Section 509.10  Purpose

 

General − This Part applies to all agencies providing services to the Department and its clients.  This rule applies to all Department services and funds, including matching funds, if required as a prerequisite to receiving Department funds.  The rule establishes minimum standards for fiscal and administrative recordkeeping.  Individual programs and offices within the Department may establish additional requirements specific to their area.  In the event of a conflict between this Section and program requirements, the more restrictive interpretation will apply.  This Part may not be modified or waived unless provided for within the rule or unless necessary to comply with federal/State laws, regulations, or executive or administrative orders, or unless they are in violation of a valid judicial order or decision.

 

Section 509.15  Definitions

 

"Accreditation" – means a process establishing that a program complies with nationally recognized standards of care set by one of the following:

 

Accreditation Manual for Hospitals (Joint Commission on Accreditation of Healthcare Organizations (JCAHO), One Renaissance Boulevard, Oakbrook Terrace, Illinois  60181, 1993);

 

Manual on Agency Accreditation (Council of Accreditation of Services for Families and Children (COA), 520 Eighth Avenue, Suite 2202B, New York, New York  10018, 1993);

 

Mental Health Standards (Joint Commission on Accreditation of Healthcare Organizations (JCAHO), One Renaissance Boulevard, Oakbrook Terrace, Illinois  60181, 1993);

 

Standards for Services for People with Developmental Disabilities (The Council on Quality and Leadership in Supports for People with Disabilities (The Council), 100 West Road, Suite 406, Towson, Maryland  21204, 1990);

 

Standards Manual for Organizations Serving People with Disabilities (Commission on Accreditation of Rehabilitation Facilities (CARF), 101 North Wilmot Road, Suite 500, Tuscon, Arizona  85711, July 1992).

 

"Agency" – means the individual or organization with whom the Department has a contract/agreement for services.  The term Provider is synonymous with agency.

 

"Arm's Length Transaction" – means a transaction between two parties, with neither party having the ability to control or exercise significant influence over the other party in the making or implementing of financial and operational decisions.

 

"Day" – means a calender day.

 

"Deemed Status" – means an agency has been accredited by an approved accrediting body as identified in Section 509.110.  The Department may deem the agency to be in substantial compliance with all or part of Sections 509.30 and 509.80 at the sole discretion of the Department.  Deemed status, however, may be nullified by a finding by the Department that the agency is in substantial non-compliance with one or more of the designated Sections of this Part.

 

"Department" – means the Illinois Department of Human Services.

 

"Fee-for-Service" – means a program for which the payments are made on the basis of a rate, unit cost or allowable cost incurred and are based on a statement or bill as required by the Department. Payments made as a fee-for-service are not subject to the Illinois Grant Funds Recovery Act [30 ILCS 705].

 

"Grant" – means a program that receives all or part of the funding in advance of the actual delivery of services. This includes prorated prospective payments and payments made by the Department on an estimated basis or any other basis when the Department does not know the actual amount earned by the Provider. This does not include advance payments made under the authority of Section 9.05 of the State Finance Act [30 ILCS 105/9.05].  All funds paid as a grant are subject to the Illinois Grant Funds Recovery Act [30 ILCS 705].

 

"Secretary" – means the Secretary of the Illinois Department of Human Services.

 

Section 509.20  Allowable/Unallowable Costs

 

Allowable/Unallowable Costs − Costs associated with Department programs are assumed to be allowable unless they are specified as unallowable by other Parts of Department rules, or by federal regulation or by individual program policies or directives of the Department.

 

a)         Expenses reimbursable from Department funds:

 

1)         In general, expenses meeting all of the following criteria are reimbursable from Department funds if the expenses are:

 

A)        Necessary and related to the provision of program services;

 

B)        Reasonable to the extent that a given cost is consistent with the amount paid by similar agencies for similar services;

 

C)        Not specified in subsection (b) of this Section as not reimbursable; and

 

D)        Not illegal.

 

2)         All expenses that can be identified to a specific Department-funded program shall be charged directly to that program.  Expenses not directly identifiable to a Department-funded program shall be allocated to all benefitting programs, both Department-funded and other programs. Providers are required to maintain a cost allocation plan, in accordance with Section 509.40(c),  if they receive more than one source of funding or operate more than one program.

 

3)         Research expenses, if prior written approval is received from the Department. Program evaluation expenses are not considered research expenses.

