You’ve filed your cost report, the holidays are over, and the cold weather is here. Time to grab a blanket, a hot cocoa (with marshmallows of course), and curl up with some scintillating reading … that’s right, the fiscal 2017 RCM. Why not, it’s got drama, action, and maybe even a surprise ending. For those of you who want to experience this first hand, turn the page now, and don’t read any more of this article because, spoiler alert, we are going to fill you in on some of the major changes that are included in the new RCM.
- Security, Housekeeping, and Maintenance staff uniforms are now allowable as a non-direct care cost. All other uniforms, including uniforms for children are still non allowable costs.
- Salaries of non-direct care staff have always been limited to 1.0 FTE, implying that any overtime paid to these staff members was non-allowable. For lower level staff members, such as maintenance and lunch staff (100 level codes) and office workers (505 and 605 codes) this posed a problem, as they are not traditionally not exempt employees. The new RCM now allows providers to have staff members in these specific codes to have a greater than 1.0 FTE allowable on the CFR. The only caveat, if the individual in one of those codes is an owner or related party, they are still limited to a 1.0 FTE.
- Programs cannot allocate non-direct care staff across multiple position title codes (such as 501 and 518). They need to pick one code and stick with it.
- The new RCM clarifies that a non-direct individual with a 500 or 600 position title code that works across multiple entities or programs is still limited to a 1.0 FTE ceiling. So if you are the Executive Director of two agencies, working 30 hours in one and 20 hours in the other, you would be a .6 FTE in the first and a .4 FTE in the second (cannot exceed 1.0 FTE’s).
- If your agency still gives bonuses you can now consider longevity and attendance in your assessment of performance for purpose of such bonuses, provided that this is tracked and incorporated into the performance review metrics.
- SED has incorporated 2 new bonuses, sign-on and retention, which allows providers to offer 10% and 5% bonuses, respectively to direct care staff in position title codes that have historically been hard to fill (such as teachers, TA’s, and related service providers).
- The new RCM includes student interest as an allowable education cost that is reimbursable, providing that the education which gave rise to the interest is allowable.
- Discretionary pension contributions are limited to 25% of an employee’s compensation
- If you have gone through an OSC audit and retained professionals (legal, accounting, etc.) to assist in a lawsuit to challenge the audit results, don’t expect SED to pay for it. The RCM clearly makes these types of expenses non-allowable.
- Providers are supposed to shop their banking relationships annually (for working capital loans). The new RCM now requires providers to shop capital indebtedness every 5 years.
- The new RCM provides some leniency for late filers. In the past, interest expense on working capital indebtedness was disallowed for late filers, the new RCM gives providers a one-month leeway to get their CFR filed before working capital interest begins to be disallowed. Once you pass that one month cushion, working capital interested is disallowed on a pre-rated basis through 90 days, at which time it would be completely disallowed. So for example, for a June 30th provider, the CFR is due, with extension, by December 1st. The new RCM gives providers through January 1st before disallowance of working capital interest begins. As long as you file your CFR before March 31st, some of your working capital would be allowable, depending on how late the CFR was filed.
- The new RCM makes it clear that you cannot loan SED originated tuition funds. As a result, loans to related parties, loans to officers, and employee advances, utilizing tuition funds is prohibited.
- Legal and accounting bills must be itemized showing date of service, service provided, and the total amount charged. If the invoice does not provide all of these criteria, it will not be allowable.
- The new RCM reduces the level of documentation required for vehicles used by providers solely for maintenance purposes. For maintenance vehicles only, a weekly log needs to be maintained that shows the beginning and ending dates of the week, the starting and ending mileage for the week, a listing of the maintenance services performed by the vehicle during the week, and the signature of a designating supervisor attesting that the vehicle was only utilized for the designated purposes listed.
There were other minor changes made to the 2016/17 RCM, however these are the most significant. We encourage you read the entire document to refresh yourself as to the rules in place that you must follow, and enjoy your cocao.
New Sign-on and Retention Bonuses Added
With the high level of direct care staff turnover that providers have been experiencing, SED has provided providers with two new bonuses that they can utilize to attract (sign-on) and retain (retention) hard to find staff members.
A sign-on bonus is just that, extra one-time money given to a staff member to come work for your agency. Sign-on bonuses are restricted to direct care titles/employees (200 and 300 level codes) and are reimbursable subject to the following additional restrictions:
- Can only be paid during the first year of employment
- Are limited to 10% of compensation
- The terms of the bonus must be appropriately spelled out in a written employer-employee agreement.
- They may only be provided to the position title codes for which the entity has demonstrated difficulty in recruitment and/or retention of qualified personnel. Difficulty in recruitment and/or retention may be demonstrated through recurring staff turnover, and/or staff vacancy at the program.
- Cannot be paid to independent contractors
A retention bonus is a one-time bonus, in excess of their regular compensation, provided to staff members to entice them to stay with your agency. Similar to sign-on bonuses, retention bonuses are restricted to direct care titles/employees with the following caveats:
- Cannot be paid during first year of employment
- Are limited to 5%
- The terms of the bonus must be appropriately spelled out in a written employer-employee agreement and must include the following provisions:
- Requirements for receiving the retention bonus,
- Amount and timing of payment, and
- Forfeiture of any unpaid retention bonus expectation upon termination of employment
- Cannot be paid to independent contractors
- Must be paid within 2 ½ months after the end of the year.
Both bonuses are subject to all aspects, constraints and cost parameters contained in the methodology.
Kenneth R. Cerini, CPA, CFP, FABFA
Ken is the Managing Partner of Cerini & Associates, LLP and is the executive responsible for the administration of our not-for-profit and educational provider practice groups. In addition to his extensive audit experience, Ken has been directly involved in providing consulting services for nonprofits and educational facilities of all sizes throughout New York State in such areas as cost reporting, financial analysis, Medicaid compliance, government audit representation, rate maximization, board training, budgeting and forecasting, and more.