441—150.3 (234) Iowa purchase of social services agency contract.
	 150.3(1) Initiation of contract proposal. When the department issues a request for proposal to select providers, the process and conditions for approving contract proposals shall be as specified in the request, and the department shall not be required to contract with a provider that is not selected. Otherwise, the following procedures for initiation of contract proposals shall apply.
	  a.   	 Right to request a contract. All potential provider agencies have a right to request a contract.
	  b.   	 Initial contact. The initial contact should be between the potential provider and the service area manager for the service area in which the provider’s headquarters is located. In the case of out-of-state providers, this contact can be with the service area manager for either the closest service area or the service area initiating the contact. At the beginning of the process of developing a contract, the bureau of purchased services shall give the provider:
	 (1) 	 Information about the contracting process; and
	 (2) 	 Instructions on how to access the Purchase of Service Provider Handbook electronically.
	  c.   	 Contract proposal development. When the service area manager determines that a contract is to be developed, a project manager will be assigned who will assist in contract development and processing. The project manager will assist the contractor in completing the contract proposal and fiscal information appropriate to the contract. This information shall include documentation that the conditions of participation are met. Form 470-0663, Iowa Purchase of Social Services Agency Contract Face Sheet, shall be completed at the same time as Form 470-0628, Iowa Purchase of Social Services Agency Contract, or Form 470-0630, Amendment or Renewal of the Iowa Purchase of Social Services Agency Contract, is prepared.
	  d.   	 Contract proposal approval or rejection. Before a contract can be effective, it shall be signed by the following persons within the time frames provided:
	 (1) 	 Authorized representative of the provider agency.
	 (2) 	 Service area manager, within one week from receipt.
	 (3) 	 Rescinded IAB 5/11/05, effective 5/1/05.
	 (4) 	 Chief of the bureau of purchased services, within 30 days from receipt.
The provider shall be given a notice and explanation in writing of delays in the process or of rejection of the proposal. Payment cannot be made until the contract is signed by the provider’s authorized representative and the chief of the bureau of purchased services.
	  e.   	 Criteria for rejection. The following criteria may cause a proposed contract to be rejected:
	 (1) 	 The service is not needed by department clients.
	 (2) 	 The service is not in the social services block grant plan for the counties to be served by the program.
	 (3) 	 No funds are available for the service being proposed.
	 (4) 	 The proposed contract does not meet applicable rules, regulations, or guidelines, including service definition.
	  f.   	 Contract effective date. When the agreed-upon contract conditions have been met, the effective date of the contract is the first day of an agreed-upon month following signature by the chief of the bureau of purchased services.
	 150.3(2) Contract administration.
	  a.   	 Contract management. During the contract period the assigned project manager shall be the contract liaison between the department and the provider. The project manager shall be contacted on all interpretations and problems relating to the contract and shall follow the issues through to their resolution. The project manager shall also monitor performance under the contract and shall provide or arrange for technical assistance to improve the provider’s performance, if needed. Report of On-Site Visit, Form 470-0670, may be used to monitor performance under the contract.
	  b.   	 Contract amendment. The contract shall be amended only upon agreement of both parties. Amendments which affect the cost of services shall include reestablishment of applicable rates. Amendment or Renewal of Iowa Purchase of Social Services Agency Contract, Form 470-0630, shall be used to amend or renew the contract.
	  c.   	 Contract renewal. A joint decision to pursue renewal of the contract must be made at least 60 days before the expiration date.
	 (1) 	 Each contract shall be evaluated. The department shall take the results of the evaluation into consideration in making the decision on renewal. This evaluation may involve use of the Monitoring and Evaluation Review Guide, Form 470-2571, or other evaluation tools specified in the contract.
	 (2) 	 Desk Audit for Civil Rights Contract Compliance, Form 470-2215, shall be completed by the provider.
	  d.   	 Contract termination. Causes for termination during the period of the contract are:
	 (1) 	 Mutual agreement of the parties involved.
	 (2) 	 Demonstration that sufficient funds are unavailable to continue the services involved.
	 (3) 	 Failure to make required reporting.
	 (4) 	 Failure to make financial and statistical records available for review.
	 (5) 	 Failure to abide by the provisions of the contract.
