New Jersey Administrative Code › Title 6A - EDUCATION › Chapter 23A - FISCAL ACCOUNTABILITY, EFFICIENCY AND BUDGETING PROCEDURES › Subchapter 18 - TUITION FOR PRIVATE SCHOOLS FOR STUDENTS WITH DISABILITIES › Section 6A:23A-18.6 - Non-allowable costs

Current through Register Vol. 56, No. 14, July 15, 2024
(a) Costs that are not allowable in the
				calculation of the certified actual cost per student shall include the
				following:
1. Administrative costs in excess
				of, and/or instructional cost less than, the percentages indicated in
				N.J.A.C.
				6A:23A-18.3(a)3;
2. Costs for maintaining an administrative
				office in a private home or other residence;
3. Advertising costs in excess of 0.5 percent
				of the APSSD's actual allowable costs, not including advertising;
4. Costs associated with lobbying, including
				salaries and fringe benefits;
5.
				Costs other than those governed by (a)50 below associated with lobbying in an
				attempt to influence:
i. The outcome(s) of
				any Federal, State, or local referendum, initiative or similar activity;
				or
ii. The introduction, enactment,
				or modification of Federal or State legislation or a State
				rulemaking.
6. The
				salary of a professional staff member, consultant, or subcontractor, including
				a member of a management company, who is not certified but is functioning in,
				or contracted to perform the duties of, a position requiring certification in
				accordance with N.J.A.C. 6A:9B or bachelor's or master's degree under this
				subchapter;
7. The salary and
				fringe benefits of a staff member, or any payment(s) to a purchased service
				provider, for time not expended and/or services not performed except in
				accordance with (a)56 and 57 below;
8. A salary in excess of the associated
				maximum allowable salary determined pursuant to
				N.J.A.C.
				6A:23A-18.3(o), (p), and (q)
				for a staff member or consultant whose position requires certification,
				license, or a bachelor's or master's degree, including a director, assistant
				director, executive director, and business manager.
i. An APSSD shall prorate salaries for such
				part-time or split-time positions, including salaries in entities described in
				N.J.A.C.
				6A:23A-18.3(e) and
				(f);
ii. The part-time and split-time maximum
				allowable salary shall be calculated as follows:
(1) Multiply the staff member's total salary
				by the percentage of time attributed to the APSSD position;
(2) Multiply the maximum allowable full-time
				salary for the position by the percentage of time attributed to the APSSD
				position; and
(3) Subtract the
				amount calculated in (a)8ii(2) above from the amount calculated in (a)8ii(1)
				above. If the result is greater than zero, this is the non-allowable part-time
				or split-time salary.
9. A salary of an employee not covered by
				(a)6 above in excess of the lowest maximum allowable salary in the same county
				according to the list of maximum allowable salaries determined in
				N.J.A.C.
				6A:23A-18.3(o), (p), and (q)
				whose position does not require certification, license, or bachelor's degree,
				including an individual with the director, assistant director, executive
				director, or business manager job title whose job function(s) are not
				consistent with those functions described in N.J.A.C. 6A:23A-18.2.
i. An APSSD shall prorate salaries for such
				part-time or split-time positions, including salaries in entities described in
				N.J.A.C.
				6A:23A-18.3(e) and
				(f).
ii. The part-time and split-time maximum
				allowable salary is calculated as follows:
(1)
				Multiply the staff member's total salary by the percentage of time attributed
				to the APSSD position;
(2) Multiply
				the lowest maximum allowable salary in the same county by the percentage of
				time attributed to the APSSD position; and
(3) Subtract the amount calculated in
				(a)9ii(2) above from the amount calculated in (a)9ii(1) above. If the result is
				greater than zero, this is the non-allowable part-time or split-time
				salary.
10.
				Costs of fringe benefits when based on and/or associated with a non-allowable
				salary;
11. Legal, accounting, or
				consultant fees resulting from a frivolous challenge to a State audit or
				financial review or the prosecution of a claim against the State. The
				Commissioner shall determine whether the challenge is frivolous by considering
				factors including, but not limited to, the following:
i. Overall merit of the claim; or
ii. Whether the challenge serves the public
				interest;
12. Consultant
				fees for services that fail to meet the following standards:
i. The work of the consultant shall be
				detailed in an executed written contract signed by both parties that includes:
(1) A detailed description of the nature of
				the services to be provided;
(2)
				Duration of the contract;
(3)
				Detailed fee information;
(4) Fee
				payment schedule(s);
(5) The
				approximate number of days to complete the work; and
(6) The anticipated product or outcome of the
				work;
ii. Performed by a
				consultant who does not possess the appropriate school certification when such
				certification exists;
13. Total contributions, donations, awards,
				and scholarships in excess of $ 750.00;
14. Depreciation unacceptable under
				N.J.A.C.
