executive compensation

Read this if your organization uses provider-based billing. 

Like an old car rusting in a field, provider-based billing is not something that gets much attention. Hospitals have set up departments to manage it, completed their attestations (or not), and then forgotten about it, leaving it to rust in the field. Provider-based billing is one of those things that is not a problem until it is. There are many reasons why hospitals may want to review their provider-based billing processes:

1. Facility updates are constant in healthcare and departments may have moved since their initial inceptions
2. Hospital acquisitions and mergers have changed ownership structures and may have removed grandfather status protections
3. When leadership changes, new leadership often assumes that everything was set up and is being billed correctly
4. Commercial payor guidance has and continues to change 
5. CMS provider-based rules have changed

Many hospitals move department locations and do not give much thought to the claim implications. Besides address, enrollment, and credentialing updates that may or may not be needed, the move may make the department ineligible to continue provider-based billing because it no longer meets the criteria under the updated regulations.

Attestations for smoother audits

Very few hospitals have a library where they can easily access all their attestations. Many providers don’t ever submit an attestation to Medicare as they are not required to do so. However, not having one opens the hospital to more risk if the department is ever deemed non-compliant with the regulations. If the hospital has a library of all attestations, an audit can be a quick and painless experience. The audit would involve:

• Confirming nothing has changed since the attestation in terms of location and structure
• Reviewing some claims to identify if charges are split and billed correctly
• Ascertaining if payor rules are being followed
• Checking that signage is correct in the lobby of provider-based locations.
• Reviewing the 855 form and confirming the required departments are listed

If an attestation is not available, the audit becomes more difficult. If the department is on the main campus and meets all the provider-based rules, the audit easily follows the above steps. If the department is not on the main campus, the audit becomes more challenging, as you would need to confirm:

• The department is located within 35 miles of the main campus
• If the department is or was grandfathered and doesn’t need to meet the requirements
• If an attestation should be completed
• How/when was the department created, and what other facts pertaining to its inception are relevant  

Difficulties arise when a hospital identifies that a department does not meet the current criteria and an attestation is not available. Simply stopping billing as provider-based billing is not sufficient as there are False-Claim Act and other compliance implications. Regardless of the remedy, identifying these issues on your own—as opposed to during an external audit—is certainly better. It will provide you time to fully research the situation and confirm if there is or is not really a concern. If it is confirmed that billing was incorrect, proactively self-disclosing the issues is certainly better than defending an audit. 

Proactive audits for peace of mind

You may be wondering why we are writing about provider-based billing now. The reality is that we are seeing more provider-based billing issues both with our clients and across the country. Hospitals are very busy and there is simply not enough time to worry about everything. This is an area where a quick audit can bring peace of mind and also force your teams to become reacquainted with the updated regulations and safeguard against future problems. 

BerryDunn has assisted several health systems with auditing and working through provider-based concerns. Our experts are available to support clients with questions or concerns about their provider-based departments. If you have questions about your specific situation, please don’t hesitate to contact us [LINK when live]. We’re here to help.

Non-profit financial statements include a wealth of important knowledge and can often be overwhelming. When sharing your financial statements with your board of directors or other stakeholders, it can be useful to simplify your financial statements so the key information stands out and unimportant information doesn’t cause confusion. In our work with independent schools and other non-profit clients, we’ve seen many ways that financial statements can be simplified to paint a clearer picture of your organization’s health.

Engage with stakeholders to improve your financial statements 

Boards, donors, creditors, and other stakeholders gain key insights to a non-profit's financial status through reading the financial statements, allowing them to make informed strategic decisions. These reports also allow for improving communication between organizations and their stakeholders. Financial reporting additionally provides historical knowledge that can assist with strategic planning and forecasting.

As a first step in improving the ease with which your financial statements can be read, proactively engage with your stakeholders to gather feedback on the effectiveness and clarity of your current financial statements. To do this, consider conducting informational sessions or webinars to explain changes and address questions. Make sure to understand the needs of your stakeholders and what financial statement items they are most interested in and tailor disclosures to address their concerns and the items that matter most to them.

