Client Services Contracting Frequently Asked Questions

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This page contains definitions and answers to frequently asked questions about client services grant contracts.

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Contract Processing

Q:   Could you give me an idea of when my contract will be mailed?

A:   You can expect your contract to be mailed at least 45 days prior to the start date.  To contact Department of State Health Services (DSHS) for more specific information, please see Contact Us.

Q:   Are there deadlines relating to amending any contracts?

A:   Yes, there is a deadline that all amendments or budgets should be executed no later than 90 days before the end of the contract term.  It is very important that contractors make every effort to plan their expenditures during the first nine months of the contract to ensure this deadline is met.  Exceptions will require a reason for the delay in addition to the written justification.

Q:   Please explain DSHS’s contract numbering system.

A:   DSHS’S contract number consists of the ten digit vendor number (IRS number, state agency number, or social security number) + check digit + [1) if applicable, a letter may appear here which indicates that DSHS has entered into more than one contractual relationship with this entity in the same fiscal year; 2) an * here indicates that this contract is exempt from our internal review process] fiscal year in which contract ends + contract attachment number [if applicable, a letter may appear at the end which indicates an amendment or budget revision has been processed; A for the first one, B for the second, C for the third, etc.].

Q:   Are there limitations on the length of a contract term?

A:   Most DSHS contracts have a one-year term which coincide with the state fiscal year or federal fiscal year.  However, some program areas may determine it is necessary to have contracts with multi-year terms.  DSHS policy allows up to a 4-year term.  Annual contracts allow DSHS to incorporate changes in laws, rules, and regulations which may change from year to year.  Also, it is important to maintain our contract database and assure contractor names, addresses, signature authorities, etc., are updated.

Q:   What are legal authorities?

A:   Legal authorities are the laws that govern the contracting activities and allow DSHS to contract for certain activities with particular types of entities.  For example, state agencies have a legal authority of Chapter 771, Texas Government Code, which has different requirements than the legal authority for non-profit organizations, which is Chapter 12, Health and Safety Code.  One difference is that there is a requirement for advertising services competitively when contracting with non-profit organizations, but this requirement does not exist for contracting with state agencies.

Q:   What should we do if our attorneys want to negotiate a legal item in your General Provisions?

A:   Please call the Office of General Counsel at (512) 458-7236 to discuss your concerns and coordinate the negotiations.

Q:   How do I download a Child Support form, Lobby form, Disclosure form, or Hub form I need for my contract?

A:   Go to the Forms web page, click on the link to the form you need, and save or print it.

Q:   How can I get my contract developed faster?

A:  Development's goal is to mail signed contracts at least 45 days prior to their start date.  DSHS program area provides us with all necessary information, so applicants' prompt negotiation and cooperation in answering any question will assist in expediting the process.  Any funded applicant who receives a DSHS contract should promptly return their signed contract and all applicable signed forms.

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Applying for DSHS Funding

Q:   How do I apply for grants/contracts funded by Department of State Health Services’ (DSHS) grants?

A:   DSHS announces available funding for public health services using the Request for Proposals (RFP) process in the Texas Register.  The applicant completes the RFP and submits a budget on what they believe the services will cost to perform.  DSHS receives the RFP, reviews and, if approved, enters into an agreement (contract) with the entity that will provide the service.  See also Funding Links.

Q:   How does DSHS apply for federal grants?

A:   The Federal Register is the federal government's announcement guide.  The DSHS Funding Information Center is a good resource for finding available funding.  DSHS applies for federal grants by completing a grant application to the possible awarding agency.  The agency reviews the application and, if approved, awards the funds.

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Contract Accounting Issues

Q:   What is the deadline for submitting a request for reimbursement?

A:   If you are uncertain about this after reading your contract and the General Provisions in your contract, please call the Office of General Counsel at (512) 458-7236 to discuss your concerns.

Q:   What if the budget revision needed is less than 10% of the amount we are getting from Department of State Health Services (DSHS)?

A:   If the contractor needs to move less than 10% cumulatively between the categories, approval from DSHS is not necessary unless 1) funds are being moved in or out of the equipment category or 2) funds are being moved in or out of the indirect category.

Q:   What should I do if I need to revise the budget or amend the amount of my contract?

A:   Please complete a Contract Budget Revision Form (GC-9 or GC-9a) submit it to your funding program who will review this request and if approved, will forward contract amendment information to the Client Services Contracting Unit.

