HUD funding: Three compliance

must-dos

for affordable housing owners

Read this if you are at a rural health clinic or are considering developing one.

Section 130 of H.R. 133, the Consolidated Appropriations Act of 2021 (Covid Relief Package) has become law. The law includes the most comprehensive reforms of the Medicare RHC payment methodology since the mid-1990s. Aimed at providing a payment increase to capped RHCs (freestanding and provider-based RHCs attached to hospitals greater than 50 beds), the provisions will simultaneously narrow the payment gap between capped and non-capped RHCs.

This will not obtain full “site neutrality” in payment, a goal of CMS and the Trump administration, but the new provisions will help maintain budget neutrality with savings derived from previously uncapped RHCs funding the increase to capped providers and other Medicare payment mechanisms.

Highlights of the Section 130 provision:

• The limit paid to freestanding RHCs and those attached to hospitals greater than 50 beds will increase to $100 beginning April 1, 2021 and escalate to $190 by 2028.
• Any RHC, both freestanding and provider-based, will be deemed “new” if certified after 12/31/19 and subject to the new per-visit cap.
• Grandfathering would be in place for uncapped provider-based RHCs in existence as of 12/31/19. These providers would receive their current All-Inclusive Rate (AIR) adjusted annually for MEI (Medicare Economic Index) or their actual costs for the year.

If you have any questions about your specific situation, please contact us. We’re here to help.

Read this if your facility or organization has received provider relief funds.

The rules over the use of the provider relief funds (PRF) have been in a constant state of flux since the funds started to show up in your bank accounts back in April. Here is a summary of where we are as of November 30, 2020 with allowable uses of the funds.
 
The most recent Post-Payment Notice of Reporting Requirements is dated November 2, 2020. In accordance with the notice, PRF may be used for two purposes:

1. Healthcare-related expenses attributable to coronavirus that another source has not reimbursed and is not obligated to reimburse
2. Lost revenue, up to the amount of the difference between 2019 and 2020 actual patient care revenue

The Department of Health and Human Services (HHS) has issued FAQs as recently as November 18, 2020.  The FAQs include the following clarifications on the allowable uses:

Healthcare related expenses attributable to the coronavirus

1. PRF may be used for the marginal increased expenses or incremental expenses related to coronavirus.
2. Expenses cannot be reimbursed by another source or another source cannot be obligated to reimburse the expense.
3. Other sources include, but are not limited to, direct patient billing, commercial insurance, Medicare/Medicaid/Children’s Health Insurance Program (CHIP), or other funds received from the Federal Emergency Management Agency (FEMA), the Provider Relief Fund COVID-19 Claims Reimbursement to Health Care Providers and Facilities for Testing, Treatment, and Vaccine Administration for the Uninsured, and the Small Business Administration (SBA) and Department of Treasury’s Paycheck Protection Program (PPP). This would also include any state and federal grants received as a result of the coronavirus.
4. Providers should apply reasonable assumptions when estimating the portion of costs that are reimbursed from other sources.
5. The examples in the FAQs for increased cost of an office visit and patient billing seem to point to only supplemental coronavirus related reimbursement needing to be offset against the increased expense.
6. PRF may be used for the full cost of equipment or facility projects if the purchase was directly related to preventing, preparing for and responding to the coronavirus; however, if you claim the full cost, you cannot also claim the depreciation for any items capitalized.
7. PRF cannot be used to pay salaries at a rate in excess of Executive Level II which is currently set at $197,300.

Lost revenues attributable to the coronavirus

1. Lost revenues attributable to coronavirus are calculated based upon a calendar year comparison of 2019 to 2020 actual revenue/net charges from patient care (prior to netting with expenses).
2. Any unexpended PRF at 12/31/20 is then eligible for use through June 30, 2021 and calculated lost revenues in 2021 are compared to January to June 2019.
3. Reported patient care revenue is net of uncollectible patient service revenue recognized as bad debts and includes 340B contract pharmacy revenue.
4. This comparison is cumulative, for example, if your net income improves in Q4, it will reduce lost revenues from Q2.
5. Retroactive cost report settlements or other payments received that are not related to care provided in 2019 or 2020 can be excluded from the calculation.

Whether you are tracking expenses or lost revenues, the accounting treatment for both is to be consistent with your normal basis of accounting (cash or accrual).
 
As a reminder, the first reporting period (through December 31, 2020) is due February 15, 2021. The reporting portal is supposed to open January 15, 2021. Any unexpended PRF at December 31, 2020 can be used from January 1, 2021 through June 30, 2021, with final reporting due July 31, 2021.

The guidance continues to change rapidly and new FAQs are issued each week. Please check back here for any updates, or contact Mary Dowes for more information.

Read this if your organization, business, or institution is receiving financial assistance as a direct result of the COVID-19 pandemic.

