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

5/30/12 N.Y. St. Reg. OVS-22-12-00009-P

NEW YORK STATE REGISTER

VOLUME XXXIV, ISSUE 22

May 30, 2012

RULE MAKING ACTIVITIES

OFFICE OF VICTIM SERVICES

PROPOSED RULE MAKING

NO HEARING(S) SCHEDULED

 

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

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

Statutory authority:

Executive Law, section 623(3); 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 proposed rule (Full text is posted at the following State website:ovs.ny.gov):

The 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.

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, subdivisions (a) and (b) provide for the background and intent and applicability of this new section.

Subdivision (c) contains definitions for administrative expenses, covered operating expenses, covered executive, covered provider, executive compensation, office, program services, program services expenses, related entity, reporting period, State-authorized payments and State funds.

Subdivision (d) relates to limits on administrative expenses. 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 subdivision addresses how the restriction will apply in the event that a covered provider has multiple sources of State funds or State-authorized payments. The subdivision also states that applicable law or contract may provide for more stringent limitations, which shall control.

Subdivision (e) relates to 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. The subdivision also states that applicable law or contract may provide for more stringent limitations, which shall control.

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

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

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

Subdivision (i) relates to the reporting by covered providers. Covered providers are required to report information pertinent to administrative costs and executive compensation on an annual basis.

Subdivision (j) relates to 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:

John Watson, General Counsel, Office of Victim Services, One Columbia Circle, Suite 200, Albany, New York 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: Subdivision 3 of section 623 of the Executive Law provides that the Office of Victim Services (OVS or Office) shall have the power and duty to adopt, promulgate, amend and rescind suitable rules and regulations to carry out the provisions and purposes of Article 22 of the Executive Law. Other authorities for enacting these rules include Executive Order No. 38, enacted January 18, 2012.

2. Legislative objectives: Pursuant to Executive Order No. 38, enacted January 18, 2012, the OVS recognizes its fiduciary duties related to any State funds or State-authorized payments made by the Office via competitive grants for the provision of services to victims of crimes and others impacted by such victimization. This section is meant to establish the minimum expectations and requirements pursuant to Executive Order #38.

3. Needs and benefits: The OVS is proposing to adopt the following regulation because the State of New York directly or indirectly funds with State and federal monies 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 such funds 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 the Office to providers are not used to support excessive compensation or unnecessary administrative costs.

4. Costs: a. Costs to regulated parties. The costs of implementing this rule to affected providers is 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 the OVS of such implementation are expected to be very limited as well, and efforts to ensure efficient centralization of certain aspects of such implementation are underway.

b. Costs to local governments. These proposed regulations do not apply to local governments and would not impose any additional costs on local governments.

c. Costs to private regulated parties. The proposed regulations would impose minimal any additional costs on private regulated parties.

5. Local government mandates: These proposed regulations do not impose any program, service duty or responsibility upon any local government.

6. Paperwork: The proposed regulatory amendments will require limited additional information to be reported to the OVS by 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 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 #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

The Office of Victim Services projects there will be no adverse economic impact or reporting, recordkeeping or other compliance requirements on small businesses or local governments in the State of New York as a result of this proposed rule change. This proposed rule change is simply designed to address executive compensation and administrative costs of those providers of program services that receive State funds or State-authorized payments paid by the Office. Since nothing in this proposed rule change will create any adverse impacts on any small businesses or local governments in the state, no further steps were needed to ascertain these facts and none were taken. As apparent from the nature and purpose of this proposed rule change, a full Regulatory Flexibility Analysis is not required and therefore one has not been prepared.

Rural Area Flexibility Analysis

The Office of Victim Services projects there will be no adverse impact on rural areas or reporting, recordkeeping or other compliance requirements on public or private entities in rural areas in the State of New York as a result of this proposed rule change. This proposed rule change is simply designed to address executive compensation and administrative costs of those providers of program services that receive State funds or State-authorized payments paid by the Office. Since nothing in this proposed rule change will create any adverse impacts on any public or private entities in rural areas in the state, no further steps were needed to ascertain these facts and none were taken. As apparent from the nature and purpose of this proposed rule change, a full Rural Area Flexibility Analysis is not required and therefore one has not been prepared.

Job Impact Statement

The Office of Victim Services projects there will be no adverse impact on jobs or employment opportunities in the State of New York as a result of this proposed rule change. This proposed rule change is simply designed to address executive compensation and administrative costs of those providers of program services that receive State funds or State-authorized payments paid by the Office. Since nothing in this proposed rule change will create any adverse impacts on jobs or employment opportunities in the state, no further steps were needed to ascertain these facts and none were taken. As apparent from the nature and purpose of this proposed rule change, a full Job Impact Statement is not required and therefore one has not been prepared.