				6A:23A-18.5(a)3  and 4 and
				depreciation:
i. On donated goods and
				assets;
ii. Not based on estimated
				straight-line method;
iii. On
				automobiles in excess of the dollar or percentage limitation contained under
				Internal Revenue Code (IRC) Section 280F, including any passenger vehicle not
				used in transporting students or supplies without regard to weight class
				exceptions defined in Section 280F(d)(5)(A);
iv. On a stepped-up basis resulting from the
				sale to a related party as defined in IRC Section 318 for Constructive
				Ownership of Stock. For a nonprofit organization, Section 318 will apply to the
				members of the board of directors or related parties as defined in IRC Section
				267(b) or 267(c) unless the gain from such a sale was used to offset tuition
				for a prior year; or
v. On a
				stepped-up basis from transfer from one spouse to another upon death as defined
				in IRC Section 1014;
15.
				The cost of:
i. Depreciation associated with
				the purchase and ownership of any passenger vehicle not used for transporting
				students or supplies purchased on or after July 1, 2017, if:
(1) The depreciable basis upon which
				depreciation is calculated exceeds $ 30,000;
(2) The depreciation expensed exceeds
				allowable depreciation calculated on the straight-line basis over a period of
				not less than five years; or
(3)
				The depreciation expensed is attributable to a passenger vehicle that has been
				assigned to, or used on a regular basis, by an APSSD staff member who is not
				the APSSD executive director, director, and/or owner.
ii. Vehicle lease payments made pursuant to
				the lease agreement entered into, on, or after July 1, 2017, when:
(1) The annual lease payment(s) exceeds the
				annual depreciation allowable on an owned passenger vehicle with a maximum
				depreciable basis of $ 30,000; or
(2) The lease payments are for a leased
				passenger vehicle that has been assigned to, or used on a regular basis by, an
				APSSD staff member who is not the APSSD executive director, director, and/or
				owner.
16.
				Investment expenses associated with the purchase/sale of stock, securities,
				other investment instruments, or other investments not associated with the
				education of students with disabilities;
17. Total costs in excess of $ 500.00
				incurred for entertainment expenses;
18. The cost of food/beverages in excess of $
				1,500 for activities such as, but not limited to, staff meetings,
				parent/teacher meetings, workshops, and professional development seminars for
				parents or teachers;
19. Costs from
				a fine or penalty resulting from a violation of, or failure by, the APSSD to
				comply with a Federal, State, and/or local law or rule;
20. Meal costs in excess of the limits set
				forth in N.J.A.C. 6A:23A-18.23.
21.
				The cost of keyman insurance except where a term insurance policy is required
				by a lender as collateral for a loan;
22. The cost of an employee's life insurance
				coverage, both term and whole life policies, in excess of 3.5 times the
				employee's gross salary;
23. Costs
				for fringe benefits as follows:
i. When the
				benefits are determined in an arbitrary or capricious manner, including, but
				not limited to, class of employee, whether by title or position rather than
				according to an existing written uniform policy based on an equitable standard
				of distribution, such as years of service or education. The criteria cannot be
				exclusionary regardless if based on an equitable standard of distribution, such
				as years of service or education;
ii. When the fringe benefit has not been
				adopted by the APSSD's board of directors at a board meeting prior to the
				benefit's implementation, documented in the meeting minutes, and the employees
				were not made aware of the policy; or
iii. When the benefit is not listed in
				N.J.A.C.
				6A:23A-18.5(f)  or not
				approved by the Commissioner, or his or her designee;
24. The cost of fundraising, including, but
				not limited to, costs for a financial campaign, an endowment drive, or
				solicitation of a gift and bequest to raise capital or obtain a
				contribution;
25.
