# COMAR Title 10 — Maryland Department of Health

## Subtitle 08 — Health Facilities Grants

### Chapter 01 — Construction Funds for Public and Nonprofit Nursing Homes

**Authority:** Health-General Article, §2-104(b), Annotated Code of Maryland; Ch. 228, Acts of 1990

**Administrative History:** Effective date:

**Administrative History:** Regulations .01—.09 adopted as an emergency provision effective November 13, 1985 (12:25 Md. R. 2469); emergency status expired March 13, 1986

**Administrative History:** Regulations .01—.09 adopted as an emergency provision effective April 2, 1986 (13:9 Md. R. 1019) (Emergency provisions are temporary and not printed in COMAR)

**Administrative History:** Regulations .01—.09 adopted effective July 12, 1986 (13:13 Md. R. 1491)

**Administrative History:** Chapter recodified from COMAR 10.08.19 to 10.08.01 and amended effective February 23, 1987 (14:4 Md. R. 417)

**Administrative History:** Regulations .01 and .03—.10 amended effective December 5, 1994 (21:24 Md. R. 1988)

**Administrative History:** Regulation .02 repealed effective December 5, 1994 (21:24 Md. R. 1988)

**Administrative History:** Regulation .03B amended effective March 26, 2018 (45:6 Md. R. 319)

**Administrative History:** Regulation .04A amended effective March 26, 2018 (45:6 Md. R. 319)

**Administrative History:** Regulation .06A amended effective March 26, 2018 (45:6 Md. R. 319)

**Administrative History:** Regulation .08B amended effective March 26, 2018 (45:6 Md. R. 319)

**Administrative History:** Regulation .09C amended effective March 26, 2018 (45:6 Md. R. 319)

**Administrative History:** Annotation: The following chapters were originally adopted to govern the administration of construction funds for public and non-profit nursing homes. These chapters were repealed effective February 23, 1987 (14:4 Md. R. 417) and replaced by the current COMAR 10.08.01:

**Administrative History:** 10.08.01 (1968) effective February 17, 1969; amended effective June 30, 1969 and June 11, 1975 (2:13 Md. R. 930)

**Administrative History:** 10.08.02 (1972) effective April 5, 1973; amended effective June 11, 1975 (2:13 Md. R. 930)

**Administrative History:** 10.08.03 (1975) effective September 17, 1975 (2:21 Md. R. 1340)

**Administrative History:** 10.08.08 (1977) effective March 24, 1978 (5:6 Md. R. 465)

**Administrative History:** 10.08.11 (1978) effective April 20, 1979 (6:8 Md. R. 656)

**Administrative History:** 10.08.13 (1980) effective as an emergency provision August 11, 1980 (7:20 Md. R. 1872); effective permanently December 12, 1980 (7:25 Md. R. 2336)

#### Regulation .01 Scope.

*COMAR 10.08.01.01*

A. These regulations govern the administration of construction funds for public and nonprofit nursing homes made available by the Nursing Home Loan Act of 1990, and subsequent similar Loan Acts. In addition, these regulations govern the administration of the assurances, residual requirements, and the State's right of recovery for those applicants that received construction funds under the Nursing Home Loan Acts of 1972, 1975, 1977, 1978, 1980, and 1985.

B. It is the intent of the Department that State grant funds be used:

  (1) To assist applicants for the construction, expansion, renovation, and equipping of nursing home eligible under the Nursing Home Loan Act of 1990 and subsequent similar Loan Acts in accordance with these regulations; and

  (2) After the applicant has secured all funds available from other sources.

#### Regulation .02 Repealed.

*COMAR 10.08.01.02*

#### Regulation .03 Definitions.

*COMAR 10.08.01.03*

A. In this chapter, the following terms have the meanings indicated.

B. Terms Defined.

  (1) “Applicant” means a county, municipal corporation or nonprofit organization that seeks to obtain State grant funds under the Loan Acts.

  (2) “Certificate of Need” means a certificate issued by the Maryland Health Care Commission under Health-General Article, §19-101 et seq., Annotated Code of Maryland, for a health care project.

  (3) Construction.

    (a) “Construction” means construction of new buildings or additions to existing buildings and initial capital equipment, including plans, specifications, site improvements, surveys, and applicable engineers' and architects' fees.

    (b) “Construction” does not include the cost of land acquisition or the cost of off-site improvements.

  (4) “Department” means the Maryland Department of Health.

  (5) “Facility” means a nursing home that is wholly owned by and operated under the authority of a:

    (a) County or municipal corporation; or

    (b) Nonprofit organization.

  (6) “Grantee” means a county, a municipal corporation, or a nonprofit organization for which State grant funds under the Loan Act are approved by the Board of Public Works.

  (7) Initial Capital Equipment.

    (a) “Initial capital equipment” means items which:

      (i) Are necessary to furnish and initially operate a facility;

      (ii) With normal maintenance, have a life expectancy of at least 15 years; and

      (iii) Are of durable construction.

    (b) “Initial capital equipment” does not include items which:

      (i) Could be easily lost, damaged, or destroyed during normal usage;

      (ii) Could be easily stolen;

      (iii) Are likely to be technically obsolescent within 15 years; or

      (iv) Are intended to replace similar items already on hand.

  (8) “Loan Act” means:

    (a) The Nursing Home Loan Act of 1972, Chapter 119, Acts of 1972;

    (b) The Nursing Home Loan Act of 1975, Chapter 656, Acts of 1975;

    (c) The Nursing Home Loan Act of 1977, Chapter 703, Acts of 1977;

    (d) The Nursing Home Loan Act of 1978, Chapter 904, Acts of 1978;

    (e) The Nursing Home Loan Act of 1980, Chapter 713, Acts of 1980;

    (f) The Nursing Home Loan Act of 1985, Chapter 304, Acts of 1985;

    (g) The Nursing Home Loan Act of 1990, Chapter 228, Acts of 1990; and

    (h) All subsequent similar legislation.

  (9) “Nonprofit nursing home” means a nursing home which is or will be wholly owned by and operated under the authority of a nonprofit organization.

  (10) “Nonprofit organization” means:

    (a) A bona fide religious organization, or a chartered nonprofit corporation which is classified under §501(c)3 of the Internal Revenue Code as a nonprofit; and

    (b) That no part of the organization's or corporation's earnings inures to the benefit of an individual or is used for any purpose other than the maintenance and operation of the nursing home, the purchase of equipment to be used in the nursing home, or the expansion of the nursing home.

  (11) “Nursing home” means a comprehensive care facility as set forth in COMAR 10.07.02.

  (12) “Nursing Home Loan Act of 1972” means Chapter 119, Acts of 1972.

  (13) “Nursing Home Loan Act of 1975” means Chapter 656, Acts of 1975.

  (14) “Nursing Home Loan Act of 1977” means Chapter 703, Acts of 1977.

  (15) “Nursing Home Loan Act of 1978” means Chapter 904, Acts of 1978.

  (16) “Nursing Home Loan Act of 1980” means Chapter 713, Acts of 1980.

  (17) “Nursing Home Loan Act of 1985” means Chapter 304, Acts of 1985.

  (18) “Nursing Home Loan Act of 1990” means Chapter 228, Acts of 1990.

  (19) “Office of Capital Planning, Budgeting, and Engineering Services” means the office within the Department designated by the Secretary to administer this chapter.

  (20) “Public nursing home” means a nursing home that is wholly owned and operated under the authority of a county or a municipal corporation.

  (21) “Renovation” means the work required to restore or modernize, or both, most or all of a nursing home.

  (22) “Secretary” means the Secretary of Health, or a designated representative.

  (23) “Wholly owned” includes leased property, if the project proposed by the applicant includes:

    (a) A lease agreement with the State for a State-owned building or State-owned property; or

    (b) A lease agreement:

      (i) Which is for a minimum of 15 years following the project completion or extends the right of purchase to the lessee, and

      (ii) In which the lessor consents to the recording of a notice of the State's right of recovery, under the Nursing Home Loan Act of 1990, Section 1, Paragraph (9), in the land records of the county or Baltimore City in which the facility is located.

#### Regulation .04 Eligibility of Applicant for State Funds.

*COMAR 10.08.01.04*

A. To be eligible for State funds under the Loan Act of 1990 and subsequent similar Loan Acts, an applicant:

  (1) Shall be a county, a municipal corporation, or a nonprofit organization;

  (2) That is a nonprofit organization shall verify its nonprofit status to the Department through its articles of incorporation, or appropriate documentation from the Internal Revenue Service classifying the organization as nonprofit;

  (3) Shall have a Certificate of Need from the Maryland Health Care Commission, if a Certificate of Need is required for the project;

  (4) Shall be eligible for certification to participate in the Medical Assistance Program and shall agree to participate;

  (5) Shall certify that the nursing home meets the requirements of 42 U.S.C. §12101 et seq.; and

  (6) Shall be approved by the Secretary to receive a grant award.

B. In determining the site or location of a facility, an applicant may not make a selection with the effect of excluding individuals from, denying them the benefits of, or subjecting them to discrimination under any programs to which this chapter applies, on the grounds of race, color, religion, disability, or national origin, or with the purpose or effect of defeating or substantially impairing the accomplishment of the objectives of the Loan Act of 1990 or this chapter.

#### Regulation .05 Priority of Eligible Projects.

*COMAR 10.08.01.05*

The Department shall determine the priority of applicants for State grant funds under the Loan Act of 1990 and subsequent similar Acts after consideration of:

A. All eligible applications;

B. The availability of unallocated State funds at the time an application is received; and

C. Priorities established by the Department.

#### Regulation .06 Application Procedure.

*COMAR 10.08.01.06*

A. An applicant shall direct an application for State grant funds authorized by the Loan Act of 1990 and subsequent similar Loan Acts to the Office of Capital Planning, Budgeting, and Engineering Services.

B. The Department shall provide notice and information to the State Clearinghouse for intergovernmental review in accordance with COMAR 14.24.04.

C. At the time of filing the application required by §A of this regulation, the applicant shall file a written statement with the Department containing the following material:

  (1) Current or intended program of services;

  (2) Admission policies for the nursing home;

  (3) Agreement to admit patients without discrimination on the basis of race, religion, national origin, creed, or color;

  (4) The number of personnel employed or to be employed at the nursing home, by occupation, and all perquisites, salaries, and any other funds paid or to be paid to these personnel;

  (5) Expenses incurred or to be incurred in operating the nursing home;

  (6) The schedule of rates charged or to be charged for services rendered;

  (7) If the nursing home is operating, a current, certified profit-and-loss statement and balance sheet for the most current fiscal year; and

  (8) If the applicant is applying for poverty funding under Regulation .09D of this chapter, an agreement that the majority of the individuals served by the applicant shall be poverty-designated clients, as defined in Regulation .09D of this chapter, for each year for a period of 15 years following the completion of the nursing home.

D. If the application meets all pertinent criteria, the Secretary, in the Secretary's discretion, may approve that application and, if approved, shall recommend the application to the Board of Public Works, together with a written report stating that:

  (1) Notice and information have been provided to the State Clearinghouse;

  (2) The application has been approved by the Secretary, and when a federal grant is involved, the application has also been approved by the Secretary of Health and Human Services or other appropriate federal authority; and

  (3) The Secretary recommends that the Board of Public Works make available to the applicant State grant funds.

#### Regulation .07 Assurances from Grantee.

*COMAR 10.08.01.07*

A. The following assurance in this section applies to all grantees receiving construction funds under the Loan Acts of 1972, 1975, 1977, and 1978: For a period of 15 years following the completion of a project, the grantee shall operate the nursing home as a public or nonprofit nursing home and the nursing home may not be sold, bargained, or transferred to a person, agency, or organization not qualified under these regulations without prior written approval of the Department and the Board of Public Works.

B. The following assurance in this section applies to all grantees receiving construction funds under the Loan Act of 1980: For a period of 15 years following the completion of a project, the grantee shall operate the nursing home as a public or nonprofit nursing home and the nursing home may not be sold, bargained, or transferred to a person, agency, or organization not qualified under these regulations without prior written approval of the Secretary.

C. The following assurance in this section applies to all grantees receiving construction funds under the Loan Acts of 1985, 1990, and subsequent similar Acts: For a period of 15 years following the completion of a project, the grantee shall operate the nursing home as a public or nonprofit nursing home and the nursing home may not be sold, bargained, or transferred to a person, agency, or organization not qualified under these regulations without prior written approval of the Board of Public Works.

D. The following assurance in this section applies to all grantees receiving construction funds under the Loan Acts of 1972, 1975, 1977, 1978, 1980, 1985, 1990, and subsequent similar Acts: The grantee shall operate and maintain the completed nursing home in accordance with all applicable State and federal regulations and standards for comprehensive care facilities.

E. The following assurance in this section applies to all grantees receiving construction funds under the Loan Acts of 1972, 1975, 1977, and 1978: Patients shall be admitted without discrimination on the basis of race, creed, color, sex, national origin, age, marital status, or handicap.

F. The following assurance in this section applies to all grantees receiving construction funds under the Loan Acts of 1978, 1980, 1985, 1990, and subsequent similar Acts: The nursing home shall apply the same admissions standards to all persons. A Medicaid recipient shall receive the same consideration as any other candidate for admission. Quotas by class of payor are not allowed.

G. For those grantees receiving State funds under the Loan Acts of 1972, 1975, 1977, and 1978, the grantee shall agree to provide uncompensated care annually at one of the following levels:

  (1) A grantee may advise the State that it does not intend to deny an individual admission to the facility because of the individual's inability to pay;

  (2) A grantee may advise the State that its level of uncompensated care for individuals unable to pay shall be equal to 10 percent annually of all State funds received under the applicable Nursing Home Loan Act;

  (3) A grantee may advise that the proposed level of uncompensated care shall be equal to 3 percent of the difference between the facility's annual operating cost and the sum of the annual Medicare and Medicaid reimbursements.

H. For those grantees that received State funds under the Loan Act of 1980, the grantee shall agree to provide uncompensated care annually at one of the following levels:

  (1) The grantee shall advise the Department that its level of uncompensated care for individuals unable to pay shall be equal to 10 percent annually of all State funds received under the Nursing Home Loan Act of 1980;

  (2) The grantee shall advise the Department that the proposed level of uncompensated care shall be equal to 3 percent of the difference between the facility's annual operating cost and the sum of the annual Medicare and Medicaid reimbursements.

