Section 465IAC2-16-21. Unallowable costs in the base rate and other cost based rates approved by the department

   (a) Expenditures for the following services are ineligible costs under Title IV-E and are not to be included in the base rate:

(1) Counseling.

(2) Therapy.

(3) Education (other than school supplies).

(4) Health and medical services or treatment.

  (b) Consistent with federal guidelines, the department will not pay residential treatment services providers for certain unallowable expenses and costs, as specified in subsections (c) and (d). These unallowable costs will not be considered by the department in calculating the base rate and other cost based rate approved by the department. The unallowable costs and expenses as listed in subsections (c) and (d) must be paid with funds secured from a funding source other than the department.

  (c) The following costs are unallowable:

(1) Fines and penalties resulting from violations of or failure of the organization to comply with federal, state, or local laws and regulations, except when incurred as a result of compliance with specific provisions of a contract with the department or instructions in writing from the department.

(2) Investment management counsel and staff and similar expenses incurred solely to enhance income from investments.

(3) Lobbying as defined in 2 CFR Part 230 (OMB Circular A-122 Cost Principles for Non-Profit Organizations).

(4) Organized fundraising, including financial campaigns, endowment drives, solicitation of gifts and bequests, and similar expenses incurred solely to raise capital or obtain contributions. A portion of administrative costs will be allocated to fundraising costs.

(5) Donations and contributions, including cash, property, and services made by the organization, regardless of the recipient.

(6) Donated goods or services received by the organization, except when donated services utilized in the performance of a direct cost activity are material in amount.

(7) Bad debts, including losses arising from uncollectible accounts and other claims, related collection costs, and related legal costs.

(8) Compensation and special benefits to owners in excess of amounts reasonable for the services rendered.

(9) Entertainment, including amusement, diversion, and social activities and any associated costs not directly related to reasonable entertainment and recreation for children placed with the residential treatment services provider by the department or a probation department, such as the following:

(A) Tickets to shows or sports events.

(B) Meals.

(C) Lodging.

(D) Rentals.

(E) Transportation.

(F) Gratuities.

(10) Alcoholic beverages.

(11) Litigation expenses and fees if the expenses and fees relate to a lawsuit or other legal proceeding:

(A) that:

(i) alleges a violation of, or failure to comply with, a federal, state, local, or foreign statute or regulation by the organization (including its agents and employees); and

(ii) results in:

(AA) a conviction in a criminal proceeding;

(BB) a determination of liability in a civil or administrative proceeding involving an allegation of fraud or similar misconduct;

(CC) the imposition of a monetary penalty in any civil or administrative proceeding;

(DD) the termination of the contract with the department;

by reason of a violation or failure to comply with a law or regulation, or a disposition by consent or compromise if the action could have resulted in any of the proceeding dispositions listed in this item;

(B) initiated by the residential treatment services provider against the department for:

(i) administrative or judicial review of any final rate, payment, child assessment, or child program placement determination made by the department;

(ii) interpretation or application of this rule, any other rule of the department, or any department policy;

(iii) alleged noncompliance by the department with any provision of Title IV-E or any other federal or state law, rule, or regulation; or

(iv) alleged breach of any contract between the department and the residential treatment services provider;

(C) naming as a party defendant any other federal or state governmental agency; or

(D) initiated by, or on behalf of, a child or a child's parent or legal guardian, against the residential treatment services provider, alleging a claim for damages, violation of a constitutional or statutory right, or any other basis for liability of the provider to the plaintiff or plaintiffs.

(12) Mortgage and loan principal payments.

(13) Contingency reserves or similar provisions made for events the occurrence of which cannot be foretold with certainty as to time, intensity, or with an assurance of their happening.

(14) Advertising and marketing except those which relate to the core mission of the residential treatment services provider or are solely for the recruitment of personnel, the procurement of goods or services necessary to support the program, and other specific purposes necessary to meet the requirements of the department.

(15) Housing of nonclients, except as specifically authorized by the department in licensing rules as established by 465 IAC 2-9 through 465 IAC 2-13, as amended.

(16) Taxes from which exemptions are available to the residential treatment services provider directly, or which are available to the residential treatment services provider based on an exemption afforded by the federal government when the awarding agency makes available the necessary exemption certificates.

(17) Federal income taxes.

(18) Nonstraight line depreciation except where clear evidence indicates that the expected consumption of the asset will be significantly greater or lesser in the early portions of its useful life than in later portions of its useful life.

  (d) The following costs and expenses will be considered by the department to be unallowable costs on the cost report and will not be considered in calculating the administrative payment:

(1) Salaries: Amounts exceeding the maximum allowable variation established by the department from the median salary for the job category that is determined by the department using:

(A) most recent available Child Welfare League of America Salary Study published by CWLA Press, that contains a survey of applicable job category salaries; or

(B) applicable job category salaries paid by all residential treatment services providers in Indiana, as determined by reports compiled by, or available to, the department.

(2) Fringe benefits: Amounts exceeding the maximum allowable variation established by the department from the median fringe benefit rate (total fringe benefits as a percent of total wages) for all Indiana residential treatment services providers, as determined by reports compiled by, or available to, the department.

(3) Client to direct care staff ratios: Costs associated with staff in significant excess of licensing requirements as established by 465 IAC 2-9 through 465 IAC 2-13, as amended, or services standards adopted by the department and incorporated in a written agreement with residential treatment services providers.

(4) Direct care staff to supervisor ratios: Costs associated with supervisory staff in significant excess of licensing requirements as established by 465 IAC 2-9 through 465 IAC 2-13, as amended, or services standards adopted by the department and incorporated in a written agreement with residential treatment services providers.

(5) Indirect cost allocations: Any indirect cost allocations as a percentage of total costs in excess of the maximum percentage of total costs established by the department for allowable indirect costs.

(6) Total administrative costs: Any amount by which total administrative costs, as defined in the cost report, exceed a maximum percentage of total costs established by the department.

(7) Occupancy costs associated with excess capacity as defined in section 7 of this rule.

(Department of Child Services; 465 IAC 2-16-21; filed Apr 26, 2011, 11:20 a.m.: 20110525-IR-465100416FRA)