Wednesday, October 9, 2013 8:00 a.m. registration 8:30 a.m ... · 8:30 a.m. to 4:35 p.m. seminar...

2013 BKD Not-for-Profit Seminar With Breakout Session for Health Care Providers

BKD, LLP with offices in Arkansas, Colorado, Illinois, Indiana, Iowa, Kansas, Kentucky, Mississippi, Missouri, Nebraska, Ohio, Oklahoma, Pennsylvania, Tennessee & Texas

111 S. Tejon St., Suite 800 • Colorado Springs • 719.471.4290 | 1700 Lincoln St., Suite 1400 • Denver • 303.861.4545

Wednesday, October 9, 2013

8:00 a.m. registration

8:30 a.m. to 4:35 p.m. seminar

History Colorado Center 1200 Broadway

Denver, CO 80203

2013 BKD NOT-FOR-PROFIT SEMINAR WITH BREAK OUT SESSION FOR HEALTH CARE PROVIDERS

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Speaker Bios – 2013 BKD Not-for-Profit Seminar With Breakout Session for Health Care Providers



Kate Carr, CPA, CFP® Managing Director Denver, Colorado [email protected]

Kate has more than 20 years of tax experience in public accounting. Prior to joining BKD, she worked for more than 10 years with various national firms. Kate provides income tax planning and compliance for high-net-worth individuals, manufacturers, distributors, retail entities and other privately held companies. She helps clients identify issues related to federal guidelines, state filings, accounting methods and international tax matters.

As a member of BKD’s family wealth planning team, Kate also provides tax planning and compliance in the areas of trust, estate and gift taxation and family wealth planning for closely held businesses and their owners. She works with family attorneys and financial advisors to address tax and wealth planning strategies, including income tax, estate and gift tax, cash flow and various nontax considerations. She also assists with the continued monitoring and assessment of planning techniques to help accomplish client goals and objectives. She is a licensed CPA in Colorado and California and is a Certified Financial Planner™.

Kate is currently a member of the Colorado Philanthropic Advisors Network and Social Venture Partners – Denver. She serves on the board of the Rocky Mountain Estate Planning Council and is active with other estate planning councils in both Colorado Springs and Denver. She has served on the board of Care and Share Food Bank for Southern Colorado and the Memorial Health System Foundation’s Planned Giving Committee, and in 2009, Kate was named one of the Colorado Springs Business Journal’s “Women of Influence.”

Kate has conducted a variety of internal and external educational seminars on topics including tax planning for private foundations, exit planning for privately held companies, generation-skipping transfer tax, and fiduciary income tax.

She is a 1987 graduate of Arizona State University, Tempe, with a B.S. degree in accounting.

Michael J. Engle, CPA Partner Kansas City, Missouri [email protected]

Mike is the North Region tax leader for BKD National Not-for-Profit & Government Group and BKD National Health Care Group. He has more than 14 years of experience providing tax services to health care entities, colleges, universities and not-for-profit organizations. He is charged with the growth and development of tax services for these industries throughout BKD’s North Region. In addition, Mike is the co-leader of the Kansas City office’s not-for-profit and government and health care groups.

He performs comprehensive reviews of not-for-profit activities to identify and help mitigate exposure areas related to private inurement, intermediate sanctions, worker classification and unrelated business taxable income issues. He also has extensive experience dealing with IRS examinations, obtaining favorable determination letters, private letter rulings and closing agreements.

Mike is a member of the American Institute of Certified Public Accountants, Missouri Society of Certified Public Accountants and Kansas Society of CPAs. He is a frequent presenter for various industry group meetings, teaches firm-sponsored tax courses and has authored numerous tax articles for various business magazines and industry journals.

He is a 1996 graduate of The University of Kansas, Lawrence, with a B.A. degree in business.

Rand Gambrell, CPA/ABV, CVA, CFE Director Denver, Colorado [email protected]

Provides business valuation services, forensic accounting, economic damage analysis, fraud auditing and bankruptcy and restructuring services, including serving as an expert witness

Performs valuations for transactions, restructurings, marital dissolutions and income tax-related purposes and provides economic analyses of damage resulting from business interruption and breach of contract

Helps identify source and use of funds through forensic accounting and provides financial consulting related to bankruptcy

M.B.A. degree from the University of Denver, Colorado and a B.A. degree with a psychology emphasis from the University of Colorado, Boulder

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Lea M. Geiser Hayler, CPA Director Colorado Springs, Colorado [email protected]

Lea has more than 13 years experience working with not-for-profit and healthcare clients. She provides accounting and auditing services to religious organizations, foundations, mental health centers, not-for-profit hospitals, long-term care facilities, and home health agencies. She also provides Medicare/Medicaid cost report review and consultation services to health care organizations.

As part of the financial statement assurance process, Lea oversees the testing of detailed transactions and the review and analysis of internal control structures. She consults clients on a wide variety of issues, including debt financing arrangements, entity purchase and consolidation, and new accounting pronouncements.

She serves as a board member for Cheyenne Village, Inc. and is a member of the American Institute of Certified Public Accountants, the Colorado Society of Certified Public Accountants, the Christian Leadership Alliance, and the Home Care Association of Colorado.

She is a 1999 magna cum laude graduate of the University of Colorado, Colorado Springs, with a B.S. degree in business administration with an emphasis in accounting.

Jami L. Johnson, CPA Manager Denver, Colorado jljohnson @bkd.com

Jami has more than three years of experience in the accounting industry. As a member of the BKD National Health Care Group, she provides accounting and auditing services to a variety of for-profit and not-for-profit clients, including health care systems, mental health centers, assisted living facilities, and rural, urban and research-oriented hospitals.

She also provides OMB Circular A-133 compliance testing, which allows not-for-profit organizations to conform with requirements for federal funding. Jami also assists with the preparation of Medicare and Medicaid cost reports and third-party reimbursements.

As an audit in-charge, Jami leads the client engagement process, including the supervision and training of the audit team, review of the audit work papers and communication with the client, and lead audit partner and manager.

Jami serves on the board of BikeDenver and is a member of the Health Care Financial Management Association, the Colorado Society of Certified Public Accountants and the American Institute of Certified Public Accountants.

Jami graduated in 2008 from the University of Hawaii-Monoa, Honolulu, with a BBA degree in accounting and finance.

Nichole M. Kubly, CPA Senior Manager Denver, Colorado [email protected]

Nikki is a member of BKD National Not-for-Profit & Government Group and relocated from Indiana to Colorado in 2008. She has more than eight years of experience and works primarily with not-for-profit organizations and governmental entities, including airports, colleges and universities, foundations and membership organizations.

In addition to overall audit and attest services, Nikki provides guidance regarding Circular A-133 procedures for federal grant compliance, has assisted clients in operational reviews and assists with new audit and accounting requirement implementation. Before entering public accounting, Nikki was a business manager for a major public university for three years.

She also conducts in-house training sessions for various topics, including alternative investments. Nikki has presented on various audit and accounting topics to not-for-profit financial managers and development officers at the annual BKD Colorado not-for-profit seminar in addition to the Colorado Nonprofit Association annual conference in 2011.

Nikki serves on the board of the Colfax Marathon and is a member of the American Institute of Certified Public Accountants and Colorado Society of Certified Public Accountants.

She is a 2002 graduate of Purdue University, West Lafayette, Indiana, with a B.S. degree in accounting.

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Kimberly K. McKay, CPA Partner Colorado Springs, Colorado [email protected]

Kimberly is the North regional industry leader for BKD National Health Care Group. She has 20 years of experience in the health care industry providing services to health systems, hospitals, mental health centers, long-term care facilities and physician practices. She manages the audits of numerous health care providers and is actively involved in all aspects of health care services, including accounting and auditing, third-party reimbursement consulting and Medicare/Medicaid cost report preparation. She also assists health care clients with special projects, including negotiations with intermediaries, financing and strategic planning.

In 2009, Kimberly was appointed to the national American Institute of Certified Public Accountants (AICPA) Health Care Expert Panel, which focuses on identifying health care auditing and accounting issues to bring forward to the Financial Reporting Executive Committee. In addition, Kimberly serves on the AICPA Health Care Audit Guide committee, which proposes changes to the Health Care Audit Guide. She was named a “Woman of Influence” in 2008 by the Colorado Springs Business Journal.