 

b)         Expenses not reimbursable from Department funds, unless prior written authorization is received from the Department:

 

1)         Compensation for members of the agency's governing body.  This does not include reimbursement for travel or other agency  related business expenses incurred by these members;

 

2)         Expenses related to entertainment of persons other than individuals who receive services through a Department program;

 

3)         Individual staff or agency association dues are not reimbursable except for the following situations:

 

A)        Dues for group purchasing relationships for the exclusive purpose of cost saving on purchases.

 

B)        Dues for membership that provide agency staff with professional training and resources necessary to provide services funded by the Department;

 

4)         Costs of attending professional meetings; e.g., association meetings and conventions are not allowable except for the portion of costs related to activities to enhance or improve services funded by the Department.  (Costs for staff attendance at in-service training seminars and workshops can be reimbursed.);

 

5)         Fund-raising expenses;

 

6)         Bad debts;

 

7)         Charity and grants (The cost of employee educational assistance can be reimbursed.);

 

8)         The following types of interest expenses:

 

A)        Interest on funds borrowed for investment purpose;

 

B)        Interest on funds borrowed to create more than two months of working  capital;

 

C)        Interest on funds borrowed for the personal benefit of any person;

 

D)        Interest on funds borrowed without a prior time-limited written agreement with the Department for the purchase of land, buildings and/or equipment for future expansion, until such assets are actively used in support of program services;

 

E)        Interest in excess of the current market rate paid to individuals or organizations in less than "arm's length" transactions;

 

F)         Interest charges on intra-agency fund loans, e.g., interest recorded in the capital fund on cash loaned to the operating fund;

 

G)        Interest expense to the extent that interest income was realized by investment of excess operating funds i.e., interest expense must first be offset against interest income and any remaining interest expense is eligible for reimbursement from Department grant funds;

 

9)         The use of Department funds to develop commodity or equipment inventories.  The usage of commodity inventories and the depreciation on fixed assets are expenses that are eligible for reimbursement from Department funds;

 

10)         Depreciation on fixed assets acquired with Department funds;

 

11)         Cost of production of a work program.  When the product of a Department-funded work program is saleable, the expenses of individual's wages and fringe benefits and of material costs are not reimbursable from Department funds;

 

12)         In-kind contributions;

 

13)         Alcoholic beverages;

 

14)         The portion of the cost of automobiles furnished by the organization related to personal use by employees, including transportation to and from work, is unallowable as a fringe benefit or indirect cost;

 

15)         Costs of fines, penalties, legal services, resulting from or in relation to the failure of the provider to comply with federal, state, and local laws and regulations, are unallowable, except when incurred as a result of compliance with specific provisions of a Department award or program or instructions in writing from the Department;

 

16)         Goods or services for personal use or purchased at less than an "arm's length" transaction for an amount greater than the fair market value;

 

17)         The cost associated with lobbying any elected official of local, state or federal government is unallowable, including:

 

A)        Expenses incurred in attempts to influence the outcome of any federal, state, or local election, referendum or initiative;

 

B)        Expenses incurred in attempts to influence the introduction, enactment, or modification of federal or state legislation; and

 

C)        Expenses incurred in connection with legislative liaison activities when such activities are carried on in support of, or in preparation for, unallowable lobbying. Cost associated with providing technical and factual information on a topic directly related to the performance of a program funded by the Department, through hearing testimony, statement or letters to elected officials or representative body, are not considered lobbying cost and are allowable;

 

18)         Relocation cost of provider employees, except in the following situations:

 

A)          The move is for the benefit of the employer;

 

B)          Reimbursement to the employee is in accordance with an established  written policy consistently followed by the employer; and

 

C)          The reimbursement does not exceed the employee's actual (or reasonably estimated) expenses;

 

19)         Gratuities;

 

20)         Political contributions;

 

21)         Related party transactions except for the following situations:

 

A)        When the items for which expenses incurred are consistent with fair market value; and

 

B)        There is evidence of approval in the minutes of the governing body;

 

22)         Costs associated with goods or services paid in a "conflict of interest" situation.

 

(Source:  Amended at 26 Ill. Reg. 8547, effective May 31, 2002)

 

Section 509.30  Fiscal Requirements/Management

 

a)         The agency shall be managed in a manner consistent with sound fiscal standards.  The agency shall maintain written policies and procedures regarding its fiscal activities, including but not limited to payroll, purchasing, cash management, relevant fee schedules, contracts and risk management.  The agency must demonstrate internal controls that are consistent with any generally accepted accounting principles or as may be appropriate for the size of the organization as determined by the Department.

 

b)         An agency is required to show proof that the governing body has approved a budget at least annually.  If the budget approved by the governing body indicates deficits for Department-funded programs and/or for the agency as a whole, this should be documented in the minutes of the governing body meeting.  The governing body is expected to fulfill its statutory responsibility.

