Executive Order 38 was issued by NY Governor Cuomo in 2011, requiring state agencies to adopt regulations capping executive compensation (and administrative expense) by state-funded organizations.  Philanthropy Daily has a very detailed article on the operation of these regulations but it’s important to note that, depending on a particular organization’s fiscal year, the regulations may have taken effect as early as January 1, 2014.

Of particular note for non-profit organizations are the following:

– The rules apply to entities receiving at least $500,000 in state support, and for the purpose of these regulations, the full Medicaid payment received by the entity, not just the state share, is counted.

– If the state funding exceeds 30% of the organization’s total, compensation is capped at $199,000 unless either the compensation is below the 75th percentile according to surveys approved by the state and the compensation committee reviewed and approved the compensation in compliance with the law’s requirements, or a waiver is obtained.

As of the beginning of this year, we are seeing an upsurge in inquiries about the law and its effects, particularly around the 75th percentile requirement.

Please note that this blog post is a compressed summary of very detailed laws and regulations; a professional advisor should be consulted to ensure compliance.