N.D. Admin Code 75-02-09-10 - Interest expense
Current through Supplement No. 383, January, 2022
General Authority: NDCC 50-24.1-04
Law Implemented: 42 USC 1396 a(a)(30)(A)
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1. To be allowable under the program, interest must be:
a. Supported by evidence of an agreement that funds were borrowed and that payment of interest and repayment of the funds are required. Repayment of operating loans must be made within two years of the borrowing;
b. Identifiable in the facility's accounting records;
c. Related to the reporting period in which the costs are incurred;
d. Necessary and proper for the operation, maintenance, or acquisition of the facility.
Necessary means that the interest be incurred on a loan made to satisfy a financial need of the facility and for a purpose reasonably related to resident care. Proper means that the interest be incurred at a rate not in excess of what a prudent borrower would have had to pay in an arm's-length transaction. In addition, the interest must be paid to a lender not related to the facility through common ownership or control;
e. Unrelated to funds borrowed to finance costs of assets in excess of the depreciable cost of the asset as recognized in section 75-02-09-09; and
f. If associated with refinancing or refunding debt, interest expense associated with the original borrowing must have been allocable when the debt was initially incurred.
2. If it is necessary to issue bonds to finance the costs of assets, any bond premium or discount must be amortized on a straight-line basis over the life of the bond issue.