a.

General Municipal Law (GML) Article 18 (§§800-813) also includes provisions on conflict of interest. Pursuant tor General Municipal Law §2, the GML is generally applicable to town, city, village and county governments. Therefore, we believe that a library would be governed by the GML conflict provisions only if the library is a part of the local government and has no separate legal existence apart from the local government. Most libraries are independent Education Corporations or Not-for-Profit Corporations and, as such, are distinct legal entities, separate from the town, village, city etc. in which they are located or serve. However, in rare instances, a library may have been established as an unincorporated office, department etc. of the local government. In such instance, the GML conflict provisions will apply to the library as an instrument of the local government.

Finally, we acknowledge that it is at least theoretically possible that a library incorporated under the Education Law or the NPCL may be affiliated with a local government to such an extent that it is legally deemed to be a part of the local government so that the GML conflict provision apply to the library. We believe that such instances, if they exist, would be extremely rare. However, because NPCL §715-a is interpreted to require a corporation to adopt any specific conflict of interest policy not otherwise required by this section or any other law or rule, or to supersede or limit any requirement or duty governing conflicts of interest required by any other law or rule (emphasis added)," we believe that both NPCL §715-a and GML Article 18 would apply to the library in such instance.

Q: Is the “Whistleblower Policy” mandated by the Non-Profit Revitalization Act required given Labor Law §740(2)’s statutory prohibition against punitive actions which might be taken by employers to punish whistleblowers, and does that statute also apply to public employers or only those in the private sector, or both?

A: Pursuant to Not-for-Profit Corporation Law (NPCL) §715-b, as added by the Non-Profit Revitalization Act, libraries that are subject to the NPCL (i.e. libraries incorporated by the Board of Regents as education corporations and libraries that are incorporated with the Department of State as not-for-profit corporations) must adopt a Whistleblower policy that meets the requirements of NPCL §715-b.

The New York Labor Law and the NPCL (unless overridden by the Education Law) would both apply to most libraries. The Labor Law applies to most businesses within New York State and is a general law effecting employer/employee relations. We note that the Not for Profit Law §715-b (d) states "Nothing in this section shall be interpreted to relieve any corporation from any additional requirements in relation to internal compliance, retaliation, or document retention required by any other law or rule." Thus we believe that both laws would apply to libraries.

Q: Is an appeal process in Whistleblower Policy required?

A: While having an appeal process in the whistleblower policy might be useful, and a library developing one should consult with their attorney regarding the pros and cons, we do not believe it is required by Not-for-Profit Corporation Law §715-b.