I. If the grantee finds that the options in §G or H of this regulation are not feasible, the grantee shall propose an alternate option to the Department. This alternate proposal shall be reviewed by the Secretary in consultation with the grantee, and a determination shall be made as to its acceptability.

#### Regulation .08 Residual Requirements of the Grantee.

*COMAR 10.08.01.08*

A. Annual Requirements.

  (1) For a period of 15 years following the completion of a project involving these grant funds, a grantee that received funds under the Loan Acts of 1972, 1975, 1977, 1978, 1980, 1985, 1990, and subsequent similar Loan Acts shall file written statements annually with the Department containing the following material:

    (a) The number of personnel employed at the nursing home, by occupation, and all perquisites, salaries, and any other funds currently paid to these personnel;

    (b) Fees or retainers paid directly or under contract to persons rendering services at the nursing home;

    (c) A current, certified, audited profit-and-loss statement and balance sheet for the nursing home;

    (d) Rates and fees charged for services at the nursing home;

    (e) Gifts or endowments received during the current year;

    (f) Patient days of service rendered, showing separately the days of service rendered to patients in the following classifications:

      (i) Self-paying;

      (ii) Below cost;

      (iii) Medicare;

      (iv) Medicaid;

      (v) Public assistance; and

    (g) Other supplemental information required by the Secretary.

  (2) For a period of 15 years following the completion of a project that receives poverty funding under Regulation .09D of this chapter, the grantee shall submit annually a quantitative statement of its performance in serving poverty clients defined in Regulation .09D of this chapter.

B. Insurance Requirements.

  (1) The applicant shall provide builders’ risk insurance during the entire period of project construction or renovation as follows:

    (a) The policy shall name the State as a loss payee;

    (b) The policy shall be endorsed to protect the State's interest in the nursing home;

    (c) The coverage shall be for an amount at least equal to the replacement cost of the nursing home; and

    (d) The grantee shall submit evidence of this insurance to the Office of Capital Planning, Budgeting, and Engineering Services.

  (2) Upon completion of a project, the grantee shall maintain for a period of 15 years all-risk insurance coverage as follows:

    (a) The coverage shall be for an amount at least equal to the replacement cost of the nursing home;

    (b) The policy shall name the State as a loss payee;

    (c) The policy shall be endorsed to protect the State's interest in the project;

    (d) The policy shall be endorsed to notify the Office of Capital Planning, Budgeting, and Engineering Services, 201 West Preston Street, Baltimore, Maryland 21201 of any:

      (i) Notification of cancellation of policy;

      (ii) Material loss covered by the policy; and

      (iii) Material changes in the policy; and

    (e) The grantee shall submit evidence of this insurance annually to the Office of Capital Planning, Budgeting, and Engineering Services and to the State Treasurer’s Office, Insurance Division.

C. A grantee receiving grant funds under the Loan Acts of 1972, 1975, 1977, 1978, 1980, 1985, 1990, and subsequent similar Loan Acts, shall make available business records of the nursing home for verification by representatives of the Department or its designated agents during the entire period of work on the project and for a period of 15 years after the project has been completed.

D. Extension of Time for Completion, and Other Changes.

  (1) The applicant shall promptly notify the Secretary if the applicant is unable to encumber funds:

    (a) In the manner approved by the Secretary; or

    (b) Within 2 years of the appropriation by the Maryland legislature.

  (2) The Secretary may grant a request by the applicant for a change in the manner or time of encumbrance of funds, including an extension of time, for good cause.

E. Expenditures. State funds may not be expended until the grantee is in compliance with §B(1) of this regulation, and a notice of the right of recovery is recorded in the land records of the political jurisdiction in which the property is located.

F. Penalties. If the grantee does not comply with §§A, B, and C of this regulation, the Secretary may:

  (1) Refuse to consider the grantee for any future funding under a Loan Act; and

  (2) Require an audit of the grantee.

#### Regulation .09 Grant Limitations and Provisions.

*COMAR 10.08.01.09*

A. The provisions of these regulations apply to applicants for grants under the Loan Act of 1990 and subsequent similar Loan Acts.

B. Use of Federal Grants. Federal grants available for a project shall be applied first to the cost of construction, expansion, renovation, and equipping of an eligible nursing home, before a State grant is expended.

C. Limits on State Grant.

  (1) For a project without federal participation, a State grant may not be more than:

    (a) 50 percent of eligible costs, unless the project is approved for poverty funding; or

    (b) 75 percent of eligible costs, if a project is approved for poverty funding.

  (2) For a project with federal participation, a State grant may not be more than:

    (a) 50 percent of the eligible costs remaining after the federal grant has been applied, unless the project is approved for poverty funding; or

    (b) 75 percent of the eligible costs remaining after the federal grant has been applied, if a project is approved for poverty funding.

  (3) An applicant may not be eligible for retroactive participation in the cost of acquisition, construction, renovation, or purchase of equipment.

  (4) The grant shall include only those expenditures incurred or contracted for after the grant award is approved by the Board of Public Works, except as provided in §E of this regulation.

D. Poverty Funding. An applicant is eligible for poverty funding for a nursing home, if the majority of individuals served by the nursing home:

  (1) Are certified by a local department of social services as eligible for the Disability Assistance and Loan Program (DALP) or Medical Assistance;

  (2) Are eligible for Supplemental Security Income benefits; or

  (3) Have income levels which do not exceed 150 percent of the federal poverty level.

E. Application Costs.

  (1) An applicant shall pay the costs necessary to file the application, such as the costs for appraisals, architects' fees, surveys, and test borings.

  (2) If the project is recommended for funding by the Department, the Department shall review the costs expended under §E(1) of this regulation, and may recommend those costs to the Board of Public Works for inclusion in the grant award.

F. Matching Funds.

  (1) An applicant shall provide from other sources matching funds equal to the total eligible cost of the project less the State grant award.

  (2) An applicant may not expend matching funds before the State grant award, unless the Board of Public Works approves otherwise.

  (3) The Department may not consider real or personal property, in-kind contributions, or funds expended before the date a grant award is approved by the Board of Public Works as matching funds.

G. Prohibition Against Use of Funds for Religious Purposes.

  (1) A grantee may not use any portion of the proceeds of a State grant:

    (a) For the furtherance of sectarian religious instruction; or

    (b) In connection with the design or construction of any building used or to be used as a place of sectarian religious worship or instruction, or in connection with any program or department of divinity for any religious denomination.

  (2) Upon the request of the Board of Public Works, the grantee shall submit evidence satisfactory to the Board that none of the proceeds of the grant has been or is being used for a purpose prohibited by the Loan Act.

#### Regulation .10 Right of Recovery.

*COMAR 10.08.01.10*

A. In the event of default under the terms of the Loan Acts and this chapter, nursing homes which received funds from the Loan Acts of 1975, 1977, 1978, 1980, 1985, 1990, and all subsequent Loan Acts are subject to the State's right of recovery as set forth in the Loan Acts.

B. Grant funds received by nursing homes from the Loan Act of 1972 shall be recovered proportionably and in the same manner as federal funds are recovered under the provisions of Subchapter IV—Construction of Hospitals and Other Facilities, 42 U.S.C. §291 et seq., as set forth in that Loan Act.

### Chapter 02 — Construction Funds for Public and Nonprofit Community Mental Health, Addiction, and Developmental Disabilities Facilities

**Authority:** Health-General Article, §§2-102, 24-601, et seq., Annotated Code of Maryland

**Administrative History:** Effective date: February 23, 1987 (14:4 Md. R. 417)

**Administrative History:** Regulations .01 and .03—.10 amended and Regulation .02 repealed effective December 5, 1994 (21:24 Md. R. 1988)

**Administrative History:** Regulation .03B amended effective March 14, 2016 (43:5 Md. R. 385); March 26, 2018 (45:6 Md. R. 319)

**Administrative History:** Regulation .05B amended effective March 26, 2018 (45:6 Md. R. 319)

**Administrative History:** Regulation .07D amended effective March 26, 2018 (45:6 Md. R. 319)

**Administrative History:** Regulation .07E amended effective March 9, 1998 (25:5 Md. R. 369)

**Administrative History:** Regulation .09B amended effective March 26, 2018 (45:6 Md. R. 319)

**Administrative History:** Annotation: The following chapters were originally adopted to govern the administration of construction funds for public and nonprofit community mental health center components, addiction facilities, and developmental disabilities facilities. These chapters were repealed effective February 23, 1987 (14:4 Md. R. 417) and replaced by the current COMAR 10.08.02:

**Administrative History:** 10.08.04 (1972) effective April 26, 1973; amended effective July 7, 1976 (3:14 Md. R. 746)

**Administrative History:** 10.08.05 (1973) effective April 30, 1975 (2:9 Md. R. 677); amended effective July 7, 1976 (3:14 Md. R. 746)

**Administrative History:** 10.08.06 (1974) effective September 17, 1975 (2:21 Md. R. 1340)

**Administrative History:** 10.08.07 (1975) effective July 7, 1976 (3:14 Md. R. 747)

**Administrative History:** 10.08.09 (1977) effective March 24, 1978 (5:6 Md. R. 466)

**Administrative History:** 10.08.10 (1978) effective May 4, 1979 (6:9 Md. R. 727)

**Administrative History:** 10.08.12 (1979) effective February 22, 1980 (7:4 Md. R. 347)

**Administrative History:** 10.08.14 (1980) effective April 17, 1981 (8:8 Md. R. 720)

**Administrative History:** 10.08.15 (1981) effective as an emergency provision July 15, 1981 (8:15 Md. R. 1296); effective permanently November 23, 1981 (8:23 Md. R. 1855)

**Administrative History:** 10.08.16 (1982) effective January 17, 1983 (10:1 Md. R. 29)

**Administrative History:** 10.08.17 (1983) effective as an emergency provision August 24, 1983 (10:19 Md. R. 1684); effective permanently March 12, 1984 (11:5 Md. R. 462)

**Administrative History:** 10.08.18 (1984) effective as an emergency provision August 15, 1984 (11:18 Md. R. 1578); effective permanently December 31, 1984 (11: 26 Md. R. 2278)

#### Regulation .01 Scope.

*COMAR 10.08.02.01*

A. These regulations govern the administration of State grant funds for public and  nonprofit community mental health, addiction, and developmental disabilities facilities made available by the:

  (1) Community Mental Health, Addiction, and Developmental Disabilities Facilities Loan Act of 1989, Chapter 126, Laws of Maryland 1989, and similar Acts;

  (2) Maryland Consolidated Capital Bond Loan Act of 1990, Chapter 421, Laws of Maryland 1990, and similar Acts;

  (3) Maryland Consolidated Capital Bond Loan Act of 1991, Chapter 471, Laws of Maryland 1991 and similar Acts; and

  (4) Maryland Consolidated Capital Bond Loan Act of 1992, Chapter 4 (special session), Laws of Maryland 1992, and similar Acts.

B. These regulations do not supersede, terminate, or abrogate the residual requirements of prior regulations adopted in accordance with the previous Acts which provided funds for these same purposes. The terms of the prior regulations, to the extent they conflict with these regulations, shall continue to govern the administration of funds for public and nonprofit facilities which receive, or have received, State grant funds authorized by Acts of years before 1992.

C. It is the intent of the Department that State grant funds be used:

  (1) To assist eligible applicants for the construction, acquisition, renovation, and equipping of facilities eligible under the Act in accordance with these regulations; and

  (2) After the applicant has secured all funds available from other sources.

#### Regulation .02 Repealed.

*COMAR 10.08.02.02*

#### Regulation .03 Definitions.

*COMAR 10.08.02.03*

A. In this chapter, the following terms have the meanings indicated.

B. Terms Defined.

  (1) “Acquisition” means purchasing and obtaining ownership of all or part of an existing building for use as a community mental health, addiction, or developmental disabilities facility.

  (2) “Act” means Health-General Article, §24-601 et seq., Annotated Code of Maryland.

  (3) “Addiction” means a disease which is characterized by a pattern of pathological use of alcohol or a drug, or both, with repeated attempts to control the use and with significant negative consequences in at least one of the following areas of life:

    (a) Financial;

    (b) Legal;

    (c) Medical; or

    (d) Psychosocial.

  (4) “Addiction facility” means any facility which provides or proposes to provide treatment for an addiction.

  (5) “Applicant” means a county, a municipal corporation, or a nonprofit organization that seeks to obtain State grant funds under the Act.

  (6) “Appropriate administration” means the Behavioral Health, Developmental Disabilities, or Prevention and Health Promotion Administration.

  (7) “Community mental health facility” means a facility where one or more of the following mental health programs is provided, or is proposed to be provided:

    (a) Inpatient services;

    (b) Outpatient services;

    (c) Partial care services, including day care services and night care services;

    (d) 24-hour emergency services;

    (e) Aftercare services;

    (f) Consultation services;

    (g) Education services;

    (h) Community rehabilitation services.

  (8) Construction.

    (a) “Construction” means construction of new buildings or additions to existing buildings and initial capital equipment, including plans, specifications, site improvements, surveys, and applicable engineers' and architects' fees.

    (b) “Construction” does not include the cost of land acquisition and the cost of off-site improvements.

  (9) “Department” means the Maryland Department of Health.

  (10) Developmental Disabilities Facility.

    (a) “Developmental disabilities facility” means any facility which provides or proposes to provide services for individuals with disabilities, whether the facility is  hospital-based, a clinic, vocational, day, or a residential site.

    (b) For purposes of this definition, facility does not include a Veterans' Administration hospital.

  (11) “Facility” means a:

    (a) Public community mental health facility, addiction facility, or developmental disabilities facility that is wholly owned by, and operated under, the authority of a county or municipal corporation; or

    (b) Nonprofit community mental health facility, addiction facility, or developmental disabilities facility that is wholly owned by, and operated under, the authority of a nonprofit organization or corporation.

  (12) “Grantee” means a county, a municipal corporation, or a nonprofit organization or corporation for which State grant funds under the Act are approved by the Board of Public Works.

  (13) Initial Capital Equipment.

