preparing for: tribal accounting & audit in 2021
TRANSCRIPT
PREPARING FOR: TRIBAL ACCOUNTING & AUDIT IN 2021 National Tribal Practice Team
The information provided herein is for informational purposes only and should not be construed as financial, investment, tax, accounting or legal advice.
TODAY’S SPEAKERS Just some of the REDW professionals who comprise our National Tribal Practice Team.
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Colaine Curtis, MBAAccounting Specialist
602.730.3605
Corrine Wilson, CPAPrincipal & National
Tribal Practice Co-Leader
Wesley Benally, CPASenior Manager &
National Tribal Practice Co-Leader
Mike Dierlam, CPASenior Manager
Marcus Benally, MBASenior Audit [email protected]
602.730.3670
Ft. McDermitt Paiute Shoshone Tribe
Navajo Nation Navajo Nation Navajo NationCherokee Tribe
TODAY’S AGENDA
Updates
2020 Compliance Supplement & Addendum
CARES Act and Other Updates
CARES Act Provider Relief Fund
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GASB UPDATES Wesley Benally, CPASenior Manager & Co-Leader of National Tribal Practice
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GASB UPDATES
Learning Objectives Identify the effective dates for new GASBs and when they
apply to your organization
Obtain an understanding of key provisions and technical bulletins of applicable GASB pronouncements for 2020 and 2021 and how they may apply to your tribal organization
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POLLING QUESTION #1
Are you aware of, and prepared for, the GASB standards you need to implement for your 2020 and 2021 audits?
Yes No
Not sure
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EFFECTIVE DATES
FY Begins after December 15, 2019 (FYE 12/31/2020 or 9/30/21)
• GASB 84• GASB 90• GASB 97
FY Begins after June 15, 2020 (FYE 12/31/2020 or 9/30/21)
• Statement 93
FY Begins after December 15, 2020 (FYE 12/31/2020 or 9/30/21)
• GASB 89
FY Begins after June 15, 2021 (FYE 12/31/2020 or 9/30/21)
• GASB 87• GASB 92
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BEGINNING AFTER DECEMBER 15, 2019GASB 84 – Fiduciary Activities
Defines specific criteria to identifying activities for state, local governments and Tribes and their entities, including those only engaged in business-type activities.
Defines what should be reported as fiduciary activities and how governments should report fiduciary activities in general purpose external financial reports.
Tribes need to re-assess their fiduciary funds and pension funds, as there could be changes.
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COMPONENT UNIT – YES OR NO
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BCU
EnterpriseGovernmental
PG Legal Entity
= Fund/BCU
= Primarygovernment(legal entity)
= DCU
= Financial reporting entity
Fiduciaryfund
DCU
DCU
CORE OF THE DECISION TREE
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PATH STEPS – COMPONENT UNIT/CONTROL NOT IN QUESTION
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Fiduciary Component Units that Provide Post-Employment Benefits
Other Component Units Are Fiduciary Component Units If …
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• Contributions are irrevocable (cannot be reversed)• Plan assets are dedicated to providing benefits• Plan assets are legally protected from creditors
• Administered through trust agreement or equivalent when government itself is not the beneficiary
• Dedicated to providing benefits to recipients in accordance with terms and legally protected from creditors
• For the benefit of individuals and the government does not have administrative or financial involvement assets
• For the benefit of organizations or other governments that are not part of the financial reporting entity
PATH STEPS – NOT COMPONENT UNIT/CONTROL REVIEW REQUIRED
Post-Employment Benefits that are not Component Units are fiduciary if …
All other activities are fiduciary if the following are met …
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• The government controls the assets of the arrangement and the arrangement contains the following:
• A pension or other post-employee benefit plan that is a trust as defined by GASB 67
• Pension assets are not part of the reporting entity• Other post-employee benefits are not part of the reporting entity
• The government controls the assets • The assets are not derived from specific sources• Assets are administered through trust agreement (government not beneficiary)• Assets are for the benefit of individuals and government does not have
administrative involvement
EXAMPLE – PER CAPITA/MINOR TRUST FUNDS
A tribe has a minor trust fund for their minors 18 years and younger that is currently not reported in the Tribe’s financial statements as a fiduciary fund. In addition, based on the Tribe’s Revenue Allocation Plan, gaming profits require contribution on a yearly basis. In a review of trust documents, the Tribe can revoke and take control of assets. Should the Tribe include the activity for this trust fund as a fiduciary fund?
