Interest expense

To be allowable under the program, interest must be: 1. Supported by evidence of an agreement that funds were borrowed and that payment of interest and repayment of the funds are required. Repayment of operating loans must be made within two years of the borrowing. 2. Identifiable in the center's accounting records. 3. Related to the reporting period in which the costs are incurred. 4. Necessary and proper for the operation, maintenance, or acquisition of the center. Necessary means that the interest be incurred on a loan made to satisfy a financial need of the center and for a purpose reasonable related to client care. Proper means that the interest be incurred at a rate not in excess of what a prudent borrower would have had to pay in an arm's-length transaction. In addition, the interest must be paid to a lender not related to the center through common ownership or control. 5. Unrelated to funds borrowed to finance costs of assets in excess of the depreciable cost of the asset as recognized in "depreciation". 6. In such cases where it is necessary to issue bonds for financing, any bond premium or discount will be amortized on a straight-line basis over the life of the bond issue.