Alaska Administrative Code, Article 7, 7 AAC 145.533 - Personal care services, Community First Choice services, or home and community-based waiver services allowable costs | Alaska Administrative Code

(a) For purposes of the annual report required in 7 AAC 145.531, costs are allowable costs if they are reasonable, necessary, and related to the service provided. For purposes of this section,

(1) a cost is reasonable if the amount expended does not exceed what a prudent buyer who seeks to minimize costs would pay for an item or service; and

(2) a cost, direct or indirect, is necessary if it is appropriate in developing and maintaining the required standard of operation for providing recipient care in accordance with state law.

(b) For purposes of the annual report required in 7 AAC 145.531, allowable costs include, subject to (a) of this section,

(1) wages, salaries, and associated costs; those costs must be commensurate with compensation paid for equivalent staff positions or similar duties on a state-specific industry level; the target provider shall support each cost with a timesheet, or other contemporaneous documentation, that supports time worked and the category of service if applicable; in this paragraph, "associated costs" include

(A) payroll taxes;

(B) insurance for

(i) the owner-employee;

(ii) an employee who is a related party; and

(iii) other employees and staff;

(C) payments for contract labor services; and

(D) other labor costs that can be tied directly to recipient care;

(2) travel costs for recipients and target providers including transportation, per diem, and meal allowances that are an allowable element of a covered service;

(3) the costs of items or services purchased for recipients that are necessary to carry out the recipients' approved support plans or plans of care;

(4) board of directors' expenses, including travel and training costs directly associated with board functions on behalf of the target provider, but excluding lobbying activities;

(5) bonuses to owners or other related parties, except that to be allowable, bonuses

(A) may not represent any form of profit sharing or distribution of profits;

(B) may not be determined on the level of profit earned by the target provider;

(C) must be clearly defined in a written agreement or employment policy;

(D) may not be made only to related parties;

(E) must be based upon the same criteria for all members of the same employee classification type; in determining the employee classification type, part-time employees may be considered a different classification type than full-time employees;

(F) must be made available to all employees of the same classification type; however, if the employee classification type predominantly consists of related parties, the bonuses are nonallowable costs; and

(G) may not be made available only to employees who are officers, stockholders, or the highest paid individuals of the organization, and may not otherwise discriminate in favor of certain employees;

(6) general service costs, including the costs of

(A) personal services and associated benefits, training, and travel of the owner, the target provider's executive director, and the target provider's secretarial, clerical, accounting, and other administrative staff;

(B) office equipment, including leased equipment, supplies, postage, related professional subscriptions, and associated procurement costs;

(C) rent, a lease, interest on capital loans, utilities, equipment, security systems, and routine maintenance; and

(D) professional dues for professional staff;

(7) contractual costs for consulting, legal, and financial accounting and auditing services directly related to the provision of care;

(8) insurance expenses, including professional liability, automobile, and facility coverage, and bonding;

(9) advertising costs limited to

(A) announcing the opening of or change of name of a facility;

(B) recruitment of personnel;

(C) advertising for the procurement or sale of items;

(D) obtaining bids for construction or renovation;

(E) advertising for a bond issue;

(F) informational listing of a target provider in a telephone directory;

(G) listing a facility's hours of operation; and

(H) advertising specifically required as part of a target provider's accreditation process; and

(10) depreciation expense on assets used in the provision of covered service care to the extent the useful lives are no shorter than the useful life allowed under 26 U.S.C. (Internal Revenue Code) by the United States Department of the Treasury, Internal Revenue Service for federal income tax purposes; equipment expense is allowable only in accordance with generally accepted accounting principles (GAAP).

(c) For purposes of the annual report required in 7 AAC 145.531, nonallowable costs include

(1) items or services purchased for recipients that are not necessary to carry out approved plans of care;

(2) lobbying expenses;

(3) fundraising expenses;

(4) contingency funds;

(5) fines, penalties, and bad debts;

(6) contributions or donations;

(7) entertainment expenses, including meals, banquets, gratuities, and decorations;

(8) organization dues that are based on a percentage of grant award amounts;

(9) other costs not allowed under requirements or special conditions related to other state grant awards to the target provider;

(10) public relations and community education expenses related to advertisements, brochures, newsletters, marketing, surveys, and staff and community development activities; and

(11) costs incurred by a target provider related to a court or administrative proceeding initiated by a target provider, except that costs incurred on an issue in a court or administrative proceeding originally initiated by a target provider are allowable costs if the target provider is the prevailing party on the issue under a final order, and the rules governing the proceedings do not make provision for the award of fees and costs to a prevailing party.

(d) To determine the relationship to recipient care and to determine whether individual cost survey reports are reasonable and accurate for use in rate-setting determinations, the department will evaluate the costs that target providers report.

(e) A target provider is responsible for accurate cost reporting. The target provider is responsible for including in the cost survey report all costs incurred, based on an accrual method of accounting, and in accordance with allowable and nonallowable cost provisions in this section and other applicable provisions of 7 AAC 105 - 7 AAC 160. The cost survey is limited to actual allowable costs and other financial and statistical information. The target provider may not impute or report a cost on the cost survey if

(1) the cost was not actually incurred; or

(2) documentation does not exist for the cost, even if the cost was actually incurred during the reporting period.

(f) A target provider shall maintain adequate documentation to support the_compensation of owners and other related parties. If a target provider fails to provide_adequate documentation upon request to substantiate the cost to the related party, and if that cost exceeds $5,000, the reported cost is nonallowable. The minimum documentation for each owner or related party cost in excess of $5,000 is

(1) identification of the related party's total cost;

(2) the basis of allocation of direct and indirect costs to the target provider;

(3) other business entities served by the related party;

(4) a detailed written description of actual duties, functions, and responsibilities;

(5) documentation substantiating that the services performed were not duplicative of services performed by other employees;

(6) daily timesheets or other documentation verifying the hours and days worked;

(7) the total amount of compensation paid for these duties, with a breakdown detailing regular salary, overtime, bonuses, benefits, and other payments;

(8) documentation of regular, periodic payments or accruals of the compensation; and

(9) if applicable, a detailed allocation worksheet indicating how the total compensation was allocated across all business components that received benefit of the effort.

(g) Allowable expenses in related-party transactions are reported on the cost survey report at the cost to the related party. However, those costs may not exceed the price of comparable services, equipment, facilities, or supplies that could be purchased or leased elsewhere in an arm's length transaction.

(h) Total expenses on the cost survey must match the audited financial statements.

(i) The department may determine a cost survey report to be unacceptable and return it to the target provider for

(1) use of an incorrect cost-reporting period;

(2) failure to provide required financial and statistical data or providing inaccurate financial and statistical data;

(3) failure to maintain all work papers and any other records that support the information submitted on the cost survey report relating to all allocations, cost centers, cost or statistical line items, and schedules; or

(4) failure to complete the cost survey report in accordance with this chapter, other applicable provisions of 7 AAC 105 - 7 AAC 160, and the Cost Survey Instructions, adopted by reference in 7 AAC 160.900.

(j) A target provider shall maintain records to support cost survey information related to all expenses, allocations, statistical data, surveys, and schedules. Upon review of the cost survey report and the supporting documents listed in the Cost Survey Instructions, adopted by reference in 7 AAC 160.900, the department may make a written request for clarification, additional information, or additional documents. Not later than 21 days after the department issues the request, the target provider shall provide the requested clarification, additional information, or additional documents.

(k) Documentation for all costs reported on the cost survey report must be available for review and maintained for a minimum of seven years.

(l) If documentation is inadequate to support a reported cost, the department will disallow the cost.