Q:   What is the proper accounting procedure for travel advances?

A:   Travel advances should not be charged to a Department of State Health Services (DSHS) contract.  An advance is not an expense, but rather constitutes a loan to an employee.  Only the actual travel expense incurred may be charged to a contract.

Travel advances should be recorded in the general ledger as an account receivable for the individual employee receiving the advance.  When the employee has completed the trip and submitted a travel voucher for the expenses incurred, the total costs of the trip should be credited to the advance account and the total expenses charged to the appropriate expense account.  If the employee incurred allowable expenses in excess of the advance, a check for the difference should be issued to the employee and debited to the travel advance account.  If the employee incurred allowable expenses which were less than the amount of the advance, the employee should repay the difference and the receipt recorded as a credit to the advance account.

Q:   What is the difference between "Direct Costs" and "Indirect Costs"?

A:   Direct costs are costs incurred specifically in the performance of activities required by a contract's scope of work or other cost objectives.  Direct costs also include those costs benefiting both the contract’s scope of work and other cost objectives and can be distributed in reasonable proportion to the benefits received by each cost objective involved.  This class of direct costs is referred to as Allocated Direct Costs.

Indirect costs are those which are necessary to the overall operation of an organization although a direct relationship to a specific cost objective cannot be readily identified.

Examples:

Direct costs: Travel expenses; vehicle mileage for an outreach worker; specific medical supplies or prescription drugs; consultant fees; equipment; rent, utilities and maintenance for separate office space used by employees working on only one contract; long distance telephone charges.

Allocated Direct Cost: Rent, utilities, repairs and maintenance for office space shared by employees performing tasks under more than one contract; copy machine rental and supplies; telephone system costs (other than long distance charges).

Indirect Costs: General office supplies; executive director’s salaries and other related expenses, receptionist’s salary and fringe benefits; accounting functions.

Q:   What is a cost allocation plan?

A:   A cost allocation plan is a formal written plan which defines the method or methods to be used by a contractor to allocate costs which benefit more than one cost objective.  The plan should identify those types or classes of costs which will be allocated and include the formula (basis) to be used in allocating the costs as well as a narrative describing the rationale and development of the formula.  Supporting documentation for the development of the formula must be maintained.  The plan must be logical and systematic and must be revised when circumstances relating to the plan change significantly.  Budgets or revenue may not be used as a basis for allocating costs to a DSHS contract.

The written plan, supporting documents, and documentation and rationale for any revisions must be maintained by the contractor and made available to DSHS financial compliance monitors upon request.

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Program Income

Q:   What is program income?

A:   Program income (PI) is the income resulting from fees collected for health services rendered by a contractor in an effort that is wholly or partially funded by a Department of State Health Services (DSHS) contract.  PI includes all fees paid by either the patients or third party reimbursements from Medicaid, Medicare, commercial insurance payments, etc.

Q:   How can program income be used?

A:   Program Income can be used to provide additional services or otherwise expand the scope of work of a contract.  The program income must be expended during the contract term in which it is earned, and may not carry forward to the succeeding term.  Any unused program income must be refunded to DSHS at the end of the contract term.

Please consult the your contract and its General Provisions for additional information relating to program income.  To contact DSHS for more specific information, please see Contact Us.

Q:   What is a program income (PI) allocation plan?

A:   Program income earned as the result of an effort that is jointly funded by DSHS and the contractor is to be shared by DSHS and the contractor.  A Program Income Allocation Plan is the means by which DSHS’s share is determined.  The required formula for a Plan is (DSHS’s share of funding) times (total PI collected) divided by the sum of (DSHS's share of funding) plus (contractor's share of funding) equals (DSHS’s share of PI).

DSHS’s share of funding x total PI collected

= DSHS’s share of PI


DSHS's share of funding + contractor's share of funding

This calculation must be repeated for each contract that generates PI.

Q:   What methods are used to apply program income earned?

A:   The following discussion applies to Texas Department of Health legacy contracts. Contractors shall utilize one of the following methods for applying program income:

Additive method: add the program income to the funds already committed to the project by both parties.  Program income will be used by the contractor to further the program objectives of the state/federal statute under which the contract(s) was/were made, and it shall be spent on the same project in which it was generated.

Deductive method: deduct the program income from the total allowable costs to determine the net allowable costs.

