Each set of regulations would have the following:

The first section would set forth the background and intent underlying the regulations. Both Part 409 and Subpart 166-5 are being added to comply with the requirements of Executive Order #38, which requires that the executive agencies promulgate regulations establishing limits on administrative costs and executive compensation of service providers where such costs and compensation are supported by State funds.

There would be a section setting forth the statutory basis for promulgating the regulations.

There would be a section setting forth the applicability of the regulations.

There would be a definitions section, which would include definitions of what service providers are covered, what administrative expenses are covered, what constitutes executive compensation, and what constitutes State funds for purposes of the regulations, as well as other useful definitions. The covered service providers would basically be entities or individuals having contracts or other agreements with the Office of Children and Family Services (Office) or another government entity for at least two years prior to and during the covered reporting period during which time the provider received an average amount greater than $500,000 each year where at least 30 percent of the provider's total annual in-state revenues were derived from State funds, directly or indirectly. Governmental units and individual professionals providing program services under agreement with the State would not be covered. Also, Part 409 would provide that individuals or entities providing child day care services who are in receipt of child care subsidies under the Social Services Law would not be covered based on the receipt of such subsidies. However, such providers could be subject to the regulations if they receive State funds other than child day care subsidies.

There would be a section discussing the limitations on use of State funds to support administrative expenses. The limitation would basically be that no more than 25 percent of the State funds could be used for administrative expenses for the year commencing January 1, 2013, with the percentage decreasing five percent each year thereafter until the limit would be 15 percent for calendar year 2015.

There would be a section discussing the limitations on use of State funds to support executive compensation. Commencing on January 1, 2013, the limitation would basically be that no more than $199,000 per year in executive compensation could be supported by State funds. This section also addresses certain variances from the standard limitation.

There would next be a section under which service providers who exceed the limitations on use of State funds to support administrative expenses and executive compensation could seek waivers from those limitations. The section would establish standards for granting waivers and a process for determining whether to grant waivers.

There would be a section on reporting requirements for service providers subject to the new regulations, and provision for the consequences of failing to comply with the reporting requirements.

The final section would set forth the penalties to which a service provider would be subject if the service provider fails to comply with the limitations on use of State funds to support administrative expenses or executive compensation and fails to obtain a waiver of those limitations. This section would also set forth the procedure to be followed in assessing such penalties.

1. Statutory authority:

Section 20(3)(d) of the Social Services Law (SSL) authorizes the Office of Children and Family Services (OCFS) to establish rules and regulations to carry out its powers and duties pursuant to the provisions of the SSL.

Section 34(3)(f) of the SSL requires the Commissioner of OCFS to establish regulations for the administration of public assistance and care within the State.

Section 501(5) of the Executive Law authorizes the Commissioner of OCFS to promulgate regulations necessary to establish, operate and maintain programs operated and oversee by OCFS under the Executive Law.

2. Legislative objectives:

The proposed regulations are necessary in order for New York State to maintain appropriate controls on administrative expenses and the amount of State funds going toward the purpose of executive compensation. This will support the legislative goal that State funds be expended in a manner consistent with the best fiscal interests of the State, as provided for throughout the State Finance Law.

3. Needs and benefits:

OCFS is proposing to adopt the regulation because the State of New York directly or indirectly funds with taxpayer dollars a large number of tax exempt not-for-profit organizations and for-profit entities that provide critical services to New Yorkers in need. The goal of the regulation is to establish appropriate controls so that taxpayer 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 establish standards to prevent the use of State funds or State-authorized payments that come through OCFS for support of excessive executive compensation or unnecessary administrative costs.

4. Costs:

The compliance cost to providers of services is expected to be minimal because most, if not all, of the information that will be required to be reported by providers of services is already gathered and reported by such providers for other purposes.

It is estimated that the cost to OCFS of implementing this rule will be minimal, as the State will be making efforts to centralize as many of the functions associated with the rule as possible in order to efficiently implement the rule.

5. Local government mandates:

The proposed regulations will impose very minimal additional mandates on social services districts. The social services districts will be required to provide some information to OCFS concerning service providers with which the local districts have contractual relationships, but the administrative functions required by the proposed regulations will be carried out by OCFS.

6. Paperwork:

The proposed regulations will require some additional reporting of information to the State by service providers receiving State funds or State-authorized payments. The State will, to the extent feasible, provide that such reporting be done electronically to avoid unnecessary paperwork costs.

7. Duplication

The proposed regulations do not duplicate, overlap, or conflict with any other State of federal requirements. However, the proposed regulations seek to minimize the reporting requirements faced by service providers by building upon existing 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:

Since Executive Order #38 requires the adoption of the proposed regulations, there is no viable alternative to implementing the proposed regulations.

9. Federal standards:

The regulatory amendments do not conflict with any federal standards.

10. Compliance schedule:

The proposed rule will be effective as of January 1, 2013.

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.

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.

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.