				Goodwill;
26. Interest costs on
				loans when:
i. Interest is in excess of the
				general prevailing rate at the time the loan was taken;
ii. The loan is a less-than-arm's
				length/related party transaction that has not been previously approved by the
				Department and has not been repaid in accordance with the Department's approval
				letter; or
iii. The loan is not
				exclusively used to meet educational program needs;
27. Interest costs on long-term loans or
				mortgages if:
i. The loan is used for other
				than financing of fixed assets;
ii.
				The loan is not secured by the fixed asset being financed; or
iii. The interest costs are on the portion of
				the loan term that exceeds the recovery period for depreciation of the fixed
				asset securing the loan;
28. A loss incurred on the sale or exchange
				of fixed assets between related parties;
29. The write-off of uncollected accounts
				receivable (bad debts):
i. Before three years
				has elapsed and before a reasonable effort has been made to collect such
				accounts receivable; or
ii. That
				arise out of the APSSD's provision of:
(1)
				Extraordinary services;
(2)
				Services to students placed by an out-of-State agency; or
(3) Services to private placement
				students;
30.
				An ordinary living expense for a student that is normally assumed by the parent
				of a student attending a public day school;
31. Retirement plan costs that are:
i. Not in conformance with the Employee
				Retirement Income Security Act of 1974, P.L. 93-406 and its successor
				legislation, and that exceed costs allowed by the Internal Revenue
				Service;
ii. For a non-qualified
				retirement plan(s);
iii. For a
				defined contribution plan in excess of the maximum percentage and maximum
				dollar amount, (see IRC Section 415(c)) as the lesser of 100 percent of the
				employee's compensation or $ 53,000 as adjusted annually in IRC;
iv. For a defined benefit plan in excess of
				an amount, by employee, that would allow the defined plan to provide a benefit
				in excess of the percentage of the employee's number of years of service
				divided by 55 times the highest three-year average salary and at an age prior
				to age 55;
v. For contributions to
				a retirement plan that are not applied consistently in accordance with (a)23
				above even if in compliance with Employee Retirement Income Security Act of
				1974 (ERISA). Such excess contributions will be deemed a non-allowable
				cost;
vi. Not paid to a qualified
				plan within nine months of the end of the APSSD's fiscal tax year;
vii. Not paid in accordance with the fringe
				benefits criteria in (a)23 above; and
viii. If applicable, not in conformance with
				a church plan as defined in ERISA;
32. Costs of a contingent pay increase or
				merit pay award when the amount(s) was not in accordance with
				N.J.A.C.
				6A:23A-18.5(a)14  or 15 or
				the contingent pay increase or merit pay award(s) is inconsistent with the
				plan(s) submitted to and approved by the Commissioner, or his or her designee,
				prior to implementation;
33. Costs
				for the payment of a bonus;
34.
				Costs for a loss on an investment;
35. Costs associated with a research
				activity, including, but not limited to, staff salaries, supplies, or printing
				and reproduction of a material;
36.
				Payment of Federal, State and local income taxes on income other than
				tuition;
37. Costs associated with
				travel to and from the officer's or employee's home and the school or
				agency;
38. Costs for all personal
				expenses, such as a personal travel expense or repair on a personal
				vehicle;
39. Costs associated with
				personal use of an APSSD-owned or -leased vehicle, including, but not limited
				to, to/from work commutation as determined pursuant to
				N.J.A.C.
				6A:23A-18.5(a)18;
40. Costs associated with an APSSD-owned or
				-leased vehicle or a vehicle contained in a related party transaction involving
				the purchase of transportation services where a detailed daily mileage log
				documenting vehicle usage was not maintained;
41. A business-incurred charge for a
				privately owned vehicle in excess of the mileage rate allowed by the IRS for
				automobile travel;
42.
				Transportation costs for a student to and from school, except where the
				student's IEP requires after-school activities;
43. Rental costs for buildings and equipment
				when the lessor is not a separately identifiable legal entity;
44. Costs related to transactions between
				related parties in which one party to the transaction is able to control or
				substantially influence the actions of the other. Such transactions are defined
				by the relationship of the parties and include, but are not limited to,
				transactions between divisions of an institution; institutions or organizations
				under common control through common officers, directors, members, or owners;
				and an institution and a director, trustee, officer, or key employee of the
				institution or his or her immediate family either directly or through
				corporations, trusts, or similar arrangements in which they hold a controlling
				interest. Such costs shall include, but are not limited to:
i. Rental costs for buildings and equipment
				in excess of the actual allocated costs of ownership (for example, straight
				line depreciation in accordance with
				N.J.A.C.