    (a) “Initial capital equipment” means items which:

      (i) Are necessary to furnish and initially operate a facility;

      (ii) With normal maintenance have a life expectancy of at least 15 years; and

      (iii) Are of durable construction.

    (b) “Initial capital equipment” does not mean items which:

      (i) Could be easily lost, damaged, or destroyed during normal usage;

      (ii) Could be easily stolen;

      (iii) Are likely to be technically obsolescent within 15 years; or

      (iv) Are intended to replace a similar item already on hand.

  (14) “Nonprofit facility” means a facility which is, or will be, wholly owned by and operated under the authority of a nonprofit organization.

  (15) “Nonprofit organization” means:

    (a) A bona fide religious organization, or a chartered nonprofit corporation which is classified under §501(c)3 of the Internal Revenue Code as a nonprofit organization; and

    (b) That no part of the organization's or corporation's earnings inures to the benefit of an individual or is used for any purpose other than the maintenance and operation of the facility, the purchase of equipment to be used in the facility, or the expansion of the facility.

  (16) “Office of Capital Planning, Budgeting, and Engineering Services” means the office within the Department designated by the Secretary to administer this chapter.

  (17) “Public facility” means a facility that is wholly owned by and operated under the authority of a county or a municipal corporation.

  (18) “Renovation” means the work required to restore or modernize, or both, most or all of a facility.

  (19) “Secretary” means the Secretary of Health, or a designated representative.

  (20) Wholly Owned.

    (a) “Wholly owned” includes leased property, if the lease agreement is with the State for a State-owned building or State-owned property.

    (b) “Wholly owned” includes leased property which is not State-owned, if the:

      (i) Lease agreement is for a minimum of 30 years following the project completion or extends the right of purchase to the lessee; and

      (ii) Lessor consents to the recording of a notice of the State's right of recovery, under Health-General Article, §24-606, Annotated Code of Maryland, in the land records of the county or Baltimore City in which the facility is located.

#### Regulation .04 Eligibility of Applicant for State Grant Funds.

*COMAR 10.08.02.04*

A. To be eligible for State grant funds under the Act, an applicant shall:

  (1) Be a county, a municipal corporation, or a nonprofit organization;

  (2) Be recommended by the appropriate administration as a result of a proposal for a project conforming to the plans or program for services by that administration;

  (3) Have proposed a project which is in accord with the priorities of the Secretary;

  (4) Be eligible for licensing or certification under existing federal or State regulations, or both, when licensing or certification is required in order to provide treatment or services in the facility;

  (5) Be eligible for certification, and agree to participate, in Title XVIII and Title XIX of the Social Security Act, if applicable;

  (6) Have proposed a project which meets the handicap-accessibility requirements of COMAR 05.02.02, promulgated pursuant to Article 83B, §6-102, Annotated Code of Maryland, if applicable, and 42 U.S.C. §12101 et seq.; and

  (7) Be approved by the Secretary to receive a grant award.

B. In determining the site or location of a facility, an applicant may not make a selection with the effect of excluding individuals from, denying them the benefits of, or subjecting them to discrimination under any programs to which this chapter applies, on the grounds of race, color, religion, disability, or national origin, or with the purpose or effect of defeating or substantially impairing the accomplishment of the objectives of the Act or this chapter.

#### Regulation .05 Application Procedure.

*COMAR 10.08.02.05*

A. An applicant shall apply for a grant to be used for construction, acquisition, renovation, and equipping of a facility by filing an application with the Department on a form provided by the Department.

B. An applicant shall direct an application for State grant funds to the Office of Capital Planning, Budgeting, and Engineering Services.

C. The Department shall provide notice and information to the State Clearinghouse for intergovernmental review in accordance with COMAR 14.24.04.

D. The applicant shall comply with the application procedures in effect at the time of application, as prescribed by applicable federal and State regulations.

E. At the time of filing the application, and before the authorization of an award of State grant funds, the applicant shall file a written statement with the Department containing the following materials:

  (1) Current or intended program of services;

  (2) The facility's admission policies, including:

    (a) Statements in which the applicant shall:

      (i) Agree to admit individuals on the basis of their need for services without regard to race, national origin, color, disability, religion, or ability to pay,

      (ii) According to law and these regulations, define clearly proposed limitations, if any, regarding age groups, illness, or disorder categories, and

      (iii) Give priority to individuals for admission to the facility who are certified by a local department of social services for assistance, and to individuals of low income;

    (b) For an applicant serving or intending to serve individuals in a developmental disabilities facility, an agreement to:

      (i) Serve only those clients for whom the Developmental Disabilities Administration has authorized services in accordance with COMAR 10.22.18 or Health-General Article, §7-403, Annotated Code of Maryland, or

      (ii) Obtain written permission from the Director, Developmental Disabilities Administration, before serving individuals not funded by the Developmental Disabilities Administration;

  (3) The number of personnel employed or to be employed at the facility, by occupation, and all perquisites, salaries, and other funds paid, or to be paid, to these personnel;

  (4) Expenses incurred, or to be incurred, in carrying out qualified facilities operations;

  (5) The schedule of rates charged, or to be charged, for services rendered;

  (6) If a facility is currently operating, a certified, audited profit-and-loss statement and balance sheet for the most current year; and

  (7) If the applicant is applying for poverty funding under Regulation .07E of this chapter, an agreement that the majority of the individuals served by the applicant shall be poverty-designated clients, as defined in Regulation .07E of this chapter, for each year for a period of 30 years following the completion or acquisition of the facility.

F. If the application meets all pertinent criteria, the Secretary, in the Secretary's discretion, may approve that application and, if approved, shall recommend the application to the Board of Public Works, together with a written report stating that:

  (1) Notice and information in the application have been provided to the State Clearinghouse;

  (2) The application has been approved by the Secretary, and when a federal grant is involved, the application has also been approved by the Secretary of Health and Human Services or other appropriate federal authority; and

  (3) The Secretary recommends that the Board of Public Works make available to the applicant State grant funds.

#### Regulation .06 Priority of Awards.

*COMAR 10.08.02.06*

The Department shall determine the priority of applicants for State grant funds after consideration of:

A. All eligible applications;

B. Each project, by the appropriate administration, for conformance with the program or plans for these services established by the respective administrations;

C. Priorities as established by the Department;

D. The reasonableness of the projected capital, and operating costs and revenues, for the facility;

E. The availability of State grant funds;

F. The total unallocated State grant funds available at the time the application is received; and

G. The readiness of the project to go before the Board of Public Works.

#### Regulation .07 Grant Limitations and Provisions.

*COMAR 10.08.02.07*

A. The provisions of these regulations apply to applicants for grants under the Act.

B. Use of Federal Grants. Federal grant funds available for a project shall be applied first to the cost of construction, acquisition, renovation, and initial capital equipment of the facility, before a State grant is expended.

C. Community Development Block Grants. Community development block grants are considered as local matching funds and are not considered as federal grant funds.

D. Limits on State Grant.

  (1) For a project without federal participation, a State grant may not be more than:

    (a) 50 percent of eligible costs, unless the project is approved for poverty funding; or

    (b) 75 percent of eligible costs, if a project is approved for poverty funding.

  (2) For a project with federal participation, a State grant may not be more than:

    (a) 50 percent of the eligible costs remaining after the federal grant has been applied, unless the project is approved for poverty funding; or

    (b) 75 percent of the eligible costs remaining after the federal grant has been applied, if a project is approved for poverty funding.

  (3) An applicant may not be eligible for retroactive participation in the:

    (a) Cost of:

      (i) Acquisition;

      (ii) Construction; and

      (iii) Renovation; or

    (b) Purchase of equipment.

  (4) The grant shall include only those expenditures incurred or contracted for after the grant award is approved by the Board of Public Works, except as provided in §F of this regulation.

E. Poverty Funding. An applicant is eligible for poverty funding for a facility, if the majority of individuals served by the facility:

  (1) Are certified by a local department of social services as eligible for Family Investment Program (FIP) or Medical Assistance;

  (2) Are eligible for Supplemental Security Income benefits; or

  (3) Have income levels which do not exceed 150 percent of the federal poverty level.

F. Application Costs.

  (1) An applicant shall pay the costs necessary to file the application, such as the costs for appraisals, architects' fees, surveys, and test borings.

  (2) If the project is recommended for funding by the Department, the Department shall review the costs expended under §F(1) of this regulation, and may recommend those costs to the Board of Public Works for inclusion in the grant award.

G. Matching Funds.

  (1) The applicant shall provide from other sources matching funds equal to the total eligible cost of the project less the State grant award.

  (2) An applicant may not expend matching funds before the State grant award, unless the Board of Public Works approves otherwise.

  (3) The Department may not consider real or personal property, in-kind contributions, or funds expended before the date a grant award is approved by the Board of Public Works, as matching funds.

H. Prohibition Against Use of Funds for Religious Purposes.

  (1) A grantee may not use any portion of the proceeds of a State grant:

    (a) For the furtherance of sectarian religious instruction; or

    (b) In connection with the design, acquisition, or construction of any building used, or to be used, as a place of sectarian religious worship or instruction, or in connection with any program or department of divinity for any religious denomination.

  (2) Upon the request of the Board of Public Works, the grantee shall submit evidence satisfactory to the Board that none of the proceeds of the grant has been, or is being, used for a purpose prohibited by the Act.

#### Regulation .08 Use of Funds for Site Acquisition and Renovation.

*COMAR 10.08.02.08*

A. If the applicant is using both State funds and federal grant funds for site acquisition and renovation, then at least two State-approved appraisers shall determine that portion of the total cost applicable to the land site alone. The Department shall exclude this cost from State participation.

B. If the applicant is acquiring a site with existing improvements and renovating the improvements for use as a community mental health, addiction, or developmental disabilities facility, and if the applicant will not be using a federal grant, then the total project costs, including costs applicable to the acquisition of this site and existing improvements, are eligible for State participation.

C. In the circumstances outlined in §B of this regulation, at least two State-approved appraisers shall make an estimate of the market value of the site and existing improvements. State participation shall be limited to the lesser of the value approved by the Department of General Services based upon the appraisals or actual acquisition cost.

D. If an applicant proposes to acquire a land site on which to construct a facility, the cost of the land is not eligible for State participation.

#### Regulation .09 Residual Requirements of the Grantee.

*COMAR 10.08.02.09*

A. Annual Requirements.

  (1) For a period of 30 years following the completion of construction or renovation, or the acquisition of a facility involving the State grant funds in this chapter, a grantee shall file a written statement annually with the Department containing the following material:

    (a) The number of personnel employed at the facility, by occupation, and all remunerations, retainers, perquisites, and expenses currently paid;

    (b) Fees or retainers paid directly or under contract to consultants and other persons rendering services at the facility;

    (c) A current, certified, audited profit-and-loss statement and balance sheet for the facility;

    (d) Rates and fees charged for services provided at the facility;

    (e) Gifts or endowments received during the current year;

    (f) Volume of service at the facility, such as the days of service rendered to inpatient clients, the number of day program clients and the number of days of service, or the number of outpatient clients and outpatient visits; and

    (g) Other supplemental information required by the Secretary.

  (2) For a period of 30 years following the completion of a project that receives poverty funding under Regulation .07E of this chapter, the grantee shall submit annually a quantitative statement of its performance in serving poverty-designated clients, as set forth in Regulation .07E of this chapter.

B. Insurance Requirements.

  (1) The grantee shall provide builders’ risk insurance during the entire period of project construction or renovation as follows:

    (a) The policy shall name the State as a loss payee;

    (b) The policy shall be endorsed to protect the State's interest in the building;

    (c) The coverage shall be for an amount at least equal to the replacement cost of the facility; and

    (d) The grantee shall submit evidence of this insurance to the Office of Capital Planning, Budgeting, and Engineering Services.

  (2) On acquisition of a building or part of a building, the grantee shall provide all-risk insurance coverage as follows:

    (a) The coverage shall be for an amount at least equal to the replacement cost of the facility;

    (b) The policy shall name the State as a loss payee;

    (c) The policy shall be endorsed to protect the State's interest in the project;

    (d) The policy shall be endorsed to notify the Office of Capital Planning, Budgeting, and Engineering Services, 201 West Preston Street, Baltimore, Maryland 21201 of any:

      (i) Notification of cancellation of the policy,

      (ii) Material loss covered by the policy, and

      (iii) Material changes in the policy; and

    (e) The grantee shall:

      (i) Maintain this insurance for a period of 30 years, and

      (ii) Submit evidence of this insurance annually to the Office of Capital Planning, Budgeting, and Engineering Services and to the State Treasurer’s Office, Insurance Division.

  (3) Upon completion of a project, the grantee shall maintain, for a period of 30 years, all-risk insurance coverage as follows:

    (a) The coverage shall be for an amount at least equal to the replacement cost of the facility;

    (b) The policy shall name the State as a loss payee;

    (c) The policy shall be endorsed to protect the State's interest in the project;

    (d) The policy shall be endorsed to notify the Office of Capital Planning, Budgeting, and Engineering Services, 201 West Preston Street, Baltimore, Maryland 21201 of any:

      (i) Notification of cancellation of the policy,

      (ii) Material loss covered by the policy, and

      (iii) Material changes in the policy; and

    (e) The grantee shall submit evidence of this insurance annually to the Office of Capital Planning, Budgeting, and Engineering Services and to the State Treasurer’s Office, Insurance Division.

C. During the entire period of work on the project and for a period of 30 years after the project has been completed or acquired, the grantee shall make available the business records of the facility for verification by representatives of the Department or its designated agent.

D. Extension of Time for Completion, and Other Changes.

  (1) The applicant shall promptly notify the Secretary if the applicant is unable to encumber funds:

    (a) In the manner approved by the Secretary; or

    (b) Within 2 years of the appropriation by the Maryland legislature.

  (2) The Secretary may grant a request by the applicant for a change in the manner or time for encumbrance of funds, including an extension of time, for good cause.

E. Expenditures. State funds may not be expended until the grantee is in compliance with §B(1) and (2)(a)—(d) of this regulation, and a notice of the right of recovery is recorded in the land records of the county or Baltimore City in which the property is located.