Yes or No?
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FY BEGINNING AFTER DECEMBER 15, 2019
GASB 90 – Majority Equity Interest an Amendment of GASB Statements No. 14 and No. 61
Clarifies that a government with a majority equity interest in an organization that remains legally separate after acquisition must report its equity interest as an investment if:
it meets GASB’s investment definition, it would be measured using the equity method.
For a majority equity interest in a legally separate entity that does not meet the definition of an investment:
the government is to report the legally separate entity as a component unit.
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EXAMPLE – INVESTMENT VS. COMPONENT UNIT
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GASB Codification 2600.116 provides an example to illustrate the “intent” criteria for distinguishing an investment from a component unit. In that example, a government purchases 100 percent of the stock of a concrete plant.
If the government’s intent in owning the concrete plant is to provide a controlled source of concrete for its capital projects, it would be reported as a component unit.
If the intent for owning the concrete plant is to earn income or profit, and the present service capacity of the equity interest is based solely its ability to generate cash or to be sold to generate cash, then the equity interest meets the definition of an investment.
FY BEGINNING AFTER DECEMBER 15, 2019GASB 97 – Certain Component Unit Criteria, and Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans
This Statement has various effective dates. The provisions effective for periods beginning after December 31, 2019, include:
Limitations of the application of the financial burden criterion for contributions to post-employment benefit plans to only defined benefit pension plans and defined benefit other post-employment benefits (OPEB) plans that are administered through trusts.
This will reduce costs of reporting of certain defined contribution pension plans as fiduciary component units. This supersedes previous guidance in Statement 84 and Implementation Guide 2019-2.
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SECTION 457 PLANS
Section 457 –Pension Plan Section 457 –
OPEB
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FY BEGINNING AFTER JUNE 15, 2020
GASB 93 – Replacement of Interbank Offered Rates
Provides relief in applying generally accepted accounting principles (GAAP) to contracts, hedging relationships, and other transactions affected by reference rate reform.
Requirements of this statement are effective for reporting periods after June 15, 2020;
LIBOR - Paragraph 11b is effective for reporting periods ending after December 31, 2021;
Leases - Paragraphs 13 and 14 are effective for fiscal year periods beginning after June 15, 2021, and all reporting periods thereafter.
Review existing debt agreements for interest rate swaps
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LIBOR TO SOFR
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LIBOR SOFR
FY BEGINNING AFTER DECEMBER 15, 2020
GASB 89 – Accounting for Interest Cost Incurred before the End of a Construction Period
Interest cost incurred before the end of a construction period will be expensed rather than included in the historical cost/capitalization of a capital asset reported in a business-type activity or enterprise fund.
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FY BEGINNING AFTER JUNE 15, 2021GASB 87 - Leases All leases will be recorded comparable to the
current guidance for capital leases.
A lessee government will recognize a lease liability and intangible right-to-use lease asset at the lease term’s beginning.
Rent expense under current guidance will be replaced with interest and amortization expenses.
Lessors will record a lease receivable and deferred inflow of resources at the lease term’s beginning. The leased asset will not be derecognized.
Tribes should inventory all leases (expense and terms) to assess and prepare for GASB 87.
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AREAS TO CONSIDER
Control
Lease Term
Definition
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TIME PERIOD – LEASE TERM
Non-cancelable period
Period covered by lessee’s or lessor’s option to extend
Period covered by lessee’s or lessor’s option to terminate
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INTRA-ENTITY LEASES
Government and Enterprise contracts
Period covered by lessee’s or lessor’s option to extend
Period covered by lessee’s or lessor’s option to terminate
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EXAMPLE – BUILDING LEASE (INCENTIVE & EXTENSION) The Tribe leases a building to its Utility Authority (the “UA”), a
discrete component unit of the Tribe, for a non-cancellable term of 10 years.
