TDA-22-12-00021-P Limits on Administrative Expenses and Executive Compensation

5/30/12 N.Y. St. Reg. TDA-22-12-00021-P

NEW YORK STATE REGISTER

VOLUME XXXIV, ISSUE 22

May 30, 2012

RULE MAKING ACTIVITIES

OFFICE OF TEMPORARY AND DISABILITY ASSISTANCE

PROPOSED RULE MAKING

NO HEARING(S) SCHEDULED

 

I.D No. TDA-22-12-00021-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 315 to Title 18 NYCRR.

Statutory authority:

Social Services Law, section 20(3)(d)

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 proposed rule (Full text is posted at the following State website:http://otda.ny.gov/):

The proposed rule would add a new Part 315 to 18 NYCRR titled Limits on Administrative Expenses and Executive Compensation.

Section 315.1 Provides the background and intent of the proposed rule, which is to implement Executive Order No. 38, issued by Governor Andrew Cuomo on January 18, 2012.

Section 315.2 Sets forth the statutory authority for the promulgation of the rule by the Office of Temporary and Disability Assistance (hereinafter the "Office").

Section 315.3 Provides that this rule is applicable to covered providers as set forth in this Part.

Section 315.4 Contains definitions for purposes of this Part, including 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.

Section 315.5 Limits on Administrative Expenses. For the period commencing January 1, 2013, no less than 75% of the covered operating expenses paid for with State funds or State-authorized payments to a covered provider shall be used for program services expenses rather than administrative expenses. This percentage shall increase by 5% each year until it shall be no less than 85% for the calendar year 2015 and for each calendar year thereafter.

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 pursuant to specified criteria.

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 315.6 Limits on Executive Compensation. For the period commencing January 1, 2013, neither a covered provider nor a related entity shall use State funds or State-authorized payments for executive compensation given directly or indirectly to a covered executive in an amount greater than $199,000 per annum, unless specific conditions are met.

The proposed rule addresses the application of this limit if the covered provider has multiple sources of State funds or State-authorized payments.

Section 315.7 Waivers. Processes are established for covered providers to seek waivers of the limit on administrative expenses and the limit on executive compensation.

Section 315.8 Reporting by Covered Providers. Covered providers are required to report information related to administrative costs and executive compensation on an annual basis.

Section 315.9 Penalties. A process is established for the imposition of penalties in the event of non-compliance with the limit on administrative expenses and the limit on executive compensation.

A copy of the full text of the regulatory proposal is available on the Office of Temporary and Disability's website at http://otda.ny.gov/

Text of proposed 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, [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

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.

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 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, 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.

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 local governments will provide the agency contact information for their contractors, and then the agency, rather than the county or local unit of government, shall be responsible for obtaining the necessary reporting from and compliance by covered providers.

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 proposed rule will be effective 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, recordkeeping 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.