She is a frequent speaker for the Healthcare Financial Management Association, state associations and other organizations. She routinely presents education programs for client boards, staff and the community.

She is a 1992 summa cum laude graduate of University of Missouri, Columbia, with a master’s degree in accounting.

Lindie G. Sailor, CPA Senior Associate Colorado Springs, Colorado [email protected]

Lindie is a member of BKD National Not-for-Profit & Government Group. She works primarily with not-for-profit organizations and governmental entities, including cities, colleges and universities, foundations and membership organizations.

As an audit in-charge, Lindie leads the client engagement process, including the supervision and training of the audit team, review of the audit workpapers and communication with the client, lead audit partner and manager. In addition, she has conducted presentations for internal BKD seminars on a variety of accounting and auditing topics.

She is a member of the American Institute of Certified Public Accountants, the Colorado Society of Certified Public Accountants, the Colorado Springs Chamber of Rising Professionals and serves on the BKD Foundation Committee. Lindie is a 2010 graduate of The University of Colorado at Denver, with an M.S. degree in accounting, and a 2008 graduate of Colorado State University, with a B.S. degree in business with an emphasis in accounting.

In 2010, Lindie received a M.S. degree in accounting from the University of Colorado, Denver, and a B.S. degree in accounting in 2008 from Colorado State University, Fort Collins.

Steven W. Sauer, CPA Manager Colorado Springs, Colorado [email protected]

Steve is a member of BKD National Not-for-Profit & Government Group. He provides audit services to not-for-profit organizations, including foundations, colleges and universities and religious institutions. He also serves a variety of for-profit and governmental clients.

He served on a firmwide task force charged with the responsibility of modifying firm audit procedures to comport with recently issued American Institute of Certified Public Accountants (AICPA) Auditing Standards Board Statement on Auditing Standards (SAS): Special Considerations – Audits of Group Financial Statements (Including the Work of Component Auditors).

Steve is a firmwide instructor for BKD’s audit level training courses, which are required for all auditors, and has conducted presentations on various accounting topics at BKD’s not-for-profit seminars. He serves as a BKD coach and is active in the firm’s college student recruiting process. He also is trained to perform limited data-mining procedures.

He is a member of the American Institute of Certified Public Accountants and Colorado Society of Certified Public Accountants.

Steve is a 2007 magna cum laude graduate of The University of Northern Colorado, Greeley, with a B.S. degree in business administration and an emphasis in accounting.

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C. Travis Webb, CPA Managing Partner Denver, Colorado [email protected]

Travis brings more than 19 years of experience to BKD and our clients. As managing partner of BKD’s Colorado Springs and Denver offices, he is responsible for the operations and support of more than 100 partners, client service staff and administrative personnel who serve thousands of business and individual clients. In addition, he serves a client base of commercial, not-for-profit and governmental organizations.

He has been a firmwide audit and accounting technical advisor, a Sarbanes-Oxley internal control consultant and a fraud and information technology resource.

Travis serves on BKD’s Governing Board and serves as an instructor, leading the national orientation program for new managers. He’s also a certified instructor for the 7 Habits of Highly Effective People programs within the firm. Travis serves on the firm’s Technology Advisory Committee and Practice Management Evaluation Committee and is an advisor on the firm’s efforts regarding new lease accounting standards.

Travis currently serves a variety of organizations, including the Colorado Association of Commerce and Industry (treasurer), Denver Metro Chamber of Commerce, Denver Metro Chamber Leadership Foundation, Downtown Denver Partnership, Mile High United Way (Tocqueville Society chair), Young Americans Center for Financial Education (chair) and the Young American’s Bank.

He is a graduate of Missouri State University, Springfield, with an M.B.A. degree and B.S. degree in accounting.

Katie E. Willemarck, CPA Senior Manager Colorado Springs, Colorado [email protected]

Katie has more than eight years of experience in the accounting industry. She is a member of BKD National Health Care Group and assists health care clients with audits and provides general business consulting.

She is a member of the American Institute of Certified Public Accountants, Colorado Society of Certified Public Accountants and Healthcare Financial Management Association.

Katie is a 2004 graduate of the University of Baltimore, Maryland, with a B.S. degree in business administration.

Rita F. Worster, CPA Senior Manager Colorado Springs, Colorado [email protected]

Rita has more than 25 years of experience in public accounting providing audit, estate, trust and other tax services. She also works with not-for-profit organizations including foundations, religious and membership organizations, colleges and universities, and healthcare entities. She is a member of BKD National Not-for-Profit & Government Group and the BKD National Health Care Group.

Her consulting experience includes assisting with governance issues, business development plans, functional cost allocations, organizational assessments, operational efficiencies, best practices and benchmarking, budgeting, board development and board orientation, strategic planning, representation of not-for-profits during IRS audits, and formation of not-for-profit entities and for-profit subsidiaries. She has assisted with the application process for tax-exempt status for new not-for-profit organizations and leads the preparation of Federal Form 990 for not-for-profit clients of the Colorado practice unit.

Rita has conducted seminars for the Colorado Hospital Association, the Colorado Springs Center for Nonprofit Excellence and the Arizona chapter of Healthcare Financial Management Association. She conducts presentations for internal BKD educational seminars and is a contributing writer to BKD’s not-for-profit newsletter and electronic communications.

Rita has served as president and treasurer for the Colorado Springs chapter of Executive Women International, treasurer for The Home Front Cares, Inc. and is a member of the Finance Committee for the Academy for Advanced and Creative Learning. She is a member of the American Institute of Certified Public Accountants and the Colorado Society of Certified Public Accountants. She received a B.S. degree in accounting from Nebraska Wesleyan University, Lincoln, in 1984.

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Lisa R. Zuech, CPA Senior Associate Colorado Springs, Colorado [email protected]

Lisa joined BKD in 2011. As a member of BKD National Not-for-Profit & Government Group, she provides audit services to not-for-profit organizations and governments, including foundations, religious institutions and cities. Lisa also serves a variety of health care clients.

Lisa is a member of the American Institute of Certified Public Accountants, the Colorado Society of Certified Public Accountants and the Colorado Springs Chamber of Rising Professionals.

Lisa is a 2010 summa cum laude graduate of the University of Colorado, Colorado Springs, with a B.S. degree in business administration and an emphasis in accounting.

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Guest Speaker Bios – 2013 BKD Not-for-Profit Seminar With Breakout Session for Health Care Providers



Carol Bruce-Fritz Chief Executive Officer Community Health Partnership 722 S. Wahsatch Avenue Colorado Springs, CO 80903 Phone:(719) 632-5094 [email protected]

Carol Bruce-Fritz has built a career in helping nonprofit organizations interpret values and mission into vital business strategies. She is a visionary leader with a proven track record in strategic business planning, leadership coaching and training, organizational development, brand identity and loyalty, crisis and issue management, media and public relations, governance systems, volunteer and stakeholder relations, and fundraising. She has worked with charitable organizations of all sizes, including the American Cancer Society and United Way, throughout the West.

Ms. Bruce-Fritz is the CEO of Community Health Partnership, a coalition of health care providers serving the Pikes Peak region. CHP was formed in 1992 by local health care leaders to foster a coordinated approach to health care issues. CHP facilitates coordination among existing health care providers and identifies ways to work together to address community health issues. CHP administers the Coordinated Access to Community Health (CATCH) system of care for uninsured and the Community Care of Central Colorado, the Regional Care Collaborative Organization (RCCO), a Medicaid payment reform project. Community Care of Central Colorado serves 62,000 Medicaid clients annually in El Paso, Elbert, Park and Teller Counties.

Renny Fagan President & CEO Colorado Nonprofit Association 789 Sherman St., Suite 240 Denver, CO 80203 [email protected]

Renny joined the Association in March 2009 after serving as the state director for U.S. Senator Ken Salazar and Senator Michael Bennet. He was responsible for the Senator’s Colorado staff and eight offices around the state. Fagan is a former state legislator, head of the Colorado Department of Revenue, deputy attorney general, and volunteer with El Pomar Foundation’s Awards for Excellence program. A Colorado native, he grew up in the Pikes Peak region and has resided in the Denver Metro area for the last 15 years.