Updated: August 5, 2020

Many for-profit and not-for-profit organizations are receiving financial assistance as a direct result of the COVID-19 pandemic. While there has been some guidance, there are still many unanswered questions. One unanswered question has been whether or not any of this financial assistance will be subject to the Single Audit Act. Good news―there’s finally some guidance:

• For organizations receiving financial assistance through the Small Business Administration (SBA) Payroll Protection Program (PPP), the SBA made the determination that financial assistance is not subject to the Single Audit.
• The other common type of financial assistance through the SBA is the Emergency Injury Disaster Loan (EIDL) program. The SBA has made the determination that as these are direct loans with the federal government, they will be subject to the Single Audit. 

It is unlikely there will be guidance within the 2020 Office of Management and Budget (OMB) Compliance Supplement related to testing the EIDL program, as the Compliance Supplement anticipated in June 2020 will not have any specific information relative to COVID-19. The OMB announced they will likely be issuing an addendum to the June supplement information specific to COVID-19 by September 2020.

Small- and medium-sized for-profit organizations, and now not-for-profit organizations, are able to access funds through the Main Street Lending Program, which is comprised of the Main Street New Loan Facility, the Main Street Priority Loan Facility, the Main Street Expanded Loan Facility, the Nonprofit Organization New Loan Facility, and the Nonprofit Organization Expanded Loan Facility. We do not currently know how, or if, the Single Audit Act will apply to these loans. Term sheets and frequently asked questions can be accessed on the Federal Reserve web page for the Main Street Lending Program.

Not-for-profits have also received additional financial assistance to help during the COVID-19 pandemic, through Medicare and Medicaid, and through the Higher Education Emergency Relief Fund (HEERF). While no definitive guidance has been received, HEERF funds, which are distributed through the Department of Education’s Education Stabilization Fund, have been assigned numbers in the Catalog of Federal Domestic Assistance, which seems to indicate they will be subject to audit. We are currently awaiting guidance if these programs will be subject to the Single Audit Act and will update this blog as that information becomes available.

Healthcare providers are able to access Provider Relief Funds (PRF) through the US Department of Health & Human Services. PRF help with healthcare-related expenses or lost revenue attributable to COVID-19. Guidance on what qualifies as a healthcare-related expense or lost revenue is still in process, and regular updates are posted on the FAQs of the US Department of Health & Human Services website. According to the Health Resources and Services Administration (HRSA), PRF funds will be subject to the Single Audit Act requirements. It is important to note that while an organization may have received funds exceeding the threshold, it is the expenditure of these funds that counts toward the Single Audit threshold.

If you have questions about accounting for, or reporting on, funds that you have received as a result of the COVID-19 pandemic, please contact a member of our Single Audit Team. We’re here to help.

Read this if your organization, business, or institution is receiving financial assistance as a direct result of the COVID-19 pandemic.

Updated: September 8, 2020

We expect to receive guidance on how to determine what qualifies as lost revenue sometime in the fall, and will post additional information when that becomes available. If you would like the information sent to you directly, please contact Grant Ballantyne.

New information continues to surface about the reporting requirements of the CARES Act Provider Relief Funds (PRFs). The most recent news published by the Health Resources and Services Administration (HRSA) states the funds will be subject to the Single Audit Act requirements. What does this mean and how does it impact your organization? Here’s a brief synopsis. 

A Single Audit (often referred to as a Uniform Guidance audit) is required when total federal grant expenditures for an organization exceed $750,000 in a fiscal year. It is important to note that while an organization may have received funds exceeding the threshold, it is the expenditure of these funds that counts toward the Single Audit threshold.  

PRFs help with healthcare-related expenses or lost revenue attributable to COVID-19. Guidance on what qualifies as a healthcare-related expense or lost revenue is still in process, and regular updates are posted on the FAQs of the US Department of Health & Human Services website.

You may remember, there were originally quarterly reporting requirements related to PRFs. On June 13, 2020 HHS updated their FAQ document to reflect a change in quarterly reporting requirements related to PRFs. According to the updated language, “Recipients of Provider Relief Fund payments do not need to submit a separate quarterly report to HHS or the Pandemic Response Accountability Committee. HHS will develop a report containing all information necessary for recipients of Provider Relief Fund payments to comply with this provision.”

Organizations that receive more than $150,000 in PRFs must still submit reports to ensure compliance with the conditions of the relief funds, but the content of the reports and dates on which these are due is yet to be determined (as of August 4, 2020). The key distinction to remember here is that this limit is based on total funds received, regardless of whether or not expenditures have been made. 

As more information comes out, we will update our website. At the moment the main takeaways are:

• Expending $750,000 of combined relief funds and other federal awards will trigger a Single Audit
• Receiving $150,000 of PRFs will cause reporting requirements, on a to-be-determined basis
• Tracking PRF expenditures throughout the fiscal year will be essential for the dual purpose of reporting expenditures and accumulating any potential Single Audit support

If you would like to speak with a BerryDunn professional about reporting under the Single Audit Act, please contact a member of our Single Audit Team.

Read this if your organization, business, or institution has leases and you’ve been eagerly awaiting and planning for the implementation of the new lease standards.

Ready? Set? Not yet. As we have prepared for and experienced delays related to Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 842, Leases, and Governmental Accounting Standards Board (GASB) Statement No. 87, Leases, we thought the time had finally come for implementation. With the challenges that COVID-19 has brought to everyone, the FASB and GASB recognize the significant impact COVID-19 has had on commercial businesses, state and local governments, and not-for-profits and both have proposed delays in effective dates for various accounting standards, including both lease standards.

