Frequently Asked Questions

Obligation to Submit (Covered Provider Status Determination)

  1. How is it determined that an organization is a covered provider?
  2. If my organization is not a covered provider under the EO38 regulations, is it required to submit any Disclosure Form or other filing through the EO38 website?
  3. May a covered provider that submitted a waiver request prior to submitting its Disclosure Form amend and resubmit its waiver request at the same time that it submits a timely Disclosure Form?
  4. If a covered provider receives funding from multiple State agencies that promulgated the EO38 regulations, will the submission of one Disclosure Form or waiver request through the State EO38 portal satisfy the requirement to file with each such State a
  5. Would State funding for program services received by a not-for-profit organization ("Organization A") through another not-for-profit organization ("Organization B") likely apply towards the $500,000/30% thresholds when determining whether Organization A i
  6. If yes, is Organization B required to be a "covered provider" for the funds to be "counted" towards Organization A's limits?
  7. How will vendors that have contracts (in some cases scores of contracts) with covered entities (as well as other non-covered entities) know if and when the vendors might be subject to EO 38?
  8. Is there an expectation that covered entities will report information on the source of funds used for vendor payments to their vendors?
  9. In the event that a consolidation of two hospitals occurs by which the “acquiring” hospital becomes the sole member and the controlling party of the second hospital (triggering a consolidated financial statement, even as the two facilities may be regar

Executive Compensation Calculation

  1. Does executive compensation include compensation from sources other than State funds and State-authorized payments?
  2. To the extent that distributions to shareholders in “S” corporations are not considered compensatory or guaranteed payments, are those payments excluded from the executive cap?
  3. How does a covered provider determine if a distribution or dividend to a shareholder is made from ‘current reporting period’s earnings’ if the provider has both current and accumulated earnings?
  4. Can a for-profit skilled nursing facility operator take distributions specifically to pay taxes and not have it count as gross compensation on the Executive Compensation Calculation Worksheet?
  5. Does the definition of “executive compensation” capture all distributions and dividends paid to a covered executive, including those that are considered to be a return on equity, or only those dividends and distributions that are deemed remuneration for s
  6. When a compensatory profits interest given to a covered executive in a prior year for services rendered during that year generates additional profits in a later year, should these later year profits allocations also be considered “executive compensation”?
  7. Is there a suggested methodology that should be used by a covered entity organized as a partnership, LLC or “S” corporation to distinguish dividends and distributions deemed to be a return on equity from those considered to be remuneration for services re
  8. Is compensation reported on IRS Form K-1 excluded from or treated differently under the definition of “executive compensation” within the EO38 regulations?
  9. Please advise how the regulations treat payments that are made to a covered executive to reimburse the executive for income taxes incurred as a result of a covered executive's retained earnings. For example, if a covered entity has retained earnings of $
  10. Are benefits that accrue, but are subject to forfeiture (for example, where an executive receives deferred compensation that is subject to a vesting schedule based on tenure), counted as executive compensation?
  11. May a for-profit New York “S” corporation that is a "covered provider" pay a “covered executive” a salary for the services rendered by such individual less than or equal to $199,000 using "State funds" and issue dividends, also using "State funds," to su
  12. Does the answer to the question above change if the “covered provider” is a:

Executive Compensation Limitations

  1. Is a covered provider prohibited from paying executive compensation in an amount greater than $199,000 per annum, irrespective of the source of the funds used to pay the covered executive?
  2. Is a covered provider allowed to use more than $199,000 in State funds or State-authorized payments to pay a covered executive, if the use of such funds would otherwise meet the requirements of paragraph (b) of the “Limits on Executive Compensation” secti
  3. If the executive compensation provided to a covered executive meets the requirement that it has been “reviewed and approved by the covered provider's board of directors or equivalent governing body (if such a board or body exists) including at least two i
  4. If a for-profit nursing home operator owns four nursing homes (separate legal entities in different locations, related by common ownership, each of which would qualify independently as a “covered provider” under the EO38 regulations) and is paid a salary
  5. A nonprofit CEO oversees a nursing home and two assisted living facilities, each of which independently qualifies as a covered provider under the EO38 regulations and none of which are related organizations. The CEO receives compensation totaling $300,000
  6. Insofar as a covered provider is a closely-held entity without independent directors (e.g. solely owned/family owned), how can that provider compensate any executive more than $199,000 (but less than the 75th percentile) without violating the EO38 regulat
  7. Is it a violation of the EO38 regulations’ executive compensation limitations for a for-profit New York State “S” corporation that is a “covered provider” to make distributions in excess of $199,000 to a shareholder who is not a “covered executive” using
  8. Is it a violation of the EO38 regulations’ executive compensation limitations for a for-profit New York State “C” corporation that is a “covered provider” to issue dividends in excess of $199,000 to a shareholder who is not a “covered executive” using “St
  9. What criteria should be used to determine whether a director or member of a covered provider’s governing body is “independent” for purposes of compliance with the EO38 regulations?

1. How is it determined that an organization is a covered provider?

In order to determine if an organization is a covered provider, please go to the Determination section of the website.  The step-by-step guide can be used to complete the Determination. Please also note that a discussion of the covered provider status determination is provided in the Section A of the Guidance document.

2. If my organization is not a covered provider under the EO38 regulations, is it required to submit any Disclosure Form or other filing through the EO38 website?

No. Organizations that are not covered providers are not required to file any documents with regard to EO38. It is suggested, however, that entities receiving State funds or State-authorized payments consider Determination section accessible from the EO 38 website to determine whether they are or are not covered providers, and maintain copies of the PDF documents within their records to produce in the event of a future review or audit.

3. May a covered provider that submitted a waiver request prior to submitting its Disclosure Form amend and resubmit its waiver request at the same time that it submits a timely Disclosure Form?

Yes. There are no restrictions or prohibitions on a covered provider’s ability to amend and resubmit a waiver request, so long as the amended request is timely submitted. To be timely, the amended waiver request must be submitted no later than at the time of submission of the covered provider’s Disclosure Form. Disclosure Forms are due within 180 days of the close of the covered reporting period.

4. If a covered provider receives funding from multiple State agencies that promulgated the EO38 regulations, will the submission of one Disclosure Form or waiver request through the State EO38 portal satisfy the requirement to file with each such State agency?

Yes. The EO38 web portal is specifically designed to provide a “one-stop” experience for covered providers, eliminating the need for multiple submissions of the same document.

5. Would State funding for program services received by a not-for-profit organization ("Organization A") through another not-for-profit organization ("Organization B") likely apply towards the $500,000/30% thresholds when determining whether Organization A is a covered provider?

Yes. State funds received by Organization B for the provision of program services that are then provided to Organization A for the provision of such program services by Organization A would likely be deemed State funds received to render program services as well as in-state revenue, and would be considered as such when determining the covered provider status of both Organization A and Organization B.

6. If yes, is Organization B required to be a "covered provider" for the funds to be "counted" towards Organization A's limits?

No. Organization A’s determination regarding covered provider status is not necessarily dependent upon Organization B’s covered provider status.

7. How will vendors that have contracts (in some cases scores of contracts) with covered entities (as well as other non-covered entities) know if and when the vendors might be subject to EO 38?

The definition of “covered provider” within the EO38 regulations expressly exempts “[i]ndividuals or entities providing primarily or exclusively products, rather than services, in exchange for State funds or State-authorized payments, including but not limited to pharmacies and medical equipment supplies.” In addition, only State funds or State authorized payments received “to render program services” are considered when determining covered provider status. Program services are those services rendered directly to and for the benefit of members of the public (and not for the benefit or on behalf of the State or the awarding agency). In the event a vendor provides services that are program services, it is encouraged to discuss the source of funding received with its contractors, to ascertain whether the vendor is likely to be a “covered provider” under the EO38 regulations. In addition, the EO38 regulations include the following requirement, “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.”

8. Is there an expectation that covered entities will report information on the source of funds used for vendor payments to their vendors?