He received his B.A. in Political Science at the University of Chicago and his law degree from Northwestern University.

William Robinson, Jr. Gallagher Benefit Services, Inc. Area Vice President 6399 S. Fiddler's Green Circle Suite 200 Greenwood Village, CO 80111 [email protected]

Bill joined Gallagher Benefit Services, Inc. as an Area Vice President in 2002. He has over 30 years of experience in the benefits industry. Before coming to GBS, Bill served as Senior Vice President with a national employee benefit consulting and actuarial firm for nearly 15 years. Prior to benefits consulting, Bill worked as an officer for two national insurance companies.

Bill has extensive experience with public sector health consulting, specializing in cost management strategies, managed care, joint purchasing initiatives, self-funding, competitive bidding, flex benefits, and consumer directed healthcare.

Bill obtained his undergraduate degree in Economics (with honors) from the University of California, and earned an MBA from the Anderson School of Business at UCLA. He is a licensed health insurance broker in Colorado, Wyoming, Nebraska, Iowa, New Mexico, and South Dakota. In addition, Bill is a Fellow of the Life Management Institute and a Registered Health Underwriter.

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Agenda – 2013 BKD Not-for-Profit Seminar With Breakout Session for Health Care Providers



Agenda

Program Name: 2013 BKD Not-for-Profit Seminar with Breakout

Session for Health Care Providers Date(s): October 9, 2013

Length in Minutes

Start Time Title/Topic Speaker Field of Study

30 Minutes

8:00 AM Registration N/A N/A

5 Minutes 8:30 AM Welcome & Introductions Travis Webb N/A

25 Minutes

8:35 AM

Tax Provisions Included in 2010 Health Care Reform

Act Kate Carr

Specialized Knowledge & Application

50 Minutes

9:00 AM

Current Trends and Emerging Issues Impacting

Colorado’s Nonprofits

Renny Fagan, Colorado Nonprofit

Association


15 Minutes

9:50 AM Break N/A N/A

25 Minutes

10:05 AM

Leases Exposure Draft Summary of Key Changes

& Impact Travis Webb Accounting

50 Minutes

10:30 AM

Connect for Health Colorado – A Marketplace

Overview

William Robinson Jr., Gallagher Benefit

Services, Inc.


25 Minutes

11:20 AM

Fiduciary Responsibilities & Key Metrics Consideration

for Boards

Nikki Kubly & Travis Webb


60 Minutes

11:45 PM Lunch N/A N/A

50 Minutes

12:45 PM

Got Fraud? Fraud, Your Audit & You – Let’s Discuss

Rand Gambrell & Steve Sauer


50 Minutes

1:35 PM

Tax Update & New Developments

Mike Engle & Rita Worster Taxes

25 Minutes

2:25 PM Single Audit Update Katie Willemarck &

Jami Johnson Accounting

(Governmental)

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Agenda – 2013 BKD Not-for-Profit Seminar With Breakout Session for Health Care Providers



Agenda

Program Name: 2013 BKD Not-for-Profit Seminar with Breakout

Session for Health Care Providers Date(s): October 9, 2013

30 Minutes

2:50 PM Break Out into Separate Tracks & Afternoon Snack

Not-For-Profit Track (Auditorium – Remain Here)

Length in Minutes

Start Time Title/Topic Speaker Field of Study

25 Minutes

3:20 PM

Overhaul of AICPA Audit & Accounting Guide for Not-

for-Profit Entities Lea Geiser Hayler Accounting

25 Minutes

3:45 PM

NFP Industry Update (Giving Trends, Regulatory

& Financial Update)

Nikki Kubly & Lisa Zuech Accounting

25 Minutes

4:10 PM

To Recognize or Not to Recognize: That is the

Question…for NFPs

Steve Sauer & Lindie Sailor Accounting

4:35 PM Adjourn N/A N/A

Health Care Track (Martin Room – 4th Floor)

50 Minutes

3:20 PM

Improving The Health Of Our Community

Through Collaboration”

Carol Bruce Fritz, Community Health

Partnership


25 Minutes

4:10 PM

AICPA Health Care Expert Panel Update Kimberly McKay


4:35 PM Adjourn N/A N/A

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Welcome to the 2013 BKD Not-for-Profit

Seminar with Breakout Session for Health Care

Providers1

Presented byKate Carr, CPA, Managing DirectorOctober 9, 2013

Tax Provisions Included in 2010 Health Care Reform Act


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Health Care Reform

• Patient Protection and Affordable Care Acto Signed into law 03/23/10o Significantly reforms health care system & affects

virtually all taxpayers• Health Care and Education Reconciliation Act

of 2010o Signed into law 03/30/10o Amends certain provisions of Patient Protection

Act & adds new provisionso Upheld by Supreme Court on 06/28/12

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Health Care Reform

• Federal budget estimates for next 10 yearso Gross cost of $940 billiono Reduce federal deficit $143 billiono Tax provisions to raise $437.8 billiono Medicare/Medicaid cuts of $455 billion

Source: Congressional Budget Office & Joint Committee on Taxation4


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Business Provisions

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Penalty for Not Providing Coverage

• Large employers subject to penalty if minimum essential coverage not provided to employees

• Penalties also apply if coverage is unaffordable or if employee receives premium credits

• Penalty not deductible• Effective 2015

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• Large employer definedo Average of 50 or more full-time employees in

preceding yearo Full-time employee defined as working an

average of 30 hours per weeko Full-time equivalent rule for counting part-time

workers Total hours of service by part-time employees for

month divided by 120o Special rule for seasonal workers


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• Excise tax if employer does not offer coverageo At least one employee receives health coverage

assistanceo $2,000 ($167/month) per full-time employee

reduced by 30 employeeso Applies to all full-time employees in excess of 30

even if only a portion receive health coverage assistance


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• Excise tax if employer provides coverage but employee receives health coverage assistanceo $3,000 ($250/month) per employee that receives

health coverage assistance


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Small Employer Health Insurance Credit• Eligible Small Employers (ESEs)• Percentage of employer premium costs• Income tax credit for taxable organizations• Payroll tax credit for tax-exempts• Effective for taxable years beginning after

12/31/09

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• ESE definedo No more than 25 full-time equivalent employees (FTEs) Calculated by dividing total hours of all employees by

2,080 Employee hours in excess of 2,080 not counted

o Average employee wage is $50,000 or less Calculated by dividing total wages paid to all

employees by number of FTEso Seasonal workers not counted if worked less than 120

days during year

Small Employer Health Insurance Credit

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• Credit calculationo 2010 through 2013 – up to 35% of employer-paid

premiumo 2014 & after – up to 50% but only available for two years

• Sliding scale based on size & wages• Creditable contribution limited to small business

benchmark premium• Employer must pay at least 50% of premium

Small Employer Health Insurance Credit

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Excise Tax on High-cost Plans

• 40% excise tax if value of employer-sponsored health coverage exceeds threshold amounto $10,200 individual coverageo $27,500 family coverageo Adjustments for high-risk professions, age & gender

• Tax levied at insurer levelo Can be employer if self-insured

• Effective for tax years after 12/31/17

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• Applies to self-insured plans & plans sold in group market

• Aggregate value of all health coverage is taken into accounto Insurance premiumso Employee contributions to flexible spending accounto Employer contributions to HRAs & HSAso Long-term care, dental, vision and accident & liability

insurance not included• If threshold exceeded, tax is imposed pro rata on

issuers of insurance15


• Employer must calculate• Penalty if employer underreports• Effective 2011, must report value of health

insurance coverage on W-2

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Tax-exempt Hospitals

• Exemption typically based on community benefit standard

• Complete community needs assessment every 3 years

• $50,000 excise tax penalty for failure to satisfy• Effective for tax years beginning after 03/23/10

