(a)(No change.) (b)Cost report requirements. Unless specifically stated in program rules, each provider must submit financial and statistical information on cost report forms provided by HHSC, or on facsimiles that are formatted according to HHSC specifications and are pre-approved by HHSC staff, or electronically in HHSC-prescribed format in programs where these systems are operational. The cost reports must be submitted to HHSC in a manner prescribed by HHSC. The cost reports must be prepared to reflect the activities of the provider while delivering contracted services during the fiscal year specified by the cost report. Cost reports or other special surveys or reports may be required for other periods at the discretion of HHSC. Each provider is responsible for accurately completing any cost report or other special survey or report submitted to HHSC. (1)(No change.) (2)Recordkeeping and adequate documentation. There is a distinction between noncompliance in recordkeeping, which equates with unauditability of a cost report and constitutes an administrative contract violation or, for the Nursing Facility program, may result in vendor hold, and a provider's inability to provide adequate documentation, which results in disallowance of relevant costs. Each is discussed in the following paragraphs. (A)Recordkeeping. Providers must ensure that records are accurate and sufficiently detailed to support the legal, financial, and other statistical information contained in the cost report. Providers must maintain all workpapers and any other records that support the information submitted on the cost report relating to all allocations, cost centers, cost or statistical line items, surveys, and schedules. HHSC may require supporting documentation other than that contained in the cost report to substantiate reported information. (i)For Texas Department of Aging and Disability [ Human] Services (DADS)- [(DHS)] contracted providers, each provider must maintain records according to the requirements stated in 40 TAC §69.158 [§69.205] (relating to How long must contractors, subrecipients, and subcontractors keep contract-related records? [Contractor's Records]) and according to the HHSC's prescribed chart of accounts, when available. (ii)[For Texas Department of Mental Health and Mental Retardation (TDMHMR) contracted providers, contractors must keep financial and supporting documents, statistical records, and any other records pertinent to the services for which a claim or cost report is submitted to HHSC. The records and documents must be kept for a minimum of five years after the end of the reporting period. If any litigation, claims, or audit involving these records begins before the five-year period expires, the contractor must keep the records and documents for not less than five years or until all litigation, claims, or audit findings are resolved.] If a contractor is terminating business operations, the contractor must ensure that: (I) - (II)(No change.) (iii)(No change.) [(iv)For Intermediate Care Facilities for Persons with Mental Retardation, Home and Community-based Services, Service Coordination/Targeted Case Management, Rehabilitative Services, and Texas Home Living programs, failure to maintain all workpapers and any other records that support the information submitted on the cost report relating to all allocations, cost centers, cost or statistical line items, surveys and schedules constitutes an administrative contract violation, procedural guidelines and informal reconsideration and/or appeal processes are specified in §355.111 of this title (relating to Administrative Contract Violations).] (iv)[(v)] For all other programs, failure to maintain all workpapers and any other records that support the information submitted on the cost report relating to all allocations, cost centers, cost or statistical line items, surveys and schedules constitutes an administrative contract violation. In the case of an administrative contract violation, procedural guidelines and informal reconsideration and/or appeal processes are specified in §355.111 of this title (relating to Administrative Contract Violations). (B)Adequate documentation. To be allowable, the relationship between reported costs and contracted services must be clearly and adequately documented. Adequate documentation consists of all materials necessary to demonstrate the relationship of personnel, supplies, and services to the provision of contracted client care or the relationship of the central office to the individual service delivery entity level. These materials may include, but are not limited to, accounting records, invoices, organizational charts, functional job descriptions, other written statements, and direct interviews with staff, as deemed necessary by HHSC auditors to perform required tests of reasonableness, necessity, and allowability. (i) - (iii)(No change.) (iv)To substantiate the allowable cost of leasing a luxury vehicle as defined in §355.103(b)(7)(C)(i) of this title, the provider must obtain at the time of the lease a separate quotation establishing the