	 150.3(3) Conditions of participation. The provider shall meet the following standards:
	  a.   	 Licensure, approval, or accreditation. The provider shall have any license, approval, and accreditation required by law, regulation or administrative rules, or standards of operation required by the state or the federal government before the contract can be effective. Out-of-state providers shall meet Iowa licensing standards related to treatment, professional staff to client ratio, and staff qualifications.
	  b.   	 Signed contract. A contract can be effective only when signed by all parties required in 150.3(1)“d.”
	  c.   	 Civil rights laws. The providers shall be in compliance with all federal, state and local civil rights laws and regulations with respect to equal employment opportunity, or have a written work plan approved by the diversity programs unit to come into compliance. Equal Opportunity Review, Form 470-0148, shall be completed by the provider. Equal Opportunity Review Status Report, Form 470-2194, shall be completed by the diversity programs unit.
	  d.   	 Title VI compliance. The provider shall be in compliance with Title VI of the 1964 Civil Rights Act and all other federal, state, and local laws and regulations regarding the provision of services, or have a written plan approved by the diversity programs unit to come into compliance. Equal Opportunity Review, Form 470-0148, shall be completed by the provider. Equal Opportunity Review Status Report, Form 470-2194, shall be completed by the diversity programs unit.
	  e.   	 Section 504 compliance. The provider shall be in compliance with Section 504 of the Rehabilitation Act of 1973 and with all federal, state, and local Section 504 laws and regulations, or have a written work plan approved by the diversity programs unit to come into compliance. Equal Opportunity Review, Form 470-0148, Plan Review Accessibility Checklist, Form 470-0149, and Section 504 Transition Plan: Structural Accessibility, Form 470-0150, shall be completed by the provider. Equal Opportunity Review Status Report, Form 470-2194, shall be completed by the diversity programs unit.
	  f.   	 Affirmative action. The provider shall be in compliance with all federal, state, and local laws and regulations regarding affirmative action, or have a written work plan approved by the diversity programs unit to come into compliance. Equal Opportunity Review, Form 470-0148, shall be completed by the provider. Equal Opportunity Review Status Report, Form 470-2194, shall be completed by the diversity programs unit.
	  g.   	 Abuse reporting. The provider shall have a written policy and procedure approved by the service area manager or designee for reporting abuse or denial of critical care of children or dependent adults.
	  h.   	 Confidentiality. The provider shall comply with all applicable federal and state laws and regulations on confidentiality including rules on confidentiality contained in 441—Chapter 9. The provider shall have a written policy and procedure approved by the service area manager or designee for maintaining individual client confidentiality including client record destruction.
	  i.   	 Client appeals and grievances. Clients receiving service through a purchase of service contract have the right to appeal adverse decisions made by the department or the provider. The provider shall have a written policy and procedure approved by the service area manager or designee for handling client appeals and grievances and shall provide information to clients about their rights to appeal.
	  j.   	 Client reports. The provider shall maintain the following client records:
	 (1) 	 Provider service plan or individual program plan. Providers shall develop a written service plan or individual program plan for each client within 30 days of service initiation. The plan shall include a concise description of the situation or area which will be the focus of the service; statement of the goals to be achieved through the delivery of services; time limited and measurable objectives which will lead to the attainment of the goal to be achieved; specific service components, frequency, and the assignment of responsibility for the provision of the components; and the month and year when it is estimated the client will be able to achieve the current goals and objectives. The provider service plan shall be updated upon receipt of a new departmental case plan, but at least once every six months.
	 (2) 	 Quarterly progress reports. Quarterly progress reports shall be sent to the department service worker responsible for the client. The first report shall be submitted to the department three months after service is initiated. Reports shall be submitted quarterly thereafter, unless provided for otherwise in rules for a specific service.
The progress report shall include a description of the specific service components provided, their frequency, and who provided them; the client’s progress with respect to the goals and service objectives; and any recommended changes in the service plan or individual program plan. For all placement cases the report shall include interpretation of the client’s reaction to placement, a summary of medical or dental services that were provided, a summary of educational or vocational progress and participation, and a summary of the involvement of the family with the client and the services.
Reports for the supervised apartment living service shall also include supporting documentation for service provision. The documentation shall list dates of client and collateral contacts, type of contact, persons contacted, and a brief explanation of the focus of each contact. Each unit of service for which payment is sought should be the subject of a written progress note.