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Fees on Health Plans

• Health Care Act created Patient-Centered Outcomes Research Trust Fund (PCORTF)o Created to conduct comparative clinical effectiveness

research• PCORTF to be funded by annual fee on health

insurance policies & self-insured health plans• Effective for policy or plan years beginning on or

after 12/01/12 & before 09/30/19

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Fees on Health Plans

• Fee equal to specified dollar amount times average number of lives covered under policyo $1 for plan years ending before 10/01/13o $2 for years beginning after 09/30/13o Increased based on projected per capita amount of

national health expenditures for years beginning after 09/30/14

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Individual Provisions

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20

Individual Health Insurance Mandate

• All individuals required to maintain minimum essential coverage

• Penalty applies for failure to maintain coverage for individual & dependents

• Effective for taxable years beginning after 12/31/13

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• Minimum essential coverage includeso Government-sponsored programso Eligible employer-sponsored planso Plans in individual marketo Grandfathered group health planso Other coverage as determined by Secretary of HHS in

coordination with Treasury

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21


• Exceptions from mandateo Not legally present in United Stateso Incarceratedo Religious exemptiono Members of Indian tribeo Income below filing thresholdo Cost of coverage exceeds 8% of household income

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• Penalty calculation – greater ofo Applicable percentage of incomeo Flat dollar amount

• Determined monthly• Penalty amount for minors is ½ adult amount• Penalty for entire family limited to 3 times the flat

dollar amount for an adult• No penalty if coverage gap 3 months or less

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Calendar Year PenaltyPercent of Income**

2014 $95 1.0%

2015 $325 2.0%2016 and afterwards 695* 2.5%

* Indexed to rate of inflation after 2016 rounded to next lowest $50

** Based on household income in excess of taxpayer's threshold amount of income required to file an income tax return

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Premium Assistance Credit

• Refundable income tax credit• Available to qualifying taxpayers enrolled in

qualified health plan through Exchange• Effective for tax years ending after 12/31/13

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23


• Health Care Act requires each state to establish American Health Benefit Exchange

• Insurers provide qualified health plans on these Exchanges

• Credit is payable in advance directly to insurer & taxpayer receives reduced premium

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• Eligible individualo Household income between 100% and 400% of federal

poverty level• Credit equals difference between cost of second

lowest-cost silver plan (adjusted for age & location) & affordable premium amounto Affordable amount based on sliding scale

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Household Income Relative to Federal Poverty Level*

Initial Premium Percentage (1)

Final Premium Percentage (1)

Up to 133% 2.00% 2.00%

133% up to 150% 3.00% 4.00%

150% up to 200% 4.00% 6.30%

200% up to 250% 6.30% 8.05%

250% up to 300% 8.05% 9.50%300% up to 400% 9.50% 9.50%

* Household incomes above 400% of poverty line not eligible for credit

(1) Maximum share of income enrollee will have to pay for coverage


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To Receive CPE Credit

• Complete individual CPE credit form with o Title & date of live seminar o Your company name o Your printed name, signature & email address o Circle sessions attendedo Calculate your total credit in minuteso Hand in sheet at end of seminar

• Complete group attendance sheet (will be passed around at end of day)o Print your company nameo Your printed name, email address, time in, time out & signature

• If all eligibility requirements are met, each participant will be emailed their CPE certificates within 3-4 weeks of live seminar

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Continuing Professional Education (CPE) Credits

BKD, LLP is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be submitted to the National Registry of CPE Sponsors through its website: www.learningmarket.org.

The information in BKD seminars is presented by BKD professionals, but applying specific information to your

situation requires careful consideration of facts and circumstances. Consult your BKD advisor before acting

on any matters covered.

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CPE Credit

• CPE credits will be awarded upon verification of participant attendance; however, credits may vary depending on state guidelines

• For questions, concerns or comments regarding CPE credit, please email the BKD Learning & Development Department at [email protected]

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Thank You

Contact Us111 S. Tejon StreetSuite 800Colorado Springs, CO 80903719.471.4290FAX 719.632.8087

1700 Lincoln StreetSuite 1400Denver, CO 80203303.861.4545FAX 303.832.5705

BKD SeminarRenny Fagan

President & CEO

Colorado Nonprofit Association

Current Trends and Emerging Issues Impacting Colorado’s Nonprofits


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Colorado Nonprofit Association

Cost-saving member benefits

Lead the sector in best practices and resources

Advocate for the nonprofit sector

1400 members statewide

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Trends and Emerging Issues

1. Operating environment remains challenging2. Coloradan’s charitable donations, trends in giving and

business-nonprofit connections3. Federal tax reform?4. Social Impact Bonds5. New organizational forms for “doing good”

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Colorado’s Nonprofits are Major Employers

• More than 142,000 nonprofit professionals, comprising 7.9% of Colorado’s private employment

• From 2000 – 2010, employment in Colorado’s nonprofit sector grew by 2.5%, while the state’s private sector employment decreased by 0.6%

Source: Johns Hopkins Center for Civil Society Studies’ Economic Data Project, Holding the Fort: Nonprofit Employment During a Decade of Turmoil, January 2012.

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Public CharitiesCount # Filing

Form 990 or 990-N

Total Revenue (billions)

Total Assets (billions)

Denver 3,002 2,250 $7.7 $14.2

Arapahoe 1,707 1,157 $4.0 $9.6

Adams 806 491 $1.3 $2.5

Boulder 1,524 1,200 $1.6 $3.1

Jefferson 1,809 1,343 $1.9 $2.4

Colorado 18,171 13,249 $23.4 $43.2

Source: Internal Revenue Service, Exempt Organizations Business Master File (July 2013), accessed through the National Center for Charitable Statistics, http://nccsdataweb.urban.org

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39%

43%

48%

39%

23%

15%

24%

40%

31%

24%

31%

30%

18%

30%

16%

18%

10%

16%

9%

3%

9%

Overall Revenue

Individual donations

Corporate giving

Foundation grants

Government grants

Government contracts

Earned income / fees for services

In terms of revenue for 2012, do you expect your organization to...?Fall short of our revenue goals Meet our revenue goals Exceed our revenue goals

39

38%

39%

17%

5%

Has demand for your nonprofit's programs/services:

Significantly increased

Somewhat increased

Stayed about the same

Somewhat decreased

Significantly decreased

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30

23% 5% 19%

9% 4% 15%

20% 10% 10%

20% 5% 13%

14% 3% 11%

55% 73% 4%

49% 47% 4%

11% 12% 10%

Has your nonprofit done any of the following in 2012? Are you considering any of these measures for 2013?

Cut back programs

Eliminate programs

Turn away clients

Cut staff pay or hours

Lay off staff

Try new strategies to increase revenue

Try new strategies to reduce expenses

Restructuring (such as a merger or amajor change in strategy/focus)

We've done this in 2012

We may do this in 2013

We expect to do this in 2013 41

8%

61%

22%

6%

2%

When considering your outlook for your organization in 2013, are you...

Very optimistic

Optimistic

Neutral

Pessimistic

Very pessimistic

42


31

Coloradan’s Charitable Giving

$3.24 billion in charitable deductions2.15% of adjusted gross income

Source: 2011 IRS Statistics of Income

43

Coloradan’s Charitable GivingYear Total Charitable

Deductions (billions)Ave. Contribution per Return

2011 $3.244 $4,477

2010 $3.050 $4,144

2009 $2.777 $3,839

2008 $2.981 $3,993

2007 $3.313 $4,278

44


32

Coloradan’s Charitable GivingAGI % claiming

deductionAve. contribution deduction

Under $25,000 7 $1,559$25,000 to $49,999 16 $1,856$50,000 to $74,999 20 $2,238$75,000 to $100,000 17 $2,647$100,000 to $200,000 29 $3,679$200,000 to $500,000 8 $7,586$500,000 to $1 million 1 $20,624$1 million and more 0.5 $157,365

45

46


33

Colorado Generosity Project

47

Coloradans Age18-44Convenience and technology

• Buy products from a business that donates some of its

proceeds to charity (65%)

• Give online (43%)

• Respond to an email appeal (26%)

• Respond to a social media post (22%)

• Make a donation thru a cell phone text (11%)

48


34

Coloradans Age 18-44Personal Connection Remains Important

• Most recent donation to an organization with which “you or someone you know had a good experience” and donate to a nonprofit that could benefit “you or someone you know”

• Make donations when asked in person

• Respond to more dramatic messages - more likely to donate if an organization was in danger of closing or poised to undertake a bold new project

49

Coloradans Age 45-64• Most likely to make donations of goods

• Respond to personal appeals from someone they know (33%)

• Donate thru special events (66%)

• Most likely to be swayed by needs-based messages:

– “you hear that an org cannot meet growing demand for the services it provides (67%)

– “you hear that an org is stepping up to replace cuts in govt.-provided services (67%)

50


35

Coloradans Age 65 and up• Most often make lower dollar donations

• Most likely to purchase tickets to a fundraising event

• Most loyal to the organizations they support

• Value specific information about how the donation will be used

• Much more likely to give in response to an appeal from the

organization

• Respond to request received in the mail

• Would give more if better connected with nonprofits

51

Political AffiliationOverall giving:Total over $1,000 40%R 29%D

Differences in causes supported:• Religious 64% R 33% D

• Arts/culture 39% D 8% R

More likely to give as a result of:• News story 43% D 24% R

• Social media post 21% D 3% R

52


36

Business-Nonprofit Connections

Improving Efficiency and Effectiveness

What are the criteria by which your company selects a nonprofit partner?

