Category Archives: Healthcare

Adult Care Home News

by Rachel Owensdhhs

We now have some clarity when it comes to DHHS compliance for Adult Care Homes (ACH).  Last year, the North Carolina General Assembly passed General Statute 131 D-4.1-4.3. It was under this statute, that the Adult Care Cost Report requirement returned.  These cost reports are mandatory for facilities receiving State/County Special Assistance Program funds. Types of facilities subject to this requirement include nursing home combination facilities with adult care beds, mental health supervised living facilities, and all other  adult care homes (Licensed under general Statute Chapters 131E, 122C, and 131D, respectively).

In addition to these cost reports, any of these facilities that are licensed for 7 or more beds, are to be audited.  This audit is of the cost report information in the form of Agreed-Upon-Procedures (AUPs), that must be done by a certified public accountant (CPA)/independent accountant.

The requirements for the combination facilities are slightly different since they are based on the Medicare’s requirements of Skilled Nursing facilities.  Combined nursing facilities should submit a cost report and related AUPs based on their last completed Medicare cost report, which in most cases covers October 2013 through September 2014.

Important Dates:  For the mental health facilities, the reporting period is July 1, 2014 through June 30, 2015.  The reporting period for adult care home facilities is October 1, 2014 through September 30, 2015.

The due date is December 31, 2015 for all facilities.

All facilities that do not receive any funds through the State/County Special Assistance Program are considered exempt and an exemption form must be completed.  This form can be found on the DHHS Office of the Controller’s website at www.ncdhhs.gov/control.

Nursing-homeThe ACH cost report software is also available online, here.  All questions related to the AUPs can be addressed to [email protected].  If you have questions about cost report and AUP preparation, please contact our office.

NC Adult Care Home Update

by Rachel Owens

The NC Department of Health and Human Services sent out a memo dated July 15, 2015 with the latest information regarding General Statute 131D-4.2 – the Adult Care Home providers and their reporting requirements.  To comply with these requirements ALL facilities that receive State/County Special Assistance funds are required to file a cost report.  Those facilities that have 7 beds or more are additionally expected to have Agreed-Upon-Procedures performed.  dhhs

For facilities licensed under Chapter 122C (mental health supervised living facilities) the reporting period is July 1, 2014 – June 30, 2015.  All other facilities are required to use the year end September 30, 2015 regardless of their fiscal year end.  These cost reports are due December 31, 2015.

More information is forthcoming about AUP instructions, and software.  Please continue to check our website and blog for additional information.

Langdon & Company LLP has extensive history working with the long-term healthcare industry. We offer a high degree of expertise and experience with the needs of Adult Care Home providers and would be happy to assist you in the timely filing of the Cost Report.  If you have questions, we will be happy to help you.  Contact [email protected] or [email protected]!

ABLE (Achieving a Better Life Experience) Act – A new way to save for children with disabilities

by Meagan Bulloch

The ABLE Act amends Section 529 of the IRS Code of 1986 to create tax-advantage savings accounts for individuals with disabilities.  The ABLE Act will provide individuals with disabilities the same types of flexible savings tools that all other American have through college savings accounts, health savings accounts and individual retirement accounts.  Most importantly this Act will prevent money saved through 529-ABLE accounts from counting against an individual’s eligibility for federal benefits programs.

As of December 19, 2014 this was signed into law by President Barack Obama. o-SAVINGS-ACCOUNT-facebook

What you should know (Adapted from NDSS):

  1. 529-ABLE accounts are “tax-advantage” savings accounts for individuals with disabilities and their families.  Income earned by these accounts will not be taxed.  Also the money will not be considered an asset when determining eligibility for government supported benefits.
  2. Who is eligible – Any individual with significant disabilities with an age of onset before 26 years of age is eligible.  Eligible individuals can be over the age of 26, but must have documentation of disability that indicates age of onset before the age of 26.  
  3. How much money can be saved – Under current tax law, an individual can contribute a maximum of $14,000 into an ABLE account and not be subject to gift taxes.  The total limit over time that can be made into an ABLE account will be subject to the individual state and their limit for education-related 529 savings accounts.  The first $100,000 in ABLE accounts will be exempt from the SSI $2,000 individual resource limit.  If the ABLE account exceeds $100,000, the beneficiary would be suspended from eligibility for SSI benefits, but would continue to be eligible for Medicaid.    
  4. What expenses qualify – A “qualified disability expense” is considered an expense incurred as a result of the beneficiary living with their disability.  These would include education, housing, transportation, employment training and support, assistive technology, personal support services, health care expenses, financial management and administrative services and other expenses which will be developed in 2015 by the Treasury Department.   
  5. Can I have more than one ABLE account – No, the Act limits the opportunity to one ABLE account per eligible individual. 
  6. How is an ABLE account different from other options – ABLE accounts allow more choice and control for the beneficiary and their families.  The cost of opening an account will be considerably less than setting up either a Special Needs Trust or Pooled Income Trust.  The ABLE account will also be less complicated to set up and owners will have the ability to control their funds.  This new approach also offers individuals living with a disability the ability to work and contribute to their own support and save for their own future with fear of losing necessary support and services.

