Residential Care Agency Cost Reporting System

PURPOSE: This rule establishes a uniform cost reporting system to be used in reporting actual cost incurred in the operation of residential care agencies. The uniform cost reporting system provides the data necessary for the determination of the costs and rates associated with the provision of foster care maintenance. (1) Objectives. This rule establishes a uniform cost reporting system to be used in reporting actual cost incurred in the operation of residential care agencies. The Residential Care Agency Cost Report included is one part of the two (2)-part process set forth by the State of Missouri Department of Social Services in fulfilling the requirements for identifying foster care maintenance related expenditures within residential care agencies. The other part of the process involves participation in either a time study or random moment sample to determine the portion of time direct care staff spend performing foster care maintenance related activities. (2) General Cost Reporting Principles. Residential Care Agency Cost Report line specific reporting instructions are included as an appendix to this rule included herein. The cost report must include all costs incurred by the residential care agency. Costs included in the report can be grouped/categorized in several different ways and are subject to certain guidelines or requirements: (A) Costs directly attributable to a function or activity may be charged in their entirety to that function or activity. Example: A staff person working in a single function or activity may have one hundred percent (100%) of their time charged to that function or activity. (B) Costs not attributable to a single function or activity must be distributed based on an appropriate allocation methodology. Example: A staff person who spends a portion of their time working for several different functions or activities should have their related cost allocated across each program by some substantially documented methodology. (C) Some staff will have their associated cost allocated through the application of activity-based time study or random moment sample (RMS) results: All agency staff responsible for the provision of direct daily supervision of children on a regular basis will be included in the activity based allocation time study process. Those staff that should NOT participate in the time study include: 1. Agency administration. It should be noted that, in some agencies, an agency administrator might perform a significant amount of direct care of residents. In these instances, the individual should participate in the time study process. 2. Staff involved in the provision of a single function such as the provision of counseling or therapy; medical service; food preparation; cleaning; or facility maintenance. (D) Costs are either considered allowable or unallowable, based on federal definitions and guidelines, for inclusion in the calculation of the residential foster care maintenance rate. (E) Costs must be net of applicable credits when determining the portion attributable to the residential foster care maintenance rate. Any credits to reported costs will be applied as a function of the rate calculation process. Examples of applicable credits may include, but are not limited to: 1. IV-E training payments; 2. USDA reimbursements; 3. Payments from school districts or the Department of Elementary and Secondary Education for the provision of educational services; 4. Reimbursements from the Department of Social Services (DSS), the Department of Mental Health (DMH) or other third party payors that offset reported costs such as, including but not limited to: A. Reimbursements for the development of the initial treatment plan, quarterly updates to the initial treatment plan and other treatment planning services reimbursed by others; B. Reimbursements for day treatment; and C. Reimbursements for counseling or other therapeutic services. 5. Reimbursements for medical and behavioral health services covered by the state’s Medicaid State Plan (either directly or indirectly through MC+Plans) including, but not limited to: A. Physician’s services; B. Pharmacy-related services; C. Psychology and counseling services; and D. Targeted case management. 6. Other reimbursement from Medicaid or the MC+plans for the provision of other medically necessary services. 7. Reimbursements for medical and behavioral health services covered by other third party payors. (3) Explanation of Common Terms. To facilitate the completion of the cost report costrelated terms used throughout the instructions are defined, and a brief explanation of their application is given. (A) Reported Costs. For a cost to be included on the cost report it must meet the following general criteria: 1. Be reasonable for the performance of the activities of the agency; 2. Be accorded consistent treatment; and 3. Be adequately documented. (B) Reasonable. A cost is reasonable if, in its nature or amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the costs. Reasonable costs are further defined in OMB Circular OMB A-87. (C) Allowable. Allowable costs are those costs that are generally considered eligible for federal reimbursement based on the cost principles established in federal transmittals such as OMB Circular A-87 or A-122. Appendix A gives a list of items that are generally considered to be allowable. This is not an all-inclusive list and other costs not listed may be allowable. Although a cost may be considered ineligible for inclusion in the foster care maintenance rate based upon federal rules, regulations, or guidelines. (See “Eligible Cost”) (D) Unallowable. A cost is unallowable for reimbursement under, or claim to, any federal program based on established cost principles. Appendix A includes a list of items considered to be unallowable. All costs should be included on the cost report. Costs that are not allowable based on the federal guidelines should be placed in the “Unallowable” column on the cost report. (E) Administrative Cost. Refers to those costs related to general operation and management of an agency or to those costs incurred in the support of multiple agency functions or programs. Examples of administrative costs include, but are not limited to: 1. Executive direction and supervision; 2. Bookkeeping and fiscal management; 3. Secretarial and clerical support; 4. Physical plant management; 5. Staff training (unless clearly related to a primary activity area); and 6. Related occupancy costs. (F) Allocation Methodology. Documentation and/or description of the procedures/methods used to distribute costs to programs and to the direct service categories on the cost report. In general, costs should