Sec. 400.2. Limits on administrative expenses

(a) Limits on allowable administrative expenses. No less than 75 percent of the covered operating expenses of a covered provider paid for with State funds or State-authorized payments shall be program services expenses rather than administrative expenses. This percentage shall increase by five percent each year until it shall be no less than 85 percent in 2015 and for each year thereafter. In determining whether an expense is a program service expense or an administrative expense, a covered provider may allocate a portion of the expense to each type if such allocation is supported by the nature of the expense. Such allocation may include allocation of portions of an employee’s time and compensation to administrative or program services. Commencing on July 1, 2013, the limits on allowable administrative expenses pursuant to this Part shall be effective and applicable to each covered provider on the first day of each provider’s respective covered reporting period.

(b) Subcontractors and agents of covered providers. The restriction on allowable administrative expenses in subdivision (a) of this section and the reporting requirements in section 400.5 of this Part shall apply to subcontractors and agents of covered providers if and to the extent that such a subcontractor or agent has received State funds or State-authorized payments from the covered provider to provide program or administrative services during the reporting period and would otherwise meet the definition of a covered provider but for the fact that it has received State funds or State-authorized payments from the covered provider rather than directly from a governmental agency. A covered provider shall incorporate into its agreement with such a subcontractor or agent the terms of these regulations by reference to require and facilitate compliance. Upon request, covered providers shall promptly report to the funding or authorizing agency the identity of such subcontractors and agents, along with any other information requested by that agency or by the department, or its designee. A covered provider shall not be held responsible for a subcontractor’s or agent’s failure to comply with these regulations.

(c) Covered providers receiving State funds or State-authorized payments from county or local government or from entity contracting on its behalf. The department or its designee, rather than the county or local unit of government or an entity contracting on behalf of such government, shall be responsible for obtaining the necessary reporting from and compliance by such covered providers, and shall issue guidance to affected county and local governments to set forth the procedures by which the department or its designee shall do so.

(d) Covered providers with multiple sources of State funds or State-authorized payments. If a covered provider receives State funds or State-authorized payments from multiple sources, the provider’s compliance with the restriction on allowable administrative expenses in subdivision (a) of this section shall be determined based upon the total amount program services expenses and administrative expenses paid for by such funding received from all of such sources. As set forth in section 400.5 of this Part, the covered provider shall report all of such State funds and State-authorized payments, and the expenses paid for by such funding, in the form and at the time specified by the department or its designee.

(e) Other limits on administrative expenses. If the contract, grant, or other agreement is subject to more stringent limits on administrative expenses, whether through law or contract, such limits shall control and shall not be affected by the less stringent limits imposed by these regulations. However, the definition and interpretation of terms in this Part shall not be affected or limited by the definition or interpretation of terms in other regulations or agreements.