Meagan Bulloch ([email protected]) is an audit manager at Langdon & Company LLP focused primarily on non-profit clients.

 

The Why, Who, What and How of an effective audit committee for nonprofit organizations

by Meagan Bullochhands

The establishing and maintaining an audit committee is considered a best practice for nonprofit organizations.  An audit committee can greatly help the governing board perform their fiduciary and oversight roles over financial reporting, reducing risk and maintaining donor confidence.  Some organizations may utilize their finance committee as an audit committee.  What is important is not the form of the committee but the substance.

Q: Why should a nonprofit consider forming an audit committee?

A: In addition to Sarbanes Oxley and state requirements imposed for organization’s soliciting funds within certain states, the Form 990 asks if an organization has an audit committee.  Although, such a committee is not a requirement, the establishment of one is considered a best practice by the IRS.  As the Form 990 is a public document, answering “no” to this question may lead to funders questioning why the organization is not following a suggested best practice.  The American Institute of Certified Public Accountants’ (AICPA) Audit Committee Toolkit: Not-for-Profit Organizations, 2nd Edition (available at AICPA Store) lists numerous reasons as to why a nonprofit organization should consider forming an audit committee, including providing better: financial results, decision-making in terms of accuracy and quality of financial reporting; ability to build stronger relationships with stakeholders; as well as facilitating transitions in leadership.

Q:  Who makes the best audit committee members?

A:  Audit committee’s typically consist of 3-6 members with diverse backgrounds and experience all of which are considered “financially literate.”  To be financially literate, members should be able to read and understand fundamental financial statements and recognize when the numbers along with associated disclosures to not make business sense.  Additionally, the best audit committee members are fully involved and engaged with the organization and ensure that two-way constructive dialogue occurs at all times between all parties involved.  Members should also be independent in both fact and appearance.  To be truly effective, the committee must be able to resist any attempt by management to compromise financial reporting.  The following relationships are considered to impair independence:

  1.  An audit committee member who is or has been an officer or employee of the organization during the past 3 years
  2. A member who is an immediate family member of an officer or someone in management
  3. A member who has a direct business relationship with the organization in the past three years; such as a consultant

Q:  Who can serve as a financial expert on the audit committee?

A:  The inclusion of at least one financial expert is a highly recommended best practice.  The following attributed are deemed essential components of a financial expert:

  1.  An understanding of generally accepted accounting principles (GAAP) and nonprofit financial statements
  2.   The ability to assess the general application of such principles in connection with the accounting for estimates, accruals and reserves
  3. Experience preparing, auditing, analyzing or evaluating financial statements that are comparable to those of the organization
  4. An understanding of internal controls and procedures for financial reporting
  5. An understanding of the audit committee function
  6. A general understanding of nonprofit financial issues and specific knowledge of the nonprofit industry in which the organization operates

It is worth noting that an audit committee financial expert has no greater obligations or liability than any other members of the audit committee and board of directors who are not designated as financial experts.

Q:  What should be the mission of an effective audit committee?

A:  Simply put, the mission should be oversight.  Specifically, the following areas should be their main focus:

  1.  Financial reporting
  2. Risk Management

Audit function – oversight of and communication with independent auditors, both internal and external

Langdon & Company LLP will be happy to assist with your audit needs.  Please contact our office!

Meagan Bulloch ([email protected]) is an audit manager at Langdon & Company LLP focused primarily on non-profit clients.

Audit Options

by Katie Anthony

You may think that since you are not a publicly held company that you don’t need an audit. However, audits are for private companies as well. Many non-profits are required to have audits in order to comply with federal and state grant requirements. Other companies just want to make sure that they are on the right track, and have an audit done in order to have an independent accountant take a look at their financial statements. In addition, there are different types of audits.