While it is expected that vendors receiving funds to render program services will discuss the source of funding with their contractors in light of EO38 and its implementing regulations, there are no express requirements in the EO38 regulations requiring contractors to list their specific funding sources in sub-contracts or other agreements with vendors. There is, however, a requirement in the EO38 regulations that covered providers must include a provision incorporating the EO38 regulations by reference in all contracts with subcontractors or agents receiving State funds or State-authorized payments from the covered provider.

9. In the event that a consolidation of two hospitals occurs by which the “acquiring” hospital becomes the sole member and the controlling party of the second hospital (triggering a consolidated financial statement, even as the two facilities may be regarded as separate for other purposes, including provider numbers, billing, Public Health Law Article 28 licensure, federal identification numbers, etc.), would the 30 percent State funding/State authorized funding test apply to the consolidated entity?

Generally, the acquired hospital becomes a division of the controlling hospital and is listed as such on the operating certificate. In such a circumstance, the 30 percent State funding/State-authorized payments test would apply to the consolidated entity as a whole. However, to the extent that the two facilities described above are separate legal entities, possessing separate and distinct provider numbers, billing, Public Health Law Article 28 licensure, and federal identification numbers, the two facilities would be considered separate (albeit related) entities for purposes of applying the tests to determine whether either would be considered a Covered Provider pursuant to the EO38 regulations. It should also be noted that, with regard to related organizations, the EO38 regulations provide that, “In the event a covered provider pays a related organization to perform administrative or program services, the covered executives of the related organization shall also be considered ‘covered executives’ of the covered provider for purposes of reporting and compliance with these regulations if more than thirty percent of such a covered executive’s compensation is derived from State funds or State-authorized payments received from the covered provider.”

10. How do I determine my Covered Reporting Period (CRP)?

The Covered Reporting Period (CRP) is the provider’s most recently completed annual Reporting Period commencing on or after July 1, 2013.  In instances where the individual/entity is required to submit an annual Cost Report, the Reporting Period must be the same as the reporting period covered by the Cost Report.  Absent a Cost Report, the individual/entity may use either of two options to determine the CRP: 1) the calendar year; or 2) the individual’s/entity’s fiscal year.  For further information, refer to page 14 of the Guidance Document.

11. Why can’t I enter January 1, 2013 to December 31, 2013 for my CRP?

The effective date of the regulation is July 1, 2013 and therefore, the first CRP for a calendar year is Jan. 1, 2014 – Dec. 31, 2014.  You do not need to complete the Determination until after Dec. 31, 2014 and the Disclosure would not be due until June 29, 2015.

12. Where can I find a list of those “Cost Reports” that, if applicable, would define a covered provider’s “covered reporting period?”

The list of applicable “Cost Reports” for EO38 purposes is found within Appendix C of the EO38 Guidance Document.

13. For a covered provider that is not required to submit an annual Cost Report, when does its covered reporting period begin?

Absent a Cost Report, the individual/entity may use either of two options to determine the CRP: 1) the calendar year; or 2) the individual’s/entity’s fiscal year.  For further information, refer to page 14 of the Guidance Document.For example, a covered provider choosing to use the calendar year would have its first covered reporting period beginning January 1, 2014 and ending December 31, 2014. A covered provider with an organizational fiscal year commencing on October 1st that chooses to use its fiscal year would have its first covered reporting period beginning October 1, 2013 and ending September 30, 2014.

14. When may a waiver request be submitted?

A covered provider may submit a waiver request for a particular covered reporting period before or at the same time as the covered provider’s submission of a timely Disclosure Form applicable to that covered reporting period.

15. If a waiver request is submitted before the related Disclosure Form is submitted, is the waiver request required to be re-submitted at the time the EO 38 Disclosure Form is submitted?

If the information provided in the original waiver request has not changed, a re-submission of the waiver request is not necessary.Please note, an approved waiver request based on projected data submitted before the related Disclosure Form will remain in effect only so long as the projected information underlying the original waiver request matches the actual information for the applicable reporting period. In the event that the projected information underlying a previously approved waiver request does not match the actual information for the applicable reporting period, a covered provider should submit an amended waiver request at the time the EO38 Disclosure Form is submitted.

