Cost Report

By: Kristi Klein, Management Analyst &

Sacha Wise, Provider Reimbursement & Grants
Manager
Department of Human Services
Office of Budget & Finance
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Cost Report
Information
General Overview of Cost Report

General Overview of Cost Report

Updates
Things to Remember
Use of Cost Report in Rate Setting
Per Unit Cost
Were on the web at:
http://www.state.sd.us/dhs/BF/Cost
%20Report.htm

*You can find changes to the FY05 cost

report, frequently asked questions,
examples, guidelines, and forms for the
cost report.
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Overview of Cost Report

Guidelines

Who is required to submit a cost report?

As required by contract, a cost report should be

submitted by agencies receiving funding from the
Division of Alcohol and Drug Abuse and should
coincide with the providers fiscal year, unless
waived by the Department of Human Services.

When is the cost report due to

the Department of Human
Services?

The deadline for returning the

required annual cost report to the
Department is four months after the
reporting period. All incomplete or
incorrect reports will be returned to
the provider for corrections.

Overview of Cost Report

Guidelines

What is the purpose of the cost report?

The purpose of the cost report is to define

the cost of each service by service center.

What are the 3 components of the cost

report?

The cost report is

comprised of Schedule A
Expenses, Schedule B Revenues, and
Attachment 1-Personnel.
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Overview of Cost Report

Guidelines

The cost report must be completed

on an accrual basis of accounting.

Information to complete the cost report may

come from various sources depending on
each agency's method of tracking costs.
Personnel, payroll, provider expense records,
and activity logs are examples of tools that
may be used to compile information to
complete the cost report.
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Overview of Cost Report

Guidelines
Funded Depreciation Accounts

A funded depreciation account can be established for the

replacement of capital assets and can be funded at a rate
not greater than current annual depreciation.
The establishment of the fund and the procedures
governing the fund must be specifically approved by the
agencys board of directors.
The approved procedures must stipulate the rate by which
the account will be funded and shall delineate the items to
be purchased with the fund.
Agencies must use the account for the purchase of capital
items as defined by their internal procedures. Transfers
from the funded depreciation reserve account will be
allowed for necessary cash flow purposes as long as the
transfer does not cause the agency to exceed operating
reserve standards set forth in the Cost Report Preparation
Guidelines. (See Reserve Funds policy, page 7).
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Overview of Cost Report

Guidelines

Funded Depreciation Accounts cont.

Agencies with funded depreciation accounts

shall use the account heading Designated for
Capital Asset Replacement and identify the
composition of any Funded Depreciation
account in their annual audited financial
statement.
See page 4 of the guidelines for additional
details

Overview of Cost Report

Guidelines
Reserve Funds

The Policy
reserve funds should not exceed what?

What is the formula for calculating reserves?

Reserve funds shall not exceed 90 days total operating

expenses. Please refer to the memorandum sent to all
providers September 6, 2005 for additional information.

Reserves = (Unrestricted Funds Funded Depreciation and

Endowments)

If reserves exceed the 90 day total operating

expense, what must the provider do?

If reserves exceed 90 days total operating expenses, the

provider must submit a plan to the Department for reinvesting
the excess into the program. The Department will notify the
provider of approval or disapproval within 30 days.
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Overview of Cost Report

Independent
Guidelines
Audit

Who should test Schedules A & B included

in the audit report?

An independent auditor

The provider shall have an annual entity-wide

independent audit. To ensure the consistency
and validity of the cost report data, we require
Schedules A and B to be included in the paper
audit report and to be tested by the
independent auditor.

This requirement became effective SFY04.

