On Aug. 3, 2011, Governor Andrew Cuomo announced the creation of a task force to investigate the compensation practices of not-for-profit organizations that receive funding from New York State.1 The governor’s announcement must be viewed from the broader perspective of the ongoing trend of enhanced accountability for charities and other tax-exempt organizations. This article will discuss how these increasingly stringent accountability requirements can be expected to personally impact the officers, board members and key employees of such organizations.
Developing Scrutiny
The privileged status accorded eleemosynary organizations has long been accompanied by various restrictions and scrutiny by the authorities, and various concerns at different times have dominated the governmental agenda. Historically, these concerns have included (but have not been limited to) unfair competition with taxpaying corporations, support of subversive political activities, and insurance fraud. The current trend, in which the organizations’ efficiency in carrying out their missions is at issue, is now unlike any prior one in that the not-for-profits’ internal governance practices and processes themselves are now being scrutinized and regulated.
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