be allocated across the cost report’s direct service categories/activities if there is a clear delineation and documentation for the allocation. Documentation must be maintained recording the methodology and detailing the specific calculation used to distribute costs. The use of estimates not based on a statistically sound methodology is unacceptable. (G) Applicable Credits. The term applicable credits refers to those receipts, or reduction of expenditures which operate to offset or reduce expense items that are allocable to awards as direct or indirect costs. Typical examples of such transactions are: purchase discounts, rebates or allowances, recoveries or indemnities on losses, insurance refunds, and adjustments of overpayments or erroneous charges. To the extent that such credits accruing or received by the organization relate to allowable cost, they shall be credited to the federal government either as a cost reduction or cash refund, as appropriate. In some instances, the amounts received from the federal government to finance organizational activities or service operations should be treated as applicable credits. Specifically, the concept of netting such credit items against related expenditures should be applied by the organization in determining the rates or amounts to be charged to federal awards for services rendered whenever the facilities or other resources used in providing such services have been financed directly, in whole or in part, by federal funds. For rules covering program income (i.e., gross income earned from federally-supported activities) see Sec. 24 of Office of Management and Budget (OMB) Circular A-110, “Uniform Administrative Requirements for Grants and Agreements with Institutions of Higher Education, Hospitals, and Other Non-Profit Organizations.” (H) Random Moment Sample (RMS)/Time Study. A time study or RMS is a statistically based process to gather information from direct service child care staff members on how they spend their time. The information collected will be used for distributing the cost of direct staff among various activities. The results of this study are used to determine the portion of the direct service providers cost related to foster care maintenance. (I) Eligible Cost. For the purpose of determining the residential foster care maintenance rate, only those costs incurred in the provision of the following items/activities will be considered. The federal Department of Health and Human Services, Administration for Children and Families has published guidance in this regard in the Child Welfare Policy Manual Section 8.3.B.1. In general, this includes the cost of, and the cost of providing, the following: 1. Food; 2. Clothing; 3. Shelter; 4. Daily supervision; 5. School supplies; 6. Personal incidentals; 7. Liability insurance with respect to the child care; 8. Reasonable travel for the child for visitation as defined within the Child Welfare Policy Manual; and 9. Related administrative costs. (4) Entities Covered by the Cost Report. The Missouri Residential Care Agency Cost Report is to be used in reporting actual costs incurred in the operation of residential care licensed under the Department of Social Services, Division 40—Division of Family Services, Chapter 71—Licensing Rules for Residential Care Agencies. Each cost report establishes the portion of that agency’s cost attributable to the provision of foster care maintenance. Information from all reporting agencies will be used, in aggregate, to establish foster care maintenance rates for each of the following four (4) categories based upon Missouri licensing rules for residential care agencies: (A) Basic Core Requirements; (B) Infant/Toddler/Preschool; (C) Residential Treatment (DFS Levels II and III); and (D) Intensive Residential Care (DFS Level IV). (5) Reporting Period and Filing Requirements. (A) The cost report must reflect actual audited costs incurred in the provision of residential child care and related services by an agency for the most recent fiscal year. Cost reports must be submitted in accordance with the applicable instructions and in the cost report format prescribed in Appendix A, included herein. Failure to provide cost reports may result in the residential care facilities exclusion from contracts with the Children’s Division. (B) An annual cost report for fiscal years ending after December 31, 2003 must be submitted within ninety (90) days of the close of the fiscal year. The division may grant an extension for submission of the annual cost report and/or audited financial statement. Cost reports which have not been submitted for fiscal years ending in calendar year 2004 must be submitted by August 15, 2005 on the current report format contained in Appendix A. A wavier from filing a fiscal year 2004 cost report will be provided for providers that will submit a fiscal year 2005 cost report by August 15, 2005. (C) Audited financial statements must be submitted with cost reports. An auditor’s opinion does not have to be provided on the cost report. A preliminary fiscal year 2005 cost report may be submitted by August 15, 2005 without an audited financial statement. A final report and audited financial statement must be submitted in accordance with subsection (5)(B). (D) Providers must also participate in the statewide time study of direct care staff described in section (1). (6) Record Retention. Records used in support of costs reported on the cost report must be retained for a minimum of three (3) years from the end of the rate year for which the report is applicable. Records include, but are not limited to, financial, programmatic, statistical, recipient records, and supporting documentation. If any litigation, administrative review, claim, negotiation, audit, or other action involving the records has been started before the expiration of the three (3)- year period, the records shall be retained until completion of the action and resolution of all issues which arise from it, or until the end of the regular three (3)-year period, whichever is later. As part of the residential foster care maintenance rate calculation process, the state and/or its contracted representative may conduct reviews of the financial and programmatic information used as the basis for completion of an agency’s cost report. After completion of any such review, a written report will be completed addressing whether reported costs are adequately supported, allocated appropriately, and reasonable in nature. Documentation created while completing the cost report should be maintained recording the compilation of costs included in the report, and any methodologies or calculations used in the allocation of costs. Appendix A Next Section Next Section