51%

61%

12%

62%

40%

30%

58%

15%

n = 104

54


37

What added value do nonprofit partnerships bring to your company?

n = 87

13%

64%

87%

35%41%

24%

12%

76%

64%

28%

47%

9%16%

55

How would you describe your approach?

• Clearly defined, strategic and community focused

• Essential element of our core business

• Make a difference in the communities where we live and work

• Initiatives that our employees care about

• Nothing scheduled - Considered as each opportunity arises

• Scattershot

56


38

Characteristics of successful partnerships• Thinking outside the box with our relationships to fully

maximize the partnership for a win-win for both

• Mutual benefits to us and to the nonprofit; missions that align with ours; willingness to publicize our partnership with them

• Transparency

• Commitment, energy, leadership and perseverance

57

Greatest obstacles to effective partnerships

• Time and money

• Keeping employees engaged and excited

• Lack of communication or follow up by nonprofit

• Requirement or expectations of ongoing support

58


39

In the last 12 months, has your company engaged in any of the following with a non-

profit organization?n = 93

59

Nonprofits & GovernmentWhy it matters:

Nonprofits and government collaborate on many essential issues. Policy can have large impacts on communities as well as funding.

What’s Changing:

Government budgets are shrinking which places burden on nonprofits to make up services and reduces opportunities for partnership between the two sectors.

60


40

Revenue Sources by SectorSector Private

DonationsPrivate Payments

Govt. Grants/payments

InvestmentIncome

Other revenue

Arts, culture, humanities

44 34 16 < 1 6

Education 20 65 15 3 2Environment/animals

51 28 15 < 1 5

Health care 4 59 35 < 1 2HumanServices

17 28 51 1 3

Source: Evaluating the Charitable Deduction and Proposed Reforms, Urban Institute, June 2012

61

Tax Benefits for Donors• Tax benefits are a very or somewhat important reason

for giving for only 38% of respondents overall – but are important for 59% of those with annual incomes over $100,000

• 49% of those who itemize deductions on their federal tax return said tax benefits were important, compared to only 18% of those who do not itemize.

Source: Understanding Giving study

62


41

Cap on Itemized Deductions

63

Impact of Eliminating Charitable DeductionsAccording to a Tax Foundation study released August 2013:

Eliminating the deduction for charitable contributions would:• Increase tax revenues by $39 billion on a static basis;• Reduce GDP by $40 billion; and• Generate slightly less revenues ($30 billion) on a dynamic

basis;• Reduce employment by the equivalent of approximately

131,000 full-time workers; and• Reduce hourly wages by 0.2%

Does not take into account benefits of charitable activity64


42

Impact of Eliminating Charitable DeductionsAccording to a Tax Foundation study released August 2013:Eliminating the deduction for charitable contributions and trading the static revenue gains for individual rate cuts would:• Allow for an across-the-board rate cut of 3.7%;• Boost GDP by $19 billion per year; and• Boost federal revenues by $4.5 billion on a dynamic basis;• Increase employment by the equivalent of approximately

200,000 full-time workers; and• Reduce hourly wages by 0.1%Does not take into account benefits of charitable activity

65

New Forms of Capital and Public Private Partnerships

Social Impact Bonds


43

Social Impact Bonds Issues that Make for Good SIBS

Large Continuing or

Anticipated Future Cost to the

Government

Promising Preventative Program

Large Future Benefit to the Government

Promising Program

67

Social Impact Bonds Philanthropy / Private Investment

GOVERNMENT MANAGING AGENT

INVESTOR(S)

SERVICEPROVIDER(S)

INDEPENDENT EVALUATOR

State / City / CountyIntermediary / Philanthropy /

Service Provider

Organization with Promising Practice

68


44

Social Impact Bonds

GOVERNMENT MANAGING AGENT

INVESTOR(S)

SERVICEPROVIDER(S)

(5) Principal+ ROI

(1) InitialInvestment

(2) WorkingCapital

(3) Outcome Based Budget Savings

(4) Performance Based Payments

69

Social Impact Bonds

Savings/Benefits

PaymentsProgram Costs

Break-Even Point

$

% Reductions in Recidivism

Payment Example

70


45

Social Impact Bonds Primary Policy Areas Under Consideration

Early Childhood Education

Disconnected Youth

Supportive Housing

71

New models for “Doing Good”Social enterprise organizations• Addresses a social need through products and

services or through employing disadvantaged people

• Commercial activity is strong revenue driver• Common good is primary purpose

Source: Social Enterprise Alliance

72


46

New models for “Doing Good”For-benefit enterprise• Social mission• Distribute stakeholder control and decisions• Balance financial interests of capital with mission• Accountable for total impact performance-

financial, social, environmental

Source: Heerad Sabeti, “The For-Benefit Enterprise,” Harvard Business Review, Nov. 2011

73

Colorado’s Public Benefit Corporation Act

• Takes effect on April 1, 2014• “Public Benefit” means one or more positive

effects or reduction of negative effects on one or more categories of persons, entities, communities or interests other than shareholders in their capacities as shareholders, including effects if an artistic, charitable, cultural, economic, educational, environmental, literary, medical, religious, scientific or technological nature

74


47

Colorado’s Public Benefit Corporation Act• “The Board of Directors shall manage or direct the

business and affairs of a public benefit corporation in a manner that balances the pecuniary interests of the shareholders, the best interests of those materially affected by the corporation’s conduct, and the specific public benefit identified in its articles of incorporation”

• Must prepare and publish a report that describes:– Ways in which the corporation promoted the public benefit– Circumstances that hindered this promotion– Selection of a third-party standard– Assessment of performance against the third-party standard

75

New Models of “Doing Good”What difference does this make?

• Capital is used in ways other than through traditional donations to a tax exempt entity.

• Increased use of market-based revenues as a part of revenue structure.

• Legislative proposals to codify different organizational forms—will these be complementary or competitive?

76


48

Photo Courtesy of Warren Village 77

Renny Fagan, President and [email protected] Sherman Street, Suite 200

Denver, CO 80203303.832.5710

www.coloradononprofits.org

78


49

Leases Exposure DraftSummary of Key Changes & ImpactPresented by Travis Webb, CPA, Managing PartnerOctober 9, 2013

Timeline

• 1st Exposure Draft – August 2010• 2nd Exposure Draft – May 2013• Comment Period Ending – 09/13/13• Anticipated Final – No earlier than 2014• Anticipated Effective Date – No earlier than

2017o Effective date FY 2017, present 2015, 2016, &

2017 in SEC f& cial statementso Effective date FY 2018, present 2016, 2017, &

2018 in SEC financial statements80


50

Components of a Contract

• Now: Many embedded leases are off-balance sheet operating leases

• Proposed: o On-balance sheet treatment for all embedded

leaseso New guidance for distinguishing between a lease

& a serviceo In a multi-asset lease, entities will need to

identify & account for each component separately; classification depending upon primary asset within component81

Definition of a Lease

To be a lease, both must be present:

1. Identified Asset: Use of asset is fundamental to arrangement, but need not be contractually specified

2. Control: Lessee company can direct & benefit from use of asset

82


51

Lease Types - Lessees

• Now:o Operating Lease, oro Capital Lease

• Proposed:o Balance sheet: Lease asset & liability will be recognized on

balance sheet (except short-term leases (Leases with a maximum possible term of 12 months, including renewal options))

o Income Statement: Type A Leases: Financing approach (front-loaded expense

pattern similar to today’s capital leases), or Type B Leases: Straight-line expense (similar to current

operating leases)83

Lease Types - Lessors

• Now:o Operating Lease, oro Direct Financing or Sales-type Lease, oro Leveraged Lease