You may not think about it in your day to day activities, but your processes may be inefficient. Having an efficiency audit done can pinpoint areas that need work so that you can save money. All companies want to save money and being more efficient will allow your employees to either work less hours, or have time to accomplish more. Another factor could be that your employees are stressed out and don’t have time to get everything done. With just a few process changes, your employee satisfaction could go through the roof due to less job frustration. Happy employees make for a pleasant working environment and better employee retention.

working

Still don’t think you need an audit? Langdon & Company’s auditors can also perform Agreed-Upon-Procedures. With some direction from our Partners, you can take a look at your needs and tailor a report to the needs of your company. Maybe your industry has very particular regulations. Auditors can come in and make sure that you are complying with these regulations and are keeping the necessary documentation. A good example here is the trucking freight industry. CDL drivers and companies that employee these drivers are required to keep specific and detailed records regarding time spent driving, fuel bought and used across state lines, as well as annual checklists on driving records and other driver-specific information.

Give Langdon & Company LLP a call today to set up an appointment with a manager or partner concerning your company.

Katie Anthony ([email protected]) is an audit staff member at Langdon & Company LLP.  She enjoys working with a variety of clients and offering a fresh perspective on a multitude of issues.

On the Horizon: Revenue Recognition

by Lee Byrd

content updateOn May 28, 2014, Financial Accounting Standards Board’s (FASB) released Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606). The ASU replaces more than 600 pieces of current revenue recognition guidance with a five-step model. Under the current guidance, entities recognize revenue when earned and realizable. Under the new ASU, entities will recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. As such, the application of the revenue recognition criteria is based on the terms of the contract with the customer rather than on industry specific guidance. The standard requires entities to make more estimates and use more judgment than current guidance.

The five-step model is as follows:

Step 1 – Identify Contracts with Customer

Step 2 – Identify Performance Obligations

Step 3 – Determine Transaction Price

Step 4 – Allocated Transaction Price to the Performance Obligations

Step 5 – Recognize Revenue When (or as) Performance Obligations are Satisfied

The standard becomes effective for public and private companies in 2017 and 2018, respectively. Early adoption is not permitted for public companies. While this gives entities time to become familiar with the new guidance, entities will need to use this time wisely to analyze the cost and benefits of the two approaches to implementation. Entities can choose the full retrospective method, which requires that the standard be applied retrospectively to each prior reporting period presented, or the modified retrospective method, which allows the cumulative effect of initially applying the update recognized at the date of initial application with disclosure of the amount by which each financial statement line item is affected in the current year. If the full retrospective method is chosen, the ASU allows some practical expedients to be used during implementation.

Langdon & Company LLP can provide further information or assist with implementation of ASU 2014-09. Please contact our office for more information.

Lee ([email protected]) is an audit manager focused primarily on single audit procedures associated with healthcare clients.

Upcoming NFP Changes: Accounting for Shared Services

by Brittany Powellaccountant-real deal

In April 2013, FASB issued ASU 2013-06 – Not-for-Profit Entities (Topic 958): Services Received from Personnel of an Affiliate which requires not-for-profit organizations to recognize contributed services received from an affiliate that directly benefit the not-for-profit entity.  This means that a not-for-profit entity may have to record services provided by an affiliate that the affiliate does not charge the recipient not-for-profit entity for.  According to ASU 2013-06, contributed services should be recognized if they meet one of the following criteria:

  1. The services provided “create or enhance nonfinancial assets”, or
  2. The services provided “require specialized skills, are provided by individuals possessing those skills, and typically need to be purchased if not provided by donations.”

Typically, in accordance with ASU 2013-06, the contributed services should be recorded “at the cost recognized by the affiliate for the personnel providing those services.”  However, if recording the services at cost would significantly misstate the value of the services received, ASU 2013-06 allows the not-for-profit entity to elect to record the contributed services at either cost or at fair value.

ASU 2013-06 will be effective for fiscal years beginning after June 15, 2014, or in other words beginning with fiscal year ended June 30, 2015 for not-for-profit entities with a June 30 year-end.  Early adoption of ASU 2013-06 is permitted.

With the approaching implementation date of ASU 2013-06, please contact our office with any questions regarding the application of ASU 2013-06 or its applicability to your not-for-profit organization.

Brittany Powell ([email protected]) is a Senior Accountant with Langdon & Company LLP.  She specializes in audit, serving a wide variety of nonprofit organizations.