Simplify your financial statement disclosures 

For any financial statements that are to be issued in accordance with US generally accepted accounting principles (US GAAP), there are a certain number of required disclosures. Subject to materiality, for each financial statement line item, there is a related disclosure, and any item in your financial information that is material should be disclosed. As a general rule, if a trial balance account is less than 5% of total revenue, it could be grouped into an “other” category instead of being presented as a separate financial statement line item. This can also be done on the statement of financial position, but using 5% of total assets or total liabilities. Removing these smaller items can put more focus on the important items within your financial statements.

Another way to simplify your financial statements is to consider removing some small, fixed assets from your statements. For example, the purchase of an office printer could technically be considered a fixed asset to be capitalized, but it’s likely not worth the effort—and it makes the financial statement look more complex than necessary. Consider implementing a financial statement capitalization policy that determines a dollar limit threshold for capitalizing fixed assets and expensing items under that threshold.

Remove disclosures once they’re no longer needed  

Other common items that can increase the length of financial statements are disclosures related to the implementation of new accounting policies. In the year of adoption, footnotes are required to explain the impact of the adoption. In following years, not as many disclosures are necessary and can be removed. Ensure that information that is remaining after the year of adoption is either required under US GAAP or is necessary to stakeholders. If it’s not, remove it.

Take ownership of your financial statements 

Although your CPA firm might assist with the preparation of the financial statements, the ultimate responsibility rests on your organization’s management team to produce financial statements in accordance with US GAAP and satisfy the needs of your stakeholders. Ensuring your financial statements are optimized opens a great opportunity for you to sit down with your audit team and discuss your needs. Contact us at any time to set up a meeting and learn more.

Read this if your organization is looking to make an elective pay election.

The Department of the Treasury and the IRS on March 5 released final regulations (TD 9988) on the elective pay election for certain energy tax credits under IRC Section 6417, added by the Inflation Reduction Act (IRA), which treats the credits as a  payment against federal income tax liabilities. 

The final regulations adopt the proposed regulations (REG-101607-23) with some modifications that clarify which applicable entities are eligible to make an elective pay election and how the election should be made. 

The IRS also updated the elective payment frequently asked questions based on the final regulations. Finally, the IRS issued Notice 2024-27, which requests additional comments on any situations in which an elective payment election could be made for a clean energy credit that was purchased in a transfer,  a sequence of events referred to as chaining.    

Background

The IRA introduced, for tax years beginning after December 31, 2022, the ability for some entities to monetize applicable tax credits via an “elective pay” election under IRC Section 6417. This allows applicable entities to treat certain credits as payment against their federal income tax liabilities and to receive a refund of any excess payment.  

Eligible credits and entities

The IRA specifies that only some credits and entities are eligible for the elective pay election under Section 6417. Applicable credits include: 

Eligible entities, referred to as “applicable entities,” include: 

• Tax-exempt organizations
• Any state, the District of Columbia, or political subdivision 
• An Indian tribal government or subdivision 
• Any Alaska native corporation 
• The Tennessee Valley Authority 
• Rural electric cooperatives
• An agency or instrumentality of certain applicable entities

Partnerships

While the final regulations bring clarity to the issue of determining which entities are eligible to make an elective pay election, they notably exclude partnerships from making such an election (except with respect to Section 45V, 45Q, and 45X credits). This exclusion has significant implications for the renewable energy sector, where projects are commonly structured as partnership entities to pool capital, diversify risk, and combine the expertise of various entity partners. 

During the comment period on the proposed regulations, several commenters advocated for the inclusion of mixed partnerships—that is, partnerships that consist of both applicable entity and non-applicable entity partners—as applicable entities to allow for an elective payment election equal to the applicable entity partner’s allocable credit. However, the Treasury and the IRS rejected those suggestions and adopted the regulations as originally proposed.

However, the final regulations do allow entities to make a valid election out of Subchapter K as a means for these entities to make an elective pay election. Feedback from commenters highlights the complexities and burdensome requirements that arise from making such an election out of Subchapter K, limiting its usefulness. The Treasury and the IRS acknowledged such challenges and simultaneously issued proposed regulations under Section 761 for renewable energy projects that validly elect out of Subchapter K. Under the proposed regulations, exceptions would allow certain unincorporated organizations to make an elective pay election. 

Tax-exempt grants and loans

The final regulations adopt special rules regarding qualified energy property acquired using certain tax-exempt grants and forgivable loans. The rules state that (1) tax-exempt amounts are includable in the basis of the property and (2) “no excess benefit” can be derived from the use of restricted tax-exempt amounts used towards acquiring investment-related credit property. 

