HCR-22-12-00018-P Limits on State-Funded Administrative Costs and Executive Compensation

5/30/12 N.Y. St. Reg. HCR-22-12-00018-P

NEW YORK STATE REGISTER

VOLUME XXXIV, ISSUE 22

May 30, 2012

RULE MAKING ACTIVITIES

DIVISION OF HOUSING AND COMMUNITY RENEWAL

PROPOSED RULE MAKING

NO HEARING(S) SCHEDULED

 

I.D No. HCR-22-12-00018-P

Limits on State-Funded Administrative Costs 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 2658 to Title 9 NYCRR.

Statutory authority:

Public Housing Law, section 19; and Executive Order No. 38

Subject:

Limits on state-funded administrative costs and executive compensation.

Purpose:

To ensure that State funds are not used to support excessive compensation or unnecessary administrative costs.

Substance of proposed rule (Full text is posted at the following State website:www.nyshcr.org):

The proposed regulations add a new Part 2658 to 9 NYCRR, Limits on Administrative Costs and Executive Compensation.

Section 2658.4. 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 2658.5. 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 2658.6. 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 2658.7. Waivers. Processes are established for covered providers to seek waivers of the limit on administrative costs and the limit on executive compensation.

Section 2658.8. Reporting by Covered Providers. Covered providers are required to report information pertinent to administrative costs and executive compensation on an annual basis.

Section 2658.9. 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.

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

Brian P. McCartney, Division of Housing and Community Renewal, 38-40 State Street, Albany, NY 12207, [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.

This action was not under consideration at the time this agency's regulatory agenda was submitted.

Regulatory Impact Statement

Statutory Authority: Executive Order No. 38, dated January 18, 2012, as continued by Executive Order No. 43, dated April 13, 2012; N.Y. Public Housing Law, section 19.

Legislative Objectives: To limit administrative expenses and executive compensation of providers of program services in order to meet the State's ongoing obligation to ensure the proper use of taxpayer dollars and the most effective provision of such services to the public.

Needs and Benefits: The Division of Housing and Community Renewal 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 Orders No. 38 and 43, will ensure that State funds or State-authorized payments paid by this agency to providers are not used to support excessive compensation or unnecessary administrative costs.

Costs: The costs of implementing this rule to affected providers is anticipated to be minimal since most, if not all, of the information that must be reported by such providers is already gathered or reported for other purposes. The agency cost of such implementation is expected to be very limited as well, and efforts to ensure efficient centralization of certain aspects of such implementation are underway.

Local Government Mandates: The proposed regulation does not anticipate any additional mandates.

Paperwork/Reporting Requirements: The proposed regulation 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 in order to avoid unnecessary paperwork costs.

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 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.

Alternatives: Executive Orders No. 38 and No. 43 require the adoption of this proposed regulation.

Federal Standards: This proposed regulation does not conflict with federal standards.

Compliance Schedule: This rule will take effect on January 1, 2013.

Regulatory Flexibility Analysis

A Regulatory Flexibility Analysis for Small Businesses and Local Governments 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, record keeping or other compliance requirements on small businesses or local governments.

Rural Area Flexibility Analysis

A Rural Area Flexibility Analysis 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 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.