 

c)         If the agency has the responsibility for the management of funds for the individuals it serves, such funds shall be accounted for on an individual basis in a single separate account.  Funds of an individual served by the agency may not be converted for use by the agency.  The use of these funds is restricted to the direct needs and support of the individual.

 

d)         An agency that assesses fees/co-payments to individuals for services shall maintain a written policy for billing and collection of fees/co-payments.  This policy will include a system for billing individual's, with appropriate financial assistance based on the ability of the individual or the individual's responsible relative to pay.  The system shall also provide a record of charges and a method of collecting third party payments.

 

e)         No agency shall require an individual or family member to make cash or in-kind contributions, or to provide unpaid services to the agency, beyond the fee schedule specified in subsection (d) of this Section.  No agency shall suggest, imply, or give reason to believe that access to initial or continued service is contingent on, or in anyway related to, voluntary contributions by an individual or family member.  Provision of service in Department-funded programs shall not be denied on the basis of the individual's inability or ability to pay unless the Department requires fees/co-payments as part of the eligibility for services.  Such required fees/co-payments must comply with subsection (d) of this Section.

 

f)         An agency is permitted to establish and maintain reserve funds. However, the establishment of or addition to a reserve fund is not permitted from grant funds.

 

(Source:  Amended at 26 Ill. Reg. 8547, effective May 31, 2002)

 

Section 509.40  Accounting Requirements

 

a)         Each agency shall establish and maintain an accounting system in accordance with generally accepted accounting principles (GAAP).

 

b)         Accounting transactions shall be properly classified, adequately documented and recorded in appropriate books of original entry (journals), and posted to general ledgers on a monthly basis.

 

c)         For programs funded by the Department, expenses shall be recorded by specific program.  Expenses for all other programs may be booked on total.  Expenses that cannot appropriately be charged to one or more specific programs shall be allocated on a reasonable basis to the various benefitting programs, both Department-funded programs and programs funded from other sources.  It will be the agency's responsibility to document its program expense allocation methodology and rationale.

 

d)         All fiscal records shall be maintained for at least five years after the end of the fiscal year to which they relate.  If need for them still remains, because of unresolved audit issues, litigation or for similar reasons, related records must be retained until the matters are completely resolved.   Failure to maintain adequate records to document the expenditure of DHS funds creates a presumption in favor of the Department for recovery of the funds.

 

e)         All depreciation shall be computed on the straight line basis.  The agency shall clearly identify in its depreciation schedule any capital assets of $500 or more acquired with Department grant funds.

 

f)         The Department may establish additional accounting requirements for specific grants or programs.  Agencies receiving such grants or receiving funds for such programs shall comply with those special requirements.

 

(Source:  Amended at 26 Ill. Reg. 8547, effective May 31, 2002)

 

Section 509.50  Funding Suspension

 

a)         The Department may suspend funds to the provider for any of the following reasons:

 

1)         Denying Departmental staff reasonable access to records required under this Part or any other applicable rule of the Department (i.e., records pertaining to the activities and responsibilities of the provider necessary to document the use of Department funds or responsibilities of the provider relative to the management of Department funds);

 

2)         Failure to implement mutually agreed upon, written corrective actions that resulted from findings and recommendations related to a Departmental initiated review.  Providers will be given a reasonable amount of time to implement corrective actions. Normally this would be three to six months;

 

3)         When the Department has information, either from Department fiscal/administrative reviews or from an independent audit, that leads to a reasonable conclusion that the provider is in substantial non-compliance with generally accepted accounting principles or is otherwise unable to protect and account for Department funds;

 

4)         A founded complaint or report from another State agency that impacts directly or indirectly on Department of Human Services programs.

 

b)         During the period of suspension, funds earned by the provider will continue to accrue and will be released by the Department once the provider complies with the conditions that caused the funding suspension or the Secretary determines that the suspension should be removed in accordance with Section 509.65. Release of funds is contingent on the Department's authority to pay for service (e.g., reimbursement for a prior fiscal year after the close of the lapse period would be outside the Department's authority).