The addition of the “no excess benefit” rule effectively limits the amount of the applicable credit that can be claimed such that the sum of any restricted tax-exempt amount(s) and the applicable credit does not exceed the cost of the investment-related credit property. This rule applies only to tax-exempt amounts that are restricted for the specific use of purchasing, constructing, reconstructing, erecting, or acquiring the investment-related credit property. The final regulations include examples to illustrate this rule.  

Making the election

To participate in the elective pay election, all credits must undergo a prefiling registration process and the applicable entity must secure a valid registration number. Credits can be registered as early as the first day of the taxable year in which the qualified energy property is placed in service. Any election received by the IRS without a valid registration number will be deemed ineligible. As currently established, a “short form” renewal process for multiyear credits such as the production tax credit is not available. A new registration must be submitted each year a credit is generated. 

Applicable entities that already file an annual tax return would continue to file that return with the appropriate tax credit form and Form 3800 completed. Applicable entities that do not file an annual information return with the IRS would utilize Form 990-T. Note that the elective pay election must be made on an originally filed return (including extensions) and cannot be made on an amended return. 

The final regulations also confirm that fiscal year organizations that do not normally have tax filing requirements may adopt a tax year-end different from its current accounting year-end. Such organizations are required to maintain adequate books and records of any differences between their normal fiscal year-end books and adopted tax year-end books. This provides increased opportunity for organizations that placed qualified energy property in service early in 2023 and otherwise would have been excluded from a tax credit benefit. 

Processing of payments

The Treasury and the IRS opted not to define a specific time frame for processing payment of an elective pay election, instead indicating in the preamble that the prefiling registration process is designed to verify certain limited information in advance and mitigate the risk of delayed payment processing by the IRS. 

The final regulations additionally confirm that applicable entities that choose to make this election will receive payment in one lump sum as opposed to multiple payments. Some commenters had suggested an accelerated payment mechanism that would enable applicable entities to submit the election as early as the placed-in-service date of the qualified energy property, thus enabling the IRS to provide pre-payment of a portion of the applicable credit based on a review of the prefiling registration information. Given that the elective payment amount is treated as made when a credit claim or the annual tax return is filed, the Treasury and the IRS concluded that it would not be possible to implement this mechanism. 

Written by Leah Turner, Aaron Wright, and Gabe Rubio. Copyright ©2024 BDO USA, P.C. All rights reserved. www.bdo.com

The Federal Deposit Insurance Corporation (FDIC) recently issued its fourth quarter 2023 Quarterly Banking Profile. The report provides financial information based on Call Reports filed by 4,587 FDIC-insured commercial banks and savings institutions. The report also contains a section specific to community bank performance. In fourth quarter 2023, this section included the financial information of 4,140 FDIC-insured community banks. BerryDunn’s key takeaways from the report are as follows:

Community banks’ full year net income down $2 billion from 2022.

Full-year net income declined 7.1% in 2023 to $26.6 billion from $28.6 billion in 2022. Quarterly net income for community banks declined 9.9% in fourth quarter 2023, a $650.2 million decrease from the prior quarter resulting in $5.9 billion in quarterly net income. Compared to fourth quarter 2022, net income had decreased $1.9 billion, or 24.7%. More than half (59.7%) of all community banks reported a decline in net income compared to third quarter 2023. Net income for community banks was impacted by higher noninterest expense, lower noninterest income, and increased loan loss provisions.

Community banks’ net interest margins (NIM) remain constant in the fourth quarter at 3.35%.

Despite remaining consistent quarter-over-quarter, NIM was down 36 basis points from the year-ago quarter. The yield on earning assets increased 88 basis points while the cost of funds increased 124 basis points. Despite the significant decline, the community banks’ NIM performance continued to prevail over the overall banking industry’s NIM of 3.28%, which declined three basis points in fourth quarter 2023. Despite the decline, the banking industry’s NIM remained three basis points above the pre-pandemic average NIM of 3.25%.

Loan  and lease balances continued to grow in fourth quarter 2023, with 76.2% of community banks reporting quarterly loan growth. 

Loan and lease balances continued to see widespread growth in fourth quarter 2023. Community banks saw loan growth in all major portfolios. Residential real estate loans exhibited the most growth from the third quarter at 1.9%, followed closely by nonfarm, nonresidential CRE loans at 1.6%. Total loans and leases grew 7.9% from one year ago. This year-over-year growth was also driven by residential real estate and nonfarm, nonresidential CRE loans, which showed growth year-over-year of 10.1% and 7.2%, respectively.

