Section 75-04-05-18 - Rental expense paid to a related organization1. A provider agency may lease a facility from a related organization within the meaning of the principles of payment. In such a case, the rent paid to the lessor by the provider agency is not allowable as a cost. Provider agency's rent payments shall not exceed the actual cost of mortgage payments of principal and interest. The cost of ownership of the facility would, however, be an allowable cost to the provider agency. Generally, these would be costs such as depreciation, interest on the mortgage, real estate taxes, and other property expenses attributable to the leased facility. The effect is to treat the facility as though it were owned by the provider agency. Therefore, the owner's equity in the leased assets is includable in the equity capital of the provider agency.2. In order to be considered an allowable cost, the home office cost must be directly related to those services performed for individual provider agencies and relate to client services. Documentation as to the time spent, the services provided, the hourly valuation of services, and the allocation method used must be available to substantiate the reasonableness of the cost.N.D. Admin Code 75-04-05-18
Effective July 1, 1984; amended effective June 1, 1985.Amended by Administrative Rules Supplement 2017-363, January 2017, effective 1/1/2017.Amended by Administrative Rules Supplement 368, April 2018, effective 4/1/2018.General Authority: NDCC 25-01.2-18, 50-06-16
Law Implemented: NDCC 25-18-03, 50-24.1-01