§ 8-1.9 Trust governance

(a) For purposes of this section:

(1) A "trust" means a trust created solely for charitable purposes, or
a trust that continues solely for such purposes after all non-charitable
interests have terminated.

(2) "Charitable purpose" means any religious, charitable, educational
or benevolent purpose.

(3) "Key person" means any person other than a trustee, whether or not
an employee, who (i) has responsibilities, or exercises powers of
influence over the trust as a whole similar to the responsibilities,
powers, or influence of trustees and officers; (ii) manages the trust,
or a segment of the trust that represents a substantial portion of the
activities, assets, income or expenses of the trust; or (iii) alone or
with others controls or determines a substantial portion of the trust's
capital expenditures or operating budget.

(4) An "affiliate" of a trust means any entity controlled by, or in
control of, such trust.

(5) "Relative" of an individual means (i) his or her spouse or
domestic partner as defined in section twenty-nine hundred ninety-four-a
of the public health law; (ii) his or her ancestors, brothers and
sisters (whether whole or half blood), children (whether natural or
adopted), grandchildren, great-grandchildren; or (iii) the spouse or
domestic partner of his or her brothers, sisters, children,
grandchildren, and great-grandchildren.

(6) "Related party" means (i) any trustee or key person of the trust
or any affiliate of the trust; (ii) any relative of any individual
described in clause (i) of this subparagraph; or (iii) an entity in
which any individual described in clauses (i) and (ii) of this
subparagraph has a thirty-five percent or greater ownership or
beneficial interest or, in the case of a partnership or professional
corporation, a direct ownership interest in excess of five percent.

(7) "Independent trustee" means a trustee who: (i) is not, and has not
been within the last three years, an employee of the trust or an
affiliate of the trust, and does not have a relative who is, or has been
within the last three years, a key person of the trust or an affiliate
of the trust; (ii) has not received, and does not have a relative who
has received, in any of the last three fiscal years, more than ten
thousand dollars in direct compensation from the trust or an affiliate
of the trust; (iii) is not a current employee of or does not have a
substantial financial interest in, and does not have a relative who is a
current officer of or have a substantial financial interest in, any
entity that has provided payments, property or services to, or received
payments, property or services from, the trust or an affiliate of the
trust if the amount paid by the trust to the entity or received by the
trust from the entity for such property or services, in any of the last
three fiscal years, exceeded the lesser of ten thousand dollars or two
percent of such entity's consolidated gross revenue if the entity's
consolidated gross revenue was less than five hundred thousand dollars;
twenty-five thousand dollars if the entity's consolidated gross revenue
was five hundred thousand dollars or more but less than ten million
dollars; one hundred thousand dollars if the entity's consolidated gross
revenue was ten million dollars or more; or (iv) is not and does not
have a relative who is a current owner, whether wholly or partially,
director, officer or employee of the trust's outside auditor or who has
worked on the trust's audit at any time during the past three years. For
purposes of this subparagraph, the terms: "compensation" does not
include reimbursement for expenses or the payment of trustee commissions
or reasonable compensation as permitted by law and the governing
instrument; and "payment" does not include charitable contributions,
dues or fees paid to the trust for services which the trust performs as
part of its nonprofit purposes, or payments made by the trust at fixed
or non-negotiable rates or amounts for services received, provided that
such services by and to the trust are available to individual members of
the public on the same terms, and such services provided to the trust
are not available from another source.

(8) "Related party transaction" means any transaction, agreement or
any other arrangement in which a related party has a financial interest
and in which the trust or any affiliate of the trust is a participant,
except that a transaction shall not be a related party transaction if:
(i) the transaction or the related party's financial interest in the
transaction is de minimis, (ii) the transaction would not customarily be
reviewed by the board, or boards of similar organizations, in the
ordinary course of business and is available to others on the same or
similar terms, or (iii) the transaction constitutes a benefit provided
to a related party solely as a member of a class of the beneficiaries
that the trust intends to benefit as part of the accomplishment of its
mission which benefit is available to all similarly situated members of
the same class on the same terms.

(9) "Independent auditor" means any certified public accountant
performing the audit of the financial statements of a trust required by
subdivision one of section one hundred seventy-two-b of the executive
law.

(b)(1) The trustees or a designated audit committee consisting of one
or more independent trustees of any trust required to file an
independent certified public accountant's audit report with the attorney
general pursuant to subdivision one of section one hundred seventy-two-b
of the executive law shall oversee the accounting and financial
reporting processes of the trust and the audit of the trust's financial
statements. The trustees or designated audit committee shall annually
retain or renew the retention of an independent auditor to conduct the
audit and, upon completion thereof, review the results of the audit and
any related management letter with the independent auditor.