F. Penalties. If the grantee does not comply with §§A, B(2) and (3), and C of this regulation, the Secretary may:

  (1) Refuse to consider the grantee for any future funding under the Act; and

  (2) Require an audit of the grantee.

#### Regulation .10 Right of Recovery.

*COMAR 10.08.02.10*

In the event of default under the terms of the Act and this chapter, a facility financed pursuant to this chapter is subject to the State's right of recovery as set forth in the Act.

### Chapter 03 — Construction Funds for Public and Nonprofit Adult Day Care Centers

**Authority:** Health-General Article, §24-701 et seq., Annotated Code of Maryland

**Administrative History:** Effective date: December 28, 1987 (14:26 Md. R. 2746)

**Administrative History:** Regulations .01—.09 amended effective August 1, 1994 (21:15 Md. R. 1305)

**Administrative History:** Regulation .02B amended effective March 26, 2018 (45:6 Md. R. 319)

**Administrative History:** Regulation .04B amended effective March 26, 2018 (45:6 Md. R. 319)

**Administrative History:** Regulation .06E amended effective March 9, 1998 (25:5 Md. R. 369); March 26, 2018 (45:6 Md. R. 319)

**Administrative History:** Regulation .08B amended effective March 26, 2018 (45:6 Md. R. 319)

#### Regulation .01 Scope.

*COMAR 10.08.03.01*

A. These regulations govern the administration of State grant funds to counties, municipal corporations, and nonprofit organizations for conversion, acquisition, renovation, equipping, and construction of adult day care centers under the Adult Day Care Centers Loan Act of 1987, Health-General Article, §§24-701—24-707, Annotated Code of Maryland.

B. These regulations do not supersede, terminate, or abrogate the residual requirements of prior regulations adopted in accordance with the previous Acts which provided funds for these same purposes. The terms of the prior regulations, to the extent they conflict with these regulations, shall continue to govern the administration of funds for public and nonprofit facilities which receive, or have received, State grant funds authorized by Acts of years before 1991.

C. It is the intent of the Department that State grant funds be used:

  (1) To assist eligible applicants with the conversion, acquisition, renovation, equipping, and construction of adult day care center facilities, eligible under the Act in accordance with these regulations; and

  (2) After the applicant has secured all funds available from other sources.

#### Regulation .02 Definitions.

*COMAR 10.08.03.02*

A. In this chapter, the following terms have the meanings indicated.

B. Terms Defined.

  (1) “Acquisition” means purchasing and obtaining ownership of all or part of an existing building for use as an adult day care center.

  (2) “Act” means Health-General Article, §§24-701—24-707, Annotated Code of Maryland, which authorizes the disbursement of State grant funds for the purposes of conversion, acquisition, renovation, equipping, and construction of an adult day care center.

  (3) “Adult day care center” means a nonresidential center that:

    (a) Serves the elderly, medically handicapped adults, or victims of Alzheimer's disease and related disorders;

    (b) Meets the definitions in Health-General Article, §14-201(b) or §14-301(b), Annotated Code of Maryland; and

    (c) Is licensed by the Department under COMAR 10.12.04.

  (4) “Applicant” means a county, municipal corporation, or nonprofit organization that seeks to obtain State grant funds under the Act.

  (5) “Board of Public Works” means the Board established by Article XII of the Constitution of Maryland, consisting of the Governor, the Treasurer, and the Comptroller of Maryland.

  (6) “Building” means:

    (a) All or part of an existing or potential adult day care center and its surrounding real property; or

    (b) A facility proposed to be constructed for use as an adult day care center, and its surrounding real property.

  (7) Construction.

    (a) “Construction” means constructing new buildings or additions to existing buildings and initial capital equipment, including architects' fees.

    (b) “Construction” does not include the cost of land acquisition and the cost of off-site improvements.

  (8) “Conversion” means the work required to transform a building or part of a building for effective use as an adult day care center.

  (9) “Department” means the Maryland Department of Health.

  (10) “Eligible work” means that work for which the use of State funds is authorized under Health-General Article, §§24-701—24-707, Annotated Code of Maryland.

  (11) “Facility” means an adult day care center that is wholly owned by and operated under the authority of a:

    (a) County or municipal corporation; or

    (b) Nonprofit organization.

  (12) “Grant” means a State grant provided under the adult day care center loan program, unless the context clearly implies otherwise.

  (13) “Grantee” means a county, municipal corporation, or nonprofit organization for which State grant funds under the Act are approved by the Board of Public Works.

  (14) Initial Capital Equipment.

    (a) “Initial capital equipment” means items which:

      (i) Are necessary to furnish and initially operate a facility;

      (ii) With normal maintenance, have a life expectancy of at least 15 years; and

      (iii) Are of durable construction.

    (b) “Initial capital equipment” does not include items which:

      (i) Could be easily lost, damaged, or destroyed during normal usage;

      (ii) Could be easily stolen;

      (iii) Are likely to be technically obsolescent within 15 years; or

      (iv) Are intended to replace a similar item already on hand.

  (15) “Nonprofit adult day care center” means an adult day care center which is, or will be, wholly owned by and operated under the authority of a nonprofit organization.

  (16) “Nonprofit organization” means:

    (a) A bona fide religious organization, or a chartered nonprofit corporation which is classified under §501(c)3 of the Internal Revenue Code as nonprofit; and

    (b) That no part of the organization's or corporation's earnings inures to the benefit of an individual or is used for any purpose other than the maintenance and operation of the facility, the purchase of equipment to be used in the facility, or the expansion of the facility.

  (17) “Office of Capital Planning, Budgeting, and Engineering Services” means the office within the Department designated by the Secretary to administer this chapter.

  (18) “Operating costs” means costs associated with the operation of an adult day care center.

  (19) “Project” means an existing or proposed adult day care center which receives or has received a State grant for eligible work.

  (20) “Public facility” means a facility that is wholly owned by and operated under the authority of a county or municipal corporation.

  (21) “Renovation” means the work required to restore or modernize, or both, an existing or proposed adult day care center.

  (22) “Secretary” means the Secretary of Health, or a designated representative.

  (23) “Wholly owned” includes leased property, if the lease agreement:

    (a) Is for a minimum of 30 years following the project completion or extends the right of purchase to the lessee; and

    (b) Consents to the recording of a notice of the State's right of recovery, by the lessor, under Health-General Article, §24-706, Annotated Code of Maryland, in the land records of the county or Baltimore City in which the facility is located.

#### Regulation .03 Eligibility of Applicant for State Grant Funds.

*COMAR 10.08.03.03*

A. To be eligible for State grant funds under the Act, an applicant shall:

  (1) Be a county, municipal corporation, or a nonprofit organization;

  (2) Be eligible for licensing under COMAR 10.12.04;

  (3) Have relevant experience providing related health or human services;

  (4) Be recommended by the Medical Care Policy Administration as a project conforming to the Administration's 5-year plan for these services;

  (5) Complete a feasibility study as specified and approved by the Medical Care Policy Administration;

  (6) Certify that the proposed facility will meet the handicap-accessibility requirements of COMAR 10.12.04 and 42 U.S.C. §12101 et seq.;

  (7) Be eligible for certification, and agree to participate in Title XVIII and Title XIX of the Social Security Act, if applicable; and

  (8) Be approved by the Secretary to receive a grant award.

B. In determining the site or location of a facility, an applicant may not make a selection with the effect of excluding individuals from, denying them the benefits of, or subjecting them to discrimination under any programs to which this chapter applies, on the grounds of race, color, religion, disability, or national origin, or with the purpose or effect of defeating or substantially impairing the accomplishment of the objectives of the Act or this chapter.

#### Regulation .04 Application Procedure.

*COMAR 10.08.03.04*

A. An applicant shall apply for a grant to be used for conversion, acquisition, renovation, purchase of capital equipment, and construction by filing an application with the Department on a form provided by the Department.

B. An applicant shall direct the application for State grant funds to the Office of Capital Planning, Budgeting, and Engineering Services.

C. The Department shall provide notice and information to the State Clearinghouse for intergovernmental review in accordance with COMAR 14.24.04.

D. The applicant shall comply with the application procedures in effect at the time of application, as prescribed by applicable federal and State regulations, including COMAR 10.12.04.

E. At the time of filing the application, and before the authorization of an award of State grant funds, the applicant shall file a written statement with the Department containing the following material:

  (1) Current or intended program of services;

  (2) The number of personnel employed or to be employed at the facility, by occupation, and all perquisites, salaries, and any other funds paid, or to be paid, to these personnel;

  (3) Expenses incurred or to be incurred in carrying out qualified facility operations;

  (4) Schedule of rates charged or to be charged for services rendered at the facility;

  (5) Agreement to admit persons on the basis of their need for services without regard to race, national origin, color, disability, or religion, and to define clearly proposed limitations, if any, regarding age groups, level of functional impairment, or disability;

  (6) If a facility is currently operating, a certified, audited profit-and-loss statement and balance sheet for the most current year; and

  (7) If the applicant is applying for poverty funding under Regulation .06F of this chapter, an agreement that the majority of the persons served by the applicant shall be poverty-designated clients, as defined in Regulation .06F of this chapter, for each year for a period of 30 years following the completion or acquisition of the facility.

F. If the application meets all pertinent criteria, the Secretary may approve that application and may recommend the application to the Board of Public Works, together with a written report stating that:

  (1) Notice and information in the application have been provided to the State Clearinghouse;

  (2) The application has been approved by the Secretary, and when a federal grant is involved, the application has also been approved by the Secretary of Health and Human Services or other appropriate federal authority under provisions of federal regulations; and

  (3) The Secretary recommends that the Board of Public Works make available to the applicant State grant funds.

#### Regulation .05 Priority of Awards.

*COMAR 10.08.03.05*

The Department shall determine the priority of applicants to be awarded State grant funds after consideration of:

A. All eligible applications;

B. The 5-year plan of the Medical Assistance Policy Administration for these services;

C. Priorities as established by the Department;

D. The reasonableness of the projected capital, and operating costs and revenues, for the facility;

E. The availability of State grant funds;

F. The total of unallocated State grant funds available at the time the application is received; and

G. The readiness of the project to go before the Board of Public Works.

#### Regulation .06 Grant Limitations and Provisions.

*COMAR 10.08.03.06*

A. The provisions of these regulations apply to applicants for grants under the Act.

B. Alternative Public Building. State funds may be used to acquire an existing building or part of a building for use as an adult day care center, or to plan, design, and construct an adult day care center, only if the local government and the Department certify to the Board of Public Works that a surplus school building or other public building appropriate for use as an adult day care center does not exist in the area where it is desired to locate a center.

C. Use of Federal Grants. Any federal grants available for a project shall be applied first to the cost of the project, before a State grant is expended.

D. Community Development Block Grants. Community development block grants are considered as local matching funds and are not considered as federal grant funds.

E. Limits on State Grant.

  (1) For a project without federal participation, a State grant may not be more than:

    (a) 50 percent of eligible costs, unless the project is approved for poverty funding; or

    (b) 75 percent of eligible costs, if a project is approved for poverty funding.

  (2) For a project with federal participation, a State grant may not be more than:

    (a) 50 percent of the eligible costs remaining after the federal grant has been applied, unless the project is approved for poverty funding; or

    (b) 75 percent of eligible costs remaining after the federal grant has been applied, if a project is approved for poverty funding.

  (3) An applicant is not eligible for retroactive participation in the cost of acquisition, construction, renovation, or purchase of equipment.

  (4) The grant shall include only those expenditures incurred or contracted for after the grant award is approved by the Board of Public Works, except as provided in §G of this regulation.

F. Poverty Fundings. An applicant is eligible for poverty funding for a facility if the majority of individuals served by the facility:

  (1) Are certified by a local department of social services as eligible for General Public Assistance or Medical Assistance;

  (2) Are eligible for Supplemental Security Income benefits; or

  (3) Have income levels which do not exceed 150 percent of the federal poverty level.

G. Application Costs.

  (1) An applicant shall pay the costs necessary to file the application, such as the costs for appraisals, architects' fees, surveys, and test borings.

  (2) If the project is recommended for funding by the Department, the Department shall review the costs expended under §G(1) of this regulation and may recommend those costs to the Board of Public Works for inclusion in the grant award.

H. Matching Funds.

  (1) The applicant shall provide from other sources matching funds equal to the total eligible cost of the project less the State grant award.

  (2) An applicant may not expend matching funds before the State grant award, unless the Board of Public Works approves otherwise.

  (3) The Department may not consider real or personal property, in-kind contributions, or, unless approved by the Board of Public Works under §H(2) of this regulation, funds expended before the date a grant award is approved by the Board of Public Works as matching funds.

I. Prohibition Against Use of Funds for Religious Purposes.

  (1) A grantee may not use any portion of the proceeds of a State grant:

    (a) For the furtherance of sectarian religious instruction; or

    (b) In connection with the design, acquisition, or construction of any building used, or to be used, as a place of sectarian religious worship or instruction, or in connection with any program or department of divinity for any religious denomination.

  (2) Upon the request of the Board of Public Works, the grantee shall submit evidence satisfactory to the Board that none of the proceeds of the grant has been, or is being, used for a purpose prohibited by the Act.

#### Regulation .07 Use of Funds for Site Acquisition and Renovation.

*COMAR 10.08.03.07*

A. If the applicant is using both State funds and federal grant funds for site acquisition and renovation, then at least two State-approved appraisers shall determine that portion of the total cost applicable to the land site alone. The Department shall exclude this cost from State participation.

B. If the applicant is acquiring a site with existing improvements and renovating the improvements for use as an adult day care center, and if the applicant will not be using a federal grant, then the total project costs, including costs applicable to the acquisition of this site and existing improvements, are eligible for State participation.

C. In the circumstances outlined in §B of this regulation, at least two State-approved appraisers shall make an estimate of the market value of the site and existing improvements. State participation is limited to the lesser of the value approved by the Department of General Services based upon the appraisals or actual acquisition cost.

D. If an applicant proposes to acquire a land site on which to construct a facility, the cost of the land is not eligible for State participation.