But wait, there’s more! In response to feedback FASB received during the comment period for the lease standard, the revenue recognition standard has also been extended. We didn’t see that coming, and expect that many organizations that didn’t opt for early adoption will breathe a collective sigh of relief.

FASB details and a deeper dive

On May 20, 2020, FASB voted to delay the effective date of the lease standard and the revenue recognition standard. A formal Accounting Standards Update (ASU) summarizing these changes will be released early June. Here’s what we know now:

• Revenue recognition―for entities that have not yet issued financial statements, the effective date of the application of FASB Accounting Standards Codification (ASC) Topic 606, Revenue Recognition, has been delayed by 12 months (effective for reporting periods beginning after December 15, 2019). This does not apply to public entities or nonpublic entities that are conduit debt obligors who previously adopted this guidance.
• Leases―for entities that have not yet adopted the guidance from ASC 842, Leases, the effective date has been extended by 12 months (effective for reporting periods beginning after December 15, 2021).
• Early adoption of either standard is still allowed.

FASB has also provided clarity on lease concessions that are highlighted in Topic 842. 

We recognize many lessors are making concessions due to the pandemic. Under current guidance in Topics 840 and 842, changes to lease contracts that were not included in the original lease are generally accounted for as lease modifications and, therefore, a separate contract. This would require remeasurement of the new lease contract and related right-of-use asset. 

FASB recognized this issue and has published a FASB Staff Questions and Answers (Q&A) Document, Topic 842 and Topic 840: Accounting for Lease Concessions Related to the Effects of the COVID-19 Pandemic. Under this new guidance, if lease concessions are made relating to COVID-19, entities do not need to analyze each contract to determine if a new contract has been entered into, and will have the option to apply, or not to apply, the lease modification provisions of Topics 840 and 842.

GASB details

On May 8, 2020, GASB issued Statement No. 95, Postponement of the Effective Dates of Certain Authoritative Guidance. GASB 95 extends the implementation dates of several pronouncements including:
•    Statement No. 84, Fiduciary Activities―extended by 12 months (effective for reporting periods beginning after December 15, 2019)
•    Statement No. 87, Leases―extended by 18 months (effective for reporting periods beginning after June 15, 2021)

More information

If you have questions, please contact a member of our financial statement audit team. For other COVID-19 related resources, please refer to BerryDunn’s COVID-19 Resources Page.
 

Read this if your organization, business, or institution has leases and you’ve been eagerly awaiting and planning for the implementation of the new lease standards.

Ready? Set? Not yet. As we have prepared for and experienced delays related to Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 842, Leases, we thought the time had finally come for implementation. With the challenges that COVID-19 has brought to everyone, the FASB recognizes the significant impact COVID-19 has brought to commercial businesses and not-for-profits and is proposing a one-year delay in implementation, as described in this article posted to the Journal of Accountancy: FASB effective date delay proposals to include private company lease accounting.

But what about lease concessions? We all recognize many lessors are making concessions due to the pandemic. Under current guidance in Topics 840 and 842, changes to lease contracts that were not included in the original lease are generally accounted for as lease modifications and, therefore, a separate contract. This would require remeasurement of the new lease contract and related right-of-use asset. FASB recognized this issue and has published a FASB Staff Questions and Answers (Q&A) Document,  Topic 842 and Topic 840: Accounting for Lease Concessions Related to the Effects of the COVID-19 Pandemic. Under this new guidance, if lease concessions are made relating to COVID-19, entities do not need to analyze each contract to determine if a new contract has been entered into, and will have the option to apply, or not to apply, the lease modification provisions of Topics 840 and 842.

Implementation of the lease accounting standard will most likely be delayed for Governmental Accounting Standards Board (GASB) entities as well. On April 15, 2020, the GASB issued an exposure draft that would delay most GASB statements and implementation guides due to be implemented for fiscal years 2019 and later. Most notably, this includes Statement 84, Fiduciary Activities, and Statement 87, Leases. Comments on the proposal will be accepted through April 30, and the board plans to consider a final statement for issuance on May 8. More information may be found in this article from the Journal of Accountancy: GASB proposes postponing effective dates due to pandemic.

More information

Whether you are a FASB or GASB entity, you can expect a delay in the implementation of the lease standard. If you have questions, please contact a member of our financial statement audit team. For other COVID-19 related resources, please refer to BerryDunn’s COVID-19 Resources Page.

As resources are released to help higher education institutions navigate the rapidly changing landscape, we will add important links and information to this blog post:

Industry resources:
US Department of Education (ED)

• COVID-19 information and resources for schools and school personnel
• FAQs related to COVID-19
• Guidance for interruptions of study related to COVID-19

Guidance for colleges:

• How might colleges benefit from the coronavirus stimulus package?
• Update from ED on CARES Act grants to students

Guidance on leases:
FASB and GASB news: Postponement of the lease accounting standards

We are here to help
Please contact the BerryDunn higher education team if you have any questions, or would like to discuss your specific situation.