1. (a) Any form of investment income from the use of unrestricted funds will be used to reduce the allowable interest on capital indebtedness first, then other interest. Any form of investment income from the use of restricted funds found to be used for purposes other than their designated purpose, will be used to reduce the allowable interest on capital indebtedness first, then other interest. If restricted and unrestricted funds are commingled, all income to the common fund will reduce capital indebtedness first, then other interest.
2. (b) Grants, gifts and income designated by the donor for specific operating expenses will be used to reduce the allowable costs relating to the specific operating expense.
3. (c) Recovery of insured loss will be used to reduce the allowable costs relating to the insured loss.

Source

The provisions of this § 1181.273 adopted August 5, 1989, effective July 1, 1989, 13 Pa.B. 2402.

Notes of Decisions

The income earned by debt service reserve fund was properly classified as investment income and, therefore, offset against allowable interest expense on capital indebtedness. Atlas Development Association, Inc. v. Department of Public Welfare, 587 A.2d 817 (Pa. Cmwlth. 1991).

In case applying prior regulation found at Section IV(D)(10)(e)(5) of Medical Assistance Program Manual for Allowable Cost Reimbursement of Skilled Nursing and Intermediate Care Facilities, 8 Pa.B. 2837, fact that funds invested by central corporate Cash Management Office were not generated by any of the five corporation-owned facilities, but rather by other corporate operations, did not preclude offset of investment income against interest on the facilities’ capital indebtedness; further, there is nothing in the regulations to authorize deduction of expenses incurred in generating the investment income. Tressler Lutheran Service Associates v. Department of Public Welfare, 514 A.2d 661 (Pa. Cmwlth. 1986).

Interest paid by a care provider to a related party is not to be deemed investment income to the facility and therefore, is not subject to set-off against reimbursable interest on capital indebtedness under subsection (a). Chateau Convalescent Center v. Secretary of the Department of Public Welfare, 495 A.2d 659 (Pa. Cmwlth. 1985).