#### Regulation .08 Residual Requirements of the Grantee.

*COMAR 10.08.03.08*

A. Annual Requirements.

  (1) For a period of 30 years following the completion of conversion, acquisition, renovation, capital equipping, or construction of an adult day care center involving the State grant funds in this chapter, a grantee shall file a written statement annually with the Department, containing the following material:

    (a) The number of personnel employed at the facility, by occupation, and all remunerations, retainers, perquisites, and expenses currently paid;

    (b) Fees or retainers paid directly or under contract to consultants and other persons rendering services at the facility;

    (c) A current, certified, audited profit-and-loss statement and balance sheet for the facility;

    (d) Rates and fees charged for services provided at the facility;

    (e) Gifts or endowments received during the current year;

    (f) Volume of service at the adult day care center, such as days of service rendered to clients; and

    (g) Other supplemental information required by the Secretary.

  (2) For a period of 30 years following the completion of a project that receives poverty funding under Regulation .06F of this chapter, the grantee shall submit annually a quantitative statement of its performance in serving poverty-designated clients, as described in Regulation .06F of this chapter.

B. Insurance Requirements.

  (1) The grantee shall provide builders' risk insurance during the entire period of project construction or renovation as follows:

    (a) The policy shall name the State as a loss payee;

    (b) The policy shall be endorsed to protect the State's interest in the building;

    (c) The coverage shall be for an amount at least equal to the replacement cost of the facility; and

    (d) The grantee shall submit evidence of this insurance to the Office of Capital Planning, Budgeting, and Engineering Services.

  (2) Upon acquisition of a building or part of a building, the grantee shall provide all-risk insurance coverage as follows:

    (a) The coverage shall be for an amount at least equal to the replacement cost of the facility;

    (b) The policy shall name the State as a loss payee;

    (c) The policy shall be endorsed to protect the State's interest in the project;

    (d) The policy shall be endorsed to notify the Office of Capital Planning, Budgeting, and Engineering Services, 201 West Preston Street, Baltimore, Maryland 21201 of any:

      (i) Notification of cancellation of the policy,

      (ii) Material loss covered by the policy, and

      (iii) Material changes in the policy; and

    (e) The grantee shall:

      (i) Maintain this insurance for a period of 30 years, and

      (ii) Submit evidence of this insurance annually to the Office of Capital Planning, Budgeting, and Engineering Services and to the State Treasurer’s Office, Insurance Division.

  (3) Upon completion of a project, the grantee shall maintain, for a period of 30 years, all-risk insurance coverage as follows:

    (a) The coverage shall be for an amount at least equal to the replacement cost of the facility;

    (b) The policy shall name the State as a loss payee;

    (c) The policy shall be endorsed to protect the State's interest in the project;

    (d) The policy shall be endorsed to notify the Office of Capital Planning, Budgeting, and Engineering Services, 201 West Preston Street, Baltimore, Maryland 21201 of any:

      (i) Notification of cancellation of the policy,

      (ii) Material loss covered by the policy, and

      (iii) Material changes in the policy; and

    (e) The grantee shall submit evidence of this insurance annually to the Office of Capital Planning, Budgeting, and Engineering Services and to the State Treasurer’s Office, Insurance Division.

C. During the entire period of work on the project and for a period of 30 years after the project has been completed or acquired, the grantee shall make available business records of the adult day care center for verification by representatives of the Department or its designated agent.

D. Extension of Time for Completion, and Other Changes.

  (1) The applicant shall promptly notify the Secretary if the applicant is unable to encumber funds:

    (a) In the manner approved by the Secretary; or

    (b) Within 2 years of the appropriation by the Maryland legislature.

  (2) The Secretary may grant a request by the applicant for a change in the manner or time for encumbrance of funds, including an extension of time, for good cause.

E. Expenditures. State funds may not be expended until the grantee is in compliance with §B(1) and (2)(a)—(d) of this regulation, and a notice of the right of recovery is recorded in the land records of the county or Baltimore City in which the property is located.

F. Penalties. If the grantee does not comply with §§A, B(2) and (3), and C of this regulation, the Secretary may:

  (1) Refuse to consider the grantee for any future funding under the Act; and

  (2) Require an audit of the grantee.

#### Regulation .09 Right of Recovery.

*COMAR 10.08.03.09*

In the event of default under the terms of the Act and this chapter, an adult day care center financed pursuant to this chapter is subject to the State's right of recovery as set forth in the Act.

### Chapter 04 — Construction Funds for Public and Nonprofit Assisted Living Facilities

**Authority:** Health-General Article, §§24-1001—24-1007, Annotated Code of Maryland

**Administrative History:** Effective date: December 10, 2001 (28:24 Md. R. 2128)

**Administrative History:** Regulation .02B amended effective March 26, 2018 (45:6 Md. R. 319)

**Administrative History:** Regulation .05A amended effective March 26, 2018 (45:6 Md. R. 319)

**Administrative History:** Regulation .10B amended effective March 9, 1998 (25:5 Md. R. 369); March 26, 2018 (45:6 Md. R. 319)

#### Regulation .01 Scope.

*COMAR 10.08.04.01*

A. This chapter governs the administration of State grant funds to counties, municipal corporations, and nonprofit organizations for conversion, acquisition, renovation, equipping, and construction of assisted living facilities under the Assisted Living Facilities Grant Program, Health-General Article, §§24-1001—24-1007, Annotated Code of Maryland.

B. It is the intent of the Department that State grant funds be used:

  (1) To assist eligible applicants with the conversion, acquisition, renovation, equipping, and construction of assisted living facilities, eligible under the Act in accordance with this chapter; and

  (2) After the applicant has secured all funds available from other sources.

#### Regulation .02 Definitions.

*COMAR 10.08.04.02*

A. In this chapter, the following terms have the meanings indicated.

B. Terms Defined.

  (1) “Acquisition” means purchasing and obtaining ownership of all or part of an existing building for use as an assisted living facility.

  (2) “Act” means Health-General Article, §§24-1001—24-1007, Annotated Code of Maryland, which authorizes the disbursement of State grant funds for the purposes of conversion, acquisition, renovation, equipping, and construction of an assisted living facility.

  (3) “Admission criteria” means criteria established by a facility for admitting individuals including limitations, if any, regarding age or level of functional medical impairment, or both.

  (4) “Assisted living facility” means a residential facility or facility-based program that:

    (a) Meets the definitions in Health-General Article, §19-1801, Annotated Code of Maryland; and

    (b) Is licensed by the Department under COMAR 10.07.14.

  (5) “Applicant” means a county, municipal corporation, or nonprofit organization that seeks to obtain State grant funds under the Act.

  (6) “Board of Public Works” means the Board established by Article XII of the Constitution of Maryland, consisting of the Governor, the Treasurer, and the Comptroller of Maryland.

  (7) “Building” means:

    (a) All or part of an existing assisted living facility and its surrounding real property;

    (b) All or part of an existing facility to be converted to assisted living and its surrounding real property; or

    (c) A facility proposed to be constructed for use as an assisted living facility, and its surrounding real property.

  (8) Construction.

    (a) “Construction” means construction of new buildings or additions to existing buildings, including architects' fees and initial capital equipment.

    (b) “Construction” does not include cost of:

      (i) Demolition of improvements that return the land to unimproved condition; and

      (ii) Unimproved land acquisition and the cost of off-site infrastructure improvements, such as roads, water, and sewer.

  (9) “Conversion” means the work required to transform a building or part of a building for effective use as an assisted living facility.

  (10) “Default” means:

    (a) Transfer of property to a person, agency, or organization that would not qualify as an applicant, or that is not approved as a transferee by the Board of Public Works;

    (b) Failure to complete a project and obtain an occupancy permit;

    (c) Failure to commence operation of a facility within 1 year after obtaining an occupancy permit; or

    (d) Failure to qualify as a facility, as defined in §B(14) of this regulation.

  (11) “Department” means the Maryland Department of Health.

  (12) “Eligible person” means an individual who meets facility admission criteria.

  (13) “Eligible work” means that work for which the use of State funds is authorized under the Act.

  (14) “Facility” means an assisted living facility that is wholly owned by and operated under the authority of a:

    (a) County or municipal corporation; or

    (b) Nonprofit organization.

  (15) “Grant” means any funds competitively awarded from any source to the applicant including a State grant.

  (16) “Grantee” means a county, municipal corporation, or nonprofit organization for which State grant funds under the Act are approved by the Board of Public Works.

  (17) “Initial capital equipment” means items that:

    (a) With normal maintenance, have a life expectancy of at least 15 years;

    (b) Have durable construction; and

    (c) Are necessary to furnish a new facility.

  (18) “Nonprofit assisted living facility” means an assisted living facility which is wholly owned by and operated under the authority of a nonprofit organization.

  (19) “Nonprofit organization” means a bona fide religious organization, or a chartered nonprofit corporation which:

    (a) Is classified under §501(c)3 of the Internal Revenue Code as a nonprofit; and

    (b) Has no earnings which inure to the benefit of an individual or is used for any purpose other than the maintenance and operation of the facility, the purchase of equipment to be used in the facility, or the expansion of the facility.

  (20) “Office of Capital Planning, Budgeting, and Engineering Services” means the office within the Department designated by the Secretary to administer this chapter.

  (21) “Operating costs” means costs associated with the operation of an assisted living facility.

  (22) “Project” means an existing or proposed assisted living facility which receives or has received a State grant for conversion, acquisition, renovation, equipping, or construction.

  (23) “Public facility” means a facility that is wholly owned by and operated under the authority of a county or municipal corporation.

  (24) “Renovation” means restoration or modernization, or both, to an existing or proposed assisted living facility.

  (25) “Secretary” means the Secretary of Health, or a designated representative.

  (26) “State grant” means State funds awarded under the Assisted Living Facilities Grant Program, unless the context clearly implies otherwise.

  (27) “Wholly owned” includes leased property, if the lease agreement:

    (a) Is for a minimum of 30 years following the project completion or extends the right of purchase to the lessee; and

    (b) Includes a consent to the recording of a notice of the State's right of recovery, by the lessor, under Health-General Article, §24-1006, Annotated Code of Maryland, in the land records of the county or Baltimore City in which the facility is located.

#### Regulation .03 Use of State Grant Funds.

*COMAR 10.08.04.03*

A. State grant funds for assisted living facilities may be used for the following:

  (1) The conversion of public buildings or parts of buildings;

  (2) The acquisition of existing buildings or parts of buildings;

  (3) The renovation of assisted living facilities;

  (4) The purchase of initial capital equipment; or

  (5) The plan, design, and construction of an assisted living facility.

B. State grant funds may be used to acquire an existing building or part of a building or to plan, design, and construct an assisted living facility only if the local government and the Department certify to the Board of Public Works that a surplus public building appropriate for use as an assisted living facility does not exist in the area in which the proposed assisted living facility is to be located.

#### Regulation .04 Eligible Applicants for State Grant Funds.

*COMAR 10.08.04.04*

To be eligible to apply for State grant funds under the Act, an applicant shall:

A. Be a county, municipal corporation, or a nonprofit organization;

B. Sponsor a project involving work specified in Regulation .03A of this chapter;

C. Have relevant experience providing related health or human services or provide evidence of intent to contract with a provider of assisted living services; and

D. Certify that the proposed facility will meet the handicap-accessibility requirements of COMAR 10.07.14 and 42 U.S.C. §12101 et seq., or provide a certified waiver from the Department of Housing and Community Development.

#### Regulation .05 Application Procedure.

*COMAR 10.08.04.05*

A. An applicant shall apply for a State grant by filing an application with the Department on a form provided by the Department, and shall direct the completed application for State grant funds to the Office of Capital Planning, Budgeting, and Engineering Services.

B. The Department shall provide any notice and information to the State Clearinghouse for intergovernmental review that may be required under COMAR 14.24.04.

C. The applicant shall comply with all applicable federal and State laws and regulations in effect at the time of application, including COMAR 10.07.14.

D. At the time of filing the application, the applicant shall file a written statement with the Department containing the following material:

  (1) Current or intended program of services;

  (2) The number of personnel employed or to be employed at the facility, by occupation, and all perquisites, salaries, and any compensation paid, or to be paid, to the personnel;

  (3) Expenses incurred, or to be incurred, in carrying out qualified facility operations;

  (4) Schedule of rates charged, or to be charged, for services rendered at the facility;

  (5) Agreement to admit eligible persons on the basis of their need for services without regard to race, religion, national origin, color, or disability;

  (6) If an applicant is currently operating, a certified, audited profit-and-loss statement and balance sheet for the most recent year; and

  (7) If the applicant is applying for poverty funding under Regulation .08D of this chapter, an agreement that the majority of the individuals served by the applicant will be poverty-designated clients, as defined in Regulation .08D(2) of this chapter, for each year for a period of 30 years following the completion or acquisition of the facility.

E. The Secretary shall approve applications that meet the requirements of this regulation and the priorities of the Department.

#### Regulation .06 Amount of State Grant Awards.

*COMAR 10.08.04.06*

The Department shall determine the amount of the State grant for an applicant's project after consideration of the following:

A. All eligible applications;

B. Priorities of need as established by the Department;

C. The total unallocated State funds available in the Department's Administration-Sponsored Capital Programs for Assisted Living at the time the application is received;

D. The projected amount of anticipated appropriations as provided in the Governor's 5-Year Capital Improvement Program;

E. The reasonableness of the total cost of the project; and

F. Current operating costs or the reasonableness of a projected budget and revenues for the facility.

#### Regulation .07 Recommendation of State Grant Awards.

*COMAR 10.08.04.07*

A. The Department shall determine whether the approved application is to be recommended to the Board of Public Works for award of State grant funds after consideration of the following:

  (1) The availability of State grant funds;

  (2) The receipt of satisfactory evidence from the applicant of the following requirements:

    (a) Sufficient total financial contribution to complete the project;

    (b) Control of site, such as deed or lease;

    (c) Compliance with applicable local zoning requirements;

    (d) Certification that the project site is located in a State-approved Smart Growth area;

    (e) Certified bid tabulation, construction contract, contract of sale, or 30-year lease agreement with landlord, contingent on Board of Public Works approval; and

    (f) Compliance with all other applicable provisions of State or federal law; and

  (3) Whether the local government has certified to the Department that a surplus public building appropriate for use as an assisted living facility does not exist in the area in which the facility is to be located, if a new building is to be constructed.