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Overview of Cost Report

Guidelines
Non- Allowable Costs

Report in adjustments column on Schedule A

Governed by Title XIX unless further limited by cost report
guidelines or Purchase of Service Agreement
Examples of Non-Allowable Costs

Advertising, public relations, and clothing expenses as identified by

Provider Reimbursement Manual Part II provided by CMS (formerly HCFA-15)
Costs which have not been incurred by the agency, including the value of
donated goods and services
Depreciation costs for idle facilities except when such facilities are
necessary to meet caseload fluctuations
Fines and penalties resulting from failure to comply with Federal, State and
local laws
Telephone costs attributed to personal usage by employees and consumers
Any expenses incurred by the provider for the sale of goods or services
(example: production)
Entertainment costs for activities including staff only (i.e. holiday parties
not involving consumers, flowers or other gifts for staff)
All dues and costs associated with individual or agency memberships to
fraternal organizations, country clubs, etc.
All costs associated with payment to registered lobbyists
Additional Non-Allowable costs can be found on page 8 & 9 of guidelines.
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Overview of Cost Report

Guidelines
Schedule A (Expenses)

Contains the Total, Adjustments, Administration

and Support and Fund Raising columns as well as
the program services unique to each provider
group.
Cost allocated by assignment to Administration
and Support or to the benefiting service center
based on time study or activity logging unless
otherwise indicated.
Total Column - Represents the total expenses
from the operating statement of the organization
for the reporting period. The total of the expenses
must reconcile to the independently audited
financial statements.

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Overview of Cost Report

Guidelines
Schedule A (Expenses)

Chart of Accounts
Personnel Services (1000)
Personnel Benefits and Taxes
(1100)
Professional Fees & Contractual
Services (1200)
Travel/Transportation (1300)
Supplies (1400)
Occupancy (1500)
Equipment (1600)
Depreciation (1700)
Miscellaneous (1800)

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Overview of Cost Report

Guidelines
Schedule A (Expenses)

This only shows a portion of Schedule A

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Overview of Cost Report

Guidelines

Schedule B (Revenues)

Contains the Total, Adjustments, Administration and

Support and Fund Raising columns as well as the
program services unique to each provider group.

Accounts
Fees (2000)
Grants (2100)
Contributions (2200)
Other Income (2300)

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Overview of Cost Report

Guidelines

Schedule B (Revenues)

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Overview of Cost Report

Guidelines

Attachment 1

Contains hours and wages for all personnel whose

costs were reported in accounts 1010, 1020 and
1040 on Schedule A
Information Reported

Staff Credentials
Position Numbers
Position Titles
Staff Names
Start/End Dates
Total Hours Paid
Salary
Hourly/Salary Wage
Bonus
# of Hours Worked in a Service
Center
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Overview of Cost Report

Guidelines

Attachment 1

This only shows a portion of Attachment1

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Overview of Cost Report

Guidelines

Notes for Schedules A & B

Notes for Schedule A

Describe line item expenses

Adjustment column items

Reconcile between Audited Financial Statement and Schedule A
Breakdown of the expenses by type and cost in the other
accounts (1190, 1290, 1390, etc) if the account equals or
exceeds the % (listed in the guidelines) of the agencys total
expenses
Any other notes you may want to provide

Notes for Schedule B

Describe line item revenues

Adjustment column items

Reconciliation between Audited
Financial Statement and Schedule B
Any other notes you may want to
provide

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Overview of Cost Report

Guidelines

APPENDIX A, B, & C

Provides information about program services

of each Division

APPENDIX A

APPENDIX B

Division of Developmental Disabilities

Division of Mental Health

APPENDIX C

Division of Alcohol & Drug Abuse

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Updates: General

Some cells have been protected (you will not be able to click
the cell) so that changes can not be made to the formulas.
Some cells will automatically calculate and be displayed.

Schedule A, Schedule B, Notes for Schedule A and Notes for

Schedule B have all been included in one excel work book.

