Iowa Primary Care Association PIN Health Center Budgeting and Accounting Requirements PIN Purpose: Clarification & documentation?

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Barbra Davis
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1 Iowa Primary Care Association PIN Health Center Budgeting and Accounting Requirements Presented by Jeffrey Allen, CPA, Partner October 24, // experience perspective PIN Purpose: Clarification & documentation? Who? All CHCs including look a likes What? Budgeting Documentation & accounting records Accounting for CHC scope of project funding Other lines of business outside of scope 2 PIN Why? GAO & OIG pressure to improve program integrity measures Warnings? Your organization Who knows Who is responsible Ignorance of law is no excuse NACHC & BKD responses To do 3 1

2 HEADLINE ISSUE COST PRINCIPLES OIG audits of CHCs New era of accountability phrase spoken with ARRA bill Seeing fruits of change OIG est. 57 reports for 2013 Accountability, not new rules HRSA scrutinized by OIG OIG audits of CHCs Significant questioned costs 4 WHY IS EVERYONE CONCERNED? OIG audits & questioned costs For many it means changing how they have operated Uncertainty on how to effectively address the changes that are being proposed p 5 OIG FINDINGS 2012 Most common & frequent was time & effort Some six & seven figure questioned costs Examples Did not work outside of normal hours IDS Salaries not supported by personnel activity reports & improperly allocated $87,000, $700,000, $785,000, $1.6m, $3m (part of $3m on next page), $5.2m No time & attendance approval $120,

OIG FINDINGS 2012 Documentation of expenditures No separate system to track expenditures More than half of the 18 reports in 2012 had some finding PIN 2013 01: Health Center Budgeting & Accounting

3 OIG FINDINGS 2012 Documentation of expenditures No separate system to track expenditures More than half of the 18 reports in 2012 had some finding PIN : Health Center Budgeting & Accounting Requirements gives insights into the thought process and direction of compliance 7 HEALTH CENTER S RESPONSES TO OIG No one told me Auditor, HRSA site visit, HRSA grant or project officer No one else is doing it either 8 HEALTH CENTER S RESPONSES TO OIG We take care of indigent population in our community Bad Debt & Sliding Fee more than grant Grant funds were used for grant purposes Response from OIG 9 3

4 THE RULES Federal laws & regulations Section 330 of the Public Health Services Act (42 U.S.C. 254b) Program specific: CHC (42 CFR 51c) & Migrant (42 CFR 56) Grant administrative regulations (OMB Circular A 110) : 45 CFR 74 ~ Non profits 45 CFR 92 ~ State, Local, Tribal Government Cost principles: 2 CFR part 230 (OMB Circular A 122) Audit requirements: OMB Circular A 133 THE RULES Awarding agency guidance HHS Grants Policy Statement BPHC Policy Information Notices ( PINs ) & Program Assistance Letters ( PALs ) Notice of grant award ( NGA ) terms & conditions 11 FEDERAL REGULATION MAP HHS / HRSA / BPHC Section 330 CHC Grant Office Supply Company Gov t Contract - Paper Non-Profit CHC Organization (PRIVATE) Local / Tribal Government Gov t Contract -Staples CHC Department (PUBLIC) 501(c)(3) Non-Profit Requirements Local / Tribal Government Requirements Federal Contractor Requirements A-110 Grants Management Standards A CFR, Part 230 Cost Principles Standards A-133 Single Audit A-102 Grants Management Standards A-87 2 CFR, Part 225 Cost Principles Standards A-133 Single Audit Federal Acquisition Regulation - FAR Agriculture 7 CFR 3019 Agriculture 7 CFR 3016 HHS 45 CFR 74 HHS 45 CFR 92 HUD 24 CFR 84 HUD 24 CFR

5 PIN A GAME CHANGER Expectations gap How CHCs are doing things? How the Bureau & OIG want CHCs to do things? Documentation Segregate grant expenditures from non grant funds Clarification needed: definition of non grant funds Program income Other income 13 // experience perspective BUDGETING REQUIREMENTS Section IV addresses budgeting requirements and requires that appropriate HRSA approvals are requested and received Is this just for 330 grants funds or for all funds? How will this approval be documented a separate form? EHB? Budget revisions required for all funds or just 330 grant funds? Timing of approvals a concern 14 // experience perspective GRANT FUNDS VS. NON GRANT FUNDS All Section 330 grant expenditures have to be documented in your accounting records There are different requirements for grant expenditures epedtuesvs. non grant ga tepedtuesas expenditures OMB Circulars, CFRs, etc. generally do not apply to nongrant expenditures This PIN adds new requirements for documentation of expenditures of non grant funds 15 // experience perspective 5