B. Upon satisfactory completion of §A(1) and (2) of this regulation, the Secretary shall recommend to the Board of Public Works that a State grant be made to the approved applicant, together with a written report:

  (1) Stating that a notice, including information in the application, has been provided to the State Clearinghouse;

  (2) Stating that the application has been approved by the Secretary;

  (3) Stating the amount of a federal grant, if any is involved, that has been awarded to the applicant;

  (4) If required, stating that the local government has certified that there is no surplus public building; and

  (5) If required, certifying that there is no surplus public building.

#### Regulation .08 Grant Limitations and Provisions.

*COMAR 10.08.04.08*

A. Use of Federal Grants and Other Grants.

  (1) Any federal or other grant that is received for an eligible project shall be applied first to the cost of the project.

  (2) All other sources of funds shall be expended before the State grant is expended on an approved project.

B. Limits of State Grant.

  (1) Except as provided in §D(1) and (2) of this regulation, a State grant may not exceed 50 percent of the cost of eligible work remaining unpaid after all federal and other grants have been applied.

  (2) A State grant may not be used for retroactive participation in the cost of conversion, construction, renovation, acquisition, or purchase of equipment.

  (3) The State grant may include only those costs incurred or obligations contracted for after the application has been approved by the Department.

  (4) Costs necessary and appropriate for filing an application, such as appraisals, surveys, and test borings, shall be paid by the applicant. These costs may be approved for funding by the Board of Public Works, if the project is approved by the Board of Public Works.

  (5) State grant funds may not be used to pay certain costs. These costs include:

    (a) Closing costs;

    (b) Noncapital equipment;

    (c) Consultant services;

    (d) Land;

    (e) Off-site improvements; and

    (f) Amounts that exceed the appraised value of the real property.

C. Exceptions on State Grant Limits.

  (1) The Department may request Board of Public Works approval for a State grant to exceed 50 percent of the cost of eligible work remaining unpaid after all federal and other grants have been applied, if:

    (a) The project involves the conversion of a public building or part of a building to an assisted living facility, the renovation of an assisted living facility, or the planning, design, and construction of an assisted living facility;

    (b) The value of real property and improvements made available by the local government, or the value of the center to be renovated, equals or exceeds the amount of the State grant;

    (c) State funds have not been used for the acquisition, construction, or maintenance of any real property and improvements made available by the local government or any building to be converted or renovated; and

    (d) The State is not responsible for any bonded indebtedness in connection with any real property and improvements made available by the local government or any building to be converted or renovated.

  (2) A project designated as eligible for poverty area under §D of this regulation may receive a State grant to cover up to 75 percent of the cost of eligible work remaining unpaid after all federal and other grants have been applied.

D. Poverty Area Funding. An applicant is eligible for poverty area funding for a facility if:

  (1) The project complies with all applicable federal regulations and State plans or Departmental regulations; and

  (2) The majority of individuals served by the facility:

    (a) Are certified by a local department of social services as eligible for General Public Assistance or Medical Assistance;

    (b) Are eligible for Supplemental Security Income benefits; or

    (c) Have income levels which do not exceed 150 percent of the federal poverty level.

E. Funding Contribution Requirements

  (1) The applicant shall provide, from other sources, funds equal to the total cost of the eligible project less the State grant award.

  (2) The applicant shall assume the risk of all costs associated with the project that are incurred before the date of approval of a State grant award by the Board of Public Works.

  (3) An applicant may not expend the State grant award before other sources of funds are expended unless the Board of Public Works approves otherwise.

  (4) The Department may not consider as contributions:

    (a) Real or personal property;

    (b) In-kind contributions; or

    (c) Unless approved by the Board of Public Works under §B(4) of this regulation, funds expended before the date a grant award is approved by the Board of Public Works.

F. Prohibition Against Use of the Project for Purposes Other Than Assisted Living.

  (1) A grantee may not use a project funded by a State grant primarily:

    (a) For the furtherance of sectarian religious instruction or services;

    (b) As a place of sectarian religious worship or instruction, or primarily in connection with any program or department of divinity for any religious denomination; or

    (c) For any purpose other than assisted living.

  (2) Upon the request of the Board of Public Works, the grantee shall submit evidence satisfactory to the Board that none of the proceeds of the grant has been, or is being, used for a purpose prohibited by the Act.

#### Regulation .09 Use of Funds for Acquisition and Renovation.

*COMAR 10.08.04.09*

A. If the applicant is acquiring a site with existing improvements, and the existing improvements are to be renovated for or used for an assisted living facility, the total project costs may be eligible for State participation.

B. In the circumstances outlined in §A of this regulation, at least two State-approved appraisers shall provide appraisals of the site and existing improvements to be acquired. State participation shall be limited to the lesser of the appraised value approved by the Department of General Services based upon the appraisals or the actual acquisition cost.

C. If an applicant proposes to acquire an unimproved land site on which to construct a facility, the cost of the land is not eligible for State participation.

#### Regulation .10 Residual Requirements of the Grantee.

*COMAR 10.08.04.10*

A. Annual Requirements.

  (1) For a period of 30 years following the completion of conversion, acquisition, renovation, capital equipping, or construction of an assisted living facility involving the State grant funds in this chapter, a grantee shall file a written statement annually with the Department containing the following material:

    (a) A recent certified, audited profit-and-loss statement and balance sheet for the facility;

    (b) Volume of service at the assisted living facility, such as days of service rendered to clients; and

    (c) Other supplemental information required by the Secretary.

  (2) For a period of 30 years following the completion of a project that receives poverty funding under Regulation .07D of this chapter, the grantee shall submit annually a quantitative statement of its performance in serving poverty-designated clients.

B. Insurance Requirements.

  (1) Upon acquisition of the project, the grantee shall provide an all-risk insurance policy that:

    (a) Provides coverage for an amount at least equal to the replacement cost of the facility;

    (b) Names the State as a loss payee;

    (c) Protects the State's interest in the project; and

    (d) Requires notification of the Office of Capital Planning, Budgeting, and Engineering Services, 201 West Preston Street, Baltimore, Maryland 21201 of any:

      (i) Cancellation of policy;

      (ii) Material loss covered by the policy; or

      (iii) Material changes in the policy.

  (2) The grantee shall provide builders' risk insurance coverage during the entire period of project construction or renovation that:

    (a) Names the State as a loss payee;

    (b) Protects the State's interest in the building;

    (c) Provides an amount at least equal to the replacement cost of the facility; and

    (d) Requires evidence of the coverage be submitted to the Office of Capital Planning, Budgeting, and Engineering Services, 201 West Preston Street, Baltimore, Maryland 21201.

  (3) Upon completion of a project, the grantee shall maintain, for a period of 30 years, an all-risk insurance policy that:

    (a) Provides coverage for an amount at least equal to the replacement cost of the facility;

    (b) Names the State as a loss payee;

    (c) Protects the State's interest in the project;

    (d) Requires notification of the Office of Capital Planning, Budgeting, and Engineering Services, 201 West Preston Street, Baltimore, Maryland 21201 of any:

      (i) Cancellation of policy;

      (ii) Material loss covered by the policy; or

      (iii) Material changes in the policy.

  (4) The grantee shall maintain and submit evidence of this insurance annually, for a period of 30 years, to the Office of Capital Planning, Budgeting, and Engineering Services and to the State Treasurer’s Office, Insurance Division.

C. During the entire period of work on the project and for a period of 30 years after the project has been completed or acquired, the Department may audit the business records of the applicant and the applicant's agents, contractors, or assigns.

D. Extension of Time for Completion, and Other Changes.

  (1) The applicant shall promptly notify the Secretary, if the applicant is unable to encumber funds:

    (a) In the manner approved by the Secretary; or

    (b) Within 2 years of the appropriation by the Maryland legislature.

  (2) For good cause the Secretary may grant a request by the applicant for a change in the manner or time for encumbrance of funds, including an extension of time.

  (3) Upon a demonstration of good cause for an extension of time, the Secretary may grant an extension of an additional 180 days to encumber funds.

  (4) Absent good cause, the applicant shall be ineligible for grant funds. The applicant may apply for funds in future years.

E. Expenditures. State funds may not be released until the applicant has a notice of the right of recovery recorded in the land records of the county or Baltimore City in which the property is located, and the applicant is in compliance with this chapter and applicable federal and State laws.

F. Penalties. If the grantee does not comply with this chapter and all other applicable State and federal laws, the Secretary may:

  (1) Refuse to consider the grantee for any future funding under the Act;

  (2) Require an audit of the grantee;

  (3) Notify the Office of Health Care Quality; and

  (4) Take other action as appropriate.

#### Regulation .11 Right of Recovery.

*COMAR 10.08.04.11*

In the event of default under the terms of the Act and this chapter, an assisted living facility financed pursuant to this chapter is subject to the State's right of recovery as set forth in the Act.

### Chapter 05 — Construction Funds for Federally Qualified Health Centers

**Authority:** Health-General Article, §§24-1301—24-1307, Annotated Code of Maryland

**Administrative History:** Effective date: April 24, 2006 (33:8 Md. R. 732)

**Administrative History:** Regulation .02B amended effective March 26, 2018 (45:6 Md. R. 319)

**Administrative History:** Regulation .05A amended effective March 26, 2018 (45:6 Md. R. 319)

**Administrative History:** Regulation .10B amended effective March 26, 2018 (45:6 Md. R. 319)

#### Regulation .01 Scope.

*COMAR 10.08.05.01*

A. This chapter governs the administration of State grant funds to counties, municipal corporations, nonprofit corporations and other entities, hereinafter “entities”, that are authorized for funding under §330 of the Public Health Service Act (42 U.S.C. 254b) administered by the United States Department of Health and Human Services, Health Resources and Services Administration, Bureau of Primary Health Care. These grants are for the conversion, acquisition, renovation, equipping, and construction of federally qualified health centers under the Federally Qualified Health Centers Grant Program, Health-General Article, §§24-1301—24-1307, Annotated Code of Maryland.

B. It is the intent of the Department that State grant funds be used:

  (1) To assist eligible applicants with the conversion, acquisition, renovation, equipping, and construction of federally qualified health centers, eligible under the Act in accordance with this chapter; and

  (2) After the applicant has secured all funds available from other sources.

#### Regulation .02 Definitions.

*COMAR 10.08.05.02*

A. In this chapter, the following terms have the meanings indicated.

B. Terms Defined.

  (1) “Acquisition” means purchasing and obtaining ownership of all or part of an existing building for use as a federally qualified health center.

  (2) “Act” means Health-General Article, §§24-1301—24-1307, Annotated Code of Maryland, which authorizes the disbursement of State grant funds for the purposes of conversion, acquisition, renovation, equipping, and construction of a federally qualified health center.

  (3) “Admission criteria” means criteria established by a facility for admitting individuals including limitations, if any.

  (4) “Applicant” means a qualified entity that has submitted an application.

  (5) “Application” means the forms required and published by the Department, and submitted by the applicant to the Office of Capital Planning, Budgeting, and Engineering Services, to apply for a State grant for a project.

  (6) “Board of Public Works” means the Board established by Article XII of the Constitution of Maryland, consisting of the Governor, the Treasurer, and the Comptroller of Maryland.

  (7) “Building” means:

    (a) All or part of an existing federally qualified health center;

    (b) All or part of an existing facility to be converted to a federally qualified health center; or

    (c) A facility proposed to be constructed on a designated site for use as a federally qualified health center.

  (8) “Capital equipment” means items that:

    (a) With normal maintenance, have a life expectancy of at least 15 years; and

    (b) Have durable construction.

  (9) Construction.

    (a) “Construction” means construction of new buildings or additions to existing buildings, including architects' fees and capital equipment.

    (b) “Construction” does not include cost of:

      (i) The demolition of improvements that return the land to unimproved condition;

      (ii) The acquisition of unimproved land, and

      (iii) The construction of off-site infrastructure improvements, such as roads, water, and sewer.

  (10) “Conversion” means the work required to transform a building or part of a building for effective use as a federally qualified health center.

  (11) “Default” means:

    (a) Transfer of property that has ceased to be a federally qualified health center to any person, agency, or organization that would not qualify as an applicant, or that is not approved as a transferee by the Board of Public Works;

    (b) Failure to complete a project and to obtain a required occupancy permit;

    (c) Failure to commence operation of a facility within 1 year after obtaining an occupancy permit; or

    (d) Failure to qualify as a facility, as defined in §B(15) of this regulation.

  (12) “Department” means the Maryland Department of Health.

  (13) “Eligible person” means an individual who meets facility admission criteria.

  (14) “Eligible work” means work for which the use of State funds is authorized under the Act.

  (15) “Facility” means a building that is wholly owned by and operated under the authority of a federally qualified health center.

  (16) “Federally qualified health center” has the meaning stated in Health-General Article, §24-1301, Annotated Code of Maryland.

  (17) “Grant” means any funds competitively awarded from any source to the applicant including a State grant.

  (18) “Grantee” means a federally qualified health center that receives State grant funds under the Act, which are approved by the Board of Public Works.

  (19) “Nonprofit organization” has the meaning stated in Health-General Article, §24-1301, Annotated Code of Maryland.

  (20) “Office of Capital Planning, Budgeting, and Engineering Services” means the unit within the Department designated by the Secretary to administer this chapter.

  (21) “Operating costs” means costs associated with the operation of a federally qualified health center.

  (22) “Project” means a proposed scope of work for the conversion, acquisition, renovation, equipping or construction of a facility.

  (23) “Qualified entity” means:

    (a) An entity designated as a federally qualified health center;

    (b) A nonprofit organization seeking a “new start” status;

    (c) A federally qualified health center applying for a new site designation; or

    (d) A federally qualified health center applying for a “change of scope” under the Federal Public Health Service Act, §330 (42 U.S.C. §254b) that:

      (i) Has been invited by the Health Resources Services Administration to submit a full application for federally qualified health center designation; and

      (ii) Seeks to obtain State grant funds under the Act.

  (24) “Renovation” means restoration or modernization, or both, to an existing or proposed Federally Qualified Health Center.

  (25) “Retroactive expenditure” means any cost incurred or contracted for before the application for conversion, construction, acquisition, renovation, and equipment has been received and approved by the Secretary.

  (26) “Secretary” means the Secretary of Health, or a designated representative.