Fixed payments of $15,000 are due at the beginning of each year. At end of the first year, the UA is entitled to a rebate of $5,000
(Incentive) Three-year extension, likely to renew Discount rate is 6%
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IMPLEMENTATION SUGGESTIONS
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• Greater than year• Change in covenants
Debt limits and
covenants
• Change?• Communicate• Procedures to identify leases• Capital asset policies
Lease policies
GASB TECHNICAL BULLETIN 2020-1
CARES ACT Eligibility vs. Purpose Restrictions
Lost Revenues Subsequent Events PPP Loans
Operating vs. Non-Operating Matching Theory Infrequent Items
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2020 COMPLIANCE SUPPLEMENT & ADDENDUM
Mike Dierlam, CPAAudit Senior Manager
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2020 COMPLIANCE SUPPLEMENT UPDATES
Background on the 2020 Compliance Supplement & Addendum and how these can be used by Tribal governments
Cover Key Updates to the 2020 Compliance Supplement Review Important Material in the Compliance Supplement
Addendum Need to know information related to COVID-19 and CARES Act
Single Audit Implications
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COMPLIANCE SUPPLEMENT 2020 DETAILS
Initial 2020 Compliance Supplement was released to the public on August 14, 2020 – stating a later addendum for CARES Act.
On December 22, 2020, OMB released the addendum. Applicable for audits of fiscal years beginning after June 30, 2019.
Most Tribes – audits for YE September 30, 2020 and December 31, 2020.
Both the supplement and addendum are publicly available at:https://www.whitehouse.gov/omb/office-federal-financial-management/
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POLLING QUESTION #2
Does your organization review the annual compliance supplement as part of your analysis of Federal grant compliance?
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The compliance supplement was created for both auditors and auditees. It is published to communicate the most critical compliance attributes for each Federal award by CFDA required to be used by auditors for a Single Audit
Communicates internal control standards for compliance
HELPFUL USES FOR THE COMPLIANCE SUPPLEMENT
Becoming familiar with the applicable compliance attributes for your Federal awards.
Preparing supporting documentation for auditors in advance of the Single Audit.
Performing internal reviews of your program compliance and internal controls for compliance per grant requirements.
Keep in mind that grant agreements with the grantor always take precedence.
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COMPLIANCE SUPPLEMENT UPDATES
CARES Act has provided additional funds to many existing CFDA numbers.
The majority of federal agencies have received additional funds under the CARES Act.
Supplemental CARES Act funding should be tracked and presented separately on the Schedule of Expenditures of Federal Awards (SEFA). May have same CFDA, but will need a separate line on the SEFA
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COMPLIANCE SUPPLEMENT UPDATES Due to additional funds received under the CARES Act, many
Tribal governments may have provided resources to their enterprises, departments, component units, etc.
Important to consider the potential Single Audit or Program-Specific audit implications of allocating CARES Act funds to other Tribal departments. Documentation of the approach to the funding (Small-Business Grant,
Interfund Reimbursement, Subaward/Subrecipient agreement) is critical to determine if a Single Audit is required for the Tribal entity.
Example: Tribal Water Department received $800,000 to make water system improvements; a Single Audit may be required.
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COMPLIANCE SUPPLEMENT UPDATES - REPORTING
Most CFDAs require audit tests of reporting; most federal programs are required to use Federal Funding Accountability and Transparency Act reporting (FFATA).
For FYE September 30, 2020 audits, auditors are required to test FFATA reporting for only the COVID programs listed in the addendum. Except for Treasury CRF program, Reporting is considered subject to audit in the Part 2
Matrix. For FYE December 31, 2020 audits, likelihood that FFATA reporting may be
applicable for all programs.
Tribes will need to closely review the terms and conditions of grant awards to determine whether any of their grants require reporting under FFATA.
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COMPLIANCE SUPPLEMENT UPDATES - REPORTING
Requires reporting of subawards $25,000 or more Includes subrecipients
Requires reporting of subcontracts $25,000 or more for those that are federal contractors, not federal grants
Requires monthly reporting in the FFATA Subaward Reporting System
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CRF TREASURY CLARIFICATION - TRIBAL ENTERPRISES
Treasury letter to NAFOA - November 20, 2020 (handout) Clarifies audits of CRF funds that support tribal enterprises or entities, dependent on
structure of tribal entity and capacity in which it received payments. For-profit subrecipients are not subject to Single or program-specific audit (2 CFR 200.501(h).