Community banking: When one door closes, another opens

With many calendar year-end institutions having wrapped up, or in the process of wrapping up year-end financial statement audits, it is starting to feel as if we can finally put a cap on 2023. What a year it was! Although the above analytics might not paint the rosiest of pictures, with full-year net income having slid 7.1%, there is still a lot to celebrate from 2023. On the financial side, loan demand continued to remain relatively strong, especially given the challenging rate environment, with loan balances having grown 7.9% from one year ago. Deposit balances, although not matching the growth in loans, also increased from one year ago, having increased 2.3%. Although inflation remained stubborn throughout 2023 and thus far through 2024, the prospects of a “soft landing” have grown for many, with unemployment remaining at historic lows. Recently, the Fed signaled they hope to cut interest rates three times in 2024, although this seems to be a moving target, given inflation’s persistence. 

Let’s not forget, 2023 marked the year of adoption of the current expected credit loss (CECL) standard for many institutions. This is a monumental change for institutions, which completely overhauls the way institutions think about their allowance for loan losses. Not only did allowance calculations get completely revamped, many now relying significantly on vendors and peer data but as a result, processes, internal controls, and documentation also changed significantly from the previous incurred loss methodology. It is fitting for all of us to take a deep breath, as it feels as if we’ve all held our breath for the last few years leading up to adoption. We made it. Most of us are finally on the other side of an accounting standard that was issued seven years ago—and was partly a response to a crisis that occurred 15 years ago. 

Although there may be future adjustments and iterations, the CECL standard is here to stay. So, once we take that deep breath, it’s time to dig back in and continue to refine and build upon the calculation and processes we’ve implemented in 2023. We’ve come to learn that, among other things, documentation is key under the CECL methodology, arguably more so than under the incurred loss methodology, and thus should continue to be a focus in 2024.

It may be hard to believe, but it’s been just over a year since the bank failures of March 2023. This was a scary time for the banking industry, as uncertainty set in as to whether your institution could be next. But, for many institutions, this event can be looked back on as a positive moment in 2023. This event brought the differences in banks, community vs. regional vs. global, to the spotlight, allowing community bankers to showcase their differences, highlighting how community-oriented your institutions really are.

So, with that, we give a salute to 2023 and look ahead to 2024. We’ve learned a lot and we have 2023, in part, to thank for that. If quarter one is any indication, we’re in for another rollercoaster of a ride in 2024. Artificial intelligence, including “Gen AI,” continues to dominate headlines, the Fed continues to humor the idea of cutting interest rates, and let’s not forget, 2024 is an election year. But what is a “normal” year anymore? If anything, the last few years have exemplified just how resilient the community banking space really is and have given us the tools and confidence to adapt to change in nearly real-time. In other words, bring it on, 2024. As always, BerryDunn’s Financial Services team will be right alongside you, navigating every rise, bump, and drop of this rollercoaster ride.

Did you know that one in 36 children is diagnosed with autism, with many children and adults alike left undiagnosed? In addition, one in six people claim a sensory need or sensitivity. These sensitivities can create challenges for enjoying public spaces, just as physical limitations do.

Parks and recreation agencies, like any public-serving organization, have an obligation to equally serve all members of their communities. But knowing that something must be done is not the same thing as knowing how to approach it. As heard in a recent episode of the Let’s Talk Parks with BerryDunn podcast, host Becky Dunlap spoke with Meredith Tekin, President of the International Board of Credentialing and Continuing Education Standards (IBCCES), and Lane Gram, Manager for Parks and Recreation in Gilbert, Arizona, about how the town is undertaking the endeavor of making their parks and facilities accessible and enjoyable for all.

For the Town of Gilbert, inclusivity is a strategic priority. Their goal was for accessibility to extend beyond physical modifications, and into the heart of the experiences that their parks provide. Below are four of the key takeaways from their journey to having several of their parks and facilities designated as Certified Autism Centers.