	 (3) 	 Termination of service summary. A termination of service summary shall be sent to the department service worker responsible for the client within two weeks of service termination. The summary shall include the rationale for service termination and the impact of the service components on the client in relationship to the established goals and objectives.
	  k.   	 Financial and statistical records. Each provider of service must maintain sufficient financial and statistical records, including program and census data, to document the validity of the reports submitted to the department.
	 (1) 	 The records shall be available for review at any time during normal business hours by department personnel, the purchase of service fiscal consultant, and state or federal audit personnel.
	 (2) 	 These records shall be retained for a period of five years after final payment.
	  l.   	 Reports on financial and statistical records. Reports on financial and statistical records shall be submitted as required. Failure to do so within the required time limits is grounds for termination of the contract.
	  m.   	 Maintenance of client records. Records for clients served through a purchase of service contract must be retained by the provider for a period of three years after service to the client terminates.
	  n.   	 Provider charges. A provider shall not charge department clients more than it receives for the same services provided to nondepartmental clients.
	  o.   	 Special-purpose organizations. A provider may establish a separate, special-purpose organization to conduct certain of the provider’s client-related or nonclient-related activities. For example, a development foundation assumes the provider’s fund-raising activity. Often, the provider does not own the special-purpose organization (e.g., a nonprofit, nonstock-issuing corporation), and has no common governing body membership. However, a special-purpose organization is considered to be related to a provider if:
	 (1) 	 The provider controls the organization through contracts or other legal documents that give the provider the authority to direct the organization’s activities, management, and policies; or
	 (2) 	 The provider is, for all practical purposes, the primary beneficiary of the organization’s activities. The provider should be considered the special-purpose organization’s primary beneficiary if one or more of the following circumstances exist:
The organization has solicited funds on the provider’s behalf with provider approval, and substantially all funds so solicited were contributed with intent of benefiting the provider.
The provider has transferred some of its resources to the organization, substantially all of whose resources are held for the benefit of the provider; or
The provider has assigned certain of its functions to a special-purpose organization that is operating primarily for the benefit of the provider.
	  p.   	 Certification by department of transportation.
	 (1) 	 If the provider furnishes public transit service as defined in 761—910.1(324A), the provider shall annually submit to the project manager information regarding compliance with or exemption from public transit coordination requirements as found in Iowa Code chapter 324A and department of transportation rules in 761—Chapter 910. This information shall include:
	  1. 	 Form 020107, Certification Application for Coordination of Public Transit Services, which the project manager shall submit to the department of transportation; and
	  2. 	 A copy of an ACORD Certificate of Insurance or similar self-insurance documentation, as applicable.
	 (2) 	 If a provider believes it does not furnish public transit service as defined in 761—910.1(324A) and therefore is exempt from the requirements in subparagraph (1), the provider shall submit Form 020107 with only Section 1 completed when the provider enters into a new contract.
	 (3) 	 If a provider that has furnished public transit service as defined in 761—910.1(324A) ceases to do so, the provider becomes exempt from the requirements in subparagraph (1).
	 (4) 	 If an exempt provider begins to furnish public transit service as defined in 761—910.1(324A), the provider shall inform the project manager within 30 days of the change and shall adhere to the procedures in subparagraph (1).
	 (5) 	 Failure of the provider to cooperate in obtaining or providing the required documentation for compliance or exemption is grounds for denial or termination of the contract.
	  q.   	 Services provided. Services provided, as described in Form 470-0663, Iowa Purchase of Social Services Agency Contract Face Sheet, and attachments, shall at a minimum meet the rules found in the Iowa Administrative Code for a particular service or the contract may be terminated.
	  r.   	 Bonding, indemnity and insurance clauses.
	 (1) 	 Rescinded IAB 2/3/93, effective 4/1/93.
	 (2) 	 Indemnity. The provider agrees that it will at all times during the existence of this contract indemnify and hold harmless the department and county against any and all liability, loss, damages, costs or expenses which the provider may hereafter sustain, incur or be required to pay:
	  1. 	 By reason of any client’s suffering personal injury, death or property loss or damages either while participating in or receiving from the provider the care and services to be furnished by the provider under this contract, or while on premises owned, leased, or operated by the provider, or while being transported in any vehicle owned, operated, leased, chartered, or otherwise contracted for by the provider or any officer, agency, or employee thereof.
