(1)
Allowable Costs. Except as provided elsewhere in 114.
5 CMR 4.04, all expenses determined in accordance with the Principles of
Reimbursement for Provider Costs under 42 U.S.C. §§ 1395 et
seq. as set forth in 42 CFR 413et.seq. and the
Provider Reimbursement Manual, are allowable costs.
(2)
Allocation of Costs and
Income. If a provider conducts more than one program, it must
allocate costs to each program using a basis which the Division deems
reasonable. When a provider initiates a new program it may not allocate costs
from any established program to the new program during the first year of
operations.
(3)
Inputed
Values. The fair market value of donated goods and services is
allowable to the extent that:
(a) this value
can be objectively and reliably determined; and
(b) the provider would have to expend agency
funds if the donated goods and services were not available and
(c) the provider controls the donated goods
in the same manner as goods owned by the agency and controls the donated
services in the same manner as it controls its employees, including control
over time, location, nature, and performance of the service.
The amount of allowable program cost shall be reduced by the
inputed value of donated goods and services which are reported as income during
the same period.
(4)
Payments to Related
Parties. The provider must identify any such related party and the
expenses attributable to it and must demonstrate that such expenses do not
exceed the lower of the cost to the related party or the price of comparable
services, facilities or supplies that could be purchased elsewhere. The
Division may request either the provider or the related party, or both, to
submit information, books and records relating to such expenses for the purpose
of determining their allowability.
(5)
Fringe Benefits.
Employer contributions to generally-available fringe benefits are allowable if
the benefits are available to all employees under an established policy of the
provider. Benefits may vary only in relation to disparities in length of
service, collective bargaining agreements or regular hours of
employment.
(6)
Pension. Employer contributions to pension, annuity
and retirement plans are allowable if:
(a) the
contributions are based on fair, reasonable and necessary compensation for
services performed by employees,
(b) the contributions are costs incurred on
current year payrolls and do not include payments for prior year
payrolls,
(c) the plan does not
provide for contributions by the employer based on the contingency of profit or
at the discretion of the employer,
(d) the pension plan must have met the
current requirements of and, if applicable, received the approval of the
Internal Revenue Service. The provider must file with the Division all
applicable Internal Revenue Service forms documenting Internal Revenue Service
approval along with copies of the plan; and
(e) any forfeiture by an employee must be
applied against the cost to reduce the premiums paid by the employer. A
forfeiture shall be considered to have occurred when any employee who
participated in the pension plan terminates employment prior to becoming
vested. This reduction in the claim for reimbursement shall be made
notwithstanding the terms or lack of terms in the pension plan.
(7)
Reimbursement of
Capital Expenditures.
(a)
Current Expensing of Capital Items. The full cost of
acquisition of an asset having a useful life of more than one year and the full
cost of repair, betterment or improvement of an asset which adds to the
permanent value of the asset or which appreciably prolongs its useful life may
be treated as an allowable cost of the period in which it was incurred, if the
cost does not exceed $500.00 or; in the case of a group of related assets,
repairs, betterments, or improvements, the aggregate cost does not exceed
$500.00.
(b)
Depreciation. Except as excluded by 114. 5 CMR
4.04(8)(j), depreciation on plant, equipment and other assets is an allowable
cost provided the amount thereof is computed:
1. upon an historical cost basis consistent
with that used by the Internal Revenue Service;
2. using a straight line method;
3. charging 1/2 of the annual depreciation
expense in each of the years of acquisition and disposal; and
4. using the following schedule of useful
lives:
|
Asset Category
|
Life (Years)
|
Yearly Rate (%)
|
|
Buildings
|
|
1.
|
Class I or II as classified by the Dept. of Public
Safety
|
40
|
2.5
|
|
2.
|
Class III or IV as classified by the Dept. of Public
Safety
|
33.3
|
3
|
|
Improvements/Betterments
|
20
|
5
|
|
Equipment, Furniture and Fixtures
|
10
|
10
|
|
Motor Vehicles
|
5
|
20
|
|
Software used directly for benefit of publicly aided
clients
|
3
|
33.3
|
(8)
Disallowed
Costs.
