1. Nonprofit Revitalization Act of 2013 Fred M. LaMarca CPA, CFP® Zoltan Kemeny, CPA

2. Nonprofit Revitalization Act

3. Most Provisions take effect on July 1, 2014. Most Provisions take effect on July 1, 2014.

4. Changes in Act fall into two categories: 1. Relieving regulatory burdens on nonprofits 2. Improving compliance with governance issues.

5. Enhanced Audit Requirements Prior $250,000 annual revenue limit has been increased to $500,000, with subsequent increases to $750,000 in 2017 and $1,000,000 in 2021. Prior $250,000 annual revenue limit has been increased to $500,000, with subsequent increases to $750,000 in 2017 and $1,000,000 in 2021. Review report requirement annual revenue limit increases from $100,000 to $250,000. Review report requirement annual revenue limit increases from $100,000 to $250,000. Attorney general can demand an audit upon 120 days notice. Attorney general can demand an audit upon 120 days notice. Dollar Thresholds for Audits have Changed

6. Audit Committees Requires to retain/review the independent auditor. Requires to retain/review the independent auditor. Review the results of the audit and the management letter. Review the results of the audit and the management letter. Audit or similar independent committees are required to oversee the accounting and financial reporting process of the NPO and the audit of the NPO’s financial statements.

7. Additional Requirements for nonprofits with annual revenue in excess of $1,000,000 Review with the auditor the scope and planning of the audit prior to its commencement. Review with the auditor the scope and planning of the audit prior to its commencement. Governing Body Must:

8.  Any material risks and weaknesses in internal controls identified by the auditor  Any restrictions on the scope of the auditor’s activities or access to requested information.  Any significant disagreements between the auditor and management.  The adequacy of the nonprofit’s accounting and financial reporting process.  Annually consider the performance and independence of the auditor.  Audit committee needs to report its findings to the full Board of Directors. Review the following upon completion of Audit:

9. Independence Under The Act: An Independent Director means a Director who: 1. Is not, and has not, within the last 3 years been an employee of the nonprofit. 2. Does not have a relative who is or has been within the last 3 years a key employee of the nonprofit. A key employee is defined as a person who is in a position to exercise substantial influence over the affairs of the non-profit. The act sets forth specific requirements for director independence

10. 3. Has not received, and does not have a relative who has received more than $10,000 in compensation during any of the last 3 years. 4. Is not a current employee and does not have a relative who has a financial interest in an entity that has made payments to or receives payments from the non-profit in an amount which, in any of the last 3 fiscal years, exceeds the lesser of $25,000 or 2% of the entity’s consolidated gross revenues. Independence Under The Act:

11. Conflict of Interest Policies The act requires all non- profits to adopt a conflict of interest policy and requires each director to submit a completed conflict of interest statement annually to the audit committee. Specific steps need to be taken to clarify that any participation by the conflicted person is prohibited and must be documented in minutes.

12. Related Party Transactions A nonprofit is prohibited from entering into these transactions with an officer, director, or key employee unless the Board first determines that the transaction is fair, reasonable, and in the non-profit’s best interest at the time of such determination. Related party transactions are not prohibited by the Act but significantly raises the bar on these transactions

13. This generally means the Board has to have considered alternative transactions to the extent available, must be approved by at least a majority vote of the Board of the Directors and contemporaneously document these considerations in writing. Related Party Transactions

14. Board Committees Sub committees consisting of elected board members can act on behalf of the Board (Executive Committees) as long as they report to the full board. Committees which may include Board and non- board members, but act in an advisory function may not act on behalf of the board.

15. Whistleblower Policies The policy must set forth:  Reporting procedures for suspected violations of laws or corporate policy.  Designation of a corporate administrator with responsibility to report to the audit committee.  A copy of the policy needs to be distributed to all officers, directors, employees, and volunteers. Any NPO with 20 or more employees and annual revenues of over $1,000,000 in the prior year must adopt a whistleblower policy.