(2) The trustees or a designated audit committee consisting of one or
more independent trustees of any trust required to file an independent
certified public accountant's audit report with the attorney general
pursuant to subdivision one of section one hundred seventy-two-b of the
executive law and that in the prior fiscal year had or in the current
fiscal year reasonably expects to have annual revenue in excess of one
million dollars shall, in addition to those duties set forth in
subparagraph one of this paragraph:

(A) review with the independent auditor the scope and planning of the
audit prior to the audit's commencement;

(B) upon completion of the audit, review and discuss with the
independent auditor: (i) any material risks and weaknesses in internal
controls identified by the auditor; (ii) any restrictions on the scope
of the auditor's activities or access to requested information; (iii)
any significant disagreements between the auditor and management; and
(iv) the adequacy of the trust's accounting and financial reporting
processes;

(C) annually consider the performance and independence of the
independent auditor; and

(D) if the duties required by this section are performed by an audit
committee, report on the committee's activities to the trustees.

(4) If a trust is under the control of another trust or a corporation,
the trustees or designated audit committee of the controlling trust, or
the board or designated audit committee of the board of the controlling
corporation, may perform the duties required by this paragraph.

(5) Only independent trustees may participate in deliberations or
voting relating to matters set forth in this section, provided that
nothing in this paragraph shall prohibit the board or designated audit
committee from requesting that a person with an interest in the matter
present information as background or answer questions at a committee or
board meeting prior to the commencement of deliberations or voting
relating thereto.

(c) (1) Notwithstanding any provision of the trust instrument to the
contrary, no trust shall enter into any related party transaction unless
the transaction is determined by the trustees, or an authorized
committee thereof, to be fair, reasonable and in the trust's best
interest at the time of such determination. Any trustee, officer or key
employee who has an interest in a related party transaction shall
disclose in good faith to the trustees, or an authorized committee
thereof, the material facts concerning such interest.

(2) With respect to any related party transaction in which a related
party has a substantial financial interest, the trustees, or an
authorized committee thereof, shall:

(A) Prior to entering into the transaction, consider alternative
transactions to the extent available;

(B) Approve the transaction by not less than a majority vote of the
trustees or committee members present at the meeting; and

(C) Contemporaneously document in writing the basis for the trustees'
or authorized committee's approval, including consideration of any
alternative transactions.

(3) The trust instrument, by-laws or any policy adopted by the
trustees may contain additional restrictions on related party
transactions and additional procedures necessary for the review and
approval of such transactions, or provide that any transaction in
violation of such restrictions shall be void or voidable.

(4) The attorney general may bring an action to enjoin, void or
rescind any related party transaction or proposed related party
transaction that violates any provision of this article or was otherwise
not reasonable or in the best interests of the trust at the time the
transaction was approved, or to seek restitution, and the removal of
trustees or officers, or seek to require any person or entity to:

(A) Account for any profits made from such transaction, and pay them
to the trust;

(B) Pay the trust the value of the use of any of its property or other
assets used in such transaction;

(C) Return or replace any property or other assets lost to the trust
as a result of such transaction, together with any income or
appreciation lost to the trust by reason of such transaction, or account
for any proceeds of sale of such property, and pay the proceeds to the
trust together with interest at the legal rate; and

(D) Pay, in the case of willful and intentional conduct, an amount up
to double the amount of any benefit improperly obtained.

(5) The powers of the attorney general provided in this section are in
addition to all other powers the attorney general may have under this
chapter or any other law.

(6) No related party may participate in deliberations or voting
relating to a related party transaction in which he or she has an
interest; provided that nothing in this section shall prohibit the
trustees or designated audit committee from requesting that a related
party present information or answer questions concerning a related party
transaction at a trustees or committee meeting prior to the commencement
of deliberations or voting relating to the related party transaction.

(7) In an action by any person or entity other than the attorney
general, it shall be a defense to a claim of violation of any provisions
of this paragraph that a transaction was fair, reasonable and in the
trust's best interest at the time the trust approved the transaction.

(8) In an action by the attorney general with respect to a related
party transaction not approved in accordance with subparagraph one or
two of this paragraph at the time it was entered into, whichever is
applicable, it shall be a defense to a claim of violation of any
provisions of this paragraph that (i) the transaction was fair,
reasonable and in the trust's best interest at the time the trust
approved the transaction and (ii) prior to receipt of any request for
information by the attorney general regarding the transaction, the
trustees have: (A) ratified the transaction by finding in good faith
that it was fair, reasonable and in the trust's best interest at the
time the trustee approved the transaction; and, with respect to any
related party transaction involving a charitable corporation and in
which a related party has a substantial financial interest, considered
alternative transactions to the extent available, approving the
transaction by not less than a majority vote of the trustees or
committee members present at the meeting; (B) documented in writing the
nature of the violation and the basis for the trustees' or committee's
ratification of the transaction; and (C) put into place procedures to
ensure that the trustee complies with subparagraphs one and two of this
paragraph as to related party transactions in the future.

