§ 6100.661. Administrative fixed assets.
(a) A fixed asset cost used for administrative purposes is an allowable cost.
(b) The provider shall determine whether an allowable fixed asset shall be capitalized, depreciated or expensed in accordance with the following conditions:
(1) The maximum allowable fixed asset threshold as defined in applicable Office of Management and Budget Circulars and related applicable guidance as issued by the United States Office of Management and Budget.
(2) Purchases below the maximum allowable fixed asset threshold shall be expensed.
(c) The provider shall select the method used to determine the amount of depreciation charged in that year for the year of acquisition.
(d) The provider shall include depreciation based on the number of months or quarters the asset is in service or a half-year or full-year of depreciation expense.
(e) The provider may not change the method or procedure, including the estimated useful life and the convention used for an acquisition, for computing depreciation without prior written approval from the Department.
(f) The provider acquiring a new asset shall have the asset capitalized and depreciated in accordance with the Generally Accepted Government Auditing Standards. The provider shall continue using the depreciation method previously utilized by the provider for assets purchased prior to July 1, 2011.
(g) The provider shall keep the following:
(1) The title to any fixed assets that are depreciated.
(2) The title to any fixed assets that are expensed or loans amortized using Department funding.
(h) The provider shall apply the revenue amount received through the disposal of a fixed asset to any eligible or ineligible expenditure. This revenue amount is not reportable on the cost report.
(i) A provider in possession of a fixed asset shall do the following:
(1) Maintain a fixed asset ledger or equivalent document.
(2) Utilize reimbursement for loss, destruction or damage of a fixed asset by using the proceeds towards eligible HCBS expenditures.
(3) Perform an annual physical inventory. An annual physical inventory is performed by conducting a physical verification of the inventory listings.
(4) Document discrepancies between physical inventories or fixed asset ledgers.
(5) Maintain inventory reports and other documents in accordance with this chapter.
(6) Offset the provider’s total depreciation expense in the period in which the asset was sold or retired from service by the gains on the sale of assets.
(j) The cost basis for depreciable assets must be determined and computed as follows:
(1) The purchase price if the sale was between unrelated parties.
(2) The seller’s net book value at the date of transfer for assets transferred between related parties.
(3) The cost basis for assets of an agency acquired through stock purchase will remain unchanged from the cost basis of the previous owner.
(k) Participation allowance is permitted up to 2% of the original acquisition cost for fully depreciated fixed assets.
(1) Participation allowances shall only be taken for as long as the asset is in use.
(2) Participation amounts shall be used for maintaining assets, reinvestment in the program or restoring the program due to an unforeseen circumstance.
(3) Depreciation and participation allowances may not be expensed at the same time for the same asset.
Cross References This section cited in 55 Pa. Code § 6100.641 (relating to cost-based rate); 55 Pa. Code § 6100.663 (relating to administrative buildings); 55 Pa. Code § 6100.802 (relating to support coordination, targeted support management and base-funding support coordination); and 55 Pa. Code § 6100.803 (relating to organized health care delivery system).
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