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COVID-
19 consulting resources

05.13.20

The BerryDunn Recovery Advisory Team has compiled this guide to COVID-19 consulting resources for state and local government agencies and higher education institutions.

We have provided a list of our consulting services related to data analysis, CARES Act funding and procurement, and legislation and policy implementation. Many of these services can be procured via the NASPO ValuePoint Procurement Acquisition Support Services contract.

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We're here to help.
If you have any questions, please contact us at info@berrydunn.com

Related Professionals

Principals

  • Kevin Price
    Principal
    Community Development, Government Utilities
    T 207.541.2379
  • Doug Rowe
    Principal
    Justice and Public Safety
    T 207.541.2330

BerryDunn experts and consultants

Read this if you are at a state Medicaid agency.

The COVID-19 PHE has raised many questions for Medicaid programs across the country. The Centers for Medicare & Medicaid Services (CMS) and other healthcare organizations have been providing guidance on how to best manage the PHE since it began. In particular, CMS has provided recommendations on how Medicaid programs can implement new processes and rules into their Medicaid Enterprise Systems (MES) for individuals to remain under continuous enrollment until the end of the PHE. 

Strategies for MES

BerryDunn has been working with many states and territories to develop strategic plans to comply with specific rules and requirements throughout the PHE. Some of these strategies involve changes to the original designs of the MES. Examples include:

  • Updating system rules to maintain individuals enrolled in continuous coverage throughout the PHE
  • Retesting system rules to confirm systems are working properly once PHE rules are removed
  • Revamping system notifications so reminders keep individuals informed about ongoing changes
  • Training staff on the new system updates so they can manage calls and orient individuals on changes regarding their eligibility

CMS continues to release updated guidance on how Medicaid programs can best prepare for the end of the PHE in order to resume normal operations. These recommendations indicate that Medicaid programs adopt strategies to maintain coverage of eligible individuals as the continuous enrollment requirements come to an end, following the conclusion of the PHE, while allowing coverage for ineligible individuals to terminate. Medicaid programs must ensure their systems are prepared for the transition, but some of these updates and changes to the systems may pose greater challenges: 

  • Since there are no precedents to compare with the current PHE unwinding event, Medicaid programs will need to execute changes within a limited timeline and work with the issues that may arise as they execute unwinding
  • For some Medicaid programs, system rules, both current and updated ones, are not able to run simultaneously
  • Medicaid programs may need to hire additional staff, train new employees, and retrain or cross train current employees within a small window of time
  • Medicaid programs will need to perform additional MES testing to confirm those systems are working as required
  • Medicaid programs will incur additional costs to cover additional operational efforts
  • System vendors will incur extra work that may affect project timelines and other priorities

If you have any questions or would like to learn more about how BerryDunn can assist you with the PHE unwinding efforts, please contact the Medicaid consulting team.

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Design, Development, and Implementation (DDI) and project impacts resulting from the Public Health Emergency (PHE)

Read this if you work for a not-for-profit organization. 

Our annual not-for-profit Recharge event provides attendees with an opportunity to hear about hot button issues in the not-for-profit industry. We polled registrants from across the country to see where they are focusing their attention in the current landscape. 

Employee retention

Overwhelmingly, employee retention is a number one concern for organizations, with 78% of respondents saying they were strongly focused on it in 2022. Not surprisingly, financial stability (67%), cybersecurity (50%) and concerns about access to government funding (43%) were of common concern among respondents.


 
Remarkably, employee retention in 2022 weighed more heavily on respondents than concerns around the remote workplace in 2021. While over 57% of respondents were concerned about the remote workforce in 2021, employee retention did not even make it into the top four concerns for organizations. This shift is consistent with what we are seeing in our client base, as organizations embraced hybrid and remote working arrangements and are well into codification of and adherence to the policies in place. Organizations reported taking significant efforts toward employee retention, most commonly looking at increasing salaries and allowing hybrid and flexible work arrangements as methods to help retain employees.

