Title 19 Part 144

The purpose of this Part is to implement Executive Order No. 38, issued by Governor Andrew Cuomo on January 18, 2012, by exercising the authority of the Secretary of State to issue regulations governing the use of State funds and State-authorized payments in connection with providing program services to members of the public. Executive Order No. 38 provides for a limit on 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.

No less than 75 percent of the covered operating expenses of a covered provider paid for with State funds or State-authorized payments shall be program services expenses rather than administrative expenses. This percentage shall increase by five percent each year until it shall be no less than 85 percent in 2015 and for each year thereafter. In determining whether an expense is a program service expense or an administrative expense, a covered provider may allocate a portion of the expense to each type if such allocation is supported by the nature of the expense. Such allocation may include allocation of portions of an employee’s time and compensation to administrative or program services. Commencing on July 1, 2013, the limits on allowable administrative expenses pursuant to this Part shall be effective and applicable to each covered provider on the first day or each provider’s respective covered reporting period.

The restriction on allowable administrative expenses in subdivision (a) of this section and the reporting requirements in section 144.7 of this Part shall apply to subcontractors and agents of covered providers if and to the extent that such a subcontractor or agent has received State funds or State-authorized payments from the covered provider to provide program or administrative services during the reporting period and would otherwise meet the definition of a covered provider but for the fact that it has received State funds or State-authorized payments from the covered provider rather than directly from a governmental agency. A covered provider shall incorporate into its agreement with such a subcontractor or agent the terms of these regulations by reference to require and facilitate compliance. Upon request, covered providers shall promptly report to the funding or authorizing agency the identity of such subcontractors and agents, along with any other information requested by that agency or by the department or its designee. A covered provider shall not be held responsible for a subcontractor’s or agent’s failure to comply with these regulations.

The department or its designee, rather than the county or local unit of government or an entity on behalf of such government, shall be responsible for obtaining the necessary reporting from and compliance by such covered providers, and shall issue guidance to affected county and local governments to set forth the procedures by which the department or its designee shall do so.

If a covered provider receives State funds or State-authorized payments from multiple sources, the provider’s compliance with the restriction on allowable administrative expenses in subsection (a) of this section shall be determined based upon the total amount program services expenses and administrative expenses paid for by such funding received from all of such sources.

As set forth in section 144.7 of this Part, the covered provider shall report all of such State funds and State-authorized payments, and the expenses paid for by such funding, in the form and at the time specified by the department or its designee.

If the contract, grant, or other agreement is subject to more stringent limits on administrative expenses, whether through law or contract, such limits shall control and shall not be affected by the less stringent limits imposed by these regulations. However, the definition and interpretation of terms in this Part shall not be affected or limited by the definition or interpretation of terms in other regulations or agreements.

then such covered provider shall be subject to the penalties set forth in section 144.8 of this Part. To determine whether a covered provider may be subject to penalties, such provider shall provide, upon request by the department or its designee, contemporaneous documentation in a form and level of detail sufficient to allow such determination to be made.

The limit on executive compensation pursuant to this section shall not be applied to limit reimbursement with State funds or State-authorized payments for reasonable compensation paid to a covered executive for program services, including but not limited to supervisory services performed to facilitate the covered provider’s program services, rendered by the executive outside of his or her managerial or policy-making duties. Documentation of such program services rendered shall be used by the covered provider to determine that percentage, if any, of the covered executive’s compensation that is attributable to program services and that compensation shall not be considered in the calculation of his or her executive compensation. Such documentation shall be maintained and provided to the department or its designee upon request.

Clinical and program personnel in a hospital or other entity providing program services, including chairs of departments, heads of service, chief medical officers, directors of nursing, or similar types of personnel fulfilling administrative functions that are nevertheless directly attributable to and comprise program services shall not be considered covered executives for purposes of limiting the use of State funds or State-authorized payments to compensate them.

If a covered provider receives State funds or State-authorized payments from multiple sources, the provider’s compliance with the limits on executive compensation in subdivision (a) shall be determined based upon the total amount of such funding received and the reimbursements received from all sources of State funds or State-authorized payments. As set forth in section 144.7 of this Part, the covered provider shall report all of such State funds and State-authorized payments in the form specified by the department or its designee.

The limits on executive compensation in subdivision (a) and (b) of this section and the reporting requirements in section 144.7 of this Part shall apply to subcontractors and agents of covered providers if and to the extent that such a subcontractor or agent has received State funds or State-authorized payments from the covered provider to provide program or administrative services during the reporting period and would otherwise meet the definition of a covered provider but for the fact that it has received State funds or State-authorized payments from the covered provider rather than directly from a governmental agency. A covered provider shall incorporate into its agreement with such a subcontractor or agent the terms of these regulations by reference to require and facilitate compliance. Upon request, covered providers shall promptly report to the funding or authorizing agency the identity of such subcontractors and agents, along with any other information requested by that agency or by the department or its designee. A covered provider shall not be held responsible for a subcontractor’s or agent’s failure to comply with these regulations.

The office or its designee, rather than the county or local unit of government or an entity contracting on behalf of such government, shall be responsible for obtaining the necessary reporting from and compliance by such covered providers, and shall issue guidance to affected county and local governments to set forth the procedures by which the office or it designee shall do so.

If the contract, grant, or other agreement is subject to more stringent limits on executive compensation, whether through law or contract, such limits shall control and shall not be affected by the less stringent limits imposed by these regulations. However, the definition and interpretation of terms in this Part shall not be affected or limited by the definition or interpretation of terms in other regulations or agreements.

The department or its designee and the Director of the Division of the Budget may grant a waiver to the limits on executive compensation in section 144.5 of this Part for executive compensation for one or more covered executives, or for one or more positions, during the reporting period and, where appropriate, for a longer period upon a showing of good cause. To be considered, an application for such a waiver must comply with this subsection in its entirety.

The department or its designee and the Director of the Division of the Budget may grant a waiver to obtain reimbursement for administrative expenses incurred during the reporting period and thereafter in excess of the limit set forth in section 144.4 of this Part upon a showing of good cause. To be considered, an application for such a waiver must comply with this subsection in its entirety.

Beginning after the effective date of this regulation, covered providers shall submit a completed Executive Order No. 38 disclosure form for each reporting period. Such form shall be submitted no later than 180 calendar days following the covered reporting period, unless otherwise authorized. Such form shall be submitted in the manner and form specified by the department or its designee. Covered providers shall further provide the information requested in that form, and any other information requested, upon the request of the department or its designee at any time during the term of or prior to the execution of any contract or agreement with such provider.

A covered provider’s failure to submit a completed Executive Order No. 38 disclosure form, or to provide additional or clarifying information at the request of the department or its designee, may result in the termination or non-renewal of a contract or agreement for State funds or State-authorized payments.

If any provision of this Part, or any application thereof to any person or circumstance, is found to be invalid, such invalidity shall not affect any other provisions or applications of this Part that may be given effect without the invalid provisions or applications. The provisions of this Part are thus declared to be severable.