Home » 2013 Issues » May 29, 2013 » CFS-22-12-00010-A Establishing Limitations on Administrative Expenses and Executive Compensation of Service Providers Supported by State Funds
CFS-22-12-00010-A Establishing Limitations on Administrative Expenses and Executive Compensation of Service Providers Supported by State Funds
5/29/13 N.Y. St. Reg. CFS-22-12-00010-A
NEW YORK STATE REGISTER
VOLUME XXXV, ISSUE 22
May 29, 2013
RULE MAKING ACTIVITIES
OFFICE OF CHILDREN AND FAMILY SERVICES
NOTICE OF ADOPTION
I.D No. CFS-22-12-00010-A
Filing No. 507
Filing Date. May. 14, 2013
Effective Date. Jul. 01, 2013
Establishing Limitations on Administrative Expenses and Executive Compensation of Service Providers Supported by State Funds
PURSUANT TO THE PROVISIONS OF THE State Administrative Procedure Act, NOTICE is hereby given of the following action:
Action taken:
Addition of Part 409 to Title 18 NYCRR; and addition of Subpart 166-5 to Title 9 NYCRR.
Statutory authority:
Social Services Law, sections 20(3)(d) and 34(3)(f); and Executive Law, section 501(5)
Subject:
Establishing limitations on administrative expenses and executive compensation of service providers supported by State funds.
Purpose:
To comply with Executive Order numbers 38 and 43.
Substance of final rule:
The New York State Office of Children and Family Services is adopting as final regulations the additions of Part 409 of Title 18 of the NYCRR and Subpart 166-5 of Title 9 of the NYCRR.
There have been minor edits to the text as follows:
Edit to the definition of Executive Compensation in 18 NYCRR 409.3(f) and 9 NYCRR 166-5.3(f).
And a clarification in provision on Limits on Executive Compensation in 18 NYCRR 409.5(b)(2) and 9 NYCRR 166-5.5(b)(2).
18 NYCRR 409.3 and 9 NYCRR 166-5.3 contain definitions for purposes of Part 409 and Subpart 166-5, including definitions for administrative expenses, covered operating expenses, covered executive, covered provider, covered reporting period, executive compensation, program services, program services expenses, related organization, reporting period, State-authorized payments, and State funds.
18 NYCRR 409.4 and 9 NYCRR 166-5.4 Limits on Administrative Expenses contain limits on the use of State funds or State-authorized payments for administrative expenses.
18 NYCRR 409.5 and 9 NYCRR 166-5.5 Limits on Executive Compensation contain restrictions on executive compensation provided to covered executives.
18 NYCRR 409.6 and 9 NYCRR 166-5.6 Waivers establish processes for covered providers to seek waivers of the limit on administrative expenses and the limits on executive compensation.
18 NYCRR 409.7 and 9 NYCRR 166-5.7 Reporting requires covered providers to report information on an annual basis.
18 NYCRR 409.8 and 9 NYCRR 166-5.9 Penalties establish a process for the imposition of penalties in the event of non-compliance with the limitS on administrative expenses or the limits on executive compensation.
A copy of the full text of the regulatory proposal is available on: www.ocfs.state.ny.us/main/legal/Regulatory/final/
Final rule as compared with last published rule:
Nonsubstantive changes were made in 18 NYCRR sections 409.3, 409.5 and 9 NYCRR Subpart 166-5.
Revised rule making(s) were previously published in the State Register on
October 31, 2012 and March 13, 2013.
Text of rule and any required statements and analyses may be obtained from:
Public Information Office, NYS Office of Children and Family Services, 52 Washington Street, Rensselaer, N.Y. 12144, (518) 473-7793.
Revised Regulatory Impact Statement
Changes made to the last published rule do not necessitate revision to the previously published Regulatory Impact Statement (“RIS”). The revisions to the last published rule merely provide clarifications in the text and correct technical errors (i.e., grammar), which requires no change to the Regulatory Impact Statement.
Revised Regulatory Flexibility Analysis
Changes made to the last published rule do not necessitate revision to the previously published Regulatory Flexibility Analysis for Small Businesses and Local Governments. The revisions to the last published rule merely clarify the text and correct technical errors (i.e., grammar), which requires no change to the Regulatory Flexibility Analysis for Small Businesses and Local Governments.
Revised Rural Area Flexibility Analysis
Changes made to the last published rule do not necessitate revision to the previously published Rural Area Flexibility Analysis. The revisions to the last published rule merely clarify the text and correct technical errors (i.e., grammar), which requires no change to the Rural Area Flexibility Analysis.
