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2007 BEST PRACTICE COST ALLOCATION PLANS

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... Cost Allocation Plans. Items expected and commonly found missing in original cost allocation plans. Certification ... Items included in plans but not needed ... – PowerPoint PPT presentation

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Title: 2007 BEST PRACTICE COST ALLOCATION PLANS


1
2007 BEST PRACTICE COST ALLOCATION PLANS
GUIDANCE FOR DEVELOPING FY 2008 PLANS
  • July 23, 2007
  • Constitution Hall

2
2007 BEST PRACTICE PLANS GUIDANCE FOR
DEVELOPING FY 2008 PLANS
  • Welcome and Introductions
  • Purpose of the Session
  • Plan for the Day

3
2007 BEST PRACTICE PLANS GUIDANCE FOR
DEVELOPING FY 2008 PLANS
  • Findings and Observations about FY 2007 Cost
    Allocation Plans
  • Items expected and commonly found missing in
    original cost allocation plans
  • Certification
  • Description of method used to assign costs to
    funding sources
  • Schedule of costs assigned to funding sources
  • Summary of allocations of costs
  • Schedule of 460 costs
  • Service description
  • Expense items included in the allocated cost
    center

4
2007 BEST PRACTICE PLANS GUIDANCE FOR
DEVELOPING FY 2008 PLANS
  • Findings and Observations about FY 2007 Cost
    Allocation Plans
  • Helpful items found in some of the 460 cost
    allocation plans and requested from all plans
    with June 15, 2007 addendum
  • General narrative describing the entity
  • County Relationship
  • County charges (direct or indirect)
  • Description of accounting system
  • Method of Staff costing
  • CA relationship

5
2007 BEST PRACTICE PLANS GUIDANCE FOR
DEVELOPING FY 2008 PLANS
  • Findings and Observations about FY 2007 Cost
    Allocation Plans
  • Other helpful items found in some of the 460 cost
    allocation plans
  • Table of contents
  • Single document instead of Multiple files
  • Excel schedules with narrative explanations
  • Organizational charts that include prime
    subcontractors
  • CA Narratives with supporting schedules with
    financial data

6
2007 BEST PRACTICE PLANS GUIDANCE FOR
DEVELOPING FY 2008 PLANS
  • Findings and Observations about FY 2007 Cost
    Allocation Plans
  • Items included in plans but not needed
  • Employee job descriptions
  • Employee staffing Charts
  • Cost centers listing all accounts including
    unused accounts

7
2007 BEST PRACTICE PLANS GUIDANCE FOR
DEVELOPING FY 2008 PLANS
  • Findings and Observations about FY 2007 Cost
    Allocation Plans
  • Other issues found in the reviews
  • Narratives indicating predetermined cost
    allocations between funding sources
  • Inconsistent treatment of Information System
    costs
  • Plans that appeared to follow managed care
    administration functions not the Section 460 cost
    allocation requirements and definitions for
    administration
  • Reference to contracted cost allocation plan
    prepared by outside company but no detail as to
    compliance with the 460 cost allocation
    standards.

8
2007 BEST PRACTICE PLANS GUIDANCE FOR
DEVELOPING FY 2008 PLANS
  • Best Practices Three Cost Allocation Plans
  • All 46 plans were some what unique which was
    expected
  • Difference approaches for addressing the needs
  • Table of contents vs read me first files
  • Schedule based verses narrative based
  • During the development of the plans several
    CMHSPs requested model plans to review
  • 460 cost plans are so specialized that no models
    existed.
  • MDCH found Uniformity would be helpful to
    evaluate plans
  • MDCH decided to select five plans to hold out as
    best practice models

9
2007 BEST PRACTICE PLANS GUIDANCE FOR
DEVELOPING FY 2008 PLANS
  • Best Practices Three Cost Allocation Plans
  • The following criteria were used to select the
    models
  • Plans that included most of the items expected by
    MDCH based on the November 6, 2006 training
  • Plans that included the helpful items that were
    included in the addendum request but not in the
    original training
  • The plans included other helpful items and
    designs that made them user friendly

10
2007 BEST PRACTICE PLANS GUIDANCE FOR
DEVELOPING FY 2008 PLANS
  • Best Practices Three Cost Allocation Plans
  • Specific examples of criteria include
  • A general description of the organization
  • Reconcilement of the 460 cost report with the FSR
  • Clear identification of affiliation members and
    their costing methods
  • Sections on direct service cost, administrative
    costs and allocable overhead costs.
  • Clear flow of information through the plan
  • Packaged as a single document

11
2007 BEST PRACTICE PLANS GUIDANCE FOR
DEVELOPING FY 2008 PLANS
  • Best Practices Three Cost Allocation Plans
  • Specific examples of criteria include
  • Comprehensive organizational charts
  • Schedules and narratives that clearly showed
  • Expenses in a cost center
  • Method used to assign or allocate the cost center
  • Cost centers that received the cost assignment or
    allocation
  • Descriptions of the relationship with the County
    and/or CA
  • Descriptions of the accounting system and/or
    method of staff costing