A Tribal Enterprise that is not separately incorporated and received payment for costs of re-opening or covering operational expenses would be a beneficiary and not subject to Single Audit.
A Tribal structured non-profit entity that has not been separately incorporated and considered an arm of the Tribe and has >$750,000 of CRF/federal funds, would be a subrecipient and subject to Single Audit.
Tribes are responsible to ensure subrecipients and beneficiaries provide necessary reporting and records to support the use of the CRF payments.
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COMPLIANCE SUPPLEMENT UPDATES
Existing programs may have compliance requirement changes due to COVID-19 or other reasons. Review the Compliance Supplement to check for any changes.
Appendix VII expanded to include the initial COVID-19 guidance.
Section 3-1 removed. This section previously included as part of the transition to Uniform Guidance. Removed, as OMB considers this transition to be complete.
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COMPLIANCE SUPPLEMENT UPDATES
Appendix V is the roadmap to changes found within the new supplement.
6-compliance requirement for each CFDA mandate continues Maximum of 6 compliance attributes can be identified as “subject to
audit” (exception for R&D clusters – 7) Activities Allowed and Unallowed and Allowable Costs and Cost
Principles count as one requirement. Some agencies have changed these, though the changes have
been minimal. Recommended to review Part 2 Matrix.
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COMPLIANCE SUPPLEMENT UPDATES
New Programs: 14.275 Housing Trust Fund 16.575 Crime Victim Assistance Grant Program 21.016 Equitable Sharing Program 93.686 Ending the HIV Epidemic: A Plan for America
Changes to a variety of programs: Head Start, CHIP, Economic Development Cluster
Cross-cutting sections have been updated
Verify each award’s CFDA … sometimes they change from year to year!
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POLLING QUESTION #3
True or False: CARES Act funding awarded to Tribes which is passed to the Tribe’s related parties may result in new sub-recipient relationship. These relationships should be evaluated by the Tribe prior to the commencement of the audit.
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True. Tribes must have determined if awarding funds to a Tribal entity results in a subrecipient relationship, in which case the recipient of funds would potentially be subject to a Single Audit, and the Tribe would need to perform subrecipient monitoring. Review 2 CFR 200.330-.332 for subrecipient definition
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Paycheck Protection Loan Program($>600B)
Federal Agency: SBAFor-profits, NFPs
Is NOT in Compliance SupplementCFDA No: 59.073
Provider Relief Fund($175B)
Federal Agency: HHSFor-profits, NFPs, Governmental Entities
Is subject to Single AuditCFDA No: 93.498
Coronavirus Relief Fund($150B)
Federal Agency: TreasuryGovernmental Entities and Tribes
Is subject to Single AuditCFDA No: 21.019
Education Stabilization Fund($>600B)
Federal Agency: EducationStates, Schools, IHE
Is subject to Single AuditCFDA No: 84.425
COMPLIANCE SUPPLEMENT – DECEMBER ADDENDUM
COMPLIANCE SUPPLEMENT – DECEMBER ADDENDUM Coronavirus Relief Fund (20.019) applicable for many Tribal
governments. Per matrix, the following attributes are applicable: Activities Allowed/Unallowed & Allowable Costs and Costs Principles
Auditors will use Treasury’s guidance and FAQs as criteria
Period of Performance Expenditures incurred after March 1, 2020
Reporting Quarterly Financial Progress Report submitted on GrantSolutions portal
Subrecipient Monitoring, 2 CFR 200.330 - .332
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COMPLIANCE SUPPLEMENT – CRF
Allowable Activities have the following primary criteria: Necessary expenditures incurred due to the public health emergency with respect to
COVID-19 Not accounted for in the government’s most recently approved budget as of March 27,
2020 Incurred during the period that begins March 1, 2020 and ends December 30, 2021
Governments are responsible for making determinations as to what expenditures are necessary due to the public health emergency with respect to COVID-19.