• Proposed:o Type A Leases: Operating lease; recording straight-line lease income,

oro Type B Leases: Receivable and residual approach; recording interest

incomeo No more leveraged leases accounting84


52

Lease Term

• Now:o Include renewal options that are “reasonably

assured” of being exercised• Proposed:

o Include renewal/extension options where lessee has a “significant economic incentive” to exercise

o Reassessment required when there is a significant change in lessee’s economic incentive to extend lease

85

Variable Lease Payments

• Now:o Contingent rentals generally expensed as incurredo Rents based index/rate included in lease accounting

Re-measurement not required

• Proposed:o Usage or performance-based rents are not included in

lease computation& are reflected in income statement as incurred; unless considered “in-substance” fixed lease payments

o Rents based on index/rate included in lease accounting Re-measurement required

86


53

Income Statement Dual Model

• Now:o Contingent rentals generally expensed as incurredo Rents based index/rate included in lease

accounting Re-measurement not required

• Proposed:o Usage or performance-based rents are not

included in lease computation & are reflected in income statement as incurred

o Rents based on index/rate included in lease accounting Re-measurement required

87

Income Statement Recognition

• Income statement recognition depends on: 1. Nature of underlying asset as Property (e.g., real estate)

or Other than Property (e.g., equipment), and2. Consumption Principle:

1. Significance of lease term in relation to asset’s remaining useful life

2. Significance of lease payments’ present value (PV) in relation to the asset’s PV

*In general, land, a building, a part of a building, or both is “Property”. Apply straight-line recognition for property leases unless the lease term is insignificant compared to the underlying asset’s economic life or the PV of fixed lease payments is insignificant relative to the fair value of the underlying asset.

88


54

Decision Tree – Property vs. Non-property

89

Lessee Accounting

Type A/Non-Property (Financing)

• Balance Sheet– Right of Use Asset– Lease Liability

• Income Statement– Interest Expense– Amortization Expense

Type B/Property (Straight-line)

• Balance Sheet– Right of Use Asset– Lease Liability

• Income Statement– Lease Expense

90


55

Lessor Accounting

Type A/Receivable & Residual/Property

(Financing)

• Balance Sheet– Derecognize underlying

Asset– Lease Receivable– Residual Asset

• Income Statement– Profit on asset

Derecognized– Interest Income on

Receivable & Residual

Type B/Non-Property (Straight-line)

• Balance Sheet– Underlying leased asset

remains on Lessor’s Books

• Income Statement– Lease Income

91

Lessee Example

• 3 year lease for machinery with 7 year life• $25,000/year• Incremental borrowing rate of 6%• Fair value of leased asset $130,000 at inception• Lease Classification:

o Non-property → Not insignificant por on of FV or life → Accelerated lease

o Expense from interest on liability to make lease payments & amortization of ROU

92


56

Lessee Example (cont.)

Right of use (ROU) asset is net present value of lease payments at incremental borrowing rate ($66,825)Amortization expense $22,275 per year (66,825/3)

Analysis of Right of Use Asset

Beginning Balance 66,825$ Year 1 amortization ($66,825/3) 22,275$

Balance at end of year 1 44,550$ Year 2 amortization ($66,825/3) 22,275$

Balance at end of year 2 22,275$ Year 3 amortization ($66,825/3) 22,275$

Balance at end of year 3 -

93


Liability = ROU at inception, reduced by lease paymentsInterest expense = lease liability x incremental borrowing rate

Analysis of Liability to Make Lease Payments

Beginning Balance (66,825)$ Year 1 interest ($66,825 * .06) (4,010)$ Year 1 lease payment 25,000$

Balance at end of year 1 (45,835)$ Year 2 interest ($45,835 *.06) (2,750)$ Year 2 lease payment 25,000$

Balance at end of year 2 (23,585)$ Year 3 interest ($23,585 *.06) (1,415)$ Year 3 lease payment 25,000$

Balance at end of year 3 - 94


57


Had this been a straight-line lease, ROU accounting changes, but liability accounting is same

Analysis of Right of Use Asset

Beginning Balance 66,825$ Year 1 accretion of lease liability 4,010$ Year 1 lease expense ($75,000/3) (25,000)$

Balance at end of year 1 45,835$ Year 2 accretion of lease liability 2,750$ Year 2 lease expense ($75,000/3) (25,000)$

Balance at end of year 2 23,585$ Year 3 accretion of lease liability 1,415$ Year 3 lease expense ($75,000/3) (25,000)$

Balance at end of year 3 -

95

Lessor Example

• 3 year lease for machinery with 7 year life• $25,000/year• Discount rate 8.63%• Fair value of leased asset $130,000 at inception• Book value of leased asset $75,000 at inception• Anticipated fair value $85,000 at lease end• Lease Classification:

o Non-property → Not insignificant por on of FV or life → Accelerated lease

o Income from interest & accretion96


58

Lessor Example (cont.)

Lease receivable = Present value of lease payments ($63,698)

Beginning Balance 63,698$ Year 1 lease payment (25,000)$ Year 1 interest ($63,698 * 8.63%) 5,499$

Balance at end of year 1 44,197$ Year 2 lease payment (25,000)$ Year 2 interest ($44,197 * 8.63%) 3,816$

Balance at end of year 2 23,013$ Year 3 lease payment (25,000)$ Year 3 interest ($23,013 * 8.63%) 1,987$

Balance at end of year 3 -$

Lease Receivable

97


Gross residual asset = Present value of value of leased asset at lease end ($66,302)

Beginning Balance 66,302$ Year 1 accretion ($66,302 * 8.63%) 5,724$

Balance at end of year 1 72,026$ Year 2 accretion ($72,026 * 8.63%) 6,218$

Balance at end of year 2 78,245$ Year 3 accretion ($78,245 * 8.63%) 6,755$

Balance at end of year 3 85,000$

Analysis of Residual

98


59

Lessor Example (cont.)Journal Entries to Record Transactions

Year 1: Entry to de-recognize portion of leased asset "sold" Debit CreditLease receivable $ 63,698 Net residual asset 38,251

Lease profit $ 26,949 De-recognition of asset "sold" 75,000

$ 101,949 $ 101,949

Year 1: Entry to record payment and income Debit CreditCash $ 25,000 Net residual asset 5,724

Lease receivable $ 19,501 Interest income 5,499 Accretion income 5,724

$ 30,724 $ 30,724

Year of Sale: Debit CreditCash $ 85,000

Lease Profit $ 28,051 Net Residual Asset 56,949

$ 85,000 $ 85,000

99


What if this had been a straight-line lease?• Asset stays on books & continues to

depreciate as normal• Lease payments = lease income

100


60

Transition

• Pre-existing leases will not be grandfathered; Proposal applies to all outstanding leases, not just newo Capital, sales-type, direct financing leases: No adjustment to existing assets & liabilities at

transitiono Operating Leases: Option 1 – Full retrospective approach (Apply new

rules at commencement for each lease) Option 2 – Modified retrospective approach (Assets

& liabilities measured at implementation date over remaining life of lease; specific guidance provided)

101

Impact on Client – Accounting & Reporting• Policies, Processes & Controls:

o Inventory & assessment of all agreements/contractso Significantly amend accounting policies & procedures On-going re-measurement requirements (e.g. index or rate

changes, modification to contract terms, options to extend or terminate)

Increased disclosure requirements Definition of management’s judgment (e.g., definition of a

lease, lease term, proposal terminology (e.g., “insignificant”) service components, lease classification)

Added complexity in calculating book vs. tax differences Control changes with policy & process changes

102


61

Impact on Client – Information Systems• System requirements:

o Separate lease & non-lease componentso “Triggering” of reassessment criteriao Maintain Financial reporting & SOX 404 risk at acceptable levelo Data retention & security; audit trails for lease classification &

changeso Support management’s buy vs. lease/sale-leaseback decisions;

lease negotiationso Support management’s financial statement forecasting &

budgeting requirements (e.g., anticipated changes in ROA & EIBITDA calculations)

o Regulatory capital impact unclear

103

Looking Ahead

• FASB has two roundtable discussions planned

• More deliberations to follow

104


62

Questions?





