Home » 2013 Issues » May 29, 2013 » TDA-22-12-00021-A Limits on Administrative Expenses and Executive Compensation
TDA-22-12-00021-A Limits on Administrative Expenses and Executive Compensation
5/29/13 N.Y. St. Reg. TDA-22-12-00021-A
NEW YORK STATE REGISTER
VOLUME XXXV, ISSUE 22
May 29, 2013
RULE MAKING ACTIVITIES
OFFICE OF TEMPORARY AND DISABILITY ASSISTANCE
NOTICE OF ADOPTION
I.D No. TDA-22-12-00021-A
Filing No. 510
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:
Addition of Part 315 to Title 18 NYCRR.
Statutory authority:
Social Services Law, section 20(3)(d); and Not-For-Profit Corporation Law, section 508
Subject:
Limits on administrative expenses and executive compensation.
Purpose:
Establishes limits on the use of State funds or State-authorized payments for administrative costs and executive compensation by covered providers.
Substance of final rule:
The Office of Temporary and Disability Assistance (“OTDA”) is adopting final regulations to add Part 315 to Title 18 NYCRR.
There have been two minor edits to the text as follows:
Edit to the definition of Executive Compensation in 18 NYCRR § 315.3(f).
And a clarification in the provision on Limits on Executive Compensation in 18 NYCRR § 315.5(b)(2).
Section 315.1 provides the background and intent of the final regulations.
Section 315.2 sets forth the statutory authority for the promulgation of the rule by OTDA.
Section 315.3 contains definitions for purposes of this Part, including definitions for administrative expenses, covered operating expenses, covered executive, covered provider, covered reporting period, executive compensation, office, program services, program services expenses, related organization, reporting period, State-authorized payments, and State funds.
Section 315.4. Limits on Administrative Expenses. Contains limits on the use of State funds or State-authorized payments for administrative expenses.
Section 315.5. Limits on Executive Compensation. Contains restrictions on executive compensation provided to covered executives.
Section 315.6. Waivers. Processes are established for covered providers to seek waivers of the limit on administrative expenses and the limits on executive compensation.
Section 315.7. Reporting. Covered providers are required to report information on an annual basis.
Section 315.8. Penalties. A process is established for the imposition of penalties in the event of non-compliance with the limit on administrative expenses or the limits on executive compensation.
A copy of the full text of the regulatory proposal is available on OTDA’s website at www.otda.ny.gov/legal.
Final rule as compared with last published rule:
Nonsubstantive changes were made in sections 315.3(f) and 315.5(b)(2).
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:
Jeanine S. Behuniak, New York State Office of Temporary and Disability Assistance, 40 North Pearl Street, 16C, Albany, New York 12243-0001, (518) 474-9779, email: Jeanine.Behuniak@otda.ny.gov
Revised Regulatory Impact Statement
1. Statutory authority:
Social Services Law (SSL) § 20(3)(d) authorizes the Office of Temporary and Disability Assistance (hereinafter “agency”) to promulgate regulations to carry out its powers and duties.
Not-For-Profit Corporation Law (N-PCL) § 508 provides that a corporation, as defined in N-PCL § 102(a)(5), may make an incidental profit. All such incidental profits are to be applied to the maintenance, the expansion or the operation of the lawful activities of the corporation, and shall not be divided or distributed in any manner whatsoever among the members, the directors or the officers of the corporation.
2. Legislative objectives:
It was the intent of the Legislature in enacting SSL § 20(3)(d) that the agency establish rules, regulations and policies to carry out its powers and duties, and it was the intent of Governor Andrew Cuomo in signing Executive Orders No. 38 and No. 43 that this agency promulgate regulations to establish limits on the use of State funds or State-authorized payments for administrative costs and executive compensation by covered providers.
3. Needs and benefits:
This agency is proposing to adopt the regulations because the State of New York directly or indirectly funds with taxpayer dollars a large number of tax exempt organizations and for-profit entities that provide critical services to New Yorkers in need and the goal is to ensure that taxpayers' dollars are used properly, efficiently, and effectively to improve the lives of New Yorkers. In certain instances, providers of services that receive State funds or State-authorized payments have used such funds to pay for excessive administrative costs or inflated compensation for their senior executives, rather than devoting a greater proportion of such funds to providing direct care or services to their clients. Such abuses involving public funds harm both the people of New York who are paying for such services, and those persons who must depend upon such services to be available and well-funded. These regulations, which are required by Executive Order No. 38, are intended to prevent providers from using State funds or State-authorized payments paid by this agency to support excessive compensation or unnecessary administrative costs.
The revisions made to the last published rule merely clarify the text and correct technical errors (i.e., grammar) in the definition of “executive compensation” at 18 NYCRR § 315.3(f) and in the section providing limits on executive compensation at 18 NYCRR § 315.5(b)(2).
4. Costs:
The costs of implementing this rule to affected providers are anticipated to be minimal as most, if not all, of the information that must be reported by such providers is already gathered or reported for other purposes. The costs to this agency of such implementation are expected to be mitigated by efforts that are underway to ensure efficient centralization of certain aspects of such implementation.
5. Local government mandates:
The social services districts will be required to provide minimal information to the agency concerning service providers with which the social services districts have contractual relationships. The administrative functions required by the proposed regulations will be carried out by the agency.
6. Paperwork:
The proposed regulatory amendments will require limited additional information to be reported to the agency by covered providers receiving State funds or State-authorized payments. To the extent feasible, such reporting shall be made electronically to avoid unnecessary paperwork costs.
7. Duplication:
This proposed rule does not duplicate, overlap, or conflict with any State or federal statute or rule. However, the proposed rule seeks to minimize the reporting requirements faced by covered providers by building upon those requirements in the federal internal revenue code that require certain tax-exempt organizations to report information concerning their executive compensation and administrative costs.
8. Alternatives:
Executive Orders No. 38 and No. 43 require the adoption of this proposed rule.
9. Federal standards:
This proposed rule does not conflict with federal standards.
10. Compliance schedule:
The rule will become effective and be implemented on July 1, 2013.
Revised Regulatory Flexibility Analysis
Changes made to the last published rule do not necessitate revision to the previously published Statement in lieu of a Regulatory Flexibility Analysis for Small Businesses and Local Governments for the addition of Part 315 to Title 18 NYCRR.
The revisions made to the last published rule merely clarify the text and correct technical errors (i.e., grammar), which require no change to the previously published Statement in lieu of a 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 Statement in lieu of a Rural Area Flexibility Analysis for the addition of Part 315 to Title 18 NYCRR.
The revisions made to the last published rule merely clarify the text and correct technical errors (i.e., grammar), which require no change to the previously published Statement in lieu of a Rural Area Flexibility Analysis.
Revised Job Impact Statement
Changes made to the last published rule do not necessitate revision to the previously published Statement in lieu of a Job Impact Statement for the addition of Part 315 to Title 18 NYCRR.
The revisions made to the last published rule merely clarify the text and correct technical errors (i.e., grammar), which require no change to the previously published Statement in lieu of a Job Impact Statement.
Initial Review of Rule
As a rule that does not require a Regulatory Flexibility Analysis, Rural Area Flexibility Analysis or Job Impact Statement, this rule will be initially reviewed in the calendar year 2018, which is no later than the 5th 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 Office of Temporary and Disability Assistance (“OTDA”) received one comment during the public comment period associated with the revised rulemaking. The issues and concerns raised in this comment and certain comments received by other State agencies 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. OTDA’s 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: OTDA 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 agency 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: OTDA 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 in 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: OTDA 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.