16. If a waiver request has been submitted and denied by the State before the related Disclosure Form is submitted, may the covered provider submit a new and modified request, which materially differs from the original denied request, at or before the time the related EO 38 Disclosure Form is submitted?

There is no prohibition on the ability of a covered provider to submit a new and modified waiver request that is materially different from the original denied request before or at the same time as it provides the timely submission of its EO 38 Disclosure Form.Please also note that in the event a waiver request is denied by the State, a covered provider may seek reconsideration of the original waiver request by providing a signed written request for reconsideration to the State within 30 calendar days of the date of the notice of proposed waiver denial. The covered provider may include additional information in support of the original waiver request within its request for reconsideration. The determination after reconsideration may affirm, revoke, or modify the proposed denial. Such determination shall be a final decision.

17. How long does a waiver request, if approved by the State, remain in effect?

A waiver request, if approved by the State, will be effective for the term specified in the notice of approval. If no term is specified in the notice of approval, a waiver request with regard to administrative expenses limitations will be effective only for the term of the covered reporting period for which the waiver was requested. If no term is specified in the notice of approval, a waiver request with regard to executive compensation limitations will be effective until such time as (1) the executive compensation that is the subject of the waiver increases by more than five percent in any calendar year, or (2) notice is provided by the State terminating the waiver granted as a result of additional relevant circumstances. In addition, a waiver granted based on projected figures will only be valid to the extent that the projected data provided in the waiver application is true and correct when compared to the actual data accounted for at the end of the Covered Reporting Period.

18. Does the organization have to submit any documentation with the EO 38 Disclosure Form?

A covered provider will not be required to submit any documentation beyond the information required in the EO38 Disclosure Form. It is suggested, however, that underlying documentation and worksheets used by an organization in preparing its EO38 Disclosure Form be retained by that organization in the event of a future review or audit.

19. Who is eligible to sign the attestation on the Disclosure Form?

Any person duly authorized by the governing body of the covered provider to sign and submit binding documents and contracts on behalf of the covered provider is eligible to sign the attestation on the Disclosure Form on behalf of the covered provider.

20. Who is eligible to sign the attestation on the Waiver Application Form?

Any person duly authorized by the governing body of the covered provider to sign and submit binding documents and contracts on behalf of the covered provider is eligible to sign the attestation on the Disclosure Form on behalf of the covered provider

21. Is there a link to definitions such as “administrative expenses,” “covered executive,” “covered provider” and “executive compensation?”

Yes. The EO38 Guidance Document provides definitions for key terms found in the EO38 regulations.

22. What kind of compensation surveys may be used by covered providers?

To determine whether a covered executive’s compensation is “greater than the 75th percentile of that compensation provided to comparable executives in other providers of the same size and within the same geographic area,” a covered provider must use a compensation survey “identified, provided, or recognized by” the State for EO38 purposes. In addition, the EO38 regulations also require, in part and among other things, that a covered provider’s executive compensation given to a covered executive in excess of $199,000 per annum was reviewed and approved by a process including “an assessment of appropriate comparability data.” In determining whether “an assessment of appropriate comparability data” was used at the time executive compensation was reviewed, a covered provider should consider whether the data used during the review substantially addressed the 17 Factors of Comparability enumerated on page 42 of the online EO38 Guidance Document.

23. How can a covered provider ascertain whether its compensation survey is “identified, provided, or recognized” by the State as required by the EO 38 regulations?

Please see the document entitled, EO38 Survey Options.

24. Does executive compensation include compensation from sources other than State funds and State-authorized payments?

Yes. Executive compensation is not limited to compensation derived from State funds and State-authorized payments. While exemptions are provided in the EO38 regulations’ definition of “executive compensation” for certain specific categories of compensation, executive compensation may include funding from all sources.

25. To the extent that distributions to shareholders in “S” corporations are not considered compensatory or guaranteed payments, are those payments excluded from the executive cap?

To the extent such distributions were not made for services rendered (meaning that they are not provided as consideration for services rendered or that the underlying shares to which the distributions relate were not provided in exchange for services rendered), they would not count in the calculation of “executive compensation” pursuant to the EO38-related regulations. The determination as to whether a distribution is considered a compensatory payment depends upon consideration of the specific facts and circumstances surrounding the distribution.

