| on the cost report. If a
staff party also serves as an open house for promotional purposes,
an allocation of costs must be made so that only costs relating to
employees and their families in attendance are reported as allowable
costs. Entertainment expenses other than those for the benefit of
current clients or those for staff employee relations described above
are unallowable costs.
(B) Organization costs. Organization costs are those
costs directly incident to the creation of a corporation or other
form of business necessary to provide contracted services. These costs
are intangible assets in that they represent expenditures for rights
and privileges which have a value to the business enterprise.
(i) Allowable organization costs include, but are not
limited to, legal fees incurred (such as drafting documents) in establishing
the corporation or other organization, necessary accounting fees,
and fees paid to states for incorporation. Allowable organization
costs must be amortized over a period of not less than 60 consecutive
months, beginning with the first month in which services are delivered
to the first client.
(ii) The following types of costs are considered unallowable
organization costs: costs relating to the issuance and sale of shares
of capital stock or other securities, reorganization costs, and stockholder
servicing costs. If the business or corporation never commences actual
operations, the organization costs are unallowable.
(C) Franchise fees.
(i) Allowable franchise fees. Allowable franchise fees
include those costs related to actual goods, supplies, and services
received in return for fees paid to a company for the right to sell
its goods and/or services in a specific territory.
(ii) Unallowable franchise fees. Franchise fees based
upon percentages of revenues and/or sales are unallowable costs. Franchise
fees based upon goodwill are unallowable, with goodwill being that
intangible, salable asset arising from the reputation of a business
and its relationship with its customers.
(D) Startup costs. Startup costs are those reasonable
and necessary preparation costs incurred by a provider in the period
of developing the provider's ability to deliver services. Startup
costs can be incurred prior to the beginning of a newly-formed business
and/or prior to the beginning of a new contract or program for an
existing business. Allowable startup costs include, but are not limited
to, employee salaries, utilities, rent, insurance, employee training
costs, and any other allowable costs incident to the startup period.
Startup costs do not include capital purchases, which are purchased
assets meeting the criteria for depreciation in paragraph (10) of
this subsection. Any costs that are properly identifiable as organization
costs or capitalizable as construction costs must be appropriately
classified as such and excluded from startup costs. Allowable startup
costs should be amortized over a period of not less than 60 consecutive
months. If the business or corporation never commences actual operations
or if the new contract/program never delivers services, the startup
costs are unallowable.
(i) For a newly-formed business, startup costs should
be accumulated up to the time the business begins (that is, when services
are delivered to the first client/customer). Amortization of startup
costs for a newly-formed business begins the month the business begins.
In the event that a newly-formed business is established for the direct
purpose of contracting with the state for delivery of client care
services, startup costs should be accumulated up to the time the contract
is effective or the time the first client receives services, whichever
comes first, with amortization of startup costs beginning the same
month.
(ii) For a new contract or program implemented by an
existing business, startup costs are related only to the development
of the provider's ability to furnish services according to the standards
of the new contract/program and should be accumulated up to the time
the first client receives services according to the contract/program
standards or the effective date of the contract, whichever occurs
first. Amortization of startup costs for a new contract/program implemented
by an existing business begins the month in which the first client
receives services according to contract/program standards or the effective
date of the contract, whichever occurs first. If a contracted provider
intends to prepare all portions of its entire program at the same
time, startup costs for all portions of the program should be accumulated
in a single account and should be amortized beginning either when
the first client is admitted or the effective date of the contract,
whichever occurs first. However, if a contracted provider intends
to prepare portions of its program on a piecemeal basis, startup costs
should be capitalized and amortized separately for the portion(s)
of the provider's program prepared during different time periods.
For example, a newly-formed corporation opens a senior citizen center
for private clients, serving its first client on April 4, 2014. Startup
costs would be those costs incurred prior to April 4, 2014, which
meet the above definition of startup costs. Amortization of the startup
costs for this newly-formed business would begin April 2014. If this
same corporation received a contract to provide Day Activity and Health
Services (DAHS) effective October 1, 2014 and if the corporation served
its first DAHS client on November 5, 2014, startup costs would be
those costs incurred to be able to deliver services according to DAHS
program standards. If the corporation was in compliance with the DAHS
standards from its beginning (April 2014), no new startup costs would
be allowable for amortization as a result of the implementation of
the new DAHS contract by the existing corporation. On the other hand,
if the corporation was required to incur additional costs to bring
the operation up to the DAHS program standards, those startup costs
incurred prior to October 1, 2014 (since the contract effective date
occurred prior to serving the first DAHS client) would be amortized
beginning with October 2014.
(E) Research and development costs. Research and development
costs, including, but not limited to, telephone costs, travel costs,
attorney fees, and staff salaries, must be segregated into separate,
individual accounts for each venture in the contracted provider's
general ledger. Should such a "venture" result in a contract for a
program, the allowable research and development costs would be incorporated
as startup costs for that program. Research and development costs
related to states other than Texas are not allowable costs for any
allocation to any contracted program.
(F) Medical supplies and medical costs. In general,
medical supplies and equipment required by the Occupational Safety
and Health Administration (OSHA), used for universal health and safety
precautions, or otherwise required to meet contracted program requirements
are allowable costs. Refer to program-specific reimbursement methodology
rules to determine program requirements for medical supplies and medical
costs.
(G) Fines and penalties. Fines and penalties for violations
of regulations, statutes, and ordinances of all types are unallowable
costs. Penalties or charges for late payment of taxes, utilities,
mortgages, loans or insufficient banking funds are unallowable costs.
(H) Business expenses not directly related to contracted
services. Business expenses not directly related to contracted services,
including business investment activities, stockholder and public relations
activities, and farm and ranch operations (unless farm and ranch operations
are specifically allowed by the contracted program as necessary to
the provision of client care), are unallowable costs.
(I) Litigation expenses and awards. Unless explicitly
allowed elsewhere in this chapter, no court-ordered award of damages
or settlements made in lieu thereof or legal fees associated with
litigation which resulted in any court-ordered award of damages or
settlements made in lieu thereof, or a criminal conviction, are allowable.
For workers' compensation litigation awards and settlements, the part
of the award or settlement that reimburses the injured employee for
lost wages and medical bills is an allowable cost.
(J) Lobbying costs. Lobbying costs are unallowable.
(i) Lobbying means the influencing or attempting to
influence an officer or employee of any governmental agency, an officer
or employee of Congress or the state legislature, or an employee of
a member of Congress or the state legislature in connection with any
of the following actions:
(I) the awarding of any governmental contract;
(II) the making of any governmental grant;
(III) the making of any governmental loan;
(IV) the entering of any cooperative agreement; and
(V) the extension, continuation, renewal, amendment,
or modification of any governmental contract, grant, loan or cooperative
agreement.
(ii) Costs associated with the following activities
are unallowable as lobbying costs:
Cont'd... |