Financial stability

The concern around financial stability is slowly starting to decline. While financial stability was a top concern for 83% of organizations in 2021, that percentage dropped to 67% of respondents listing it as a top concern in 2022, While multiple factors certainly contribute to these results (availability of COVID relief funds, for example), the decline is significant, especially in this time of inflationary growth and demands on the labor market. This decline may be reflective of the continued transition away from short-term emergency response and toward a more future-oriented mindset. 

Other concerns

Both cybersecurity and government funding concerns held relatively steady in 2022 compared to 2021, with 45% of respondents concerned with cybersecurity and government funding in 2021, compared to 50% and 43% in 2022, respectively. 

Participants also reflected on the perceived top concerns for their board members, with employee retention and recruitment and overall financial stability leading in top importance. These mirrored concerns are of no surprise, but speak to the continued need for regular and reliable reporting to boards to allow for continued rapid response by those charged with governance.

If you have any questions about your specific concerns or situation, please don’t hesitate to contact our not-for-profit team. We’re here to help.

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Employee retention and other concerns: NFP outlook for the year ahead

Read this if you are an employer that provides educational assistance to employees.

Under Section 127 of the Internal Revenue Code (IRC), employers are allowed to provide tax-free payments of up to $5,250 per year to eligible employees for qualified educational expenses. To be considered qualified, payments must be made in accordance with an employer’s written educational assistance plan. 

The Coronavirus Aid, Relief and Economic Security (CARES) Act amended Section 127 to include student loan repayment assistance as a qualified educational expense. The expansion of Section 127 allows employers to make payments for student loans without the employee incurring taxable income and the payment is a deductible expense for the employer, resulting in tax advantages to both parties.  

Originally, the CARES Act was a temporary measure allowing tax-free principal or interest payments made between March 27, 2020 and December 31, 2020.  Due to the difficulties in adopting a formal education assistance plan, many employers were unable to take advantage of the temporary incentive. As a result, the Consolidated Appropriations Act, signed into law on December 27th, 2020 extended the provision for five years through December 31, 2025.  

Employer requirements

For payments to qualify as tax-free under Section 127, you (the employer) must meet the following requirements: 

  • The employer must have a written educational assistance plan
  • The plan must not offer other taxable benefits or remuneration that can be chosen instead of educational assistance (cash or noncash)
  • The plan must not discriminate in favor of highly compensated employees
  • An employee may not receive more than $5,250 from all employers combined
  • Eligible employees must be reasonably notified of the plan

Eligible employees include current and laid-off employees, retired employees, and disabled employees. Spouses or dependents of employees are not eligible. Payments of principal or interest can be made directly to employees as reimbursement for amounts already paid (support for student loan payments should be provided by the employee) or payments can be made directly to the lender. Other educational expenses that qualify under Section 127 include:

  • Tuition for graduate or undergraduate level programs, which do not have to be job-related
  • Books, supplies, and necessary equipment, not including meals, lodging, transportation, or supplies that employees may keep after the course is completed

The five-year extension of this student loan repayment assistance can provide tax savings to both employers (employer portion of FICA) and employees (federal and state withholding, and FICA). Additionally, offering a qualified educational assistance program may help strengthen an employers’ recruitment and retention efforts. 

If you have more questions, or have a specific question about your situation, please call us. We’re here to help.

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CARES Act expansion of IRC Section 127: Tax savings on student loan repayment assistance

What the C-Suite should know about CECL and change management

Read this if you are at a financial institution. 

Some institutions are managing CECL implementation as a significant enterprise project, while others have assigned it to just one or two people. While these approaches may yield technical compliance, leadership may find they fail to realize any strategic benefits. In this article, Dan Vogt, Principal in BerryDunn’s Management and IT Consulting Practice, and Susan Weber, Senior Manager and CECL expert in BerryDunn’s Financial Services Practice, outline key actions leaders can take now to ensure CECL adoption success.  