Revised Job Impact Statement
Changes made to the last published rule do not necessitate revision to the previously published Job Impact Statement. The revisions to the last published rule merely clarify the text and correct technical errors (i.e., grammar), which requires no change to the Job Impact Statement.
Initial Review of Rule
As a rule that requires a Regulatory Flexibility Analysis, Rural Area Flexibility Analysis or Job Impact Statement, this rule will be initially reviewed in the calendar year 2016, which is no later than the 3rd year after the year in which this rule is being adopted.
Assessment of Public Comment
A Notice of Revised Rule Making was published in the New York State Register on March 13, 2013. The New York State Office of Children and Family Services (OCFS) received comments during the public comment period associated with the revised proposed rulemaking. The issues and concerns raised in those comments are set forth below. Because the comments addressed concerns that applied to all of the participating State agencies that are implementing Executive Order No. 38, the responses to comments provided by each of those agencies are incorporated by reference into these responses.
Definitions
Comment: One comment was received requesting exhaustive lists of what constitute “state funds” and “state-authorized payments”.
Response: The proposed regulations were previously modified to clarify what constitute “state funds” and “state-authorized payments”. However, additional guidance on this topic will be provided prior to the effective date.
Limits on administrative expenses
Comment: One comment was received requesting that the State engage in a dialog with covered providers over what would constitute an adequate administrative rate.
Response: OCFS believes there is a legitimate government interest in limiting the amount of administrative expenses derived from government funds and that the limits set by the proposed regulations are appropriate. However, OCFS will continue to monitor this issue in the years that follow. No changes were made to the proposed regulations in response to this comment.
Limits on executive compensation
Comment: One comment was received questioning the concept of limiting executive compensation for not-for-profit entities.
Response: OCFS believes there is a legitimate government interest in limiting the amount of executive compensation of providers that rely heavily on state funds or state authorized payments of federal funds. No changes were made to the proposed regulations in response to this comment.
Comment: One comment was received arguing that the regulations cannot be made effective on July 1, 2013 because the Division of the Budget has not yet identified, provided or recognized any surveys on executive compensation, thus preventing covered providers from determining whether waivers will be needed.
Response: Additional guidance on this topic will be provided prior to the effective date.
Comment: One comment was received arguing that covered providers may be in the position of having to attempt to recoup executive compensation funds and may not be able to do so under the Labor Law, and that if a waiver is not granted the covered provider would have no ability to recoup such funds, thus having no mechanism to avoid non-compliance with the proposed regulations.
Response: A covered provider who is faced with this dilemma may request a waiver. The waiver provisions of the regulations are intended to avoid placing covered providers into situations where compliance with competing legal requirements is impossible.
Comment: One comment was received requesting that the Division of the Budget create a list of compensation surveys that will be identified, provided and recognized by the State, and that such surveys consider executive compensation in both the not-for-profit and for-profit fields.
Response: Prior to the effective date, guidance will be provided regarding acceptable surveys and comparability factors that must be taken into consideration for determining compensation and additional information regarding how this information will be identified, provided or recognized.
Waivers
Comment: One comment was received requesting clarification of the consequences of the denial of a waiver.
Response: The proposed regulations provide for penalties in the event of non-compliance by a covered provider that does not obtain a waiver, so if a covered provider fails to obtain a waiver and is thus out of compliance with the requirements, the covered provider may be subject to penalties. However, the proposed regulations addressing penalties provide for a six month period for a covered provider to cure the non-compliance, so the failure to obtain a waiver would not automatically result in the imposition of penalties. No changes have been made to the proposed regulations in response to this comment.
Effective Date
Comment: One comment was received requesting that the effective date of the proposed regulations be extended to six months after a covered provider’s first reporting period after the later of (1) the date the regulations become effective or (2) the identification, provision and recognition by the Division of the Budget and the State agencies of compensation surveys, in order to afford not-for-profit entities time to comply.
Response: Additional guidance will be provided prior to the effective date to facilitate compliance and/or the waiver process. No change has been made to the proposed regulations in response to this comment.
Lack of Necessity
Comment: One comment was received asserting that the proposed regulations address a problem that does not really exist, other than in a few isolated circumstances, and that the proposed regulations are not needed to address those few circumstances.
Response: OCFS believes that the regulations will serve a necessary function by establishing appropriate controls so that taxpayer dollars are used properly, efficiently, and effectively to improve the lives of New Yorkers. No change was made to the proposed regulations in response to this comment.
Coordination
Comment: One comment was received requesting that the Governor, the Attorney General and the State agencies work together so that the regulations are implemented properly and consistently, and that the nonprofit sector be included in a taskforce to implement the regulations.
Response: The development of the proposed regulations will continue to involve interagency cooperation. No changes were made to the proposed regulations in response to this comment.