 

(Source:  Amended at 26 Ill. Reg. 8547, effective May 31, 2002)

 

Section 509.60  Cancellation of Award/Agreement

 

The Department may cancel the award/agreement for any of the following reasons:

 

a)         Substantial or material breach of the agreement;

 

b)         Failure to implement a mutually agreed upon, written corrective action plan within the reasonable period of time, when the corrective action was necessary to remedy serious and substantial deficiencies and weaknesses in the provider's fiscal and administrative practices;

 

c)         Documentation of fraudulent or criminal activity, on the part of the provider, by either the Department or other governmental or investigative bodies;

 

d)         Determination by the Department, based on a founded allegation, that the provider was responsible for abuse or neglect of a client in the provider's care;

 

e)         Failure to take reasonable measures to protect Department funds from misappropriation, embezzlement, or conversion for uses not approved by the Department; or

 

f)         A founded complaint or report from another State agency relative to Department programs.

 

(Source:  Amended at 26 Ill. Reg. 8547, effective May 31, 2002)

 

Section 509.65  Process for Suspension of Funding/Cancellation of Award/Agreement

 

a)         Suspension/Cancellation.  The process for suspension of funding pursuant to Section 509.50 and cancellation pursuant to Section 509.60 is as follows:

 

1)         Notice.  The provider shall be notified, in writing, by the Department of the action taken, the reason for the action, and the effective date of the action.  The Notice shall be sent by certified mail, registered mail, or private carrier.

 

2)         Request for Review.  The provider shall have 7 days from the receipt of the notice, as determined by the certified mail, registered mail, or private carrier receipt, to request a review of the suspension/cancellation action by the Secretary of the Department and to provide supportive information to the Secretary as to why the action should not occur.  In the event that the request and information are not submitted within the 7-day period, the Department may proceed with the suspension or cancellation.

 

3)         Additional Information.  To assist the Secretary in his/her review, the Department may request additional information from the provider or other sources.  Any additional information requested from the provider must be submitted within the time period established by the Department.  Failure of the provider to comply with the request for additional information in a timely manner may result in resolution of the issue without consideration of that information.

 

4)         Secretary's Decision.  The Secretary may delegate the responsibility for investigation of the issue and fact finding.  The Secretary shall issue a final written decision as expeditiously as possible after receiving the request for review, supportive information, and any additional information requested by the Department.  The Secretary's final decision to suspend funding, in part or in whole, shall indicate terms and conditions for rescinding the suspension and reinstatement of funding.  The decision of the Secretary is a final decision of the agency for purpose of the Administrative Review Law [735 ILCS 5/Art. III], if applicable.

 

b)         Cancellation of Funding.

 

1)         Funding under this Part to a provider who is served a notice under subsection (a)(1) may be suspended summarily without opportunity to provide supportive information as provided in subsection (a)(2) if, in the Secretary's discretion, it is determined that immediate suspension is necessary because the risk of continuing funding is sufficient to seriously outweigh the general policy in favor of advance notice and the opportunity to provide supportive information.  If the suspension is pending a final decision of cancellation under Section 509.60, the provider shall not incur costs chargeable to the Department after the effective date included in the notice.  Opportunity to provide supportive information shall be provided according to the provisions of subsection (a)(2) following suspension pending cancellation of funding.  If the Secretary finds for the provider, funding shall then be reinstated.

 

2)         For all other actions for suspension or cancellation of funding, in whole or in part, suspension or cancellation shall occur after issuance of the Secretary's final written decision.

 

(Source:  Amended at 32 Ill. Reg. 7769, effective April 30, 2008)

 

Section 509.70  On-Site Fiscal/Administrative Reviews

 

a)         The Department shall conduct periodic onsite fiscal/administrative reviews of providers.  At the Department's option other public/private organizations may assist the Department in these reviews or the Department may authorize these public/private organizations to do their own review.  Public/private organizations authorized by the Department to assist or conduct reviews are subject to the confidentiality requirements of the Department. The purpose of the reviews is:

 

1)         Assess compliance with the requirements of this Part; and/or

 

2)         Follow up on corrective actions and findings from previous reviews. Fiscal/administrative reviews may be conducted as independent reviews or in conjunction with other Department on-site activity.  The Department will make reasonable efforts to combine fiscal/administrative reviews with other Department reviews to minimize disruption to the provider.

 

b)         The provider shall make available to the Department all records necessary to complete the review.  This would include all subcontracts and management agreements.  Such subcontracts or management agreements must be in writing and contain a provision authorizing the Department access to appropriate records.

 

c)         When the Department's fiscal/administrative review results in findings that merit correction, the provider shall be notified in writing and given the opportunity to submit a corrective action plan. The provider shall provide written corrective actions, if requested by the Department, in response to findings and recommendations resulting from a fiscal/administrative review.