Tax Exempt Status Does Not Imply Freedom from All Taxes and Related Filing Requirements

by Tony Pandiscia,

As a CPA firm, we often encounter new or existing organizations inquiring about becoming tax exempt under a misconception that “tax exempt status” provides a broad immunity from all taxes and tax return filings.  As a refresher, Tax Exempt Organizations (or “TEOs”) attain a legal existence under the province of state law (such as North Carolina’s “Nonprofit Incorporation Statutes”) before applying for “tax exempt status” with our Federal Government.   Once the Internal Revenue Service grants a TEO Federal exempt status, a key benefit is the exclusion from income tax on all program service related revenue (i.e. revenues generated from activities directly related to a TEO’s exempt purpose).   However the following represent other tax-related filings and liabilities that nevertheless apply to TEO:

INCOME TAX FILINGS AND UNRELATED INCOME.  Although enjoying an exemption from income tax liability on “program service revenue”, to preserve its tax exempt status a TEO must annually file Form 990, Return of Organization Exempt from Income Tax and disclose all relevant financial information and exempt function policies and procedures.  In addition, whenever income is generated via activities that are not related to an organization’s stated exempt purpose, “Unrelated Business Income Tax” (or “UBIT”) is earned.  A UBIT tax return must be filed with both the Internal Revenue Service and North Carolina Department of Revenue and corresponding UBIT tax payments remitted.

SALES TAXES.  Apart from the income tax reporting requirements, TEOs are put on a nearly level playing field with all businesses and consumers with respect to North Carolina Sales & Use Tax.  North Carolina’s “Sales & Use Tax” is an ad valorem tax typically levied at the point of purchase, although a TEO may later recoup (via filing of a refund claim form) any taxes paid for purchases used directly in furtherance of its exempt purpose.

Beginning in 2015, TEOs who charge admission to attend a live function will be subject to Sales & Use Tax on the admission charge levied on attendees.  Only TEOs that rely entirely on volunteer workforce and do not compensate any of the performers in the entertainment event will qualify for exemption.   In addition, TEOs should properly designate those amounts that do not strictly represent a charge for admission (including membership fees, specific charitable donations, and payment for amenities such as parking or merchandise discounts) as they may excluded from the sales tax base.

SOLICTATION LICENSES.  All TEOs that solicit contributions in North Carolina must register with the Secretary of State and obtain a “Charitable Solicitation License” [“CSL”].  Once obtained, the organization must annually renew the CSL with the filing of a renewal form, payment of a fee, and submission of financial data.  A very narrow exemption from the licensing requirements applies for TEOs that solicit less than $25,000 of contributions per year and which are run entirely by volunteer labor.  Upon request, the Secretary of State does permit affiliate organizations to request a “consolidated” license that covers all organizations in the group.

In summary, as a sound tax policy designed to incentivize organizations to engage in charitable activities, tax exempt status grants to a TEO a valuable freedom from income tax on program service revenue. However organizations must remember that the exemption from income tax is not a blanket exemption from all manner of taxes and filing requirements.  Tax Exempt Organizations must plan accordingly to meet the filing and tax payment obligations, and avoid subjecting themselves to excessive penalties and exemption jeopardy.

Langdon & Company ADTony lead’s our tax department as an attorney and Certified Public Accountant with over twenty years of experience.  Tony consults regularly with exempt organizations on matters related to recognition and preservation of tax status, unrelated business income tax, executive compensation, and internal policy matters.  His expertise includes additional industries such as healthcare, real estate, research & development, manufacturing, and professional services.  Tony is a frequent seminar instructor for the North Carolina Association of CPAs, for local trade groups and is regularly called upon by litigation counsel to provide expert witness testimony.

Please feel free to contact our office for more information.  Tony and our highly qualified tax department are available to answer your tax questions and provide any assistance you may need.


Adult Care Update

dhhsWith the recent announcement about the required Adult Care Home Cost Reports, we have been patiently waiting for more information.  NC DHHS has published the software for these reports along with instructions.  They have chosen to use the same software interface as in prior years – Microsoft Access.  For providers with 21 beds or more, a cost report audit IS required, but details are pending.  For those with a bed capacity from 7-20, this is NOT an audit year for this size home.  For any home with 6 beds or less, there is NO cost report required this year.

Langdon & Company LLP has incredible breadth of experience with health care providers and the associated State requirements.  Please contact our office if you have any questions or if we can help your Organization in any way.

Adult Care Provider News

dhhsNorth Carolina General Assembly passed Senate Bill 744, section 12H.11 mandating the submission of Adult Care Cost Report under General Statute 131D-4.2.  The deadline is December 31, 2014.  Providers that do not receive State/County Special Assistance or Medicaid personal care are exempt from the reporting requirements of this section.  However, these providers must file the Exemption Form, also due December 31.  According to the Controller’s website the information for the 2013-2014 Cost Report, Instructions, and 2013-2014 Chart of Accounts are all “Coming Soon.”

Langdon & Company LLP will continue to stay current on the latest developments as well.  Please call our office if we can provide any assistance in the submission process!