106


63






107

CPE Credit


• For questions, concerns or comments regarding CPE credit, please email BKD Learning & Development Department at [email protected]

108


64

Thank You



Marketplace OverviewPresented By: William Robinson, Jr.


65

111111

What is Connect for Health Colorado?

An open, competitive marketplace for individuals and small employers to:

• Compare health insurance costs and features side by side• Shop plans containing the same base benefits• Determine eligibility for and access new federal financial

assistance, based on income• Call, chat or sit down with trained representatives for help• Enroll in a health plan

112112

Connect for Health Colorado is NOT

• A replacement for the current market or brokers• Engaged with negotiating rates between carriers and

providers • Part of Medicaid• Offering Medicare or supplemental health plans• A new government health care system• A State agency or regulatory body• An organization that receives funding from Colorado

General Fund


66

113113

What is the Individual Marketplace?

• One of two shopping paths offered by Connect for Health Colorado (other is for small employers)

• A new resource for Coloradans seeking health coverage• Providing individual and family health plans that take effect

starting January 1, 2014• Online shopping, with assistance by phone and in-person• The only place where Coloradans can access new federal

financial assistance to lower premiums, co-pays and deductibles

114114

Who can shop?

• Coloradans who currently buy insurance on their own• Coloradans who are uninsured• Coloradans who are self-employed• Coloradans who don’t have access to affordable coverage

through their employer• Coloradans with legal immigration status• Family members/dependents of employees who are offered

employee-only coverage by employer• Not for individuals eligible for Medicare or seeking

supplemental plans


67

115115

Ways to shop

• Starting October 1: go to www.ConnectforHealthCO.com• Answer a few questions and browse health plan prices and

features• Answer a few questions and get an estimate of eligibility for

new financial assistance• Shop for commercial health plans without financial

assistance• Fill out the application for new financial assistance and

insurance affordability programs (Medicaid and CHP+) and find out what you are eligible for

• Enroll in health coverage that takes effect starting January 1, 2014

116116

Individual Marketplace Open Enrollment

Oct. 1 Dec. 15 Jan. 1, 2014 March 31, 2014

Shopping Starts October 1, 2013Coverage Begins January 1, 2014

Individual Open Enrollment Ends

Coverage begins

Deadline for

enrollment to have

coverage Jan. 1, 2014

Open Enrollment

Begins


68

117117

What can you shop for?

• 150 new health plans that include a comprehensive set of medical services and benefits, free preventive services

• 10 Carriers:o Access Health Colorado, Anthem Blue Cross and Blue Shield,

Cigna, Colorado Choice, Colorado HealthOP, Denver Health, Humana, Kaiser Permanente, Rocky Mountain Health Plans, UnitedHealthcare

• PPO, HMO, HSA, CYA (high deductible plans for young adults)• Health plans with dental coverage and without• Separate dental plans• Find out eligibility for Medicaid and CHP+ and enroll• A link to vision plans

118118

Who can help you use the Marketplace?

• Online chat and decision-support tools

• Help over the phone by Customer Service Center Representatives through toll-free number

• Impartial help in-person by certified Health Coverage Guides located at over 50 community-based Assistance Sites statewide

• Advice in person and by phone by licensed and certified health insurance agents and brokers located statewide


69

119119

Key changes

• Starting in 2014, you can not be denied health coverage based on a pre-existing condition or your health history

• You will not be asked about your health history or medical needs when you apply for health insurance (other than pregnancy, tobacco use and disability status)

• Starting in 2014, about 160,000 Coloradans will be newly eligible for Medicaid because of a state law passed this year; adults earning up to about $15,000 a year, couples earning up to about $21,000 and families of four earning up to about $32,000 will be eligible for Medicaid and the Marketplace will help you access Medicaid and CHP+

120120

Other facts to know

• There will be set open enrollment periods for commercial health plans that will provide coverage for the calendar yearo October 1, 2013 to March 31 2014 o October 15, 2014 to December 7, 2014 for future years

• Customers who sign up by the 15th of the month will have coverage begin on the first of the next month; if you sign up after the 15th, you will wait until the following month

• There will be ways to sign up for coverage outside of open enrollment periods (loss of job, marriage or divorce, move into the state, birth of child, change in income, etc.)


70

121121

Comprehensive Coverage

Health plans will provide, at a minimum, the following categories of services, also known as essential health benefits:

• Ambulatory patient services• Emergency services• Hospitalization• Maternity/newborn care • Mental health/substance abuse• Prescription drugs • Rehab/habilitative services and devices• Laboratory services • Preventive and wellness care/chronic disease management• Pediatric services, including oral and vision care

122122

How much will I pay?

• Prices depend on age, the region of the state in which you live, how many people are on plan, and if you use tobacco products

• Colorado Division of Insurance (DOI) approved rates in August

• Prices will not be affected by your health needs or history

• Preliminary filings show a wide range of prices:

o Rates for a 21-year-old living in Denver range from $153 to $299 a month for bronze plans and from $201 to $377 for silver plans, before cost-reductions based on income.

o Rates for a 40-year-old living in Denver range from $186 to $364 for bronze plans and from $245 to $460 for silver plans


71

123123

How can I organize my options?

• Health plans will be organized by coverage levels based on how much of the services, on average, are paid for by the carrier and how much are paid for by the customero Bronze (60% paid by carrier/ 40% paid by customer)o Silver (70/30)o Gold (80/20)o Platinum (90/10)

• You can look for health plans by• Medical provider and facility• Carrier• Coverage level• Premium

124124

Cost reductions for Individuals & Families

New financial help to reduce the cost of premiums

• Individual earning between $15,856 to $45,960/year• Couple earning between $21,404 to $62,040/year• Family of four earning $32,499 to $94,200/year

o Tax credit applied up-front by IRSo Tax credit is higher for older Coloradans, especially for those ages 55-64

New financial help to reduce out of pocket costs (co-pays and deductibles)

• Individuals earning $15,856 to $28,725/year • Family of 4 earning $32,499 to $58,875/year


72

125125

How does the new tax credit work?

• Customers will fill out the financial assistance application, providing information about future income, tax household, identity and other details to determine eligibility

• Customers will learn how much financial assistance they can receive after they are denied Medicaid/CHP+

• Customers will choose a health plan and decide how much of the tax credit to use right away to reduce the monthly premium vs. claiming the credit on taxes

• The amount of tax credit will be the same regardless of the health plan you choose

• Customers will need to report change in income to Marketplace to re-determine eligibility for financial assistance

126126

How do the cost-sharing reductions work?

• Same financial assistance application will be used

• It is possible for customers to receive both forms of financial assistance, based on income

• If eligible, based on income, customers can enroll in health plans that have lower co-pays and deductibles – like an upgrade

• Eligible Native Americans can enroll in health plans that have no co-pays and deductibles for in-network services


73

127127

Information for financial application

• Estimated household income for coming year (adjusted gross income reported on Form 1040 with some additional information, not including assets such as property)

• Identity info, such as Social Security numbers, for each person to be covered

• If you have other coverage through an employer, Medicare, Medicaid and/or pediatric dental through a separate policy

• Info about tax household, Colorado residency status, immigration status

• Other questions specific to public programs and specialized populations such as Native Americans

128128

Small Business Marketplace

• One of two shopping paths for customers of Connect for Health Colorado

• New option for providing group plans to employees

• Small businesses and non-profit organizations set the terms of the group plan and then employees come to the Small Business Marketplace to sign up for coverage


74

129129

How do Businesses Qualify?

• Have a Colorado location

• 2 – 50* combined full-time and full time equivalent employeeso Our Board chose to define our small group market in

2014-2015 as 50 or fewer employeeso Will increase to 100 or fewer employees in 2016

• Offer coverage to all full-time employees

* Business Groups of One will shop in the Individual Marketplace

130130

How do Businesses Qualify?

• Counting Employees

• Based on a monthly totals for previous calendar year

• Add monthly full time employees to full time equivalent part-timers

– Determine part-time hours for each month (but not more than 120 per employee, then divide by 120

– An employer may select any 6 month period to determine average for previous calendar year

• Once an employer is Marketplace qualified they may remain regardless of changes in employee count


75

131131

Small Employer Health Care Tax Credit

Who qualifies?