	  2. 	 By reason of any client’s causing injury to or damage to another person or property during any time when the provider or any officer, agency or employee thereof has undertaken or is furnishing the care and service called for under this contract.
	 (3) 	 Insurance. The provider agrees that in order to protect itself as well as the department and county under the indemnity agreement above, it will at all times during the term of the contract have and keep in force a liability insurance policy, verification of which shall accompany Form 470-0663, Iowa Purchase of Social Services Agency Contract Face Sheet. The provider agrees that all employees, volunteers, or any other person, other than employees of the department acting within the scope of their employment in the department, authorized to transport clients in privately owned vehicles, have liability insurance in force.
	  s.   	 Renegotiation clause. In the event there is a revision of federal or state laws or regulations and this contract no longer conforms to those laws or regulations, both parties will review the contract and renegotiate those items necessary to conform with the new federal or state laws or regulations.
	  t.   	 Performance measures. The department may require performance measures.
	 150.3(4) Establishment of rates. The Financial and Statistical Report for Purchase of Service Contracts, Form 470-0664, is the basis for establishing the rates to be paid to all providers under an Iowa Purchase of Social Services Agency Contract, Form 470-0628, except as provided below.
	  a.   	 Injectable contraceptive unit. Rescinded IAB 8/1/07, effective 9/5/07.
	  b.   	 Out-of-state providers.
	 (1) 	 Rescinded IAB 9/1/93, effective 11/1/93.
	 (2) 	 Out-of-state providers of other services shall have rates established using the applicable portions of the Financial and Statistical Report for Purchase of Service Contracts, Form 470-0664.
	  c.   	 Family-centered flexible supportive services. Rescinded IAB 5/6/09, effective 7/1/09.
	 150.3(5) Financial and statistical report. The Financial and Statistical Report for Purchase of Service Contracts, Form 470-0664, shall be completed by those providers as required in 150.3(4). The reports shall be based on the following rules.
	  a.   	 Accounting procedures. Financial information shall be based on the agency’s financial records. When the records are not kept on an accrual basis of accounting, the provider shall make the adjustments necessary to convert the information to an accrual basis for reporting. Providers who are multiple program agencies shall submit a cost allocation schedule prepared in accordance with recognized methods and procedures.
	 (1) 	 Direct program expense shall include all direct client contact personnel involved in a program including the time of a supervisor of a program, or the apportioned share of the supervisor’s time when the supervisor supervises more than one program.
	 (2) 	 Expenses other than salary and fringe benefits shall be charged as direct program expenses when the expenses are identifiable to a program. They may also be charged as direct program expenses when a method of distribution acceptable to the department is maintained on a consistent basis.
	 (3) 	 Occupancy expenses shall be allocated to programs on a space utilization formula. The space utilization formula may be used for salaries and fringes of building maintenance and janitorial type personnel.
	 (4) 	 All expenses which relate jointly to two or more programs shall be allocated to program service costs by utilizing a cost allocation method which fairly distributes costs to the related programs. Any expenses which relate directly to a particular program shall be reflected as such. All maintenance costs shall be charged directly or allocated proportionately to the related programs affected.
	 (5) 	 Indirect program service costs shall be distributed over all applicable services.
	 (6) 	 Expenses such as supplies, conferences, and similar expenses that cannot be directly related to a program shall be charged to indirect program service costs.
	 (7) 	 A multiservice agency shall establish a method acceptable to the department of distributing indirect program service costs.
	 (8) 	 Income received from fund-raising efforts or donations shall be reported as revenue on the financial and statistical report and used to offset fund-raising costs. Fund-raising costs remaining after the offset shall be an unallowable cost.
All contributions shall be accompanied by a schedule showing the contribution and anticipated designation by the agency. No private moneys contributed to the agency shall be included by the department in its reimbursement rate determination unless these moneys are contributed for services provided to specific individuals for whom the reimbursement rate is established by the department.
If a shelter care provider’s actual and allowable costs for a child’s shelter care placement exceed the amount the department is authorized to pay and the provider is reimbursed by the child’s county of legal settlement for the difference between actual and allowable costs and the amount reimbursed by the department, the amount paid by the county shall not be included by the department in its reimbursement rate determination, as long as the amount paid is not greater than the provider’s actual and allowable costs, or the statewide average of actual and allowable costs in May of the preceding year for juvenile shelter care homes, whichever is less.