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Updates: General

Please use the following naming conventions when submitting

the files: AgencyName_Schedules.xls and
AgencyName_Attachment1.xls.
AgencyName should be the full or abbreviated name of your
agency.
Examples:BMS_Schedules.xls (Behavior Management Systems)
SHAD_Attachment1.xls (Southern Hills Alcohol and Drug)

Cost reports should be emailed to Kristi Klein or Sacha Wise at

kristi.klein@state.sd.us or sacha.wise@state.sd.us

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Updates:
Attachment 1

If you are a combination provider, all of the service centers have been
included in one spreadsheet. Therefore, if you are a MH and ADA
provider, you will complete one Attachment 1 for the whole agency.

If you are a combination

provider, please make
sure administrative time
is broken out into each
area.
This is a sample of the cost report that shows where to
break out the administrative time if you are a combination
provider (Provide MH, DD, and ADA services).

Please make sure to fill

staff in the proper tabs of
1010, 1020, 1040. Do not
include all staff in one tab.
When in the Excel spreadsheet, click
on the correct tab for the staff you
are inputting.

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Updates: Schedule A

Under 1200 Professional Fees & Contract Services, accounts

1211, 1212,1213, 1214, 1215 and 1216 have been
combined into one account. The new account is 1210
Administrative/Financial.

Under 1300 Travel/Transportation, the accounts of 1310 and

1390 have been combined into one account. The account
name is now 1390 Other.

Under 1500 Occupancy, the accounts of 1520 and 1530

have been combined into one account. The account name is
now 1520 Utilities & Telephone.

The other accounts (1190, 1290, 1390, etc.) have

increases in their percentages in relation to total
expenditures. Please refer to the guidelines to double check
the percentages for those accounts as you may not have to
list the expenses on the Notes Page.
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Updates: Schedule A

T or F: Temporary employees need to be included in

attachment 1?

False. 1060 Temporary Staff do not need to be included in

Attachment 1. On Schedule A under 1000 Personnel Services, a
new account of 1060 Temporary Staff has been created. The
costs for temporary staff should only be included on Schedule
A.

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Updates: Schedule A

Examples of Temporary Staff:

Staff hired staff to fill-in or cover for administration or

support staff on maternity leave, FMLA, extended disability,
etc.

Staff hired for a short-term project. These staff are

supplements to existing staff and do not provide direct care
(i.e. staff hired to do production work along side people
served in a workshop to meet production deadlines, staff
hired for a grant position that is short lived and will not
continue, or staff hired to provide summer maintenance/yard
work).

Staff hired as on-call or relief direct care staff. These staff

fill-in when a full-time direct care staff uses vacation or sick
leave or other times as needed (i.e. additional staff needed
due to illness or behavior of people served). The number of
on-call staff and the hours available for them to work varies
at any point in time.
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Update - Schedule B

Under 2100 Grants, the accounts of

2140, 2150, 2160, 2170 and 2190 have
been combined into one account. The
account name is now 2100 Grants.

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Attachment 1

The total hours paid column should match what

column?

The total hours paid should match the total hours. If they do not
match, check the service centers to make sure the hour
information is entered correctly.

If you are a combination provider (MH & ADA), please

break out the administrative time spent in each area.

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Attachment 1

If the administrative staff manage/direct the overall

or specific programs of the agency but spend more
than 10% of their time doing direct service which
tab should they be included in on Attachment1?

They should be included in the

1020 (Professional/Program
Staff) rather than the 1010
(Administrative). Their pay
should also be included in the
1020 account on Schedule A.

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Total Hours Paid

In the total hours paid, please put the number of hours

that the employee was paid during that time period
and not the number of hours they could have worked.

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Attachment 1 &
Schedule A

Double check to make sure that Attachment 1 matches Schedule

A. In this example, there are hours reported in Attachment 1 for
Day Treatment but there are no personnel costs reported in
Schedule A. If hours are reported in Attachment 1 there should
be costs reported in Schedule A. The same should be true if
there are costs reported in Schedule A, Attachment 1 should
reflect hours spent in that service center.
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Start/End Date

T or F: Start and end dates need to be included on

the cost report.

True

Enter the date that the

individual began
employment with your
agency.
If the individual has
been employed for
more than a year, use
the first day of the
current fiscal year as
the start date.