Program income must be expended during the contract term in which it is earned and may not carry forward to the succeeding term.

For any contract beginning on or after September 1, 1999, contractor shall disburse program income, rebates, refunds, contract settlements, audit recoveries and interest earned on such funds before requesting cash payments including advance payments from DSHS.

Please consult the your contract and its General Provisions for additional information relating to program income.  To contact DSHS for more specific information, please see Contact Us.

Q:   Using the "deductive"method and "deducting" program income is confusing.  Please explain.

A:   The two provisions in the contract — "Program Income" and "Terms and Conditions of Payment" — appear to be contradictory, but they are not.  The first provision addresses how the total amount of the DSHS funding for the program’s objectives is determined — whether to include DSHS’s share of program income (additive) or not (deductive).  The second provision defines the order in which DSHS’s funding sources (program income and financial assistance) are used to reimburse the contractor’s allowable expenditures.

The first provision allows the contractor to determine if DSHS’s share of the PI generated by the activity will be included as a part of the total funding for the activity.  If the contractor chooses the Additive method, PI will be included in the total funding for the contract.

If the contractor chooses the Deductive method, DSHS’s financial assistance share of the total funding available for the activity will be reduced by the amount of the PI earned.  Consequently, the amount of DSHS’s contribution to the total funding for the activity will be limited to the amount of the financial assistance specified in the contract.

The second provision states that the contractor must reduce its reimbursement request by DSHS’s share of program collected. The effect of this action is to acknowledge that a portion of the contractor’s expenses incurred in behalf of DSHS’s contract have been reimbursed by DSHS’s share of PI which the contractor has collected and retained.

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Definitions

Attachment
Separate Department of State Health Services (DSHS) contract funded activity which has its own Scope of Work, Special Provisions, and approved budget.  A contract may include one or more attachments.

Authorized Contracting Entity
Entity involved in a contractual relationship which signs the contract.

"Base" contract (applies to Texas Department of Health legacy contracts)
First DSHS funded activity for contractor that has an end date in new federal fiscal year (starting Oct. 1st); contains base Cover Page 1, Cover Page 2, Cover Page 3, Applicable General Provisions, and Attachment(s).

"Base" Cover Page 1 (applies to Texas Department of Health legacy contracts)
Cover Page which show all Vendor information such as mailing and street addresses, Payee Name and addresses, Authorized Contracting Entity, and Legal Authority.

Budget
A financial guideline documented in the contract which describes how the funds will be utilized or describes the basis for reimbursement for the provision of contracted services.  Types of budgets may include: categorical or line item, unit cost, fee for service, or lump sum payable upon receipt of a product or deliverable.

Cover Page 2 (applies to Texas Department of Health legacy contracts)
Itemization of all funded program activities for the fiscal year with program identifier(s), term, funding source(s), amount, and total for contractor.

Cover Page 3 (applies to Texas Department of Health legacy contracts)
Signature page for Base contract only.

Fully executed
Contract is signed by both parties and is a legal binding contractual relationship; funds can be dispersed for services provided.

General Provisions
Boilerplate legal provisions pertaining to a contractor’s particular legal authority which are applicable to all program funding activities included in the contract.

Indirect Costs
A category of costs that cannot be placed in any of the other seven cost categories; i.e., administrative costs.

Payee
Entity involved in a contractual relationship which receives payment for services rendered and maintains the accounting records for the contract; i.e., fiscal agent.

Performing Agency
Party that performs services and gets paid.

Receiving Agency
Party receiving services that pays the Performing Agency.

Scope of Work
Description of services to be performed.

Special Provisions
Exceptions to the General Provisions for a funded program activity; these are usually customized for the program’s requirements and contain items such as timelines for programmatic reports.

Supplant
(verb) To replace or substitute for (another). For example, a grant recipient may not use DSHS grant funds to defray any costs that the recipient is already obligated to pay. If a grantee, prior to applying for a grant, had committed to provide funding for activities defined in the grant' s scope of work (i.e., as represented in the RFP Budget Summary), then the grantee must provide the amount of funding previously committed in addition to the amount requested under the DSHS grant.

Vendor ID #
Fourteen-digit number needed for any entity to contract with the State of Texas and must be set up with the State Comptroller’s Office.  It consists of a ten-digit vendor number (IRS number, state agency number, or social security number) + check digit + mail code.

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Last updated July 06, 2012