Call it empathy, or just the need to take a break from the tactical and check in on the human experience, but on a recent call, I paused the typical readiness questions to ask, “How’s the mood around CECL adoption – what’s it been like getting others in the organization involved?” The three-word reply was simple, but powerful: “Kicking and screaming.”  

Earlier this year, by a vote of 5-2, the FASB (Financial Accounting Standards Board) closed the door to any further delays to CECL adoption, citing an overarching need to unify the industry under one standard. FASB’s decision also mercifully ended the on-again off-again cycle that has characterized CECL preparation efforts since early 2020. One might think the decision would have resulted in relief. But with so much change in the world over the past few years, is it any wonder institutions are instead feeling change-saturated?  

Organizational change

CECL has been heralded as the most significant change to bank accounting ever, replacing 40+ years of accounting and regulatory oversight practices. But the new standard does much more than that. Implementing CECL has an effect on everything from executive and board strategic discussions to interdepartmental workflows, systems, and controls. The introduction of new methods, data elements, and financial assets has helped usher in new software, processes, and responsibilities that directly affect the work of many people in the organization. CECL isn’t just accounting—it’s organizational change. 

Change management

Change management best practices often focus on leading from optimism—typically leadership and an executive sponsor talk about opportunities and the business reasons for change. Some examples of what this might sound like as it relates to CECL might include, by converting to lifetime loss expectations, the institution will be better prepared to weather economic downturns; or, by evolving data and modeling precision, an institution’s understanding and measure of credit risk is enhanced, resulting in more strategic growth, pricing, and risk management. 

But leading from optimism is sometimes hard to do because it isn’t always motivating—especially when the change is mandated rather than chosen.  

Perhaps a more judiciously used tactic is to focus on the risk, or potential penalty, of not changing. In the case of CECL, examples might include, your external auditor not being able to sign-off on your financials (or significant delays in doing so), regulatory criticism, inefficient/ineffective processes, control issues, tired and frustrated staff. These examples expose the institution to all kinds of key risks: compliance, operational, strategic, and reputational, among them.

CECL success and change management

With so much riding on CECL implementation and adoption going well, some organizations may be at heightened risk simply because the effort is being compartmentalized—isolated within a department, or assigned to only one or two people. How effectively leadership connects CECL implementation with tenets of change management, how quickly they understand, then together embrace, promote, and facilitate the related changes affecting people and their work, may prove to be the key factor in achieving success beyond compliance.  

One important step leaders can take is to perform an impact assessment to understand who in the organization is being affected by the transition to CECL, and how. An example of this is below. Identifying the departments and functions that will need to be changed or updated with CECL adoption might expose critical overlaps and reveal important new or enhanced collaborations. Adding in the number of people represented by each group gives leaders insight into the extent of the impact across the institution. By better understanding how these different groups are affected, leaders can work together to more effectively prioritize, identify and remove roadblocks, and support peoples’ efforts longer term.           

 
No matter where your institution is currently in its CECL implementation journey, it is not too late to course-correct. Leadership—unified in priority, message, and understanding—can achieve the type of success that produces efficient sustainable practices, and increases employee resilience and engagement.

For more information, visit the CECL page on our website. If you would like specific answers to questions about your CECL implementation, please visit our Ask the Advisor page to submit your questions. For more tips on documenting your CECL adoption, stay tuned for our next article in the series, revisit past articles, or tune in to our CECL Radio podcast. You can also follow Susan Weber on LinkedIn.

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Implementing CECL: Kicking and screaming

Read this if your organization offers health insurance through a health insurance exchange.

When the Affordable Care Act (ACA) was passed in 2010, it contained a known gap which made healthcare premiums unaffordable for some families covered under Medicare or employer-sponsored health insurance plans. The gap in the law, commonly referred to as the family glitch, was formalized in 2013 as the result of a Final Rule issued by the IRS. 

The “family glitch” calculates the affordability of an employer-sponsored health insurance plan based on the cost for the employee, not additional family members. An article published in April 2022 on healthinsurance.org estimated that the cost of health insurance for a family covered by an employer-sponsored plan could end up being 25% or more of the household’s income, even if the plan was considered affordable (less than 9.61% of the household’s income) for the employee alone. Almost half of the people impacted by the family glitch are children.