26. How does a covered provider determine if a distribution or dividend to a shareholder is made from ‘current reporting period’s earnings’ if the provider has both current and accumulated earnings?

For purposes of determining whether distributions or dividends are from earnings reported in the current period, distributions/dividends are considered to come from current earnings first. Those in excess of current earnings will be deemed to come from prior year earnings or equity.

27. Can a for-profit skilled nursing facility operator take distributions specifically to pay taxes and not have it count as gross compensation on the Executive Compensation Calculation Worksheet?

Distributions received by an executive for the purpose of paying taxes should be counted as compensation to the extent that such distributions are for services rendered during the reporting period and are derived from the covered provider’s earnings during the reporting period.

28. Does the definition of “executive compensation” capture all distributions and dividends paid to a covered executive, including those that are considered to be a return on equity, or only those dividends and distributions that are deemed remuneration for services rendered by a covered executive?

“Executive compensation” encompasses all distributions and dividends that are paid to a covered executive for services rendered, which would include those distributions and dividends related to shares/equity provided to the executive for services rendered. Distributions and dividends related to shares/equity held by a covered executive obtained through the executive’s open-market or arms-length purchase/investment would not be counted within the calculation of executive compensation. Additionally, where a profit interest is given to an executive but only part of it was in return for services rendered, the portion of the profits allocation arising from an arrangement between the executive and the covered entity to provide compensation for services rendered would be counted in the executive compensation calculation.

29. When a compensatory profits interest given to a covered executive in a prior year for services rendered during that year generates additional profits in a later year, should these later year profits allocations also be considered “executive compensation”?

The definition of “executive compensation” found in the EO38 regulations includes “payments or benefits given directly or indirectly to a covered executive, including … distributions to a shareholder/partner from the current reporting period’s earnings … for services rendered during such reporting period.” Additional profits generated in later years from a compensatory profits interest given in a prior year for services rendered in that prior year would not likely be included in the later year’s executive compensation calculation, as such payments would not be considered compensation “for services rendered during [the current] reporting period.”Please note that, in the event a covered provider waits until a subsequent reporting period to provide a covered executive with distributions from a prior covered reporting period’s earnings for services rendered by the covered executive during that prior covered reporting period, it would be incumbent upon the covered provider to amend its Disclosure Form for that prior covered reporting period (if previously submitted) to include such amounts within the executive compensation calculation for that covered executive.

30. Is there a suggested methodology that should be used by a covered entity organized as a partnership, LLC or “S” corporation to distinguish dividends and distributions deemed to be a return on equity from those considered to be remuneration for services rendered?

It is suggested that the covered entity should determine whether the equity from which the dividend or distribution arises was provided to the executive by the covered entity for services rendered during the covered reporting period (which would be included in executive compensation) or whether it was the result of an open-market or arms-length purchase/investment by the executive in the covered entity (which would not be included in the executive compensation calculation). In addition, dividends or distributions arising from equity held by the executive resulting from a benefit provided by the covered entity to its other employees generally (such as an employee stock plan [ESOP] made generally available) would not be included within the calculation of executive compensation.

31. Is compensation reported on IRS Form K-1 excluded from or treated differently under the definition of “executive compensation” within the EO38 regulations?

Schedule K-1 is a federal tax document used to report the incomes or losses of a business's partners or “S” corporation's shareholders. Rather than being a financial summary for the entire group, the Schedule K-1 document is prepared for each partner or shareholder individually. While not filed with an individual partner or shareholder's tax return, financial information found in Schedule K-1 is sent to the IRS along with either a Form 1120S or a Form 1065. To the extent an amount reported on federal Schedule K-1 is for services rendered during the reporting period, it would not be excluded from the definition of “executive compensation” under the EO38 regulations.>

32. Please advise how the regulations treat payments that are made to a covered executive to reimburse the executive for income taxes incurred as a result of a covered executive's retained earnings. For example, if a covered entity has retained earnings of $750,000, those retained earnings might result in a federal and state income tax liability for a covered executive (who is the sole owner of the covered entity) in an amount in excess of $250,000. If the covered entity reimburses the covered executive an amount equal to that tax liability, will the tax reimbursement payment be considered "executive compensation" under the EO38 regulations?