Treasury updated and published federal regulations in federal register on January 15, 2021 (handout).
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CRF COMPLIANCE
Allowable examples of costs Medical, testing, facilities, telemedicine Public health, PPE, safety measures, technical assistance, disinfection,
communication Payroll for public safety, public health, healthcare, human services,
direct administrative costs for CRF funds Food delivery, distance learning, telework, sick pay and family pay
under FFCRA, prisons and jails, homeless populations Economic support for grants to small businesses, payroll support,
unemployment insurance
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CRF COMPLIANCE
Not Allowable Replacement of lost revenues Payroll/benefits for employees who work duties are not substantially
dedicated to mitigating or responding to COVID-19 Expenses covered or reimbursed by other federal funding or PPP loans Workforce bonuses other than hazard pay or overtime Severance pay or legal settlements Damages covered by insurance
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POLLING QUESTION #4
True or False: Tribal Governments should use the Treasury FAQs to determine which expenditures are necessary to respond to COVID-19 and the public health crisis.
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False. Tribal governments make this determination. Tribal governments should use the Treasury’s initial requirements, plus
the FAQs now published in the federal register, to ensure compliance. Timing of approval and justification of spending is key to support the
allowability of the expenditures. FAQs available at the time of approval.
COMPLIANCE SUPPLEMENT – DECEMBER ADDENDUM
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Appendix VII of the Addendum will allow recipients and subrecipients who have received CARES Act related funding a 3-month extension for entities with original due dates of: October 1, 2020 through June 30, 2021 Only for entities that received CARES Act funding Still can be considered a low-risk auditee No approval necessary for the extension Grantees should document reason for any delayed filing of the audit,
which may be requested by auditors.
COMPLIANCE SUPPLEMENT – DECEMBER ADDENDUM
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Other miscellaneous items of note in the December Addendum: Non-Federal entities that received donated PPE purchased with Federal
assistance funds should include the fair market value of the PPE at the time of receipt in a stand-alone footnote to the SEFA, and mark as “unaudited.”
Department of Transportation implemented a new cluster program: Federal Motor Carrier Safety Assistance Cluster
Indian Community Development Block Grant – New Special Test Added Special Provisions for ICDB – Cares Imminent Threat Grants
CARES ACT AND OTHER UPDATES Colaine Curtis, MBAAccounting Specialist Manager
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CARES ACT AND OTHER UPDATES
Employee Retention Tax Credit (ERTC)
Voluntary Families First Coronavirus Response Act (FFCRA) Leave Provisions
Indirect Cost Revisions to Uniform Guidance
Audit Considerations Extensions
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EMPLOYEE RETENTION TAX CREDIT (ERTC)
Tribal Governments and Businesses (Enterprises) are eligible for the ERTC
Eligible employers are those businesses with operations that have been partially or fully suspended due to governmental orders due to COVID-19, or
Businesses that have a significant decline in gross receipts compared to 2019.
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EMPLOYEE RETENTION TAX CREDIT (ERTC) - CONT’D
Qualified Wages/Health Benefits per calendar quarter betweenMarch 13, 2020 - December 31, 2020 Over 100 employees: ERTC applies to wages paid to employees NOT working (so for those
on Paid Admin Leave, or those the Tribe continued to pay even though they weren't working)
Under 100 employees applies to ALL wages (working or not)
Number of employees is per IRS aggregation rules
Credit is up to 50% of qualified wages/health benefits up to $10,000 per EE, for a maximum ERTC credit of $5,000
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EMPLOYEE RETENTION TAX CREDIT (ERTC) - CONT’D
January 1, 2021 to June 30, 2021 (may be extended to the end of 2021 – awaiting Congress) Over/under 500 employees (per IRS aggregation rules) wages include
qualified health plan expenses incurred by employer 941 Reporting Changes to Form 941 for COVID-19 related employment tax credits and other tax
relief
Credit is up to 50% of qualified wages/health benefits up to $14,000 per EE, for a maximum ERTC calendar quarter credit of $7,000
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EMPLOYEE RETENTION TAX CREDIT (ERTC) - CONT’D
Qualified wages exclude: Wages/benefits used with PPP Loans
Wages/benefits funded from CRF funds Wages for which the employer received tax credits per the EFFCRA
IRS Aggregation Rules – Determine the tribal entities that need to be aggregated to calculate the total employees threshold, then the qualified wages per each in the aggregation, each individual EIN entity applies for their own ERTC
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VOLUNTARY FFCRA LEAVE PROVISIONS (THRU 3/31/21)
Families First Coronavirus Response Act (FFCRA) mandatory April 1, 2020 through December 31, 2020 Leave (like FMLA) for employees with COVID-19, or family with COVID-19
that they care for or were exposed, or children home Should have adopted policy May receive a payroll tax credit for wages paid for this leave, excluding
any wages covered by PPP or CRF Employers may voluntarily continue paid leave to employees who
did not exhaust the leave in 2020 or at the discretion of the employer to continue.