(d) (1) Except as provided in subparagraph four of this paragraph,
every trust shall adopt, and oversee the implementation of, and
compliance with, a conflict of interest policy to ensure that its
trustees, officers and key persons act in the best interest of the trust
and its beneficiaries and comply with applicable legal requirements,
including but not limited to the requirements set forth in this
paragraph.

(2) The conflict of interest policy shall include, at a minimum, the
following provisions:

(A) a definition of the circumstances that constitute a conflict of
interest;

(B) procedures for disclosing a conflict of interest or possible
conflict of interest to the trustees or to a committee of the trustees,
and procedures for the trustees or committee to determine whether a
conflict exists;

(C) a requirement that the person with the conflict of interest not be
present at or participate in any deliberation or vote on the matter
giving rise to such conflict, provided that nothing in this section
shall prohibit the trustees or a committee from requesting that the
person with the conflict of interest present information as background
or answer questions at a trustees or committee meeting prior to the
commencement of deliberations or voting relating thereto;

(D) a prohibition against any attempt by the person with the conflict
to influence the deliberation or voting on the matter giving rise to
such conflict;

(E) a requirement that the existence and resolution of the conflict be
documented in the trust's records, including in the minutes of any
meeting at which the conflict was discussed or voted upon; and

(F) procedures for disclosing, addressing, and documenting related
party transactions in accordance with this paragraph.

(3) The conflict of interest policy shall require that prior to a
trustee's initial appointment, and annually thereafter, such trustee
shall complete, sign and file with the records of the trust a written
statement identifying any entity of which he or she is an officer,
director, trustee, member, owner (either as a sole proprietor or a
partner), or employee and with which the trust has a relationship, and
any transaction in which the trust is a participant and in which the
trustee might have a conflicting interest. The policy shall require that
each trustee annually resubmit such written statement. The trustees
shall provide a copy of all completed statements to the chair of the
audit committee, if there is an audit committee.

(4) A trust that has adopted and possesses a conflict of interest
policy pursuant to federal, state or local laws that is substantially
consistent with the provisions of subparagraph two of this paragraph
shall be deemed in compliance with provisions of this paragraph.

(5) Nothing in this paragraph shall be interpreted to require a trust
to adopt any specific conflict of interest policy not otherwise required
by this paragraph 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.

(e) (1) Except as provided in subparagraph three of this paragraph,
the trustees of every trust that has twenty or more employees and in the
prior fiscal year had annual revenue in excess of one million dollars
shall adopt, and oversee the implementation of, and compliance with, a
whistleblower policy to protect from retaliation persons who report
suspected improper conduct. Such policy shall provide that no officer,
trustee, employee or volunteer of a trust who in good faith reports any
action or suspected action taken by or within the trust that is illegal,
fraudulent or in violation of any adopted policy of the trust shall
suffer intimidation, harassment, discrimination or other retaliation or,
in the case of employees, adverse employment consequence.

(2) The whistleblower policy shall include the following provisions:

(A) Procedures for the reporting of violations or suspected violations
of laws or trust policies, including procedures for preserving the
confidentiality of reported information;

(B) A requirement that a trustee, officer or employee of the trust be
designated to administer, the whistleblower policy and to report to the
trustees or an authorized committee thereof, except that trustees who
are employees may not participate in any board or committee
deliberations or voting relating to administration of the whistleblower
policy;

(C) A requirement that the person who is the subject of a
whistleblower complaint not be present at or participate in board or
committee deliberation or vote on the matter relating to such complaint,
provided that nothing in this subparagraph shall prohibit the board or
committee from requesting that the person who is subject to the
complaint present information as background or answer questions at a
committee or board meeting prior to the commencement of deliberations or
voting relating thereto; and

(D) A requirement that a copy of the policy be distributed to all
trustees, officers, employees and volunteers, with instructions on how
to comply with the procedures set forth in the policy. For purposes of
this subdivision, posting the policy on the corporation's website or at
the corporation's offices in a conspicuous location accessible to
employees and volunteers are among the methods a corporation may use to
satisfy the distribution requirement.

(3) A trust that has adopted and possesses a whistleblower policy
pursuant to federal, state or local laws that is substantially
consistent with the provisions of subparagraph two of this paragraph
shall be deemed in compliance with the provisions of this paragraph.

(4) Nothing in this paragraph shall be interpreted to relieve any
trust from any additional requirements in relation to internal
compliance, retaliation, or document retention required by any other law
or rule.