monthly lease costs for the base amount allowable for cost-reporting purposes as specified in §355.103(b)(7)(C)(i) of this title. [If the lease of the luxury vehicle occurred prior to January 1, 1997, then the provider must obtain the separate quotation prior to submitting its 1997 cost report in order for the allowable costs to be reported on the cost report.] Without adequate documentation to verify the allowable lease costs of the luxury vehicle, the reported costs shall be disallowed. (v) - (xi)(No change.) (xii)Regarding all forms of compensation, providers must maintain documentation for each employee which clearly identifies each compensation component, including regular pay, overtime pay, incentive pay, mileage reimbursements, bonuses, sick leave, vacation, other paid leave, deferred compensation, retirement contributions, provider-paid instructional courses, health insurance, disability insurance, life insurance, and any other form of compensation. Types of documentation would include insurance policies; provider benefit policies; records showing paid leave accrued and taken; documentation to support hours (regular and overtime) worked and wages paid; and mileage logs or other documentation to support mileage reimbursements and travel allowances. For accrued benefits, the documentation must clearly identify the period of the accrual. For example, if an employee accrues two weeks of vacation during 20x1 and receives the corresponding vacation pay during 20x3, that employee's compensation documentation for 20x3 should clearly indicate that the vacation pay received had been accrued during 20x1. (I)For staff required to maintain continuous daily time sheets as per §355.102(j) of this title and subclause (II) of this clause, the daily timesheet must document, for each day, the staff member's start time, stop time, total hours worked, and the actual time worked (in increments of 30 minutes or less) providing direct services for the provider, the actual time worked performing other functions, and paid time off. The employee must sign each timesheet. The employee's supervisor must sign the timesheets each payroll period or at least monthly. Work schedules are unacceptable documentation for staff whose duties include multiple direct service types, both direct and indirect service component types, and both direct hands-on support and first level supervision of direct care workers. (II)For the Intermediate Care Facilities for Persons with Mental Retardation, Home and Community-based Services and Texas Home Living programs, staff required to maintain continuous daily timesheets include staff whose duties include multiple direct service types, both direct and indirect service component types and/or both direct hands-on support and first-level supervision of direct care workers. (xiii) - (xx)(No change.) (3)(No change.) (4)Requirements for cost report completion. (A)A completed cost report must: (i) - (vi)(No change.) (vii)contain a copy of the state-issued cost report training certificate[, beginning with the 1997 cost report for DHS contracted providers and beginning with the 2004 cost report for TDMHMR contracted providers]. (B)Providers are required to report amounts on the appropriate line items of the cost report pursuant to guidelines established in the methodology rules, cost report instructions, and/or policy clarifications. Refer to program-specific reimbursement methodology rules, cost report instructions, and/or policy clarifications for guidelines used to determine placement of amounts on cost report line items. (i)(No change.) [(ii)For Intermediate Care Facilities for Persons with Mental Retardation, Home and Community-based Services, Service Coordination/Targeted Case Management, Rehabilitative Services, and Texas Home Living programs, placement on the cost report of an amount, which was determined to be inaccurately placed, constitutes an administrative contract violation. In the case of an administrative contract violation, procedural guidelines and informal reconsideration and/or appeal processes are specified in §355.111 of this title.] (ii)[(iii)] For all other programs, placement on the cost report of an amount, which was determined to be inaccurately placed, constitutes an administrative contract violation. In the case of an administrative contract violation, procedural guidelines and informal reconsideration and/or appeal processes are specified in §355.111 of this title. (C)A completed cost report must be filed by the cost report due date. (i)(No change.) [(ii)For Intermediate Care Facilities for Persons with Mental Retardation, Home and Community-based Services, Service Coordination/Targeted Case Management, Rehabilitative Services, and Texas Home Living programs, failure to file a completed cost report by the cost report due date constitutes an administrative contract violation. In the case of an administrative contract violation, procedural guidelines and informal reconsideration and/or appeal processes are specified in §355.111 of this title.] (ii)[(iii)] For all other programs, failure to file a completed