	 (9) 	 When an agency has a certified public accounting firm perform an audit of its financial statements, the resulting audit report shall follow one of the uniform audit report formats recommended by the American Institute of Certified Public Accountants. These formats are specified in the industry audit guide series, “Audits of Voluntary Health and Welfare Organizations,” prepared by the Committee on Voluntary Health and Welfare Organizations, American Institute of Certified Public Accountants, New York, 1974. A copy of the certified audit report shall be submitted to the department within 60 days of receipt.
	 (10) 	 All expenses reported on Form 470-0664 shall be supported by an agency’s general ledger and documentation on file in the agency’s office.
	  b.   	 Failure to maintain records. Failure to maintain records adequate to support the Financial and Statistical Report for Purchase of Service Contracts, Form 470-0664, may result in termination of the contract. These records include, but are not limited to:
	 (1) 	 Reviewable, legible census reports.
	 (2) 	 Payroll information.
	 (3) 	 Capital asset schedules.
	 (4) 	 All canceled checks, deposit slips, invoices (paid and unpaid).
	 (5) 	 Audit reports (if any).
	 (6) 	 Board of directors’ minutes.
	  c.   	 Submission of reports. The financial and statistical report shall be submitted to the department no later than three months after the close of the provider’s established fiscal year. At least one week must be allowed prior to this deadline for the project manager to review the report and transmit it to the bureau of purchased services in central office. Failure to submit the report in time without written approval from the chief of the bureau of purchased services may reduce payment to 75 percent of the current rate. Failure to submit the report within six months of the end of the fiscal year shall be cause for terminating the contract.
	  d.   	 Rate modification. Modification of rates shall be made when required by changes in licensing requirements, changes in the law, or amendments to the contract. Requests for modification of a rate may be made when changes are because of program expansion or modification and have the approval of the service area where services are provided. Even if there is a modification of the rate, the modified rate is still subject to any maximum established in any law or rule.
	  e.   	 Payment of new rate. New rates shall be effective for services provided beginning the first day of the second calendar month after receipt by the bureau of purchased services of a report sufficient to establish rates or, by mutual agreement, new rates shall be effective the first day of the month following completion of the fiscal review. Failure to submit a report sufficient to establish a rate will result in the effective date’s being delayed. At least one week must be allowed prior to the deadline in paragraph “c” above for the project manager to review the report and transmit it to central office.
	  f.   	 Exceptions to costs. Exceptions to costs identified by the bureau of purchased services or its fiscal consultant will be communicated to the provider in writing.
	  g.   	 Accrual basis. Providers not using the accrual basis of accounting shall adjust amounts to the accrual basis when the financial and statistical report is completed. Records of cash receipts and disbursements shall be adjusted to reflect accruals of income and expenses.
	  h.   	 Census data. Documentation of units of service provided which identifies the individual client shall be available on a daily basis and summarized on a monthly report. The documentation and reports shall be retained by the provider for review at the time the expenditure report is prepared and reviewed by the department’s fiscal consultant.
	  i.   	 Opinion of accountant. The department may require that an opinion of a certified public accountant or public accountant accompany the report when adjustments made to prior reports indicate noncompliance with reporting instructions.
	  j.   	 Revenues. When the Financial and Statistical Report is completed, revenues shall be reported as recorded in the general books and records adjusted for accruals. Expense recoveries shall be reflected as revenues.
	  k.   	 Capital asset use allowance (depreciation) schedule. The Capital Asset Use Allowance Schedule shall be prepared using the guidelines for provider reimbursement in the Medicare and Medicaid Guide, December 1981.
	  l.   	 The following expenses shall not be allowed:
	 (1) 	 Fees paid directors and nonworking officers’ salaries.
	 (2) 	 Bad debts.
	 (3) 	 Entertainment expenses.
	 (4) 	 Memberships in recreational clubs, paid for by an agency (country clubs, dinner clubs, health clubs, or similar places) which are primarily for the benefit of the employees of the agency.
	 (5) 	 Legal assistance on behalf of clients.