6 GRANT FUNDS VS. NON GRANT FUNDS Some CHCs feel like: We spent the money Trust us its all in there If asked we can come up with the expenses No one ever asked before The reality is: What do the rules say? Someone is asking 16 // experience perspective NON GRANT EXPENDITURES New PIN could conflict with other grant rules or donor intentions HRSA approval for such activity? PIN requires that every expenditure be matched with a corresponding revenue stream This is required to be documented All expenditures require a price or cost analysis to be performed What does that mean? 17 // experience perspective NON GRANT EXPENDITURES Is the expectation that the new PIN requirements on non grant fund expenditures be tested by the Health Center s external auditors and if so, are violations questioned costs? PIN requires all non grant funds be fully covered by a revenue stream no more deficits? 18 // experience perspective 6

7 ACCEPTABLE NON GRANT FUND EXPENDITURES Repair or minor renovations of physical plant not to exceed $100,000 Building financial reserves up to 3 months Interest payments on cash shortfalls Salary cost over HRSA cap Fundraising Meals to board or employees in special situations Incentives valued at $20 or less Special one time costs 19 // experience perspective OTHER LINES OF BUSINESS Health centers are prohibited by the PIN to transfer benefits received from being a Section 330 grantee (e.g. program income) to out of scope activities All out of scope activities must be self sufficient and have adequate revenue streams to cover expenditures, including a reasonable allocation of overhead, if applicable 20 // experience perspective PUBLIC COMMENTS BKD Financial perspective Outlines significant administrative & grants management changes Ri Raises significant ifi questions about timplementation If implemented as published will have significant and far reaching impact 21 // experience perspective 7

8 PUBLIC COMMENTS NACHC Provides legislative context for PIN issues Strongly worded objections: 1. It is contrary to law 2. It changes agency practice without t explanation 3. It is a legislative rule that should be issue by regulation Challenges elements of the public & non public parts of the PIN 22 // experience perspective CONTEXT OF PUBLIC COMMENTS Not a license to ignore PIN Recognize the environment of more program integrity measures not less Many of the concepts are not being debated d The level of documentation may be argued, but more documentation will be required 23 // experience perspective ITEMS NOT BEING DEBATED That A 110 & A 122 rules that apply to federal grant dollars including time & effort reporting Must have plan & budget that meets requirements of PHS Act section 330(k)(3)(I)(i), even if disagreement about having two budgets That program integrity measures have been increased New Era of Accountability 24 // experience perspective 8

9 ACTION PLAN Know the rules really know the rules Who in your Organization is responsible for which rules? Where & to whom do you go for answers? Document your compliance What are your policies? Where is your documentation maintained? How well is your activity documented? 25 // experience perspective ACTION PLAN Stay informed & connected Be aware of NACHC & IPCA updates Look for final PIN Take action Prioritize your weaknesses & fix now Despite dispute over some elements of PIN, address items not up for debate 26 // experience perspective ACTION PLAN Track CHC grant funds closely Even if two budgets is challenged, identifying & documenting grant expenditures is necessary Develop a game plan to ensure time and effort reporting is in compliance Begin to consider the recording requirements of the new PIN and develop a game plan to account for nongrant funds 27 // experience perspective 9

NO TIME AND EFFORT REPORTING GUIDANCE Anticipated PIN would address Lack of explanation implies there will be no relief Response to PIN has requested guidance on applying time and effort

OMB is working on Super Circular 28 // experience perspective PERSONNEL ACTIVITY REPORTS (PARS) After the fact Actual Not budget Total activity Signed as accurate Employee or Supervisor with

10 NO TIME AND EFFORT REPORTING GUIDANCE Anticipated PIN would address Lack of explanation implies there will be no relief Response to PIN has requested guidance on applying time and effort reporting in a CHC The OIG has been very critical of the lack of adequate time and effort reporting in the industry Hope? OMB is working on Super Circular 28 // experience perspective PERSONNEL ACTIVITY REPORTS (PARS) After the fact Actual Not budget Total activity Signed as accurate Employee or Supervisor with firsthand knowledge Prepared monthly Coincide with at least one pay period 29 THANK YOU Please feel free to contact Jeffrey Allen jeallen@bkd.com FOR MORE INFORMATION // For a complete list of our offices and subsidiaries, visit bkd.com or contact: 10

11 The information in BKD seminars is presented by BKD professionals, but applying specific information to your situation requires careful consideration of facts & circumstances. Consult your financial advisor before acting on any matters covered in these seminars

1 // experience drive

1 // experience drive The following information was used as visual aid during a presentation/training session led by a BKD, LLP advisor. This content was not designed to be utilized without the verbal portion of the presentation.