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November 4, 2002
To:       Private Providers of Residential and Day Services
           CAN, CCPA, ARC-CT, FORConn
           DMR Assistant Regional directors for Administration
           DMR Regional Contract Managers
FROM:  Carroll S. Stearns, Director Administrative Services
RE:      Updates on Private Agency Requests for Prior Approvals
             and Clarifications
Since July 1, 2002 the Department has received Prior Approval requests from four private agencies. The requests pertained to prior approval of interest on the refinancing of debt on buildings partially funded by the Department of Mental Retardation, severance payments for employees retiring from the organizations, and staff development costs. The Department also received a request from an agency for clarification of the documentation requirements for vehicle costs as defined in the DMR Cost Accounting Standards, Attachment B, Travel Costs, cost item 58(d).

The following is a summary of the Department’s determinations:
  1. Interest costs associated with refinancing of properties funded by the Department.
    An agency was negotiating the refinancing of mortgages on properties owned by the agency. Some of the properties were used for residential programs, one of the properties was used as the agencies headquarters. A portion of the debt being refinanced was applicable to administrative costs funded by the Department of Mental Retardation. The refinancing would result in significant savings to the agency and ultimately to the costs funded by the State of Connecticut through revenues received from DMR and DSS. This request was approved.

  2. Severance payments.
    The Department received two requests from two separate agencies to approve severance payments applicable to the retirements of employees. The severance payments were to be made based upon the past performance of the individuals, and their contributions to the organization. One of the individuals was an Executive Director of the agency, the other individual was a former Executive Director of an agency that remained in a position with the organization after it merged with the agency submitting the request.

    Both requests were disapproved. The Department’s determination was, these severance payments represented payments for past service during periods the Department had already funded these positions and funded these individuals. In addition, to the extent these executive directors salaries exceeded $75,000 in the current fiscal period, and in the prior periods of employment recognized by the severance payments, the additional compensation from the severance payment would have exceeded the maximum allowed by Public Act 91-11.

  3. Staff Development Cost.
    An agency requested approval of $1,000 for staff development costs applicable to 80 employees. The request was approved.

  4. Documentation of Agency Vehicle Costs.
    An agency raised the question and requested clarification whether the mileage log requirements contained in the Department’s Cost Accounting Standards, Attachment B, the Travel Cost requirements, cost item 58 (d) applied to agency owned vehicles, including those vehicles permanently assigned to program sites. The agency also requested clarification for vehicles assigned to individuals and garaged at the operators homes, whether the vehicle log requirement apply only to business mileage, or did it apply for all trips including personal usage. The agency also requested clarification whether the logs were required for all mileage, or could sampling be used as means to determine the vehicle usage.

    The Department determined that:

    1. It will amend the requirements in the Cost Accounting Standards to eliminate the requirement for vehicle logs for vehicles the agency owns and are permanently assigned to DMR funded programs. However, to the extent a vehicle is used for both day and residential programs, and/or partially funded by other non-DMR funded programs, the allocation of the vehicle’s costs to programs it supports must be documented in the organization’s Cost Allocation Plan.

    2. Vehicles assigned to individuals that are garaged at the individual’s home must have logs that document 100% of how the vehicle is used. Personal mileage identified by the logs must be eliminated from the program’s costs.

    3. Sampling of vehicle usage is not acceptable.
The Department will amend the DMR Cost Accounting Standards to reflect the determination that logs are not required for vehicles permanently assigned to a program. This determination is effective July 1, 2002.

I will provide additional periodic updates to you as requests for prior approvals or clarifications are received.