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Regarding compensation of owners and related parties, providers must maintain the following documentation, at a minimum, for each owner or related party: a detailed written description of actual duties, functions, and responsibilities; documentation substantiating that the services performed are not duplicative of services performed by other employees; time sheets or other documentation verifying the hours and days worked; the amount of total compensation paid for these duties, with a breakdown detailing regular salary, overtime, bonuses, benefits, and other payments; documentation of regular, periodic payments and/or accruals of the compensation, documentation that the compensation is subject to payroll or self-employment taxes; and a detailed allocation worksheet indicating how the total compensation was allocated across business components receiving the benefit of these duties. (I)Regarding bonuses paid to owners and related parties, the provider must maintain clearly defined bonus policies in its written agreements with employees or in its overall employment policy. At a minimum, the bonus policy must include the basis for distributing the bonuses including qualifications for receiving the bonus, and how the amount of each bonus is calculated. Other documentation must specify who received bonuses, whether the persons receiving bonuses are owners, related parties, or arm's-length employees, and the bonus amount received by each individual. (II)Regarding benefits provided to owners and related parties, the provider must maintain clearly defined benefit policies in its written agreements with employees or in its overall employment policy. At a minimum, the documentation must include the basis for eligibility for each type of benefit available, who is eligible to receive each type of benefit, who actually receives each type of benefit, whether the persons receiving each type of benefit are owners, related parties, or arm's-length employees, and the amount of each benefit received by each individual. (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 [ 19x1] and receives the corresponding vacation pay during 20x3 [ 19x3], that employee's compensation documentation for 20x3 [ 19x3] should clearly indicate that the vacation pay received had been accrued during 20x1 [19x1]. (xiii)Management fees paid to related parties must be documented as to the actual costs of the related party for materials, supplies, and services provided to the individual provider, and upon which the management fees were based. If the cost to the related party includes owner compensation or compensation to related parties, documentation guidelines for those costs are specified in clause (xi) of this subparagraph. Documentation must be maintained that indicates stated objectives, periodic assessment of those objectives, and evaluation of the progress toward those objectives. (xiv)For central office and/or home office costs, documentation must be maintained that indicates the organization of the business entity, including position, titles, functions, and compensation. For multi-state organizations, documentation must be maintained that clearly defines the relationship of costs associated with any level of management above the individual Texas contracted entity which are allocated to the individual Texas contracted entity. (xv)Documentation regarding depreciable assets includes, at a minimum, historical cost, date of purchase, depreciable basis, estimated useful life, accumulated depreciation, and the calculation of gains and losses upon disposal. (xvi)Providers must maintain documentation clearly itemizing their employee relations expenditures. For employee entertainment expenses, documentation must show the names of all persons participating, along with classification of the person attending, such as employee, nonemployee, owner, family of employee, client, or vendor. (xvii)Adequate documentation substantiating the offsetting of grants and contracts from federal, state, or local governments prior to reporting either the net expenses or net revenue must be maintained by the provider. As specified in §355.103(b)(15) of this title [(relating to Specifications for Allowable and Unallowable Costs)], such offsetting is required prior to reporting on the cost report. The provider must maintain written documentation as to the purpose for which the restricted revenue was received and the offsetting of the restricted revenue against the allowable and unallowable costs for which the restricted revenue was used. (xviii)During the course of an audit or an audit desk review, the provider must furnish any reasonable documentation requested by HHSC [DHS] auditors within ten working days of the request or a later date as specified by the auditors. If the provider does not present the requested material within the specified time, the audit or audit desk review is closed, and HHSC [DHS] automatically disallows the costs in question. (xix)Any expense that [which] cannot be adequately documented or substantiated is disallowed. HHSC [ DHS] is not responsible for the contracted provider's failure to adequately document and substantiate reported costs. (xx)Any cost report that [which] is determined unauditable through a field audit or that [which ] cannot have its costs verified through a desk review will not be used in the reimbursement determination process. (3)Cost report and methodology certification. Providers must certify the accuracy of cost reports submitted to HHSC [DHS ] in the format specified by HHSC [DHS]. Providers may be liable for civil and/or criminal penalties if the cost report is not completed according to HHSC [DHS] requirements or is determined to contain misrepresented or falsified information. Cost report preparers must certify that [they received reimbursement methodology rules regarding allowable and unallowable costs, that] they read the cost determination process rules, the reimbursement methodology rules, the cost report cover letter and cost report instructions, and that they understand that the cost report must be prepared in accordance with the cost determination process rules, the reimbursement methodology rules and cost report instructions. Not all persons who contributed to the completion of the cost report must sign the certification page. However, the certification page must be signed by a responsible party with direct knowledge of the preparation of the cost report. A person with supervisory authority over the preparation of the cost report who reviewed the completed cost report may sign a certification page in addition to the actual preparer. (4)Requirements for cost report completion. (A)A completed