	 (6) 	 Costs eligible for reimbursement through the medical assistance program.
	 (7) 	 Food and lodging expenses for personnel incurred in the city or immediate area surrounding the personnel’s residence or office of employment, except when the specific expense is required by the agency and documentation is maintained for audit purposes. Food and lodging expenses incurred as part of programmed activities on behalf of clients, their parents, guardians, or consultants are allowable expenses when documentation is available for audit purposes.
	 (8) 	 Business conferences and conventions. Meeting costs of an agency which are not required in licensure.
	 (9) 	 Awards and grants to recognize board members and community citizens for achievement. Awards and grants to clients as part of treatment program are reimbursable.
	 (10) 	 Survey costs when required certification is not attained.
	 (11) 	 Federal and state income taxes.
	  m.   	 Limited service—without a ceiling. The following expenses are limited for service without a ceiling established by administrative rule or law for that service. This includes services with maximum rates, with the exception of shelter care.
	 (1) 	 Moving and recruitment are allowed as a reimbursable cost only to the extent allowed for state employees. Expenses incurred for placing advertising for purposes of locating qualified individuals for staff positions are allowed for reimbursement purposes.
	 (2) and (3) 	Rescinded IAB 5/18/88, effective May 1, 1988.
	 (4) 	 Costs for participation in educational conferences are limited to 3 percent of the agency’s actual salary costs, less excluded or limited salary costs as recorded on the financial and statistical report.
	 (5) 	 Costs of reference publications and subscriptions for program-related materials are limited to $500 per year.
	 (6) 	 Memberships in professional service organizations are allowed to the extent they do not exceed one-half of 1 percent of the total salary costs less excluded salary costs.
	 (7) 	 In-state travel costs for mileage and per diem expenses are allowable to the extent they do not exceed the maximum mileage and per diem rates for state employees for travel in the state.
	 (8) 	 Reimbursement for air travel shall not exceed the lesser of the minimum commercial rate or the rate allowed for mileage in subparagraph (7) above.
	 (9) 	 The maximum reimbursable salary for the agency administrator or executive director charged to purchase of service is $40,000 annually.
	 (10) 	 Annual meeting costs of an agency which are required in licensure are allowed to the extent required by licensure.
	  n.   	 Limited service—with a ceiling. The following expenses are limited for services with a ceiling established by administrative rule or law for that service. This includes shelter care.
	 (1) 	 The maximum reimbursable compensation for the agency administrator or executive director charged to purchase of service annually is $40,000.
	 (2) 	 Annual meeting costs of an agency which are required for licensure are allowed to the extent required by licensure.
	  o.   	 Establishment of ceiling and reimbursement rate.
	 (1) 	 The maximum allowable rate ceiling applicable to each service is found in the rules for that particular service.
	 (2) 	 When a ceiling exists, the reimbursement rate shall be established by determining on a per unit basis the allowable cost plus the current cost adjustment subject to the maximum allowable cost ceiling.
	  p.   	 Rate limits. Interruptions in service programs will not affect the rate. If an agency assumes the delivery of service from another agency, the rate shall remain the same as for the former agency.
	 (1) 	 The combined service and maintenance reimbursement rate paid to a shelter care provider shall be based on the financial and statistical report submitted to the department. For the fiscal year beginning July 1, 2008, the maximum reimbursement rate shall be $92.36 per day, based on a 365-day year. If the department reimburses the provider at less than the maximum rate, the department shall adjust the provider’s reimbursement rate to the provider’s actual and allowable cost plus the inflation factor or to the maximum reimbursement rate, whichever is less.
	 (2) 	 Effective for the period from January 1, 2010, to June 30, 2010, the reimbursement rates for services provided under a purchase of social service agency contract for supervised apartment living shall be decreased by 5 percent of the rates in effect on December 1, 2009.
	 (3) 	 The initial reimbursement rate for any new service shall be based upon actual and allowable costs. A new service does not include a new building or location or other changes in method of service delivery for a service currently provided under the contract.
	  1. 	 For shelter care, if the provider is currently offering shelter care under social services contract, the only time the provider shall be considered to be offering a new service is if the provider adds a service other than shelter care.
	  2. 	 For supervised apartment living, the only time a provider shall be considered to be offering a new service is when the agency adds a cluster site or a scattered site for the first time. If, for example, the agency has a supervised apartment living cluster site, the addition of a new site does not constitute a new service.