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VOLUNTARY FFCRA LEAVE PROVISIONS (THRU 3/31/21)
Leave provisions are a key component of the COVID Safe work environment. Opportunity for eligible employers to offer voluntary FFCRA leave in
order to limit employees coming to work sick
Federal Contract Considerations
2021 paid leave policies – consider opportunities within the workplace
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VOLUNTARY FFCRA LEAVE PROVISIONS (THRU 3/31/21)
The Tribal Coronavirus Relief Fund Extension, granted through December 31, 2021, provides access to $8 billion of CARES Act funding delayed in 2020.
Tribes may use this money to pay employees, subject to the prohibition on “double-dipping” related to the payroll tax credit.
Tribes may maintain FFCRA-compliant leave policies as appropriate.
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INDIRECT COST
Can the CRF be charged for indirect costs according to the entity’s indirect cost rate? No. CRF Guidance from Treasury states: “Payments from the Fund are not administered as
part of a traditional grant program and the provisions of the Uniform Guidance, 2 C.F.R. Part 200, that are applicable to indirect costs do not apply. Recipients may not apply their indirect costs rates to payments received from the Fund.”
Expenditures related to the administrative expenses of CRF fund payments may be charged if they represent an increase over previously budgeted amounts and are limited to what is necessary.
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INDIRECT COST - CONT’D
IDC Proposal Example: Tribal entity has FYE 9/30/20 and COVID related expenditures. Tribal entity will need to record the actual amount spent on COVID expenditures through FYE 9/30/20 in its direct cost base.
Tribes need to list CARES Act dollars separately on the SEFA schedule, even if the same CFDA was used for CARES funding.
Direct costs for IDC-type costs may be paid with support, will be subtracted from IDC pool in IDC proposal.
CARES Act fund expenditures with no IDC will be included in the IDC direct cost base with any applicable exclusions.
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REVISIONS TO UNIFORM GUIDANCE
Revisions in the Final Guidance became effective on November 12, 2020, except for the revisions to 2 C.F.R. xx 200.216 and 200.340, which became effective on August 13, 2020. Pass-through entities are responsible for addressing only a subrecipient’s
audit findings that are specifically related to their subaward and not all of the subrecipient’s audit findings.
Closeout Provisions: Revised from 90 days to 120 days
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REVISIONS TO UNIFORM GUIDANCE - CONT’D
Changes to the Micro-Purchase and Simplified Acquisition Thresholds Micro-purchase threshold increased from $3,500 to $10,000 Simplified acquisition threshold from $100,000 to $250,000
Expanded use of the Indirect de Minimus Rate Does not apply to Indian Tribes
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REVISIONS TO UNIFORM GUIDANCE - CONT’D
2 CFR 200.322 Domestic Preferences for Procurement, to maximize US goods, products and materials
2 CFR 200.216 and 200.471 – Prohibits purchases of certain telecommunications and video surveillance services or equipment from certain foreign entities (Chinese Telecommunications Ban)
Added “Never Contract with the Enemy” requirements to grants and cooperative agreements >$50,000
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OTHER AUDIT CONSIDERATIONS
Davis Bacon – For CRF, Davis Bacon does not apply to construction contracts as it is not specifically mentioned in the federal legislation with any 2 CFR 200 citations or program requirements.