				6A:23A-18.5(a)3, mortgage
				interest, real estate taxes, property insurance, and maintenance costs)
				incurred by the related property owner including a 2.5 percent return
				calculated on the actual costs of ownership incurred by the related party. The
				APSSD shall submit a cost of ownership form in a Commissioner-supplied format.
				The property or business owner shall sign and notarize the cost of ownership
				form and include a copy of the lease agreement, and a list of anticipated costs
				to be incurred by the property owner;
ii. Rental costs under a sub-lease
				arrangement with a related party for buildings and equipment in excess of the
				actual allocated costs related to the lease (such as rent, lease commission
				expense, and maintenance costs) incurred by the sub-lessor. Profit, return on
				investment, or windfall of any kind shall not be included in the sub-rental
				cost. The sub-lease agreement shall include a list of anticipated costs to be
				incurred by the sub-lessor and shall be signed by the sub-lessor and
				notarized;
iii. Cost of
				purchasing/lease purchasing buildings, equipment or other goods from related
				parties in excess of the original cost to the related party, less depreciation
				calculated using the straight line method;
iv. Cost of personal services paid to a
				related party when the services are provided by an employee of, or consultant
				to the APSSD acting as an employee or agent of the related party. Cost of
				personal services includes all remuneration, paid or accrued, for services
				rendered during the school year, including, but not limited to, wages,
				salaries, management fees, and fringe benefits; and
v. Cost of the purchase of goods or services
				from a related party in excess of the actual allocated costs of providing the
				purchased goods and/or services, including, but not limited to, salaries,
				fringe benefits, insurance, operation, maintenance, straight-line depreciation
				incurred by the related party owner. Costs may include a 2.5 percent return
				calculated on the actual costs of ownership incurred by the related party. The
				APSSD shall file a cost of ownership form in a Commissioner-prescribed format.
				The cost of ownership form shall be signed by the property or business owner
				and shall include a copy of the purchase agreement, and a list of anticipated
				costs to be incurred by the related party;
45. Cost of a less-than-arm's length/related
				party transaction when the related party and/or the APSSD, as applicable, does
				not:
i. Provide to the Commissioner
				documentation on Commissioner-prepared forms to support the actual costs of
				ownership, or does not allow the Commissioner access to such information for
				review and audit during normal business hours. Documentation shall include, but
				not be limited to:
(1) The related parties'
				tax returns;
(2) The related
				parties' invoices received, payroll and payroll tax records, bills and canceled
				checks, or electronic transfer records concerning the transaction;
				and
(3) Any other document(s)
				requested by the Department; or
ii. Disclose the related party relationship
				on Commissioner-prepared forms pursuant to this subchapter and N.J.A.C.
				6A:23A-19;
46. Rental
				costs under sale and leaseback arrangements in excess of the amount that would
				be allowable if the APSSD continued to own the property;
47. Indirect and direct costs that are:
i. For unrelated activities or enterprises as
				defined in
				N.J.A.C.
				6A:23A-18.3(g); or
ii. Unrelated to the function, operations,
				and/or program of an APSSD as defined in
				N.J.A.C.
				6A:23A-18.3(d);
48. Costs for the year-end audited
				financial statements when prepared by an individual who does not meet the
				requirements in
				N.J.A.C.
				6A:23A-18.10(a);
49. Costs for membership in civic, business,
				technical, and professional organizations when the cost is:
i. Not reasonably related to the value of the
				services or benefits received;
ii.
				For membership in an organization that devotes any activity(ies) to influencing
				legislation or State regulation(s) not directly related to the educational
				instruction program of students with disabilities and the activity(ies) is not
				subsidized by sources other than membership fees from APSSDs;
iii. Not an established annual rate charged
				to all members, but one that is periodically adjusted during the year;
				or
iv. Not supported by an annual
				affidavit signed by the organization's board of directors indicating all legal
				and lobbying costs not directly associated with the educational instruction
				programs for students with disabilities were funded by sources other than dues
				from APSSDs;
50. A staff
				member's salary that is not properly supported by the employee's time record in
				a format prescribed or approved by the Commissioner in accordance with
				N.J.A.C.