cost report by the cost report due date constitutes an administrative contract violation. In the case of an administrative contract violation, procedural guidelines and informal reconsideration and/or appeal processes are specified in §355.111 of this title. (D)(No change.) (5)Cost report year. A [Effective for reporting periods beginning on September 1, 2001 and thereafter, a] provider's cost report year must coincide with the provider's fiscal year as used by the provider for reports to the Internal Revenue Service (IRS) or with the state of Texas' fiscal year, which begins September 1 and ends August 31. (A) - (B)(No change.) (6)(No change.) (c) - (e)(No change.) (f)Cost of out-of-state audits. As specified in §355.106 of this title (relating to Basic Objectives and Criteria for Audit and Desk Review of Cost Reports), HHSC conducts desk reviews of all cost reports not selected for field audit. HHSC also conducts field audits of provider records and cost reports. Although the number of field audits performed each year may vary, HHSC seeks to maximize the number of field audited cost reports available for use in its cost projections. Whenever possible, all the records necessary to verify information submitted to HHSC on cost reports, including related party transactions and other business activities engaged in by the provider, must be accessible to HHSC audit staff within the state of Texas within fifteen working days of field audit or desk review notification. When records are not available to HHSC audit staff within the state of Texas, the provider must pay the actual costs for HHSC staff to travel and review the records out-of-state. HHSC must be reimbursed for these costs within 60 days of the request for payment. (1)(No change.) [(2)For Intermediate Care Facilities for Persons with Mental Retardation, Home and Community-based Services, Service Coordination/Targeted Case Management, Rehabilitative Services, and Texas Home Living programs, failure to reimburse HHSC for these costs within 60 days of the date of the request for payment constitutes an administrative contract violation. In the case of an administrative contract violation, procedural guidelines and informal reconsideration and/or appeal processes are specified in §355.111 of this title.] (2)[(3)] For all other programs, failure to reimburse HHSC for these costs within 60 days of the request for payment constitutes an administrative contract violation. In the case of an administrative contract violation, procedural guidelines and informal reconsideration and/or appeal processes are specified in §355.111 of this title. (g) - (h)(No change.) (i)Limits on related-party salaries, wages and/or benefits. HHSC may place upper limits or caps on related-party salaries, wages, and/or benefits as follows: (1)For related-party administrators and directors, the upper limit for salaries and wages is equal to the 90th percentile in the array of all non-related party annualized salaries, wages and/or benefits as reported by all contracted providers within a program. In addition, the hourly wage and/or benefits for related-party administrators and directors is limited to the annualized upper limit for related-party administrators and directors divided by 2,080. (2)For related-party assistant administrators and assistant directors, the upper limit for salaries and wages is equal to the 90th percentile in the array of all non-related party annualized salaries, wages and/or benefits as reported by all contracted providers within a program. In addition, the hourly wage and/or benefits for related-party assistant administrators and assistant directors is limited to the annualized upper limit for related-party assistant administrators and assistant directors divided by 2,080. (3)For owners, partners, and stockholders (when the owner, partner, or stockholder is performing contract level administrative functions but is not the administrator, director, assistant administrator or assistant director), the upper limits for salaries and wages are equal to the upper limits for related-party administrators and directors. (4)For all other staff types: (A)For the Intermediate Care Facilities for Persons with Mental Retardation, Home and Community-based Services and Texas Home Living programs, related-party limitations are specified in §355.457 of this title (relating to Fiscal Accountability) and §355.722 of this title (relating to Reporting Costs by Home and Community-based Services (HCS) Providers). (B)For all other programs, related-party salaries, wages and/or benefits are limited to reasonable and necessary costs as described in §355.102 of this title.
This agency hereby certifies that the proposal
has been reviewed by legal counsel and found to be within the agency's
legal authority to adopt.
Filed with the Office
of the Secretary of State on April 21, 2008
TRD-200802065 Steve Aragón
General Counsel
Texas Health and Human Services Commission
Earliest possible date of adoption: June 1, 2008
For further information, please call: (512) 424-6576
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