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New York State – Executive Order #38

By Mitchell Lewis, WeiserMazars LLP Partner

Executive Order #38, applicable to providers of program services in New York State, funded by New York State, became effective July 1, 2013, with the goal of placing limits on administrative expenses and executive compensation for covered providers.

If you are a covered provider, Executive Order #38 is applicable to you! Covered providers are defined as those which, after exemptions, receive state funds or state authorized funds on average greater than $500,000 and your state funds or state authorized funds as a percentage of total in-state revenues are, on average, greater than 30%. Exemptions exist for a number of New York State agencies or State funds.

Covered providers are required to submit an annual disclosure form to New York State. If you exceed the limitations, or project that you will exceed the limitations, you should apply for a waiver. In addition, some executives are considered covered, which creates the possibility of limited compensation, though not all are and not all components of compensation are included. Your administrative expenses may also be limited though, once again, not all expenses are included.

In order to help providers through this transition, New York State has created a helpful website. This site includes a 149 page preliminary guidance document, as well as four worksheets – a covered provider worksheet, a state funds/state-authorized payments worksheet, an administrative and program services expenses worksheet and an executive compensation worksheet.

This new directive will not be easy to appropriately assess and implement, and if not done carefully, it could impact your organization’s ability to continue to receive New York State funding. The WeiserMazars Not for Profit Group is currently developing a thorough, effective methodology to assess each client’s status and create a work plan to help you meet this challenge. Please contact us to discuss the applicability of the Executive Order and the calculations of the various limitations to your particular situation.