The family glitch was allowed to stand in 2013 partly because of concerns that resolving the issue could push more people off employer-sponsored plans and onto marketplace qualified health plans, ultimately raising the cost of subsidies. Since then, several attempts have been made to fix the issue, which affects around five million Americans. The most recent attempt was an executive order issued by President Biden soon after taking office in January 2021. The Office of Management and Budget has been reviewing regulatory changes proposed by the Treasury Department and IRS, details of which were published in April 2022. 

These regulatory changes would alter the way health insurance exchanges calculate a family’s eligibility for subsidies when the family has access to an employer-sponsored health insurance plan. If the changes go into effect in 2023 as proposed, audits of the 2023 fiscal year will need to account for the new regulations and potentially conduct different testing protocols for different parts of the year. 

Our team is closely following these proposed changes to help ensure our clients are prepared to follow the new regulations. Earlier this week, we attended a public hearing held by the Treasury Department, where representatives of various groups spoke in support of, or in opposition to the proposed regulatory change. Supporters noted that families with plans that offer expensive coverage for dependents would benefit from this change through reduced costs and more coverage options, including provider networks that may more closely align with the family members’ needs. Those in favor of the change anticipate that families with children would see the most benefit. 

Those opposed to the change expressed that due to the way the law is currently written, they do not see the regulatory flexibility for the administration to make this change through administrative action. Additionally, concerns were raised that families covered by multiple health insurance plans could be faced with higher out-of-pocket-costs due to having separate deductibles that must be met on an annual basis. Lastly, not all families that have unaffordable insurance would see financial relief under this proposal. 

The Treasury Department is expected to announce its decision in time for open enrollment for plan year 2023 which is scheduled to begin on November 1, 2022. Our team will continue to monitor the situation closely and provide updates on how the changes may impact our clients. 

For more information

If you have more questions or have a specific question about your situation, please reach out to us. There is more information to consider when evaluating the effects these changes will have on the landscape of healthcare access and affordability, and we’re here to help.

Article
Fixing the "family glitch": How a proposed change to the ACA will affect healthcare subsidies 

Editor's note: read this if you are a CFO, controller, accountant, or business manager.

We auditors can be annoying, especially when we send multiple follow-up emails after being in the field for consecutive days. Over the years, we have worked with our clients to create best practices you can use to prepare for our arrival on site for year-end work. Time and time again these have proven to reduce follow-up requests and can help you and your organization get back to your day-to-day operations quickly. 

  1. Reconcile early and often to save time.
    Performing reconciliations to the general ledger for an entire year's worth of activity is a very time consuming process. Reconciling accounts on a monthly or quarterly basis will help identify potential variances or issues that need to be investigated; these potential variances and issues could be an underlying problem within the general ledger or control system that, if not addressed early, will require more time and resources at year-end. Accounts with significant activity (cash, accounts receivable, investments, fixed assets, accounts payable and accrued expenses and debt), should be reconciled on a monthly basis. Accounts with less activity (prepaids, other assets, accrued expenses, other liabilities and equity) can be reconciled on a different schedule.
  2. Scan the trial balance to avoid surprises.
    As auditors, one of the first procedures we perform is to scan the trial balance for year-over-year anomalies. This allows us to identify any significant irregularities that require immediate follow up. Does the year-over-year change make sense? Should this account be a debit balance or a credit balance? Are there any accounts with exactly the same balance as the prior year and should they have the same balance? By performing this task and answering these questions prior to year-end fieldwork, you will be able to reduce our follow up by providing explanations ahead of time or by making correcting entries in advance, if necessary. 
  3. Provide support to be proactive.
    On an annual basis, your organization may go through changes that will require you to provide us documented contractual support.  Such events may include new or a refinancing of debt, large fixed asset additions, new construction, renovations, or changes in ownership structure.  Gathering and providing the documentation for these events prior to fieldwork will help reduce auditor inquiries and will allow us to gain an understanding of the details of the transaction in advance of performing substantive audit procedures. 
  4. Utilize the schedule request to stay organized.
    Each member of your team should have a clear understanding of their role in preparing for year-end. Creating columns on the schedule request for responsibility, completion date and reviewer assigned will help maintain organization and help ensure all items are addressed and available prior to arrival of the audit team. 
  5. Be available to maximize efficiency. 
    It is important for key members of the team to be available during the scheduled time of the engagement.  Minimizing commitments outside of the audit engagement during on site fieldwork and having all year-end schedules prepared prior to our arrival will allow us to work more efficiently and effectively and help reduce follow up after fieldwork has been completed. 