Seek out the inclusivity experts

The Town of Gilbert realized they had some blind spots and didn’t have the best practice expertise to address inclusivity on their own. To solve this problem, they decided to seek the guidance, and certification from, the International Board of Credentialing and Continuing Education Standards (IBCCES). IBCCES is a global leader in professional autism and neurodiversity training and offers various certifications that can be earned by meeting their stringent criteria, including an Autism Certification for Parks and Recreation Departments.

Meredith Tekin, President of IBCCES, describes how they help organizations: “IBCCES works with a variety of organizations and industries for our certification programs. When you become certified, first and foremost, you do have a third-party, IBCCES, that is there to support you, provide recommendations and guidance for areas that your staff doesn't have intimate knowledge of. And we're here not only for the training portion, but throughout the lifetime of the certification.”

Be proactive about knowing the needs of your community 

Often, for those who are not neurodivergent, it can seem like a guessing game when trying to figure out how to be inclusive in ways that matter. It may take a bad experience and a complaint before it’s clear what is needed. To avoid this, in Gilbert, they took a proactive approach.

Lane explains, “For the Town of Gilbert, the process to become certified really started with our registration process and wanting the members of our community to feel like we were open to individuals with disabilities or special needs of any kind being involved in our programs. We added questions to our registration process to make people feel more comfortable in providing information [about which accommodations they need] and from there then we started with the training for the employees and all staff, at every level.”

This proactive approach makes it easy for the community to express their needs and allows the town to anticipate those needs ahead of time. As one example, they now offer a “quiet tent” at their 4th of July celebration where they provide noise-cancelling headphones and other comforts for those who need to take a break from the noise from fireworks and crowds.

Focus on inclusivity training for all parks and recreation staff

Training is a critical part of the IBCCES certification process. "To be considered a certified autism center, the baseline is that at least 80% or more of the public-facing staff have to complete some level of training with us. So, for an organization like a parks and recreation department, we train the staff, we have multiple levels and types of training depending on that person’s role and how they interact with the public,” explained Meredith.

Lane found the training incredibly helpful in giving staff members the understanding and communication tools to be more inclusive. She said, “A lot of other benefits came along with it, just general sensitivity and awareness for our staff to be treating everyone in the general community with respect and not just making a judgment based on what they might look like or how they're behaving. And so, for our staff, I think it's just making them better people and better stewards for the community and providing a better opportunity for community members to be involved in our programs.”

She gave an example of the impact: During a road shutdown, a bicyclist was in visible distress about changing their regular route. Understanding that this was a big deal to that person, and wanting them to have a good experience, the staff found a way for the cyclist to continue on their usual route that was not disruptive to the work they were doing. It may sound simple, but the staff used compassion and problem solving to create a better experience for that particular person.

Overcommunicate and prioritize inclusive services

For those with special needs, physical or otherwise, it’s incredibly important to have information available ahead of time. A site can be technically “accessible,” but is it accessible for the specific person who wants to go there? A person with mobility issues may be able to walk fine on certain surfaces, but may have issues with a particular type of surface. They want to know before they go that they’ll be able to get around and have a good experience--or know that it’s not a place where they will feel at ease so they can avoid it.

According to Meredith, “If you think you're over-communicating, you're probably doing just enough.” IBCCES recommends an easy to find website that gives as much detail as possible about the location or facility. 360-degree video tours, sensory guides, and photos are all good options for helping the community understand what they can expect. On-site, it’s also important to clearly communicate, via symbol-based signage, so people can easily find restrooms, parking, and other facilities at the location.

As part of the IBCCES certification, the organization provides sensory guides that rate on a scale of 1 to 10 the intensity of touch, taste, sound, sight, and smell experiences at each location, and provides a narrative about the types of experiences one can expect. This is an easy-to-understand tool that can help those with sensitivities plan ahead and choose activities that are best for them.

So, where to begin? For Gilbert, AZ, the process began by making accessibility and inclusivity a top priority as they partnered with BerryDunn on their most recent master plan. Highlighting inclusivity initiatives at the highest level of planning is critical in helping ensure that strategies are put into place throughout the organization to support these efforts in a holistic way.

For more ideas on how to create inclusive spaces, listen to the full conversation. 

BerryDunn works with parks, recreation, and library organizations across the US to help them strengthen operations, innovate, and enhance services that benefit their communities. We bring decades of experience working in public service in similar roles as our clients. Our expertise includes strategic and master planning, pricing and cost recovery, feasibility studies, and organizational and operational assessments, including recreation assessments. Learn more about our team and services.