Example: Jane Doe

started 8/14/1999. For
the reporting period on
the cost report for FY04,
you would enter 7/1/2004
as the start date.
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Start/End Date

Please include an end date for everyone.

Enter the date the individual terminated
employment with your agency.
If the individual is currently employed with your
agency at the end of the fiscal year, enter the last
day of the current fiscal year.

For FY04, if the

individual was still
employed at the
end of the fiscal
year, you would
enter 6/30/2005
as the end date.

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Position Numbers

True or False: Position Numbers are not

used to analyze data.

False

Position numbers are

used to count
employees and develop
a turnover ratio.
Please include position
numbers so that
turnover rates can be
analyzed (refer to
yellow comment).
If one employee
replaces another
employee, the same
position number should
be used (refer to
orange comment).
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Wages and Bonus

Bonuses should not be included in the salary per

hour or hourly wage.
Do not include the bonus amount in the total
wages paid column.
The bonus and total wages paid added together
should match what is reported on Schedule A for
the appropriate account (1010, 1020, 1040).
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Rate Setting

Cost-Based Rates should include all direct and

indirect costs related to the provision of the
service by the provider.

Direct Costs: Those costs attributed to a single cost

objective. Salary and material costs within a unit
are directly attributable to services.
Indirect Costs: Those costs incurred for a common
or joint purpose benefiting more than one cost
objective.

The goal of any effective rate setting

methodology is to include all allowable costs
and allow the public provider to recover the full
cost incurred for the provision of the service.
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Rate Setting

STEP 1:

Define the Service

Who delivers the service? (CCDC Level I, II, III,

trainee, etc.)

How is the Cost Report used?

Credentials and salary information from

Attachment 1

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Rate Setting

STEP 1 Cont.:

Staff Salaries: Average Wage

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Rate Setting

STEP 2:

Identify Cost Components (Numerator)

Staff Salaries + Staff Benefits and Taxes +

Operating Expenses (including supplies, occupancy,
contractual services, etc) = Total Cost

How is the Cost Report used?

Attachment 1 - Salaries
Schedule A - Total Personnel Services and Total
Benefits and Taxes
Schedule A - Operating Expenses

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Rate Setting

STEP 2 Cont.:

Determinin
g Benefits
Percentage

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Rate Setting

STEP 2 Cont. :

Determining
Operating
Costs

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Rate Setting

STEP 3

Determine Billable Contacts (Denominator)

Often requires conducting surveys and/or time

studies to obtain accurate data

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Rate Setting

Validating the Model

Compare the modeled cost

to the per unit cost
Do they match or is there a
large gap between the
modeled rate and the per
unit cost?

How is the Cost Report used?

Per unit cost taken from Schedule A- Total

Expenditures divided by MMIS/STARS units as
reported by agency.

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Per Unit Cost

How do you check your

per unit cost?

Use Schedule A to check

to see what the total
expense was for a service
center.
Use the number of units
reported by the agency to
the Division per
MMIS/STARS (Include
contract, non-contract,
and Title XIX units).
Take the expenses divided
by the number of units to
get the per unit cost.
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Per Unit Cost

Variations

There are variations on the per unit

costs.

Group, IOP

Per Unit Cost range for FY04 from $13.78 to

$54.98

FY04 rate was $17.00

Clinically
Managed Low
Intensity Residential

Per Unit Cost ranges for FY04

from $34.83 to $167.02

FY04 rate was $32.00

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Per Unit Cost: Standard

Deviation

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Per Unit Cost: Standard

Deviation

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Reminder

Due to this training, we have extended

the FY05 Cost Report due date for ADA
providers from November 1, 2005 to
November 15, 2005.

Please understand that the cost reports

need to be submitted in a timely manner in
order for us to ensure adequate time for
analysis and preparation of information
prior to the Legislative session.

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Any Questions?
If you have any questions or
concerns, please feel free to
contact us.

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