New York Laws
Article 31 - Regulation and Quality Control of Services for the Mentally Disabled
31.31 - Improper Expenditure of Moneys.

(a) No provider of services licensed pursuant to this article shall
make any charitable contribution of state moneys, medical assistance
payments or social security or supplemental security income or any
interest or other income earned thereon, except as authorized by the
commissioner. Provided, however, the provisions of this section shall
not apply to receipts or donations from private or non-governmental
sources and any interest or other income earned thereon.
(b) No loans, other than through the purchase of bonds, debentures, or
similar obligations of the type customarily sold in public offerings, or
through ordinary deposit of funds in a bank, shall be made by a
not-for-profit corporation which is licensed as a provider of services
pursuant to this article to its employee who receives an annual salary
in excess of thirty thousand dollars, or to any other corporation, firm,
association or other entity in which such employee is a director or
officer or employee or holds a direct or indirect substantial financial
interest, except a loan by one corporation incorporated as a charitable
corporation as defined in paragraph (a) of section one hundred two
(Definitions) of the not-for-profit corporation law to another
charitable corporation, or a loan for a temporary or emergency purpose
which will further the health and welfare of the employee so long as the
purpose and amount of such loan are disclosed to and approved by the
board of directors of such agency. Such disclosure shall be filed with
the secretary of the corporation and entered in the minutes of the
meeting, and, if approved by such board, such disclosure shall also be
forwarded in writing to the commissioner and to the director of
community services of each local governmental unit that has, at the time
of such disclosure, a contract with such corporation for the rendition
of services pursuant to article forty-one of this chapter. A loan made
in violation of this section shall be a violation of the duty to the
not-for-profit corporation of the directors or officers authorizing it
or participating in it, but the obligation of the borrower with respect
to the loan shall not be affected thereby.
(c) (1) No contract or other transaction between a not-for-profit
corporation which is licensed as a provider of services pursuant to this
article and one or more of its employees who receive an annual salary in
excess of thirty thousand dollars, or between a not-for-profit
corporation and any other corporation, firm, association or other entity
in which one or more of such persons are directors or officers of the
board or corporation, or employee who receives an annual salary in
excess of thirty thousand dollars, or have an indirect or direct
substantial financial interest, shall be either void or voidable for
this reason alone:
a. If the material facts as to such person's interest in such contract
or transaction and as to any such common directorship, officership or
financial interest are disclosed in good faith or known to the board or
committee, and the board or committee authorizes such contract or
transaction by a vote sufficient for such purpose without counting the
vote or votes of such interested person; or
b. If the material facts as to such person's interest in such contract
or transaction and as to any such common directorship, officership or
financial interest are disclosed in good faith or known to the members
entitled to vote thereon, if any, and such contract or transaction is
authorized by vote of such members.
(2) If such good faith disclosure of the material facts as to the
person's interest in the contract or transaction and as to any such
common directorship, officership or financial interest, is made to the
directors or members, or known to the board or committee or members

authorizing such contract or transaction, as provided in paragraph one
of this subdivision, the contract or transaction may not be voided by
the corporation for the reasons set forth in paragraph one of this
subdivision. If there was no such disclosure or knowledge the
corporation may void the contract or transaction unless the party or
parties thereto shall establish affirmatively that the contract or
transaction was fair and reasonable as to the corporation at the time it
was authorized by the board, a committee or the members.