cost report must: (i)be completed according to the cost determination rules of this chapter, program-specific allowable and unallowable rules, cost report instructions, and policy clarifications; (ii)contain a signed, notarized, original certification page; (iii)be legible with entries in sufficiently dark print to be photocopied; (iv)contain all pages and schedules; (v)be submitted on the proper cost report form; (vi)be completed using the correct cost reporting period; and (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)For nursing facilities, placement on the cost report of an amount, which was determined to be inaccurately placed , may result in vendor hold as specified in §355.403 of this title (relating to Vendor Hold). (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, may result in vendor hold. (iii)[(ii)] 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 (relating to Administrative Contract Violations). (C)A completed cost report must be filed by the cost report due date. (i)For nursing facilities, failure to file a completed cost report by the cost report due date may result in vendor hold as specified in §355.403 of this title [(relating to Vendor Hold)]. (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 may result in vendor hold. (iii)[(ii)] 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 [(relating to Administrative Contract Violations)]. (D)HHSC [DHS] may excuse providers from the requirement to submit a cost report. Exceptions are granted by HHSC [DHS] as described by the program-specific reimbursement methodology rules. Providers who are excused from cost report submission will receive written notice from HHSC [DHS] verifying that an exception has been granted. (5)Cost report year. 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)Providers whose cost report year coincides with their IRS fiscal year are responsible for reporting to HHSC Rate Analysis any change in their IRS fiscal year and subsequent cost report year by submitting written notification of the change to HHSC Rate Analysis along with supportive IRS documentation. HHSC Rate Analysis must be notified of the provider's change in IRS fiscal year no later than 30 days following the provider's receipt of approval of the change from the IRS. (B)Providers who chose to change their cost report year from their IRS fiscal year to the state fiscal year or from the state fiscal year to their IRS fiscal year must submit a written request to HHSC Rate Analysis by August 1 of state fiscal year in question. (6)Failure to report allowable costs. HHSC [ DHS] is not responsible for the contracted provider's failure to report allowable costs, however any omitted costs which are identified during the desk review or audit process will be included in the cost report or brought to the attention of the provider to correct by submitting an amended cost report. (c)Cost report due date. (1)Providers must submit cost reports to HHSC Rate Analysis [DHS] no later than 90 days following the end of the provider entity's fiscal year or 90 days from the transmittal date of the cost report forms, whichever due date is later. (2)HHSC [DHS] may grant extensions of due dates for good cause. A good cause is defined as a circumstance which the provider could not reasonably be expected to control and for which adequate advance planning and organization would not have been of any assistance. Providers must submit requests for extensions in writing to HHSC Rate Analysis [DHS]. Requests for extensions must be received by HHSC Rate Analysis [DHS] prior to the cost report due date. HHSC [DHS] staff will respond in writing to requests within 15 days of receipt. (3)HHSC [DHS] may require additional financial and other statistical information, in the form of special surveys or reports, to ensure the fiscal integrity of the program. Providers must submit such additional information and/or special surveys or reports to HHSC Rate Analysis [DHS] upon request by the date specified by HHSC Rate Analysis [DHS] in its transmittal or cover letter to the special survey, report, or request for additional information. (d)Amended cost report due dates. HHSC [DHS ] accepts submittal of provider-initiated or HHSC-requested [ DHS-requested] amended cost reports as follows. (1)Provider-initiated amended cost reports must be received no later than the date in subparagraph (A) or (B) of this paragraph, whichever occurs first. Amended cost reports received after the required date have no effect on the reimbursement determination. Amended cost report information that cannot be verified will not be used in reimbursement determinations. Provider-initiated amended cost reports must be received no later than the earlier of: (A)60 days after the original due date of the cost report; or (B)[for Medicaid programs,] 30 days prior to the public hearing on proposed reimbursement or reimbursement parameter amounts[ ; and for non-Medicaid programs 30 days prior to the administrative closing of the cost report database for reimbursement determination]. (2)HHSC-required [DHS-required] amendments to the cost reports must be received on or before the date specified by HHSC [the DHS] in its request for the amended cost report. Failure to submit the requested amendment to the cost report by the due date is considered a failure to complete a cost report as specified in subsection (b)(4)(C) of this section. (e)Field audit standards. HHSC [DHS] performs cost report field audits in a manner consistent with Government Auditing Standards issued by the Comptroller General of the United States. (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 [DHS] conducts desk reviews of all cost reports not selected for field audit. HHSC [DHS ] also conducts field audits of provider records and cost reports. Although the number of field audits performed each year may vary, HHSC [ DHS] 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 [DHS] on cost reports, including related party transactions and other business activities engaged in by the provider, must be accessible to HHSC [DHS ] 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 [DHS] audit staff within the state of Texas, the provider must pay the actual costs for HHSC [DHS] staff to travel and review the records out-of-state. HHSC [ DHS] must be reimbursed for these costs within 60 days of the request for payment. (1)For nursing facilities, failure to reimburse HHSC [DHS] for these costs within 60 days of the request for payment may result in vendor hold as specified in §355.403 of this title [(relating to Vendor Hold)]. (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 may result in vendor hold. Cont'd...
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