12
2007 BEST PRACTICE PLANS GUIDANCE FOR
DEVELOPING FY 2008 PLANS
  • Best Practices Three Cost Allocation Plans
  • Copies of 5 plans will be posted on the MDCH web
    site for your review
  • Those five proposed best practice models are the
    plans submitted by
  • Summit Point
  • CEI
  • CMHCM
  • Network 180
  • North Country/Northern Affiliation

13
2007 BEST PRACTICE PLANS GUIDANCE FOR
DEVELOPING FY 2008 PLANS
  • Best Practices Three Cost Allocation Plans
  • An overview of the plan development and
    underlying theory will be presented today for
    three of the plans
  • Network 180
  • CMHCM
  • North Country/Northern Affiliation
  • The order was chosen to show the examples of
  • CMHSP/PIHP that contracts out for services
  • CMHSP/PIHP with a mix of contract and direct run
    services
  • CMHSP/PIHP affiliation with Hub and spoke model

14
SECTION 460  COST ALLOCATION PLANS Network180
  • CMH for Central Michigan
  •  North Country CMH

15
Network180
  • Who we are including general ledger cost centers
  • Review each GL cost center and allocations for
    Section 460 reporting
  • Spread Sheet 1- Division of costs between
    Administrative and Direct Service
  • Spread Sheet 2 Admin and Direct Service totals
    by funding sources
  • What I would/will do differently

16
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17
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18
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19
Network180 General Ledger Cost Centers
  • 01 Administration 35 Claims
  •  
  • 02 Human Resources 40 - Grants
  •  
  • 03 Information Systems 50 SUD (Sub Abuse)
  •  
  • 15 Training 53 MI (Mental Illness
  •  
  • 20 Access Center Support 56 Children/Families
  •  
  • 23 Access Center Services 59 - DD
  •  
  • 29 Med Clinic 62 Childrens Waiver

20
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21
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22
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23
Network180
  • Who we are including general ledger cost centers
  • Review each GL cost center and allocations for
    Section 460 reporting
  • Spread Sheet 1- Division of costs between
    Administrative and Direct Service
  • Spread Sheet 2 Admin and Direct Service totals
    by funding sources
  • What I would/will do differently

24
CMHCM COST ALLOCATION PLAN
25
Objectives
1. Keep it Simple 2. All in One Excel
File 3. Meet the A-87 and DCH Requirements 4. Crea
te a tool to produce the 460 Reports
26
Table of Contents
27
Certificate
28
Descriptions (very short)
Agency 115 words County Relationship 63
words Accounting System 152 words Services
114 words
29
Org Chart
30
Expenses by Line Item
31
Expenses by Program Type
32
Expenses by County
33
Overhead Cost Centers
34
DISTRIBUTIONS
35
Vehicle Cost Center
36
Vehicle Distribution
37
First Line Supervisors
38
Contracted Services
39
Prime Sub-Contractor
40
Allocation Summary
41
Allocation by Funding Source
42
PIHP 460 Report
43
CMHSP 460 Report
44
NEXT . . .
45
North Country Community Mental Health
  • Section 460 Cost Allocation Plan

46
North Country Community Mental Health Section 460
Cost Allocation Plan
47
North Country CMH-Overview
48
North Country CMH-Affiliation Overview
49
Organizational Chart
50
Program Descriptions and Allocation Costing
Methods
51
Program Descriptions and Allocation Costing
Methods-Administration
52
Program Descriptions and Allocation Costing
Methods-Administration-Affiliation
53
Total Budgeted Expenditures-FY2007
54
Budgeted Expense and Revenue By Line Item (Note
spreadsheet in plan submitted to DCH contained
more detail by program, expenditure, and revenue
line item)
55
Budgeted Expense and Revenue By Line Item
(Continued)
56
Expense Allocations
57
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58
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59
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60
Other Expenses Allocated (Note Detail included
in plan submitted to DCH)
61
Contracted Services Narrative
62
Contract Services Spreadsheet
63
Prime Subcontractors-Affiliates
64
Prime Subcontractors-Northern Michigan SAS
65
Direct Service Expenditures
66
Administrative Services Narrative
67
Administrative Services Narrative (continued)
68
PIHP Managed Care Administration
69
Access Center Costs to Funding Source
The Access Center costs are allocated across
boards and funding Source by the relative number
of screens.
70
Total Administrative Costs
71
Allocation of Administrative and Direct Costs By
Funding Sources
72
Allocation of Administrative and Direct Costs By
Funding Stream (continued)
73
Section 460 Compliance Report-Medicaid
74
Section 460 Compliance Report-Non Medicaid
75
Questions?