(a)
Bad
Debts. Those amounts which represent uncollectible accounts
receivable (whether estimated or actual) and any related costs including
related legal costs.
(b)
Free Care. The cost of care furnished to individuals
other than publicly assisted clients who, at the time of delivering care, have
been or reasonably could have been determined to be financially unable to pay
for such care.
(c)
Certain Salaries and Compensation. Those salaries and
wages and other compensation determined by the Division to be excessive in
light of salaries, wages and other compensation of comparable providers, and
such other criteria of reasonableness as the Division may employ.
(d)
Fundraising. The
cost of activities which have as their primary purpose the raising of capital
or obtaining contributions, including the costs associated with financial
campaigns, endowment drives, solicitation of gifts and bequests.
(e)
Research. These
costs related to the conduct of grants, contracts investigations, or programs
directed at the understanding, cure or alleviation of physical, mental or
behavioral conditions. All costs of salaries, supplies, equipment, and
occupancy which are directly related to research are to be excluded. Data
gathering and program analysis are not considered to be research.
(f)
Federal Corporate Income
Taxes and the Income Related Portion of the Massachusetts Corporate Excise
Tax.
(g)
Certain Travel Allowances. Any amount advanced, paid
or accrued to reimburse the provider's employees for use of a private motor
vehicle on official agency business in excess of the amount allowed to
employees of the Commonwealth.
(h)
Security Deposits. Money deposited by the provider
with a lessor of real property as security for full and faithful performance of
the terms of a lease.
(i)
Certain Interest.
1.
Any interest paid or accrued upon funds advanced or borrowed from any owner,
partner, officer, stockholder, related party, or affiliated or parent
organization to the extent that it exceeds the rate on obligations of the
United States Treasury having comparable terms.
2. Any interest accrued to inter-fund
borrowings.
3. Any interest paid or
accrued during a reporting year which is not supported by documentation and
certification to demonstrate that payment of interest and repayment of
principal are required under a definite repayment schedule pursuant to a
written contract.
4. Any interest
or penalties incurred because of late payments of loans or other indebtedness,
late filing or payment of federal and state tax returns, municipal taxes,
unemployment taxes, social security and the like.
5. Any interest paid or accrued upon funds
advanced or borrowed to the extent of any income received or accrued from the
investment of restricted or unrestricted funds which were available to defray
all or a portion of the expenses to which borrowed or advanced funds were
applied.
(j)
Certain Depreciation.
1. Depreciation on idle or excess assets
except such assets as are reasonably necessary for standby purposes.
2. Depreciation on donated assets.
3. Depreciation on any assets after the
expiration of the applicable useful lives set forth in 114. 5 CMR
4.04(7)(b)4.
4. Depreciation of
that portion of an asset's historical cost basis, as determined under 114. 5
CMR 4.04(7)(b)1., which was paid from restricted funds.
5. Where there has been a transfer of
ownership of any asset, no depreciation shall be allowed on any increase in the
cost basis or valuation of the assets resulting from the transfer.
(k)
Lobbying
Costs. Funds used to compensate or reward lobbyists, consultants
or staff to promote, oppose or influence legislation, or influence the
governor's approval or veto thereof or to influence the decision of any
Executive branch where such decision concerns legislation or the adoption,
defeat, or postponement of a standard, rate, rule or regulation pursuant
thereto, and any costs associated with lobbying activities. This prohibition
shall apply where the lobbyists, consultants or staff, as any part of their
regular and usual employment and not simply incidental thereto, attempt to
promote, oppose or influence legislation, approval or veto, or regulations,
whether or not any compensation in addition to the salary for such employment
is received for such services.
(l)
Unreasonable Operating Costs. Costs which the Division
determines exceed those justified under the prudent buyer concept.
(m)
Unauthorized
Expenditures. Costs which are not reasonably necessary or
appropriate for the provision of care or the efficient administration of the
program. In determining whether a particular expenditure is unauthorized, the
Division may rely upon the judgment of the principal purchasing governmental
unit or the agreement of the parties.