  (27) “State grant” means State funds awarded under the Federally Qualified Health Centers Grant Program, unless the context clearly implies otherwise.

  (28) “Wholly owned” includes leased property, if the lease agreement:

    (a) Is for a minimum of 15 years following the project completion or extends the right of purchase to the lessee; and

    (b) Includes a consent to the recording of a notice of the State's right of recovery, by the lessor, under Health-General Article, §24-1306, Annotated Code of Maryland, in the land records of the county or Baltimore City in which the facility is located.

#### Regulation .03 Use of State Grant Funds.

*COMAR 10.08.05.03*

State grant funds for federally qualified health centers shall be used solely for approved projects that involve:

A. Conversion of public buildings or parts of buildings;

B. Acquisition of existing buildings or parts of buildings;

C. Renovation of a facility;

D. Purchase of capital equipment; or

E. Planning, design, and construction of a facility.

#### Regulation .04 Eligible Applicants for State Grant Funds.

*COMAR 10.08.05.04*

To be eligible to apply for State grant funds under the Act, an applicant shall:

A. Be a qualified entity;

B. Sponsor a project involving work specified in Regulation .03 of this chapter; and

C. Certify that the proposed facility will meet the handicap-accessibility requirements of 42 U.S.C. 12101 et seq., or provide a certified waiver from the Department of Housing and Community Development.

#### Regulation .05 Application Procedure.

*COMAR 10.08.05.05*

A. An applicant shall apply for a State grant by completing an application with the Department on a form provided by the Department, and shall file the completed application for State grant funds with the Office of Capital Planning, Budgeting, and Engineering Services.

B. The Department shall provide any notice and information to the State Clearinghouse for Intergovernmental Assistance that may be required under COMAR 14.24.04.

C. The applicant shall comply with all applicable federal and State laws and regulations in effect at the time of application.

D. At the time of filing the application, the applicant shall file a written statement with the Department containing the following information or material:

  (1) Current or intended program of services;

  (2) The number of personnel employed or to be employed at the facility, by occupation, and all perquisites, salaries, and any compensation paid, or to be paid, to the personnel;

  (3) Expenses incurred, or to be incurred, in carrying out qualified facility operations;

  (4) Schedule of rates charged, or to be charged, for services rendered at the facility;

  (5) Agreement to admit eligible persons on the basis of their need for services without regard to race, religion, national origin, color, or disability;

  (6) If an applicant is currently operating as a federally qualified health center, a certified, audited profit-and-loss statement and balance sheet for the most current year;

  (7) If the applicant is applying for poverty funding under Regulation .08D of this chapter, an agreement that the majority of the individuals served by the applicant will be poverty-designated clients, as defined in Regulation .08D(2) of this chapter, for each year for a period of 30 years following the completion or acquisition of the facility; and

  (8) Letter from Health Resources Services Administration (HRSA) granting federally qualified health center status to the nonprofit and designated site or a letter from HRSA stating that the “need” score in the applicant's letter of intent is competitive and invites the applicant to submit a full application for designation as a federally qualified health center.

E. The Secretary shall approve applications that meet the requirements of this regulation and that set forth the priorities of the Department as stipulated in the annual application instructions.

#### Regulation .06 Amount of State Grant Awards.

*COMAR 10.08.05.06*

The Department shall determine the amount of the State grant, if any, for an applicant's approved project after consideration of the following:

A. All approved applications;

B. Priorities of need as established by the Department;

C. The total unallocated State funds available in the Department's Administration-Sponsored Capital Programs for federally qualified health centers;

D. The projected amount of anticipated appropriations as provided in the Governor's Five-Year Capital Improvement Program;

E. The reasonableness of the total cost of the project; and

F. Current operating costs or the reasonableness of a projected budget and revenues for the facility.

#### Regulation .07 Recommendation of State Grant Awards.

*COMAR 10.08.05.07*

A. The Department shall determine whether the application is to be recommended to the Board of Public Works for award of State grant funds after consideration of the following:

  (1) The availability of State grant funds;

  (2) The receipt of satisfactory evidence from the applicant of the following requirements:

    (a) Sufficient total financial contribution to complete the project;

    (b) Control of site, such as deed or lease;

    (c) Compliance with applicable local zoning requirements;

    (d) Certified bid tabulation, construction contract, contract of sale, or 30-year lease agreement with landlord, contingent upon Board of Public Works approval; and

    (e) Compliance with all other applicable provisions of State or federal law.

B. Upon satisfactory completion of §A of this regulation, the Secretary shall recommend to the Board of Public Works that a State grant be made to the approved applicant, together with a written report stating that:

  (1) A notice, including information in the application, has been provided to the State Clearinghouse for Intergovernmental Assistance;

  (2) The application has been approved by the Secretary;

  (3) The amount of a federal grant, if any is involved, that has been awarded to the applicant;

#### Regulation .08 Grant Limitations and Provisions.

*COMAR 10.08.05.08*

A. Use of Federal Grants.

  (1) Any federal grant that is received for an eligible project shall be applied first to the cost of the project.

  (2) Community Development Block Grants are considered as local matching funds and are not considered as federal grant funds.

  (3) All other sources of funds shall be expended before any or all of the State grant is expended on an approved project.

B. Limits of State Grant.

  (1) Except as provided in §D of this regulation, a State grant may not exceed 50 percent of the cost of eligible work remaining unpaid after all federal grants have been applied.

  (2) A State grant may not be used to fund participation in retroactive expenditures.

  (3) A State grant may include only those costs incurred or obligations contracted for eligible work after the application has been approved by the Secretary.

  (4) Costs necessary and appropriate for filing an application, such as appraisals, surveys, and test borings, shall be paid by the applicant. These costs may be approved for funding by the Board of Public Works, if the project is approved by the Board of Public Works.

  (5) State grant funds may not be used to pay the following costs:

    (a) Closing costs;

    (b) Noncapital equipment;

    (c) Consultant services;

    (d) Land;

    (e) Off-site improvements; and

    (f) Amounts that exceed the appraised value of the real property.

C. Exceptions on State Grant Limits. A project designated as eligible for poverty area funding under §D of this regulation may receive a State grant to cover up to 75 percent of the cost of eligible work remaining unpaid after all federal grants have been applied.

D. Poverty Area Funding. An applicant is eligible for poverty area funding for a facility if:

  (1) The project is designated as eligible for poverty area funding under applicable federal regulations and State plans or Departmental regulations; and

  (2) The majority of individuals served by the facility:

    (a) Are enrolled in the Maryland Medical Assistance Program;

    (b) Are eligible for Supplemental Security Income benefits; or

    (c) Have income levels which do not exceed 150 percent of the federal poverty level.

E. Funding Contribution Requirements.

  (1) The grantee shall provide, from other sources, funds equal to the total cost of the eligible project less the State grant award.

  (2) The grantee shall assume the risk of all costs associated with the project that are incurred before the date of approval of a State grant award by the Board of Public Works.

  (3) A grantee may not expend the State grant award before other sources of funds are expended.

  (4) The Department may not consider as contributions:

    (a) Real or personal property;

    (b) In-kind contributions; or

    (c) Funds expended before an application is approved by the Secretary.

F. Prohibition Against Use of the Project for Purposes Other Than Federally Qualified Health Center.

  (1) A grantee may not use a project funded by a State grant:

    (a) For the furtherance of sectarian religious instruction or services;

    (b) As a place of sectarian religious worship or instruction;

    (c) In connection with any program or department of divinity for any religious denomination; or

    (d) For any purpose other than a federally qualified health center.

  (2) Upon the request of the Board of Public Works, the grantee shall submit evidence satisfactory to the Board that none of the proceeds of the grant have been used, or are being used, for a purpose prohibited by the Act.

#### Regulation .09 Use of Funds for Acquisition and Renovation.

*COMAR 10.08.05.09*

A. If the applicant is acquiring a site with existing improvements, and the existing improvements are to be renovated for or used for a federally qualified health center, the total project costs may be eligible for State participation.

B. In the circumstances outlined in §A of this regulation, at least two State-approved appraisers shall provide appraisals of the site and existing improvements to be acquired. State participation shall be limited to the lesser of the appraised value approved by the Department of General Services based upon the appraisals or the actual acquisition cost.

C. If an applicant proposes to acquire an unimproved land site on which to construct a facility, the cost of the land is not eligible for State participation.

#### Regulation .10 Residual Requirements of the Grantee.

*COMAR 10.08.05.10*

A. Annual Requirements.

  (1) For 30 years following the completion of conversion, acquisition, renovation, capital equipping, or construction of a federally qualified health center involving the State grant funds in this chapter, a grantee shall file a written statement annually with the Department containing the following material:

    (a) A recent certified, audited profit-and-loss statement and balance sheet for the facility;

    (b) The volume of service at the federally qualified health center, such as days of service rendered to clients; and

    (c) Other supplemental information required by the Secretary.

  (2) For 30 years following the completion of a project that receives poverty funding under Regulation .08D of this chapter, the grantee shall submit annually a quantitative statement of its performance in serving designated poverty-area clients.

B. Insurance Requirements.

  (1) Upon acquisition of the project, the grantee shall provide an all-risk insurance policy that:

    (a) Provides coverage for an amount at least equal to the replacement cost of the facility;

    (b) Names the State as a loss payee;

    (c) Protects the State's interest in the project; and

    (d) Requires notification of the Office of Capital Planning, Budgeting, and Engineering Services, 201 West Preston Street, Baltimore, Maryland 21201 of any:

      (i) Cancellation of policy;

      (ii) Material loss covered by the policy; or

      (iii) Material changes in the policy.

  (2) The grantee shall provide builders’ risk insurance coverage during the entire period of project construction or renovation up to and including the owner’s acceptance of the building that:

    (a) Names the State as a loss payee;

    (b) Protects the State's interest in the building;

    (c) Provides an amount at least equal to the replacement cost of the facility; and

    (d) Requires evidence of the coverage be submitted to the Office of Capital Planning, Budgeting, and Engineering Services, 201 West Preston Street, Baltimore, Maryland 21201.

  (3) Upon completion of a project, the grantee shall maintain, for 30 years, an all-risk insurance policy that:

    (a) Provides coverage for an amount at least equal to the replacement cost of the facility;

    (b) Names the State as a loss payee;

    (c) Protects the State's interest in the project;

    (d) Requires notification of the Office of Capital Planning, Budgeting, and Engineering Services, 201 West Preston Street, Baltimore, Maryland 21201 of any:

      (i) Cancellation of policy;

      (ii) Material loss covered by the policy; or

      (iii) Material changes in the policy.

  (4) The grantee shall maintain and submit evidence of this insurance annually, for a period of 30 years, to the Office of Capital Planning, Budgeting, and Engineering Services and to the State Treasurer’s Office, Insurance Division.

C. During the entire period of work on the project and for a period of 30 years after the project has been completed or acquired, the Department may audit the business records of the applicant and the applicant's agents, contractors, heirs, or assigns.

D. Extension of Time for Completion, and Other Changes.

  (1) The applicant shall notify the Secretary promptly and in any event, not later than 30 days after the applicant knew or should have reasonably have known that the applicant is unable to encumber funds:

    (a) In the manner approved by the Secretary; or

    (b) Within 2 years of the appropriation of the State Grant by the Maryland legislature.

  (2) For good cause the Secretary may grant a request by the applicant for a change in the manner or time for encumbrance of funds, including an extension of time.

  (3) Upon a demonstration of good cause for an extension of time, the Secretary may grant an extension of an additional 180 days to encumber funds.

E. Expenditures. State funds may not be released until the applicant:

  (1) Has recorded a notice of the State's Right of Recovery, as approved by the Secretary, in the land records of the county or Baltimore City in which the property is located; and

  (2) Is in compliance with this chapter and all applicable federal and State laws.

F. Penalties. If the grantee does not comply with this chapter and all other applicable State and federal laws, the Secretary may:

  (1) Refuse to consider the grantee for any future funding under the Act;

  (2) Require an audit of the grantee;

  (3) Notify the Department's Office of Health Care Quality; and

  (4) Take other action as appropriate.

#### Regulation .11 Right of Recovery.

*COMAR 10.08.05.11*

In the event of default under the terms of the Act and this chapter, a federally qualified health center financed pursuant to this chapter is subject to the State's right of recovery as set forth in the Act.

### Chapter 06 — Construction Funds for Conversion of Nursing Facilities

**Authority:** Health-General Article, §§24-1401—24-1408, Annotated Code of Maryland

**Administrative History:** Effective date: August 13, 2007 (34:16 Md. R. 1432)

#### Regulation .01 Scope.

*COMAR 10.08.06.01*

A. This chapter governs the administration of State grant funds for any county, municipal corporation, or nonprofit organization for the conversion of nursing facility beds to provide other health care services under the Nursing Facility Conversion Grant Program, Health-General Article, §§24-1401—24-1408, Annotated Code of Maryland.

B. It is the intent of the Department that State grant funds be used:

  (1) To assist eligible applicants with the conversion of existing nursing facilities eligible under the Act in accordance with this chapter; and

  (2) After the applicant has secured all funds available from other sources.

#### Regulation .02 Definitions.

*COMAR 10.08.06.02*

A. In this chapter, the following terms have the meanings indicated.

B. Terms Defined.

  (1) “Act” means Health-General Article, §§24-1401—24-1408, Annotated Code of Maryland, which authorizes the disbursement of State grant funds for the purposes of converting nursing facility beds to provide other health care services determined appropriate by the Department.

  (2) “Admission criteria” means criteria established by a facility for admitting individuals including limitations, if any.

  (3) “Applicant” means a county, municipal corporation, or nonprofit organization that has submitted an application.

  (4) “Application” means the forms required and published by the Department, and submitted by the applicant to the Office of Capital Planning, Budgeting, and Engineering Services, to apply for a State grant for a project.

  (5) “Board of Public Works” means the Board established by Article XII of the Constitution of Maryland, consisting of the Governor, the Treasurer, and the Comptroller of Maryland.

  (6) “Building” means all or part of an existing nursing facility;

  (7) “Capital equipment” means items that:

    (a) With normal maintenance, have a life expectancy of at least 15 years;

    (b) Have durable construction; and

    (c) Are necessary to furnish a new health service not previously provided by the facility.