 

d)         The Department may at its option release the final report and associated documents to individuals and organizations other than the provider. Reasons for the release may include but are not limited to:  freedom of information requests, as part of a criminal investigation, in response to a request from another government agency, or in response to a court order.

 

(Source:  Amended at 26 Ill. Reg. 8547, effective May 31, 2002)

 

Section 509.80  Administrative Requirements

 

The Department requires that all providers of services be able to demonstrate compliance with the following administrative activities.  In those instances where these requirements are not appropriate due to the size of the agency or its legal status (e.g., not-for-profit, for-profit) the Department will consider written requests for a waiver of the specified requirement.  A request for a waiver shall be written and addressed to the Secretary.  It should identify the portion of the rule from which a waiver is being sought and state the reason for this request.  The Department shall have 30 days after the receipt of any request for a waiver to respond.  The Department's response shall be in writing.

 

a)         The organization's bylaws, policies and procedures should be current. These should be reviewed and approved by the governing body of the provider and should address issues related to good business practice. Other information that should be available includes, but is not limited to, the following:

 

1)         A current organization chart.

 

2)         A list of board members and their term of office.  Employees of the provider and immediate family members of provider employees may not serve as members of the board unless written permission is received from the Department.  Vacancies on the board should be filled in a timely fashion.  Individuals serving on the board must be able to objectively discharge their duties and may not engage in activities that could create a conflict of interest.

 

3)         Minutes of the board meetings.  The board should meet at least quarterly.

 

4)         Specific written policies on:

 

A)        Conflict of interest, including staff, administration and Board member disclosures;

 

B)        Fee policies and fee schedules;

 

C)        Unusual incidents (i.e., sexual assault, sexual harassment, abuse, neglect, death, physical injury, missing person, theft, assault, criminal conduct).

 

b)         Proof of incorporation status.

 

c)         Copies of the following reports, if applicable:

 

1)         Annual Report to the Internal Revenue Service (Return of Organization Exempt from Income Tax Form 990 or 990-EZ);

 

2)         Annual Report to the Attorney General (Charitable Organization − Form AG 990-IL).

 

d)         A comprehensive, written set of personnel policies that at a minimum address the following:

 

1)         Policies concerning the hiring, evaluating, and discipline of staff (including termination);

 

2)         Policies on nondiscrimination in hiring or employment on the basis of race, color, age, national origin, gender, religion, or handicap;

 

3)         Requirements for license, registration or certification by the State, if required;

 

4)         Requirements for a written job description listing duties and responsibilities;

 

5)         Requirements for an annual written evaluation;

 

6)         Method of performing background checks for paid staff as required by local, State or federal law or regulation;

 

7)         Policies on sexual harassment that identify employee's rights and the procedure used to file a complaint; and

 

8)         Policies concerning approval of bonuses and/or deferred compensation for staff and administration, including the need for Board approval of such personnel transactions.

 

e)         Maintenance of a property control inventory that includes a description of each item, identifying number of the item, date the item was purchased, the cost of the item, location of the item, and the source of funds used to purchase the item, if available.

 

f)         Full disclosure of all management and subcontractor arrangements, including all supporting documents.

 

(Source:  Amended at 26 Ill. Reg. 8547, effective May 31, 2002)

 

Section 509.90  Compliance with Life Safety Standards and Requirements

 

All program facilities shall be in compliance with applicable State licensure requirements and local ordinances with regard to fire, building, zoning, sanitation, health, and safety requirements.

 

Section 509.100  Prompt Payment Act

 

The provisions of the Prompt Payment Act apply to this rule.  This Part does not constitute a waiver of the provider's rights to recover a penalty for late payment as specified in the Act.

 

Section 509.110  Accreditation

 

a)         Providers demonstrating current accreditation status under either the Standards for Services for People with Developmental Disabilities (Council), Standards Manual for Organizations Serving People with Disabilities (CARF), Council on Accreditation of Services for Families and Children (COA), Mental Health Standards (JCAHO), or the Accreditation Manual for Hospitals (JCAHO) may be deemed to be in compliance with all or part of Sections 509.30 and 509.80 at the sole discretion of the Department.  Standards the Department will consider when determining whether current accreditation status will suffice include, but are not limited to, the time period since last accreditation, the continuity of provider management and board oversight (does the provider have the same management and board as when accreditation status was earned) and whether the Department has unusual or outstanding problems with the provider.

 

b)         Demonstration of current accreditation shall be the responsibility of the provider.

 

c)         If the provider's accreditation status changes for any reason, the provider shall notify the Department of that change within 30 days after the effective date following the change.

 

d)         The Department may review records of the provider subject to accreditation.