ASA-22-12-00014-P Limits on Administrative Expenses and Executive Compensation

5/30/12 N.Y. St. Reg. ASA-22-12-00014-P

NEW YORK STATE REGISTER

VOLUME XXXIV, ISSUE 22

May 30, 2012

RULE MAKING ACTIVITIES

OFFICE OF ALCOHOLISM AND SUBSTANCE ABUSE SERVICES

PROPOSED RULE MAKING

NO HEARING(S) SCHEDULED

 

I.D No. ASA-22-12-00014-P

Limits on Administrative Expenses and Executive Compensation

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

Proposed Action:

Addition of Part 812 to Title 14 NYCRR.

Statutory authority:

Mental Hygiene Law, sections 19.07, 19.09, 19.21, 19.40, 32.01, 32.07; and Executive Order No. 38

Subject:

Limits on Administrative Expenses and Executive Compensation.

Purpose:

Ensure state funds paid by this agency to providers are not used for excessive compensation or unnecessary administrative costs.

Substance of proposed rule (Full text is posted at the following State website:www.oasas.ny.gov):

The proposed regulations add a new Part 812 to 14 NYCRR, Limits on Administrative Costs and Executive Compensation.

Section 812.4: Contains definitions for administrative costs, allowable operating expenses, covered executive, covered provider, executive compensation, program services, program services costs, related entity, reporting period, State-authorized payments, and State funds.

Section 812.5: Limits on Administrative Costs. Effective January 1, 2013, no less than 75% of the State funds or State-authorized payments to a covered provider for allowable operating expenses shall be used for program services costs rather than for administrative costs. This percentage shall increase by 5% each year until it shall be at no less than 85% for the calendar year 2015 and for each calendar year thereafter.

The restriction applies to subcontractors of covered providers which provide program and/or management services which meet the specified criteria.

The restriction is applied to providers receiving State funds or State-authorized payments from county or local government.

The proposed regulation addresses how the restriction will apply in the event that a covered provider has multiple sources of State funds or State-authorized payments.

Section 812.6: Limits on Executive Compensation. A limit on executive compensation of $199,000 per annum is applied to covered executives of covered providers. Where a covered provider is reimbursed with State funds or State-authorized payments using a cost-based methodology or pursuant to a contract that specifies the extent of reimbursement for executive compensation, the limit applies to reimbursement with State funds or State-authorized payments for executive compensation. Otherwise the limit applies to executive compensation.

The limit does not apply to specific program services that also may be rendered by the covered executive outside of his or her managerial or policy-making activities.

A provision discusses the application of this limit if the covered provider has multiple sources of State funds or State-authorized payments.

Section 812.7: Waivers.

Processes are established for covered providers to seek waivers of the limit on administrative costs and the limit on executive compensation.

Section 812.8: Reporting by Covered Providers.

Covered providers are required to report information pertinent to administrative costs and executive compensation on an annual basis.

Section 812.9: Enforcement and Penalties.

A process is established for the imposition of penalties in the event of non-compliance with the limit on administrative costs, the limit on executive compensation, and/or the reporting requirement.

Section 812.10: Severability.

Text of proposed rule and any required statements and analyses may be obtained from:

Sara Osborne, Senior Attorney, NYS Office of Alcoholism and Substance Abuse Services, 1450 Western Ave., Albany, NY 12203, [phone], email: [e-mail]

Data, views or arguments may be submitted to:

Same as above.

Public comment will be received until:

45 days after publication of this notice.

Regulatory Impact Statement

1. Statutory Authority:

a) Section 19.07(c) of the Mental Hygiene Law (MHL) charges OASAS with the responsibility of seeing that persons who abuse or are dependent on alcohol and/or substances and their families are provided with care and treatment that is effective and of high quality.

b) Section 19.07(e) of the MHL authorizes the Commissioner of OASAS to adopt standards including necessary rules and regulations pertaining to chemical dependence treatment services.

c) Section 19.09(b) of the MHL authorizes the Commissioner to adopt regulations necessary and proper to implement any matter under his/her jurisdiction.

d) Section 19.21(b) of the MHL requires the Commissioner to establish and enforce regulations concerning the licensing, certification, and inspection of chemical dependence treatment services.

f) Section 19.21(d) of the MHL requires OASAS to establish reasonable performance standards for providers of services certified by OASAS.

g) Section 19.40 of the MHL authorizes the Commissioner to issue operating certificates for the provision of chemical dependence treatment services.

h) Section 32.01 of the MHL authorizes the Commissioner to adopt any regulation reasonably necessary to implement and effectively exercise the powers and perform the duties conferred by Article 32 of the MHL.

i) Section 32.07(a) of the MHL authorize the commissioner to adopt regulations to effectuate the provisions and purposes of article 32 of the MHL.

j) Executive Order No. 38 directs certain executive agencies to promulgate regulations addressing the extent and nature of a funded service provider's administrative costs and executive compensation eligible for reimbursement with State financial assistance or State-authorized payments for operating expenses.

2. Legislative Objectives:

To comply with the requirements of Executive Order No. 38.

3. Needs and Benefits:

OASAS is proposing to adopt the following regulation 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, will ensure that State funds or State-authorized payments paid by OASAS to providers are not used to support excessive compensation or unnecessary administrative costs.

4. Costs:

The costs of implementing this rule to affected providers is anticipated to be minimal; most, if not all, of the information that must be reported by such providers is already gathered or reported for other purposes. Current regulations require the submission of substantial financial information, some of which will be additional to current requirements, or collected in another form. The costs to OASAS and providers of such implementation is expected to be limited, and efforts to ensure efficient centralization of certain aspects of such implementation are underway. OASAS estimates that minimal compliance activities will be needed to satisfy any additional reporting requirements.

5. Paperwork:

The proposed regulatory amendments will require limited additional information to be reported to the agency by providers receiving State funds or State-authorized payments. To the extent feasible, such reporting shall be made electronically to avoid unnecessary paperwork costs.

6. Local Government Mandates:

As this regulation does not apply to state and local governments, there are no new local government mandates.

7. Duplications:

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 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 Order No. 38 requires the adoption of this proposed regulation.

9. Federal Standards:

These amendments do not conflict with federal standards.

10. Compliance Schedule:

This rule takes effect January 1, 2013.

Regulatory Flexibility Analysis

A Regulatory Flexibility Analysis for Small Businesses and Local Governments (RFASBLG) is not being submitted with this notice because the proposed rule will not impose any adverse economic impact on small businesses, nor will it impose new reporting, recordkeeping or other compliance requirements on small businesses or local governments.

Rural Area Flexibility Analysis

A Rural Area Flexibility Analysis (RAFA) is not being submitted with this notice because the proposed rule will not impose any adverse economic impact on rural areas.

Job Impact Statement

A Job Impact Statement (JIS) is not being submitted with this notice because it is evident from the subject matter of the regulation that it will have no impact on jobs and employment opportunities.