Distributions/dividends to a shareholder to pay a tax liability are included in executive compensation if the payment is determined to be for services rendered. 

33. Are benefits that accrue, but are subject to forfeiture (for example, where an executive receives deferred compensation that is subject to a vesting schedule based on tenure), counted as executive compensation?

Yes. The EO38 regulations provide, “With respect to employer contributions to retirement and deferred compensation plans that are not consistent with those provided to other employees, executive compensation shall be deemed to include only those amounts contributed or accrued during the reporting period for the benefit or intended benefit of the covered executive ....” The intent of this provision is to include in the calculation of executive compensation only those amounts contributed or accruing within the reporting period, even if subject to forfeiture, and to avoid double-counting by excluding prior year contributions and accruals.

34. May a for-profit New York “S” corporation that is a "covered provider" pay a “covered executive” a salary for the services rendered by such individual less than or equal to $199,000 using "State funds" and issue dividends, also using "State funds," to such individual if he/she is also a shareholder of the corporation (provided that the dividends are neither (a) compensatory nor guaranteed, nor (b) in exchange for services rendered by such shareholder) and where, collectively, the salary for the services rendered plus the dividends will exceed $199,000?

A covered provider may pay such a salary and make such a distribution of earnings or dividend payment to the shareholder and remain under the $199,000 State Funds threshold for executive compensation provided that the distribution/dividend is not for services rendered during the current reporting period.

35. Does the answer to the question above change if the “covered provider” is a: Limited Liability Company, Partnership, “C” corporation, or any other corporate form?

While the terminology used for the type of payments made by the entities (other than salary) differs somewhat, the rule is the same for all. Distributions/dividends, or other payments are not included in executive compensation, provided that they are not made for services rendered by the shareholder during the entity’s reporting period.

36. Is a covered provider prohibited from paying executive compensation in an amount greater than $199,000 per annum, irrespective of the source of the funds used to pay the covered executive?

Unless a waiver has been granted, a covered provider is prohibited from using greater than $199,000 in State funds and/or State-authorized payments to provide executive compensation to a covered executive. A covered provider may use other sources of funding or a mix of State and non-State funding sources to provide executive compensation totaling an amount greater than $199,000 per annum, so long as the factors provided in the “Limits on Executive Compensation” portion of the EO38-related regulations are satisfied or a waiver has been granted by the State.

37. Is a covered provider allowed to use more than $199,000 in State funds or State-authorized payments to pay a covered executive, if the use of such funds would otherwise meet the requirements of paragraph (b) of the “Limits on Executive Compensation” section of the EO38 regulations (for examples see 10 NYCRR § 1002.3[b] and 19 NYCRR § 144.5[b])?

No, unless a waiver has been granted, a covered provider is prohibited from using greater than $199,000 in State funds and/or State-authorized payments to provide executive compensation to a covered executive.

38. If the executive compensation provided to a covered executive meets the requirement that it has been “reviewed and approved by the covered provider's board of directors or equivalent governing body (if such a board or body exists) including at least two independent directors … [and such review included] an assessment of appropriate comparability data,” can the executive compensation then exceed the 75th percentile?

Unless a waiver is granted by the State, executive compensation provided by a covered provider to a covered executive in excess of $199,000 per annum cannot be “greater than the 75th percentile of that compensation provided to comparable executives in other providers of the same size and within the same program service sector and the same or comparable geographic area as established by a compensation survey identified, provided, or recognized by the [State].”

39. If a for-profit nursing home operator owns four nursing homes (separate legal entities in different locations, related by common ownership, each of which would qualify independently as a “covered provider” under the EO38 regulations) and is paid a salary of $400,000 from a management company that receives revenue from the four nursing homes/covered entities owned by the operator, would that compensation be subject to the EO38 regulations’ executive compensation limitations?