				6A:23A-18.5(a)10;
51. A salary or payment made to a member(s)
				of the board of directors/trustees for services performed in his or her
				capacity as a member of the board of director/trustees;
52. Cost of a pension plan contribution made
				on behalf of, and/or medical benefits for, current or retired members of the
				board of directors/trustees;
53.
				Cost of medical benefits for retired employees who have not reached the age of
				55 and who were employed a combination of less than 25 years in a New Jersey
				public school, a New Jersey public agency, or a New Jersey APSSD and have less
				than 10 years of service in an APSSD;
54. Costs of salaries and fringe benefits of
				unrecognized position titles not properly approved pursuant to
				N.J.A.C.
				6A:9B-5.5;
55. Cost of employee severance pay:
i. In excess of four weeks' salary;
				and
ii. If, in addition, the cost
				of a buyout of the employee's contract;
56. Cost of a buyout of an employee contract:
i. In excess of 90 days' salary;
				and
ii. If, in addition, the cost
				of the employee's severance pay;
57. Cost of a salary or consultant fee paid
				to a full-time employee or consultant for performing more than one
				administrative function in the APSSD;
58. Cost to purchase or rent an
				administrative office or business office at a location other than at the APSSD
				location that was not approved pursuant to
				N.J.A.C.
				6A:23A-18.5(d);
59. Cost of compensation increases paid after
				the start of the fiscal year not in accordance with
				N.J.A.C.
				6A:23A-18.5(k);
60. Start-up costs in excess of costs allowed
				pursuant to
				N.J.A.C.
				6A:23A-18.4(d);
61. Costs of salaries and fringe benefits for
				employees providing services that are not in compliance with
				N.J.A.C.
				6A:23A-18.5(e)2;
62. The cost of a fine levied pursuant to
				N.J.S.A.
				18A:6-7.5 for any staff member who does not
				have:
i. A criminal history clearance prior
				to starting employment or;
ii. An
				application for employment on an emergent basis in accordance with
				18A:6-7.1c;
63. Legal
				costs for an APSSD and/or for an APSSD representative(s), including an owner,
				employee, or agent who has plead guilty and/or is found to be guilty or liable
				in a case involving the misuse of funds, fraud (criminal or civil), or
				endangerment or abuse of a child(ren);
64. The salary in excess of the associated
				maximum salary identified in
				N.J.A.C.
				6A:23A-18.3(q)  and
				determined in accordance with
				N.J.A.C.
				6A:23A-18.5(o) and
				(p);
65. Costs found to be patently unreasonable
				by the Commissioner, or his or her designee, or an independent
				auditor/accountant;
66. Cost(s) of
				payments made to an individual employee(s) for earned unused sick benefit that
				is in excess of 2.2 percent of the individual employee's contracted salary
				amount during the fiscal year in which the payment is made;
67. Proportional costs of salary and fringe
				benefits for any administrative staff member, as defined in
				N.J.A.C.
				6A:23A-18.3(o), with the
				exception of principal and unrecognized position titles in the administrative
				category, that are in excess of a total of 3.0 FTE administrative positions per
				APSSD, per fiscal year. If the combined administrative positions exceed 3.0
				FTE, the disallowed amount will be apportioned equally across all of the
				positions;
68. Costs associated
				with travel, defined in
				N.J.A.C.
				6A:23A-18.2 1, that:
i. Exceed .0025 of the total actual allowable
				costs, less travel costs, in a fiscal year for an APSSD, or $ 20,000, whichever
				is less; and/or
ii. Violate the
				provisions of N.J.A.C. 6A:23A-18.21 (g);
69. Costs associated with waiver of health
				insurance coverage that violate the provisions of
				N.J.A.C.
				6A:23A-18.5(f)1;
70. Costs associated with depreciation of
				leasehold improvements that violate
				N.J.A.C.
				6A:23A-18.5(a)4;
71. Costs of the salary, benefits, or other
				compensation provided to an APSSD employee or contractor/consultant who is
				receiving retirement benefits as a result of his or her retirement from the
				APSSD after two calendar years have expired since the individual began
				retirement;
72. Costs associated
				with undocumented outflows from petty cash, pursuant to
				N.J.A.C.
				6A:23A-18.5(a)16;
				and
73. Costs associated with the
				failure to comply with the requirements of
				N.J.A.C.
				6A:23A-18.5(d).