	  3. 	 If the department defines, in administrative rule, a new service as a social service that may be purchased, this shall constitute a new service for purposes of establishment of a rate. Once the rate for the new service is established for a provider, the rate will be subject to any limitations established by administrative rule or law.
	 (4) 	 If a social service provider loses a source of income used to determine the reimbursement rate for the provider, the provider’s reimbursement rate may be adjusted to reflect the loss of income, provided that the lost income was used to support actual and allowable costs of a service purchased under a purchase of service contract.
	  q.   	 Related party costs. Direct and indirect costs applicable to services, facilities, equipment, and supplies furnished to the provider by organizations related to the provider are includable in the allowable cost of the provider at the cost to the related organization. All costs allowable at the provider level are also allowable at the related organization level, unless these related organization costs are duplicative of provider costs already subject to reimbursement.
	 (1) 	 Allowable costs shall be all actual direct and indirect costs applying to any service or item interchanged between related parties, such as capital use allowance (depreciation), interest on borrowed money, insurance, taxes, and maintenance costs.
	 (2) 	 When the related party’s costs are used as the basis for allowable rental or supply costs, the related party shall supply documentation of these costs to the provider. The provider shall complete a schedule displaying amount paid to related parties, related party cost, and total amount allowable. The resulting costs shall be allocated according to policies in 150.3(5)“a”(3) to (7).
Financial and statistical records shall be maintained by the related party under the provisions in 150.3(3)“k.”
	 (3) 	 Tests for relatedness shall be those specified in rule 441—150.1(234) and 150.3(3)“o.” The department or the purchase of service fiscal consultant shall have access to the records of the provider and landlord or supplier to determine if relatedness exists. Applicable records may include financial and accounting records, board minutes, articles of incorporation, and list of board members.
	  r.   	 Day care increase. Rescinded IAB 7/7/93, effective 7/1/93.
	  s.   	 Interest on unpaid invoices. Any invoice that remains unpaid after 60 days following the receipt of a valid claim is subject to the payment of interest. The rate of interest is 1 percent per month beyond the 60-day period, on a simple interest basis. A separate claim for the interest is to be generated by the agency. If the original claim was paid with both federal and state funds, only that portion of the original claim paid with state funds will be subject to interest charges.
	  t.   	 Interest as an allowable cost. Necessary and proper interest on both current and capital indebtedness is an allowable cost.
	 (1) 	 “Interest” is the cost incurred for the use of borrowed funds. Interest on current indebtedness is the cost incurred for funds borrowed for a relatively short term. Interest on capital indebtedness is the cost incurred for funds borrowed for capital purposes.
	 (2) 	 “Necessary” requires that the interest be incurred on a loan made to satisfy a financial need of the provider, be incurred on a loan made for a purpose reasonably required to operate a program, and be reduced by investment income except where the income is from gifts and grants whether restricted or unrestricted, and which are held separate and not commingled with other funds.
	 (3) 	 “Proper” requires that interest be incurred at a rate not in excess of what a prudent borrower would have had to pay in the money market on the date the loan was made, and be paid to a lender not related through control or ownership to the borrowing organization.
	  u.   	 Rate formula. Paragraph 150.3(5)“p” notwithstanding, when rates are determined based on cost of providing the service involved, they will be calculated according to the following mathematical formula:

Net allowable expenditures	 	×	Reimbursement factor	=	Base Rate	
Effective utilization level	 					
	 (1) 	 Net allowable expenditures are those expenditures attributable to service to clients which are allowable as set forth in subrule 150.3(5), paragraphs “a” to “t.”
	 (2) 	 Effective utilization level shall be 80 percent or actual (whichever is greater) of the licensed or staffed capacity (whichever is less) of the program.
	 (3) 	 Inflation factor is the percentage which will be applied to develop payment rates consistent with current policy and funding of the department. The inflation factor is intended to overcome the time lag between the time period for which costs were reported and the time period during which the rates will be in effect. The inflation factor shall be the amount by which the Consumer Price Index for all urban consumers increased during the preceding calendar year ending December 31.