Careful consideration and performance of these tasks will help your organization better prepare for the year-end audit engagement, reduce lingering auditor inquiries, and ultimately reduce the time your internal resources spend on the annual audit process. See you soon. 

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Save time and effort—our list of tips to prepare for year-end reporting

Read this if you are a community bank.

The Federal Deposit Insurance Corporation (FDIC) recently issued its first quarter 2022 Quarterly Banking Profile. The report provides financial information based on Call Reports filed by 4,796 FDIC-insured commercial banks and savings institutions. The report also contains a section specific to community bank performance. In first quarter 2022, this section included the financial information of 4,353 FDIC-insured community banks. BerryDunn’s key takeaways from the report are as follows:

Community banks continue to feel the impact of shrinking net interest margins and inflation.

Community bank quarterly net income dropped to $7 billion in first quarter 2022, down $1.1 billion from a year ago. Lower net gains on loan sales and higher noninterest expenses offset growth in net interest income and lower provisions. Net income declined $581.3 million, or 7.7 percent from fourth quarter 2021 primarily because of lower noninterest income and higher noninterest expense.

Loan and lease balances continue to grow in first quarter 2022

Community banks saw a $21.5 billion increase in loan and lease balances from fourth quarter 2021. All major loan categories except commercial & industrial and agricultural production grew year over year, and 55.3 percent of community banks recorded annual loan growth. Total loan and lease balances increased $35.1 billion, or 2.1 percent, from one year ago. Excluding Paycheck Protection Program loans, annual total loan growth would have been 10.2 percent.

Community bank net interest margin (NIM) dropped to 3.11 percent due to strong earning asset growth.

Community bank NIM fell 15 basis points from the year-ago quarter and 10 basis points from fourth quarter 2021. Net interest income growth trailed the pace of earning asset growth. The yield on earning assets fell 28 basis points while the cost of funding earning assets fell 13 basis points from the year-ago quarter. The 0.24 percent average cost of funds was the lowest level on record since Quarterly Banking Profile data collection began in first quarter 1984. 

Community bank allowance for credit losses (ACL) to total loans remained higher than the pre-pandemic level at 1.28 percent, despite declining 4 basis points from the year-ago quarter.


NOTE: The above graph is for all FDIC-Insured Institutions, not just community banks.

The ACL as a percentage of loans 90 days or more past due or in nonaccrual status (coverage ratio) increased to a record high of 236.7 percent. The decline in noncurrent loan balances outpaced the decline in ACL, with the coverage ratio for community banks emerging 57.9 percentage points above the coverage ratio for noncommunity banks. 

The banking landscape continues to be one that is ever-evolving. With interest rates on the rise, banks will find their margins in flux once again. During this transition, banks should look for opportunities to increase loan growth and protect and enhance customer relationships. Inflation has also caused concern not only for banks but also for their customers. This is an opportune time for banks to work with their customers to navigate the current economic environment. Community banks, with their in-depth knowledge of their customers’ financial situations and the local economies served, are in a perfect position to build upon the trust that has already been developed with customers.

As always, please don’t hesitate to reach out to BerryDunn’s Financial Services team if you have any questions.

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FDIC issues its First Quarter 2022 Quarterly Banking Profile