76
Review criteria for Cost Allocation Plans
  • Single document
  • Table of contents
  • Certification form with signature (scanned into
    PDF)
  • The organization chart must include the following
    if applicable
  • Spoke CMHSPs
  • Prime subcontractors
  • Identify administrative and direct cost centers

77
Review criteria for Cost Allocation Plans
  • A narrative that describes the entity
  • The terms from the Mental Health Code such as
    Authority or County Agency are adequate because
    they have legal definitions that define the
    relationship with the county.
  • Narrative indicating if the costs reported
    include costs from the county (direct or
    indirect)

78
Review criteria for Cost Allocation Plans
  • Narrative that describes the accounting system
    used.
  • Narrative that describes how the staffing costs
    are accounted for and assigned/allocated to cost
    centers
  • Narrative describing the CA arrangement or a
    statement that there is not a CA relationship
  • Narrative and schedules that identify the basis
    of allocations

79
Review criteria for Cost Allocation Plans
  • Either a formal budget or numbers that appear to
    represent the operating budget being used to
    begin the financial schedules of the plan
  • Either a completed copy of the 460 Report form or
    a separate schedule of the 460 costs
  • A narrative that describes the services provided

80
Review criteria for Cost Allocation Plans
  • A narrative and schedules that describe and show
    costs allocated to services and/or administration
  • Narrative naming the cost centers, listing of
    cost centers or spreadsheet that identifies the
    cost centers
  • A narrative and/or schedule that identifies the
    expense items in each allocated cost center
  • A narrative and/or schedule that identifies the
    programs that receive the allocated costs

81
Review criteria for Cost Allocation Plans
  • A narrative and schedule that identifies the
    distribution methods used
  • A schedule that summarizes all the cost centers
    that are allocated
  • A narrative that describes the methods used for
    assigning costs to funding sources
  • A schedule that shows the costs assigned to the
    funding sources using the methods described in
    the narrative above.

82
Expectations for FY 2008 Plans
  • Plans are due to MDCH electronically by September
    30, 2007
  • Include all of the applicable items noted in
    review criteria noted above
  • Comply with section 460 cost allocation
    requirements for the definition of direct
    services and administration
  • Plans do not allocate costs to funding sources
    based on predetermined (budgeted) amounts

83
Expectations for FY 2008 Plans
  • Clear narratives regarding methods used by
    contracted cost allocation plans
  • Narrative regarding the implementation of
    reporting for Phase II
  • Refinement of Information systems costing in the
    section 460 cost allocation plans

84
Expectations for FY 2008 Plans
  • Review of the treatment of Information Systems
    (IS) costs in the 460 Cost allocation plans found
    a wide range of treatment
  • Some plans charged all the costs to
    administration
  • Some plans charged most or all the costs to
    direct services
  • Some plans allocated costs as overhead to both
    direct services and administration
  • Basis used for allocation of IS costs also varied
    across the CMH system

85
Expectations for FY 2008 Plans
  • Specific examples related to these issued
    included
  • Cost plans that determined all costs within the
    IS department would be charged to administration
    regardless of who uses the system
  • IS systems held by outside vendors
  • IS costs shared in affiliate PIHPs
  • Different basis used for IS costs between members
    of an affiliation
  • Contracts for IS services within Affiliations

86
Expectations for FY 2008 Plans
  • Issues that can result in the assignment or
    allocation of IS costs
  • Misclassification of direct services costs into
    administration
  • Misclassification of administrative costs into
    direct services
  • Misallocation of overhead costs based on
    accumulated direct service costs
  • Contract terms changing classification of costs
    between direct service and administration
  • Contract terms changing classification of costs
    between funding sources such as Medicaid and
    General Fund

87
Expectations for FY 2008 Plans
  • The section 460 Cost allocation diagram gives
    direction as to how IS costs should be handled
  • Costs are administrative unless documentation
    proves the costs should be allocated or direct
    services
  • Under administration the diagram shows
  • Information system staff
  • Network management
  • Help desk
  • Security

88
Expectations for FY 2008 Plans
  • Under allocated overhead charged to
    administration (note documentation must support
    costs are allocable to administrative and direct
    services)
  • Equipment
  • Personal computer
  • Network management
  • Help desk
  • Securty
  • Hardware and software

89
Expectations for FY 2008 Plans
  • Under allocated overhead charged to direct
    services (must be supported with documentation)
  • Equipment
  • Personal computer
  • Network management
  • Help desk
  • security
  • Hardware and software
  • Medical records electronic or otherwise

90
Expectations for FY 2008 Plans
  • Expectations regarding IS costs
  • Costs that should be charged to direct services
  • IS costs that can be documented as used in
    providing direct services should be allocated to
    direct services
  • IS costs of using electronic medical records
    should be charged to direct services
  • IS costs of running the IS department that can be
    documented as related to providing direct services

91
Expectations for FY 2008 Plans
  • Expectations regarding IS costs
  • Costs that should be charged to administration
  • IS costs that relate to administrative functions
    should be allocated to administrative costs
  • IS costs of running the IS department should be
    administrative costs
  • Any IS costs that can not be documented as
    related to providing direct services

92
Expectations for FY 2008 Plans
  • Expectations regarding IS costs
  • IS costs of developing systems should be
    capitalized and only expensed once they are
    placed in service (turned on and used)
  • These costs would be allocated based on the above
    criteria

93
Questions ?
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