Local Education Agencies? Treasury CRF has a provision where LEAs are not required to document the specific use of funds up to $500 per student. Auditors will consider internal controls over the process and double dipping.
Hazard Pay limitations and policies – define eligible employees, COVID-19 exposure risks, and reasonable amounts
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EXTENSIONS
The spend deadline for the Coronavirus Relief Fund has been extended to 12/31/21.
Per Appendix VII in the Supplement Addendum, the extension does not require individual recipients and subrecipients to seek approval. However, it adds that recipients and subrecipients should maintain documentation of the reason for the delayed filing.
Tribes are responsible and Treasury will look to them for allowability of spending to subrecipients and beneficiaries.
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EXTENSIONS - CONT’D
Which year-end does the extension apply to?
There is no extension for December 31, 2020 year-ends.
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Fiscal Year-Ends Normal Audit Due DateExtended Due Date (3-month extension)
March 31, 2020 December 31, 2020 March 31, 2021
June 30, 2020 March 31, 2021 June 30, 2021
September 30, 2020 June 30, 2021 September 30, 2021
CARES ACT PROVIDER RELIEF FUND Marcus Benally, MBASenior Audit Associate
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LEARNING OBJECTIVES
Overview of the Provider Relief Fund (PRF)
Identify COVID-19 expense methodologies and lost revenue calculations
Review audit and compliance requirements
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BACKGROUND
CARES Act Provider Relief Fund
The Provider Relief Fund supports American families, workers, and the heroic healthcare providers in the battle against the COVID-19 outbreak.
HHS has distributed $178 billion to hospitals and healthcare providers on the front lines of the coronavirus response.
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PROVIDER RELIEF FUND
General Distributions
Initial Medicare Distribution Additional Medicare Distribution Medicaid, Dental and CHIP
Distribution
Targeted Distributions
High-Impact Area Distribution Rural Distribution Skilled Nursing Facility Distribution Indian Health Service Distribution
*Allocated $500M to 438 I/T/U facilities
Safety Net Hospital Distribution
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PROVIDER RELIEF FUNDS ($178B)
• Department of Health and Human Services (HHS)Federal Agency
• Governmental• Not-for-Profits• For-Profits
Entity Type
• 93.498 – Provider Relief Funds• 2020 OMB Compliance Supplement AddendumCFDA
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TERMS AND CONDITIONS
Indian Health Service Distribution Recipient certifies that it provides or provided after 1/31/2020
diagnoses, testing or care for possible or actual COVID-19 cases Not currently terminated from participating in Medicare or
precluded from receiving payment from Medicare Advantage or Part D
Not currently excluded from participation in Medicare, Medicaid and other Federal Healthcare programs
Billing privileges in good standing
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TERMS AND CONDITIONS - CONT’D
Recipient consents to the HHS publicly disclosing the payment that recipient may receive from the PRF. This disclosure may allow some third parties to estimate the gross receipts or
sales, program service revenue, or other equivalent information. Recipient must maintain records and cost documentation as
described in: 45 CFR Section 75.302 – Financial Management 45 CFR Section 75.361-75.365 – Record Retention and Access
Recipient must allow cooperation in all audits the Secretary, Inspector General, or Pandemic Response Accountability Committee conducts to ensure compliance with terms and conditions.
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TERMS AND CONDITIONS - CONT’D
Recipient certifies the payment will only be used to prevent, prepare for, and respond to Coronavirus.
Payment will reimburse recipient only for health care related expenses or lost revenue that are attributable to Coronavirus Recipient must certify that it will not use the payment to reimburse
expenses or losses that have been reimbursed from other sources or that other sources are obligated to reimburse
Indian Health Service Relief Fund Payment Terms and Conditions:https://www.hhs.gov/sites/default/files/terms-and-conditions-indian-health-service-relief-fund.pdf
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POLLING QUESTION #5
Which of the following areas in regards to compliance with PRF audit requirements does your organization find most challenging?
A. Financial statement preparationB. Determining what belongs on the SEFAC. Ensuring support is in compliance with PRF requirementsD. None of the above
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ACTIVITIES ALLOWED - HR 748-283 AND PL 16-139, 134 STAT. 622* To prevent, prepare for, and respond to coronavirus,
domestically or internationally, for: necessary expenses to reimburse, eligible health care providers for health care
related expenses … or lost revenues that are attributable to coronavirus.