  (8) “Construction” means an addition to an existing nursing facility building that results in the reduction of comprehensive care beds and therefore, the provision of other health care services.

  (9) “Conversion” means the work required to modify or adapt the interior arrangement and other physical characteristics of an existing nursing facility building, in order to transform the facility or part of the facility for uses as stipulated in the annual application instructions.

  (10) “Default” means:

    (a) Transfer of property to any person, agency, or organization that would not qualify as an applicant or that is not approved as a transferee by the Board of Public Works;

    (b) Failure to complete a project and to obtain required occupancy permit;

    (c) Failure to provide a new health service and commence operation within 1 year after obtaining an occupancy permit;

    (d) Failure to de-license a specified number of comprehensive nursing home beds; or

    (e) Failure to provide approved health care service upon which a grant was predicated for a period of 30 years after the completion of project.

  (11) “Department” means the Maryland Department of Health.

  (12) “Eligible person” means an individual who meets facility admission criteria.

  (13) “Eligible work” means that work for which the use of State funds is authorized under the Act.

  (14) “Facility” means:

    (a) A facility that meets the definition of Health-General Article, §19-1401(e), Annotated Code of Maryland;

    (b) A facility that is licensed by the Department; and

    (c) A nursing facility that is wholly owned by and operated under the authority of:

      (i) A county or a municipal corporation, or both; or

      (ii) A nonprofit nursing facility that is wholly owned by and operated under the authority of a nonprofit organization.

  (15) “Grant” means any funds competitively awarded from any source to the applicant including a State grant.

  (16) “Grantee” means a nursing facility that receives State grant funds under the Act, which are approved by the Board of Public Works.

  (17) “Nonprofit organization” has the meaning stated in Health-General Article, §24-1401, Annotated Code of Maryland.

  (18) “Office of Capital Planning, Budgeting, and Engineering Services” means the unit within the Department designated by the Secretary to administer this chapter.

  (19) “Operating costs” means costs associated with the operation of the new service.

  (20) “Other health care services” means those health care services determined appropriate by the Department as stipulated in the annual grant application instructions.

  (21) “Project” means the approved proposed scope of work by the Department for the renovation, construction, and equipping of a facility in order to convert existing nursing facility bed space for other health care services.

  (22) “Renovation” means restoration or modernization of space that results in the reduction of comprehensive care beds in an existing nursing facility.

  (23) “Retroactive expenditure” means any cost incurred or contracted for before the application for conversion has been received and approved by the Secretary.

  (24) “Secretary” means the Secretary of Health, or a designated representative.

  (25) “State grant” means State funds awarded under the Nursing Facility Conversion Grant Program.

  (26) “Wholly owned” has the meaning stated in Health-General Article, §24-1401, Annotated Code of Maryland.

#### Regulation .03 Use of State Grant Funds.

*COMAR 10.08.06.03*

State grant funds for nursing facilities under the Act shall be used solely for projects approved by the Department for the purpose of converting existing nursing facility beds to provide:

A. Other health care services;

B. Purchase of capital equipment; and

C. Planning, design, construction, and renovation of a facility.

#### Regulation .04 Eligible Applicants for State Grant Funds.

*COMAR 10.08.06.04*

A. To be eligible to apply for State grant funds under the Act, an applicant shall:

  (1) Be a county, municipal corporation, or a nonprofit organization;

  (2) Have a proposed project that is in accord with the priorities of the Secretary;

  (3) Be licensed by the Department;

  (4) Be eligible for certification under, and agree to participate in, Title XVIII and Title XIX of the Social Security Act;

  (5) Certify that the proposed facility will meet the accessibility requirements of 42 U.S.C. 12101 et seq., or provide a certified waiver from the Department of Housing and Community Development;

  (6) Not have had any of the following deficiencies cited in any survey conducted by the Department's Office of Health Care Quality during the calendar year preceding the grant application year, using the scope and severity matrix found in the Centers for Medicare and Medicaid Services State Operations Manual for Survey and Certification, Part 7, §7400E:

    (a) Two or more “G” level deficiencies; or

    (b) One or more “H” or higher-level deficiencies; and

  (7) Be approved by the Secretary to receive a grant award.

B. A provider operating a facility with any of the deficiencies described in §A(6) of this regulation may be eligible to apply for a grant if the facility has undergone a change in ownership as a result of an arm's length transaction as determined by the Department, since the latest survey that resulted in the deficiencies.

#### Regulation .05 Application Procedure.

*COMAR 10.08.06.05*

A. An applicant shall apply for a State grant by:

  (1) Completing an application with the Department on a form provided by the Department; and

  (2) Filing the completed application for State grant funds with the Office of Capital Planning, Budgeting, and Engineering Services.

B. The Department shall provide any notice and information to the State Clearinghouse for intergovernmental review that may be required under COMAR 14.24.04.

C. The applicant shall comply with all applicable federal and State laws and regulations in effect at the time of application.

D. At the time of filing the application, the applicant shall file a written statement with the Department containing the following information or material:

  (1) Current or intended program of services;

  (2) The number of personnel employed or to be employed at the facility, by occupation, and all perquisites, salaries, and any compensation paid, or to be paid, to the personnel;

  (3) Expenses incurred, or to be incurred, in carrying out qualified facility operations;

  (4) Schedule of rates charged, or to be charged, for services rendered at the facility;

  (5) Agreement to admit eligible persons on the basis of their need for services without regard to race, national origin, color, or disability;

  (6) A certified, audited profit-and-loss statement and balance sheet for the most current year; and

  (7) If the applicant is applying for poverty funding under Regulation .08D of this chapter, an agreement that the majority of the individuals served by the applicant will be poverty-designated clients, as defined in Regulation .08D(2) of this chapter, for each year for a period of 30 years following the completion of the conversion of the facility.

E. The Secretary shall recommend to the Board of Public Works applications that:

  (1) Meet the requirements of this regulation; and

  (2) Set forth the priorities of the Department as stipulated in the annual application instructions.

#### Regulation .06 Amount of State Grant Awards.

*COMAR 10.08.06.06*

The Department shall determine the amount of the State grant, if any, for an applicant's approved project after consideration of the following:

A. All approved applications;

B. Priorities of need as established by the Department;

C. The total unallocated State funds available for grants under the Act;

D. The projected amount of anticipated appropriations as provided in the Governor's Five-Year Capital Improvement Program;

E. The reasonableness of the total cost of the project; and

F. Current operating costs or the reasonableness of a projected budget and revenues for the facility.

#### Regulation .07 Recommendation of State Grant Awards.

*COMAR 10.08.06.07*

A. The Department shall determine whether the application is to be recommended to the Board of Public Works for award of State grant funds after consideration of the following:

  (1) The availability of State grant funds;

  (2) The receipt of satisfactory evidence from the applicant of the following requirements:

    (a) Documentation from the Maryland Health Care Commission that:

      (i) A certificate of need is not required for a decrease in bed capacity or conversion to an alternative health care facility or service proposed by the project; or

      (ii) An applicant has obtained a certificate of need, if required pursuant to Health-General Article, §19-120, Annotated Code of Maryland, for the proposed changes in bed capacity or license category, or to establish the new health care facility or service;

    (b) Sufficient total financial contribution to complete the project;

    (c) Control of site, such as deed or lease;

    (d) Compliance with applicable local zoning requirements;

    (e) Certified bid tabulation, construction contract; and

    (f) Compliance with all other applicable provisions of State or federal law.

B. Upon satisfactory completion of §A of this regulation, the Secretary shall recommend to the Board of Public Works that a State grant be made to the approved applicant, together with a written report stating that:

  (1) A notice, including information in the application, has been provided to the State Clearinghouse;

  (2) The application has been approved by the Secretary; and

  (3) The amount of a federal grant, if any is involved, that has been awarded to the applicant.

#### Regulation .08 Grant Limitations and Provisions.

*COMAR 10.08.06.08*

A. Use of Federal Grants.

  (1) Any federal grant that is received for an eligible project shall be applied first to the cost of the project.

  (2) Community development block grants are considered as local matching funds and are not considered as federal grant funds.

  (3) All other sources of funds shall be expended before any or all of the State grant is expended on an approved project.

B. Limits of State Grant.

  (1) Except as provided in §D of this regulation, a State grant may not exceed 50 percent of the cost of eligible work remaining unpaid after all federal grants have been applied.

  (2) A State grant may not be used to fund participation in retroactive expenditures.

  (3) A State grant may include only those costs incurred or obligations contracted for eligible work after the application has been approved by the Secretary.

  (4) State grant funds may not be used to pay the following costs:

    (a) Noncapital equipment;

    (b) Consultant services; or

    (c) Off-site improvements.

C. Exceptions on State Grant Limits. A project designated as eligible for poverty area funding under §D of this regulation may receive a State grant to cover up to 75 percent of the cost of eligible work remaining unpaid after all federal grants have been applied.

D. Poverty Area Funding. An applicant is eligible for poverty area funding for a facility if:

  (1) The project is designated as eligible for poverty area funding under applicable federal regulations and State plans or Departmental regulations; and

  (2) The majority of individuals served by the facility:

    (a) Are certified by a local department of social services as eligible for General Public Assistance or Medical Assistance;

    (b) Are eligible for Supplemental Security Income benefits; or

    (c) Have income levels which do not exceed 150 percent of the federal poverty level.

E. Funding Contribution Requirements.

  (1) The grantee shall provide, from other sources, funds equal to the total cost of the eligible project less the State grant award.

  (2) The grantee shall assume the risk of all costs associated with the project that are incurred before the date of approval of a State grant award by the Board of Public Works.

  (3) A grantee may not expend the State grant award before other sources of funds are expended.

  (4) The Department may not consider as contributions:

    (a) Real or personal property;

    (b) In-kind contributions; or

    (c) Funds expended before an application is approved by the Secretary.

  (5) A grantee may not use a project funded by a State grant primarily:

    (a) For the furtherance of sectarian religious instruction or services;

    (b) As a place of sectarian religious worship or instruction;

    (c) In connection with any program or department of divinity for any religious denomination.

  (6) Upon the request of the Board of Public Works, the grantee shall submit evidence satisfactory to the Board that none of the proceeds of the grant have been, or are being, used for a purpose prohibited by the Act.

#### Regulation .09 Residual Requirements of the Grantee.

*COMAR 10.08.06.09*

A. Annual Requirements.

  (1) For a period of 30 years following the conversion of nursing facility beds involving the State grant funds in this chapter, a grantee shall file a written statement annually with the Department containing the following material:

    (a) A recent certified, audited profit-and-loss statement and balance sheet for the facility;

    (b) Volume of service in the portion of the building converted with State grant funds, such as days of service rendered to clients; and

    (c) Other supplemental information required by the Secretary.

  (2) For a period of 30 years following the completion of a project that receives poverty funding under Regulation .08D of this chapter, the grantee shall submit annually a quantitative statement of its performance in serving designated poverty-area clients.

B. Insurance Requirements.

  (1) Upon acquisition of the project, the grantee shall provide an all-risk insurance policy that:

    (a) Provides coverage for an amount at least equal to the replacement cost of the facility;

    (b) Names the State as a loss payee;

    (c) Protects the State's interest in the project; and

    (d) Requires notification of the Office of Capital Planning, Budgeting, and Engineering Services, 201 West Preston Street, Baltimore, Maryland 21201 of any:

      (i) Cancellation of policy;

      (ii) Material loss covered by the policy; or

      (iii) Material changes in the policy.

  (2) The grantee shall provide builders' risk insurance coverage during the entire period of project construction or renovation up to and including owner's acceptance of building that:

    (a) Names the State as a loss payee;

    (b) Protects the State's interest in the building;

    (c) Provides an amount at least equal to the replacement cost of the facility; and

    (d) Requires evidence of the coverage be submitted to the Office of Capital Planning, Budgeting, and Engineering Services, 201 West Preston Street, Baltimore, Maryland 21201.

  (3) Upon completion of a project, the grantee shall maintain, for a period of 30 years, an all-risk insurance policy that:

    (a) Provides coverage for an amount at least equal to the replacement cost of the facility;

    (b) Names the State as a loss payee;

    (c) Protects the State's interest in the project;

    (d) Requires notification of the Office of Capital Planning, Budgeting, and Engineering Services, 201 West Preston Street, Baltimore, Maryland 21201 of any:

      (i) Cancellation of policy;

      (ii) Material loss covered by the policy; or

      (iii) Material changes in the policy.

  (4) The grantee shall maintain and submit evidence of this insurance annually, for a period of 30 years, to the Office of Capital Planning, Budgeting, and Engineering Services and to the State Treasurer's Office, Insurance Division.

C. During the entire period of work on the project and for a period of 30 years after the project has been completed or acquired, the Department may audit the business records of the applicant and the applicant's agents, contractors, heirs, or assigns.

D. Extension of Time for Completion; Other Changes.

  (1) The applicant shall notify the Secretary promptly and, in any event, not more than 30 days after the applicant knew or should reasonably have known that the applicant is unable to encumber funds:

    (a) In the manner approved by the Secretary; or

    (b) Within 2 years of the appropriation by the Maryland General Assembly.

  (2) For good cause, the Secretary may grant a request by the applicant for a change in the manner or time for encumbrance of funds, including an extension of time.

  (3) Upon a demonstration of good cause for an extension of time, the Secretary may grant an extension of up to an additional 180 days to encumber funds.

E. Expenditures. State funds may not be released until:

  (1) The applicant has recorded a notice of the State's right of recovery, as approved by the Secretary, in the land records of Baltimore City or the county in which the property is located; and

  (2) The applicant is in compliance with this chapter and all applicable federal and State laws.

F. Penalties. If the grantee does not comply with this chapter and all other applicable State and federal laws, the Secretary may:

  (1) Refuse to consider the grantee for any future funding under the Act;

  (2) Require an audit of the grantee;

  (3) Notify the Department's Office of Health Care Quality; and

  (4) Take other action as appropriate.

#### Regulation .10 Right of Recovery.

*COMAR 10.08.06.10*

In the event of default under the terms of the Act and this chapter, a nursing facility financed pursuant to this chapter is subject to the State's right of recovery as set forth in the Act.