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Beginning July 1, some for-profit and nonprofit organizations will have to adjust their executives’ compensation — limiting it to $199,000.
Gov. Andrew Cuomo proposed regulations last year that will limit providers that receive more than $500,000 each year in state funding and at least 30 percent of their annual funding from the state to spend no more than $199,000 for executive compensation.
The regulations were proposed to limit “excessive executive compensation or administration costs” to protect the recipients of services by providers as well as taxpayers against wasteful use of public funds, the order stated.
While there are 11 local nonprofit organizations with executives making more than the proposed cap, officials were unsure how the regulations would be implemented.
“How can you put an arbitrary number on it and say this is what the cap is?” said Oneida County Judge Norman Siegel, chairman of the Board of Trustees for St. Elizabeth Medical Center in Utica.
Thomas Pollak, program director for the National Center for Charitable Statistics at the Urban Institute, said organizations voluntarily issuing limits would be more effective.
“I can see both sides. I’m very sympathetic to the view,” he said. “Despite preferring voluntary measures to limit compensation, I certainly understand the rationale in mandating it also.”
Providers could pay an executive more than the $199,000 if they keep the compensation below the top 25 percent in the field determined by a compensation survey. They also must have the salary approved by its board of directors, including two independent directors, and must have a review of comparability data.
The key difference between for-profits and nonprofits is that for-profit employees get profit margins, said Elizabeth Boris, director of the Center of Nonprofits and Philanthropy at the Urban Institute in Washington, D.C.
Boris said there’s probably no reason for a cap because the Internal Revenue Service requires nonprofit providers to do a comparable analysis of similar organizations.
She emphasized that salaries might be higher because of the environment people work in.
“If you went to a nonprofit hospital, would you want to feel like you’re getting inferior care compared to a for-profit hospital?” Boris said. “I think some people like to think that people working in nonprofits accept lower salaries because they value the work, but that isn’t to say that we should mandate that they have lower salaries.”
Read more: http://www.uticaod.com/news/x460062364/How-will-new-regulations-affect-local-nonprofits#ixzz2W6ZohEda
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