Funds are available for construction of temporary structures, leasing of properties, medical supplies and equipment, including personal protective equipment and testing supplies, increased workforce and trainings, emergency operation centers, retrofitting facilities, and surge capacity
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*For all distributions except Skilled Nursing Facility Infection Control Distribution
ACTIVITIES ALLOWED - HR 748-283 AND PL 16-139, 134 STAT. 622* - CONT’D
Payment means a pre-payment, prospective payment, or retrospective payment
Note: PRF may be use for expenditures, lost revenues and/or a combination of both Documentation to support either expenditures or lost revenues must
clearly show how you met the terms and conditions
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*For all distributions except Skilled Nursing Facility Infection Control Distribution
ACTIVITIES UNALLOWABLEHR 748-283 AND PL 116-139, 134 STAT. 622)* These funds may not be used to reimburse expenses or losses
that have been reimbursed from other sources or that other sources are obligated to reimburse.
*All distributions
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LOST REVENUE CALCULATIONS Calculated using any reasonable method
Budget to actual – (2020 budget approved prior to 3/27/2020) Year to Year OR Quarter to Quarter change
Include revenues from all sources that can be attributed to COVID-19 Cancelled elective surgeries/procedures Fewer outpatient visits
Awaiting HHS guidance on lost revenue calculation for 2021
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REPORTING On January 15, 2021, the Department of Health and Human
Services (DHHS) announced a delay in reporting of the Provider Relief Funds.
Recipients of Provider Relief Fund payments greater than $10,000 to register to report on use of funds as of December 31, 2020 beginning January 15, 2021.
Recipients who have not used all of the funds after December 30, 2020, have six more months from January 1 – June 30, 2021 to use remaining funds.
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ACCOUNTING CONSIDERATIONS
Governmental Entities – GASB
GASB 33, Non-exchange Transactions
Most likely include in non-operating revenue
Not-for-Profit Entities – FASB
ASC 958-605 If conditions are deemed present,
release from liability as conditions are met
Consider treatment for net assets with donor restriction
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SINGLE AUDIT & SEFA REPORTING
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Fiscal Year Ending SEFA InclusionCFDA No. 93.498
How are amounts calculated?
Other Information
Prior to 12/31/2020 Not included N/A Report 2020 expenditures & lost revenue in 2021 audit
12/31/2020 2020 Expenditures & Lost Revenues
Based on 12/31/2020 amounts reported to HHS
SEFA amounts are based upon the 12/31/2020 PRF report
After 12/31/2020 but before 06/30/2021
2020 Expenditures & Lost Revenues
Based on 12/31/2020 amounts reported to HHS
SEFA amounts are based upon the 12/31/2020 PRF report
06/30/2021 ? ? 2021 OMB Supplement to provide guidance
NEW SEFA DISCLOSURE – PPE
The SEFA will have to include a footnote with an amount of donated Personal Protective Equipment (PPE) from federal assistance Can be marked unaudited
Information related to audit due dates and treatment of donated PPE can be found in Part 8, Appendix 7 of Addendum of Compliance Supplement
Fiscal Year Ends after 12/31/2020 and before 6/30/2021: Disclose that SEFA amounts are based upon the 12/31/2020 PRF report.
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AVAILABLE RESOURCES
HHS Website CARES Act Provider Relief Fund | HHS.gov
FAQs CARES Act Provider Relief Fund: FAQs | HHS.gov
GAQC 2020 OMB Compliance Supplement Web Page
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CONTACT US! Please don’t hesitate to reach out if you have questions.
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Colaine Curtis, MBAAccounting Specialist
602.730.3605
Corrine Wilson, CPAPrincipal & National
Tribal Practice Co-Leader
Wesley Benally, CPASenior Manager &
National Tribal Practice Co-Leader
Mike Dierlam, CPASenior Manager
Marcus Benally, MBASenior Audit [email protected]
602.730.3670
Ft. McDermitt Paiute Shoshone Tribe
Navajo Nation Navajo Nation Navajo NationCherokee Tribe