If the management company is a related organization and more than 30 percent of the operator’s compensation is derived from State funds or State-authorized payments received from any one of the related covered provider nursing homes, then the operator would be considered a covered executive of that covered provider nursing home for purposes of the application of the EO38 regulations.In addition, the EO38 regulations define a “covered executive,” in part, as “a compensated director, trustee, managing partner, or officer whose salary and/or benefits, in whole or in part, are administrative expenses, and any key employee whose salary and/or benefits, in whole or in part are administrative expenses and whose executive compensation during the reporting period exceeded $199,000.” “Executive compensation” includes cash and noncash benefits, as described in the EO38 regulations, given “directly or indirectly” to a covered executive by a covered provider. Therefore, if the operator is a compensated director, trustee, managing partner, officer, or key employee receiving such cash and noncash benefits in excess of $199,000 directly or “indirectly” (such as through a management company) from any one of the four nursing homes, then the operator would be considered a covered executive of that nursing home.

40. A nonprofit CEO oversees a nursing home and two assisted living facilities, each of which independently qualifies as a covered provider under the EO38 regulations and none of which are related organizations. The CEO receives compensation totaling $300,000 per annum pursuant to a shared expense agreement among the three facilities to pay the CEO’s salary as apportioned among the facilities based on actual time spent. Is the CEO’s salary apportioned for each covered provider when applying the executive compensation rules?

Under the facts presented above, each covered provider should evaluate the amount of executive compensation it provides to the CEO through the shared services agreement and the source of those funds. Based on the level of compensation and the source of such funding, each covered provider would then independently determine whether the CEO would qualify as a covered executive and, if so, whether the executive compensation provided is within the executive compensation limitations set forth in the EO38 regulations.

41. Insofar as a covered provider is a closely-held entity without independent directors (e.g. solely owned/family owned), how can that provider compensate any executive more than $199,000 (but less than the 75th percentile) without violating the EO38 regulations, considering that the regulations appear to require that such compensation must be reviewed and approved by “two independent directors or voting members”?

A covered provider that has a governing body and provides a covered executive with compensation in excess of $199,000 during a covered reporting period without having had such compensation reviewed and approved by “at least two independent directors or voting members” would be in violation of the executive compensation limitations of the EO38 regulations, unless a waiver is requested and received from the State.

42. Is it a violation of the EO38 regulations’ executive compensation limitations for a for-profit New York State “S” corporation that is a “covered provider” to make distributions in excess of $199,000 to a shareholder who is not a “covered executive” using “State funds or State-authorized payments?”

The limitations on executive compensation within the EO38 regulations apply only to “executive compensation” provided by a “covered provider” to a “covered executive” as those terms are defined in the applicable EO38 regulations. Funds provided to a person who is not a “covered executive” would not be subject to the EO38 limitations on executive compensation. Please be advised, however, that although such distributions would not be subject to the EO38 regulations’ executive compensation limitations, this response should not be construed as authorizing such distributions as allowable charges to State funds or State-authorized payments. For information on whether costs are allowable, please consult directly with the State agency responsible for the provision of the subject State funds or State-authorized payments.

43. Is it a violation of the EO38 regulations’ executive compensation limitations for a for-profit New York State “C” corporation that is a “covered provider” to issue dividends in excess of $199,000 to a shareholder who is not a “covered executive” using “State funds or State-authorized payments?”

The EO38 regulations’ executive compensation limitations apply only to “executive compensation” provided by a “covered provider” to a “covered executive,” as those terms are defined in the applicable EO38 regulations. Funds provided to a person who is not a “covered executive” would not be subject to the EO38 regulations’ executive compensation limitations. Please be advised, however, that although such distributions would not be subject to the EO38 regulations’ executive compensation limitations, this response should not be construed as authorizing such distributions as allowable charges to State funds or State-authorized payments. For information on whether costs are allowable, please consult directly with the State agency responsible for the provision of the subject State funds or State-authorized payments.

44. What criteria should be used to determine whether a director or member of a covered provider’s governing body is “independent” for purposes of compliance with the EO38 regulations?

