Texas Administrative Code › Title 40 - SOCIAL SERVICES AND ASSISTANCE › Part 19 - DEPARTMENT OF FAMILY AND PROTECTIVE SERVICES › Chapter 700 - CHILD PROTECTIVE SERVICES › Subchapter Q - PURCHASED PROTECTIVE SERVICES › Division 3 - REIMBURSEMENT METHODOLOGY FOR 24-HOUR CHILD CARE FACILITIES › Section 700.1751 - What is the Cost Determination Process?

Current through Reg. 49, No. 28; July 12, 2024
Non-Texas Department of Family and Protective Services
						(DFPS) foster family homes, general residential operations, residential
						treatment centers, foster group homes, and child placing agencies that contract
						with DFPS to provide 24-hour residential child-care services must submit
						financial and statistical information according to the requirements specified
						in this subsection. Providers of 24-hour residential child care services must
						report this information on cost-reporting forms approved by the Texas Health
						and Human Services Commission (HHSC), or electronically in HHSC-prescribed
						format where these systems are operational. The cost report must cover all of
						the provider's activities while delivering contracted services during the
						fiscal year specified by the cost report unless HHSC, at its sole discretion,
						requires a provider to submit a cost report covering selected activities or
						covering another time period. The word "rate," when used in this subchapter,
						shall refer to the prospective daily unit rate paid either directly or
						indirectly to a provider with whom DFPS has a contract or an agreement. This
						subchapter does not apply to DFPS cost reimbursed contracts.
(1) Who must file a cost report. Every
					 24-hour residential child-care provider that directly or indirectly receives
					 payment from DFPS for services to children whom DFPS has placed with the
					 provider must submit a cost report. The provider must submit a separate cost
					 report for each separately licensed facility that the provider operates. If two
					 or more facilities share a license, but function as separate and distinct
					 facilities, each of them must submit a cost report that covers its own
					 revenues, expenses, and statistics. A child-placing agency that holds multiple
					 licenses that operate as one legal entity must submit one cost report for the
					 entire legal entity.
(2) Cost
					 report due date. Unless HHSC specifies otherwise, providers must submit cost
					 reports to HHSC Rate Analysis no later then 90 days following the end of the
					 provider entity's fiscal year or 90 days from the transmittal date of the
					 cost-reporting forms, whichever due date is later.
(3) Extension of due date. When circumstances
					 that a provider cannot reasonably be expected to control prevent the provider
					 from submitting a cost report by the due date as specified in paragraph (2) of
					 this section, HHSC may extend the due date. The provider must request the
					 extension in writing before the due date, and HHSC must respond to the request
					 within 15 workdays after receiving it.
(4) Cost-report supplements. To obtain
					 additional financial and statistical information that does not appear in a
					 provider's regular cost report, HHSC has the authority to require the provider
					 to submit a cost-report supplement. The provider must submit the supplement by
					 the due date specified by HHSC.
(5)
					 Vendor hold. If a provider fails to file a cost report or cost-report
					 supplement by the due date or according to the other requirements specified in
					 this subchapter, HHSC has the authority to institute a vendor hold and withhold
					 payments from the provider until the provider submits an acceptable cost
					 report. A provider's failure to submit a cost report after HHSC has placed the
					 provider on vendor hold may result in nonrenewal or cancellation of the
					 provider's contract with DFPS. When a provider is on vendor hold, HHSC does not
					 extend the due date for receipt of the provider's cost report.
(6) Accounting requirements. Except for
					 governmental institutions operated on the cash method of accounting, providers
					 must ensure that the financial and statistical information submitted in their
					 cost reports is based on the accrual method of accounting. Each provider's
					 treatment of financial and statistical data must reflect the application of
					 generally accepted accounting principles (GAAP) approved by the American
					 Institute of Certified Public Accountants (AICPA). For purposes of cost
					 reporting, however, the requirements of this subchapter take precedence over
					 the AICPA's GAAP and any other authority's accounting requirements, including
					 Internal Revenue Service requirements.
(7) Methods of allocation. HHSC adjusts
					 allocated costs if the department considers the allocation method to be
					 unreasonable.
(A) Direct costing must be used
					 whenever possible, which means that allowable costs incurred for the benefit
					 of, or directly attributable to, a specific business component must be directly
					 charged to that particular business component. If direct costing is not
					 possible, a provider must use reasonable methods of allocation and must be
					 consistent in the use of allocation methods across program areas and business
					 entities to ensure that allowable costs are equitably allocated across business
					 activities or business entities receiving the benefits of those allocated
					 costs. Costs reported for the provider must be representative of the actual
					 circumstances of the provider's operations, whether directly charged or
					 allocated. An indirect allocation method approved by some other department,
					 program, or governmental entity is not automatically approved by HHSC. HHSC
					 reviews each allocation method on a case-by-case basis in order to ensure that
					 the reported costs fairly and accurately represent the operations of the
					 provider. Any change in allocation methods from one year to the next must be
					 fully disclosed by the provider on its cost report and must be accompanied by a
					 written explanation of the reasons for such change.
(B) When practical and the amounts are
					 material, costs must be allocated on a functional basis. Some examples are
					 listed as follows.
(i) Costs of a central
					 payroll operation could be allocated to all business components based on the
					 number of checks issued.
(ii) Costs
					 of a central purchasing function could be allocated based on the dollar amount
					 of purchases made or requisitions handled.
(iii) Costs of utilities or rent could be
					 allocated based upon square footage.
(iv) Payroll costs for an employee working
					 across business components could be allocated based upon that employees'
					 timesheets and/or a documented time study.
(v) Transportation equipment costs could be
					 allocated based upon mileage logs.
(C) General management and administrative
					 costs that cannot be allocated on a functional basis should be allocated
					 reasonably and consistently across all business components receiving the
					 benefits of those allowable general management and administrative costs. If all
					 the business components have equivalent units of equivalent service, such
					 general management and administrative costs could be allocated based upon each
					 business component's units of service. One recommended method for allocating
					 such costs would be based upon the ratio of each business component's variable
					 costs related to the total variable costs of all the provider's business
					 components. Because only cost data are analyzed in the calculation of
					 reimbursement rates, allocation methods based upon revenue streams are
					 inappropriate and generally unallowable.
(D) Cost allocation methods must be clearly
					 and completely documented in the provider's workpapers, with details as to how
					 specific allocations are made.