	 (4) 	 Base rate is the rate which is developed independent of any limits which are in effect. Actual rates paid are subject to applicable limits or maximums.
	  v.   	 Rescinded IAB 5/13/92, effective 4/16/92.
	 150.3(6) Client eligibility and referral.
	  a.   	 Program eligibility. To receive services through the purchase of service system, clients shall be determined eligible and be formally referred by the department.
	 (1) 	 The department shall not make payment for services provided before the client’s application, eligibility determination, and referral. See “b” below for an exception to this requirement.
	 (2) 	 Except as provided in paragraph “c,” the department shall use the following forms to authorize services:
	  1. 	 Form 470-0622, Referral of Client for Purchase of Social Services.
	  2. 	 Form 470-0719, Placement Agreement: Child Placing or Child Caring Agency (Provider).
	  b.   	 When a court orders foster care and the department has no responsibility for supervision or placement of the client, the department will pay the rate established by these rules for maintenance and service provided by the facility.
	  c.   	 Family-centered services. For family-centered services, the provisions in rule 441—172.3(234) relating to approval, authorization, and referral shall apply.
	 150.3(7) Client fees. The provider shall agree not to require any fee for service from departmental clients unless a fee is required by the department and is consistent with federal regulation and state policy. Rules governing client fees are found in 441—130.4(234).
The provider shall collect fees due from clients. The provider shall maintain records of fees collected, and these records shall be available for audit by the department or its representative. When a client does not pay the fee, the provider shall demonstrate that a reasonable effort has been made to collect the fee. Reasonable effort to collect means an original billing and two follow-up notices of nonpayment. When the second notice of nonpayment is sent, the provider shall send a copy of the notice to the department worker.
	 150.3(8) Billing procedures. At the end of each month the provider agency shall prepare Form 470-0020, Purchase of Service Provider Invoice, for contractual services provided by the agency during the month.
Separate invoices shall be prepared for each county from which clients were referred, each service, and each funding source involved in payment. Complete invoices shall be sent to the departmental county office responsible for the client for approval and forwarding for payment.
More frequent billings may be permitted on an exception basis with the written approval of the service area and the chief of the bureau of purchased services.
	  a.   	 Time limit for submitting vouchers, invoices, or claims. The time limit for submission of original vouchers, invoices, or claims shall be three months from the date of service.
	  b.   	 Resubmittals of rejected claims. Valid claims which were originally submitted within the time limit specified in paragraph “a” but were rejected because of an error shall be resubmitted without regard to time frames.
	 150.3(9) Reviews of departmental actions. A provider who is adversely affected by a departmental decision may request a review. A review request may cause the action to be stopped pending the outcome of the review, except in cases where it can be documented that to do so would be detrimental to the health and welfare of clients. The procedure for review is:
	  a.   	 The provider shall send a written request for review to the project manager responsible for the contract within ten days of receipt of the decision in question. This request shall document the specific area in question and the remedy desired. The project manager shall provide a written response within ten days.
	  b.   	 When dissatisfied with the response, the provider shall submit to the service area manager within ten days the original request, the response received, and any additional information desired. The service area manager shall study the concerns and the action taken, and render a decision in writing within 14 days. A meeting with the provider may be held to clarify the situation.
	  c.   	 If still dissatisfied, the provider may within ten days request a review by the chief of the bureau of purchased services. The request for review should include copies of material from paragraphs “a” and “b” above. The bureau chief shall review the issues and positions of the parties involved and provide a written decision within 14 days. A meeting may be held with the provider, project manager, and service area manager or designee.
	  d.   	 The provider may appeal this decision within ten days to the director of the department, who will issue the final department decision within 14 days.
	 150.3(10) Review of financial and statistical reports. Authorized representatives of the department or state or federal audit personnel shall have the right to review the general financial records of a provider. The purpose of the review is to determine if expenses reported to the department have been handled as required under 150.3(5). Representatives shall provide proper identification and shall use generally accepted auditing principles. The reviews may include an on-site visit to the provider, the provider’s central accounting office, the offices of the provider’s agents, a combination of these, or, by mutual decision, to other locations.
	 150.3(11) Rescinded, effective 3/1/87.
This rule is intended to implement Iowa Code section 234.6.
[ARC 7741B, IAB 5/6/09, effective 7/1/09; ARC 8447B, IAB 1/13/10, effective 1/1/10]