OVS-22-12-00009-A Limits on Administrative Expenses and Executive Compensation

5/29/13 N.Y. St. Reg. OVS-22-12-00009-A

NEW YORK STATE REGISTER

VOLUME XXXV, ISSUE 22

May 29, 2013

RULE MAKING ACTIVITIES

OFFICE OF VICTIM SERVICES

NOTICE OF ADOPTION

 

I.D No. OVS-22-12-00009-A

Filing No. 511

Filing Date. May. 14, 2013

Effective Date. Jul. 01, 2013

Limits on Administrative Expenses and Executive Compensation

PURSUANT TO THE PROVISIONS OF THE State Administrative Procedure Act, NOTICE is hereby given of the following action:

Action taken:

Amendment to section 525.22; and addition of section 525.24 to Title 9 NYCRR.

Statutory authority:

Executive Law, section 623(3); Not-For-Profit Corporation Law, section 508; and Executive Order No. 38

Subject:

Limits on administrative expenses and executive compensation.

Purpose:

To establish limitations on administrative expenses and executive compensation for those programs funded by the Office.

Substance of final rule:

The revised, proposed regulations amend section 525.22 of Title 9 NYCRR and adds a new section 525.24 to Title 9 NYCRR, related to Victim Assistance Programs and Limits on Administrative Costs and Executive Compensation, respectively.

Since the publication of the last, revised rule on March 13, 2013, there have been minor edits to the text as follows:

Edit to the definition of Executive Compensation in section 525.24(b)(6), and

Edit to the provisions on Limits on Executive Compensation in section 525.24(d)(2)(ii).

Section 525.22 is amended to state that Victim Assistance Programs receiving state funds or state-authorized payments from the Office of Victim Services (OVS or Office) pursuant to the terms of a contract or memorandum of understanding shall comply with all applicable federal and state laws and regulations and any applicable contractual or memorandum of understanding language entered into with the office. Applicable state regulations shall include, but not be limited to this section and the newly added section 525.24 of this part.

Section 525.24, subdivision (a) provides for the background and intent of the revised rule, which is to implement Executive Order No. 38, issued by Governor Andrew Cuomo on January 18, 2012.

Subdivision (b) contains definitions for purposes of this section, including definitions for administrative expenses, covered operating expenses, related organization, covered executive, covered provider, executive compensation, office, program services, program services expenses, reporting period, state-authorized payments, and state funds.

Subdivision (c) relates to limits on administrative expenses. This subdivision contains limits on the use of state funds or state-authorized payments for administrative expenses. The restriction will apply to subcontractors and agents of covered providers which meet the specified criteria. The restriction will apply to covered providers receiving state funds or state-authorized payments from county or local governments, rather than directly from a state agency, pursuant to specified criteria. The revised regulation addresses how the restriction will apply in the event that a covered provider has multiple sources of state funds or state-authorized payments.

Subdivision (d) relates to limits on executive compensation. This subdivision contains restrictions on executive compensation provided to covered executives. The restriction will apply to subcontractors and agents of covered providers which meet the specified criteria. The restriction will apply to covered providers receiving state funds or state-authorized payments from county or local governments, rather than directly from a state agency, pursuant to specified criteria. The revised rule addresses the application of this limit if the covered provider has multiple sources of state funds or state-authorized payments.

Subdivision (e) relates to waivers for the limit on executive compensation and the processes are established for covered providers to seek such waivers.

Subdivision (f) relates to waivers for the limit on reimbursement for administrative expenses and the processes are established for covered providers to seek such waivers.

Subdivision (g) relates to denials of waiver requests, notice to the impacted parties and the Office’s reconsideration of the waiver requests.

Subdivision (h) relates to the reporting by covered providers. Covered providers are required to report information on an annual basis.

Subdivision (i) establishes 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.

Final rule as compared with last published rule:

Nonsubstantive changes were made in sections 525.24(b)(6) and (d)(2)(ii).

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:

John Watson, General Counsel, Office of Victim Services, A.E. Smith State Office Bldg., 80 S. Swan Street, 2nd Floor, Albany, New York 12210-8002, [phone], email: [e-mail]

Revised Regulatory Impact Statement

The Office of Victim Services has determined that changes made to the last published rule do not necessitate revision to the previously published Statement in Lieu of a Regulatory Flexibility Analysis (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 RIS.

Revised Regulatory Flexibility Analysis

The Office of Victim Services has determined that changes made to the last published rule do not necessitate revision to the previously published Statement in Lieu of a Regulatory Flexibility Analysis (RFA).

The revisions to the last published rule merely clarify the text and correct technical errors (i.e., grammar), which requires no change to the RFA.

Revised Rural Area Flexibility Analysis

The Office of Victim Services has determined that changes made to the last published rule do not necessitate revision to the previously published Statement in Lieu of a Rural Area Flexibility Analysis (RAFA).

The revisions to the last published rule merely clarify the text and correct technical errors (i.e., grammar), which requires no change to the RAFA.

Revised Job Impact Statement

The Office of Victim Services has determined that changes made to the last published rule do not necessitate revision to the previously published Statement in Lieu of a Job Impact Statement (JIS).

The revisions to the last published rule merely clarify the text and correct technical errors (i.e., grammar), which requires no change to the JIS.

Assessment of Public Comment

A Notice of Revised Rule Making was published in the New York State Register on March 13, 2013. The Office of Victim Services (OVS or Office) received several comments during the public comment period associated with the revised rulemaking. The issues and concerns raised in these comments are set forth below. Issues and concerns have been grouped according to the part of the revised rule they address because they are related or for convenience in providing an efficient response. Because many 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. The OVS response is provided for each issue.

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 dialogue with covered providers over what would constitute an adequate administrative rate.

Response: The OVS 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, the Office 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: The OVS 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: The OVS 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.