If a director or voting member of a covered provider satisfies the criteria for independence set forth in the Internal Revenue Service’s (IRS) Instructions for Form 990, publicly available online at http://www.irs.gov/pub/irs-pdf/i990.pdf (see pages 19 and 62), such a director or voting member may be considered an “independent director or voting member” of the covered provider for purposes of the EO38 regulations.

45. How is a covered provider’s profit considered for purposes of the limits on administrative expenses?

The EO38 regulations’ administrative expenses limitation is focused on covered operating expenses (administrative expenses plus program services expenses) of the covered provider paid for with State-funds or State-authorized payments during the covered reporting period. The calculation considers only those State-funds and State-authorized payments used by the covered provider during the reporting period for “program services expenses” and “administrative expenses,” as defined in the EO38 regulations. The administrative expenses limitation considers the proportionate distribution of a covered provider’s covered operating expenses, not the excess revenue generated after expenses have been met.

46. Is a covered provider’s profit included within the definition of either “covered operating expenses” or “program services expenses” under the EO38 regulations?

For purposes of the EO38 regulations’ limits on administrative expenses, “covered operating expenses” and “program services expenses” relate to expenses paid by the covered provider using State funds and State-authorized payments during the covered reporting period.

47. How do I know if I am a covered provider and required to comply with EO #38?

In order to determine if an organization is a covered provider, please go to the Determination section of the website.  The step-by-step guide can be used to complete the Determination. Please also note that a discussion of the covered provider status determination is provided in the Section A of the Guidance document.

48. When do the EO #38 implementation regulations go into effect?

The regulations were published as final in the May 29, 2013 NYS State Register, with an effective date of July 1, 2013. The limitations on Executive Compensation and Administrative Expenses for Covered Providers, as defined in the regulations, become effective on the first day of a Covered Provider's respective Covered Reporting Period beginning on or after July 1, 2013.

49. To what state agencies do the limitations on Executive Compensation and Administrative Expenses in EO #38 apply?

The state agencies covered by EO #38 are:

  • Agriculture and Markets (AGMKTS)
  • Department of Corrections and Community Supervision (DOCCS)
  • Department of Health (DOH)
  • Department of State (DOS)
  • Division of Criminal Justice Services (DCJS)
  • Homes and Community Renewal (HCR)
  • Office for the Aging (NYSOFA)
  • Office for People with Developmental Disabilities (OPWDD)
  • Office of Alcoholism and Substance Abuse Services (OASAS)
  • Office of Children and Family Services (OCFS)
  • Office of Mental Health (OMH)
  • Office of Temporary and Disability Assistance (OTDA)
  • Office of Victim Services (OVS)

50. If I am a Covered Provider, when am I required to file my EO #38 Disclosure Form?

According to the regulations, the EO #38 Disclosure Form must be filed no later than 180 days after the last day of a Covered Provider's Covered Reporting Period, as defined in the regulations.

51. If I am a Covered Provider, when must I file any applications for waivers from the requirements of the regulations?

Waiver applications must be filed no later than concurrent with the EO #38 Disclosure Form, which is due no later than 180 days after the last day of the Covered Reporting Period, as defined in the regulations.

52. If I can't determine whether I'm a Covered Provider until after the end of the Covered Reporting Period, can I still apply for a waiver?

Yes. Providers that anticipate being Covered Providers may file an application for a waiver from the requirements of the EO38 regulations before the last day of their anticipated Covered Reporting Period. Waiver applications submitted in advance of the end of the Covered Reporting Period must be based on reasonable expectations about the applicability of the regulations to the provider and reasonable projections about anticipated administrative expenses and executive compensation. In the event that such a waiver application is granted by the State, an amended waiver application should also be submitted at the time the related EO #38 Disclosure Form is submitted if the actual information at such time differs from the projected information previously submitted on the waiver application. Waivers granted based on projected figures will only be valid to the extent that the projected data provided in the waiver application is true and correct when compared to the actual data accounted for at the end of the Covered Reporting Period.

53. What if a Covered Provider is unable to afford or otherwise procure a compensation survey?

Please see the document entitled, EO38 Survey Options.