• Employers with fewer than 25 employees for the tax-yearo Full-time employeeso Add part-time hours and divide by 2080 to obtain full-time equivalent

• Average employee income of less than $50,000 o (not counting owners or family members)

• Employer must pay premiums under a “qualifying arrangement” with nondiscriminatory contributions of not less than 50% of employee cost

132132

Small Employer Health Care Tax Credit

Amount of Credit:

For tax years beginning 1/1/2014…

o Up to 50% (35% for nonprofits) of contributions made for non-owner employees and their dependents

o Nonprofits may take the credit against their payroll taxeso Credit can be claimed for only two years beginning in 2014o Amount of credit is determined on a sliding scale based on the

number of employees and employee average income

Estimate the credit at: www.connectforhealthco.com


76

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Small Group Choices

• 92 Health Plans

• Anthem Blue Cross and Blue Shield• Colorado Choice• Colorado HealthOP• Kaiser Permanente• Rocky Mountain Health Plans• See Change Health

134134

Employer/Employee Choice Options

• One Carrier / One Plan

• One Carrier / All Plans

• One Metal Level / All Carriers

• Two Adjacent Metal Levels / All Carrierso Example: Bronze and Silver


77

135135

How Will Employers Access the Marketplace?

• Employer or Agent/Broker – open an account• Build a roster/census• Review proposal options• Decide on the right plan design at the right price• Complete a preliminary application – contribution/waiting period • Trigger Employee Open Enrollment• Employee review their options menu and select plans or waive• System reviews completed enrollment and waivers• Open enrollment closes – participation is reviewed• Final Invoice – employer approval• Release Employer Application and enrollments to carriers• Carrier provide certificates and ID cards• Small Business Marketplace provides employer billing and

ongoing administration

136136

Protecting Your Privacy

• The Marketplace will comply with state and federal laws to protect your informationo We won’t use or share your financial information after

determination of eligibility for financial assistance is madeo We won’t ask you for medical information (except for tobacco use,

pregnancy and disability)

• There will be strict security to protect access to files

• The website and backup systems will have strong protections against outside attacks


78

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Key Takeaways

• You have a broad array of health plan choices in one place

• Connect for Health Colorado is the only place to access cost savings that you can use right away to reduce your costs

• You can get help over the phone and in-person from a statewide network of trained professionals

• Sign up by Dec. 15 to have your coverage start Jan. 1

138138

Resources

• Website: www.ConnectforHealthCO.com

• Email questions: [email protected]

• Toll-free help by phone: 1-855-PLANS-4-YOU (855-752-6749) 8 am to 6 pm Monday to Friday, 8 am to 5 pm Saturdays

• County Snapshots: http://www.connectforhealthco.com/how-it-works/county-snapshots/


79

Fiduciary Responsibilities & Key Metrics Consideration for Boards

Presented byTravis Webb, CPA, Managing PartnerNikki Kubly, CPA, Senior ManagerOctober 9, 2013

• Greater scrutiny being placed on not-for-profits—particularly public charities [501(c)(3) organizations]

• Response to high-profile scandals in not-for-profit world

• Trickle down effect of Sarbanes-Oxley • What does this mean?

o Role of Board and Audit/Finance Committees is crucial for good governance & evolving

o Expectation gap between general public (including donors, watchdog groups & regulatory authorities) & members of these bodies regarding scope of their fiduciary duties is narrowing

Changing Landscape forNot-for-Profits

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• Convened Oct 2004 – request of Senate Finance Committeeo 24 diverse nonprofit / philanthropic leaderso June 2005 / April 2006 report with 120 actions

that seek to strengthen transparency, governance & accountability Led to extensive redesign of Form 990 in 2009

o Oct 2007 guide & 2009 workbook www.nonprofitpanel.org

Panel on Nonprofit Sector

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• The Prudent Person Rule• Protect assets & provide financial oversight

o Review & approve organization budgets, spends & makes moneyo Establish & follow monetary policies that balance short & long

term needso Verify that organization’s financial systems & practices meet

accepted standardso Ensure that organization has adequate operational reserves for

rainy days & to take advantage of unexpected opportunitieso Safeguard organization’s reputationo Ensure organization is not subjected to unnecessary risk

Fiduciary Responsibilities

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81

• Monitoring Money Managemento Budget to actual monitoring – how often is your

board doing this?o Annual financial statementso Ensure cash management controls are in placeo Other responsibilities: Adequate liability insurance Monitoring distribution of authority for financial

decisions Monitoring organization’s reserves Approving investment policy

Relevant expertise Overseeing investment performance


143

• Providing Audit Oversighto Finance and/or audit committee –

separate or together?o Selection of independent auditoro Provide expectations to independent

auditorso Review Form 990


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82

• Executive compensation• Conflicts of interest

o IRS has a sample policy – laws may vary by state

• Investments• Fundraising• Minutes & records• Document retention & destruction• Ethics & whistleblower policy

Key Areas of Note – 990

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• No reason to reinvent the wheelo www.guidestar.org 1.8 million tax-exempt organizations reported

• BoardSourceo Established in 1988 by Independent Sector and

Assoc. of Gov. Boards of Univ. and Colleges

• Charity Navigatoro Founded in 2001o Examines charitable performance on financial

health & accountability / transparency

990 Resources

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83

• Board of Directors & Management share responsibility for setting a tone of trust & accountability byo Reviewing or establishing written policies for Code of Ethics Conflicts of interest Managing investments Purchasing practices Expense reporting, etc.

o Creating a safe environment to address governance issues


147

• What else can be done?o Monitor public support test To be considered a public charity, an

organization must generally receive financial support from a sufficient broad base of donors

o Establish appropriate internal controls


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84

• Most frauds are discovered inside the organizationo By chance, employee tips, internal auditors,

complaints, etc. 43% of fraud reporting came from tips – ACFE 2012

Report

o ACFE 2012 Report – 10.4% NFP victims & $100,000 median loss

o Consider fidelity bondingo Consider a fraud reporting hotline, including BKD’s

IntegraReports

Reporting Concerns

149

• BKDo Available checklists & should be providing some

guidance on control gaps in an annual letter

• Interneto Several free guides http://www.compasspoint.org/internal-controls-

checklist http://www.nonprofitaccountingbasics.org/reporting-

operations/internal-controls-small-organizations http://www.councilofnonprofits.org/resources/financial

-management

Internal Control Resources

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85

• Reserveso Rainy Day Funds – a “what if” considerationo How much is enough / too much Focus on your fixed costs

Evaluate program shortfalls vs. cancellation options

3 to 6 months / 6 to 12 months / More than 12?

o Explanation of difference between reserves, restrictions & endowments

Key Metrics

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• Financial Reportingo General not-for-profit specific issues

Revenue recognition for contributions Endowment vs. restricted Program service costs vs. support service costs

• Key ratios & indicatorso Current ratioo Days cash on hando Unrestricted net assetso Concentrationso Functional expense ratios

Key Metrics

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• Colorado Nonprofit Association• BoardSource (www.boardsource.org)

o Governance Series, including Ten Basic Responsibilities of Nonprofit Boards (YouTube)

• Independent Sector (www.independentsector.org)o Principles Workbook: Steering Your Board Toward Good

Governance and Ethical Practice

Resources

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Questions?


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• Compl& group attendance sheet (will be passed around at end of day)o Print your company nameo Your printed name, email address, time in, time out & signature


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156


88

CPE Credit



157

Thank You




89

Got Fraud? Fraud, Your Audit & You – Let’s Discuss

Presented byRand Gambrell, CPA, ABV, CFE, CFF, CVA, DirectorSteven Sauer, CPA, ManagerOctober 9, 2013

Case Study: District of Columbia, Office of Tax and Revenue

• Manager in Real Property Tax Administration (RPTA) embezzles over $48 million of District of Columbia funds

• Scheme lasts nearly 20 years, involving processing of fraudulent real property tax refunds

• 30 Office and Tax Revenue employees lost their jobs as result of fraud

160


90

Case Study: Where Were the Auditors

• RPTA has internal andtwo external audit firmso Internal audit is spread

thin, tax refunds not identified as risk area Variances identified, but

not investigatedo External auditors

document process, check approvals, do not review supporting documents

161

Is This Refund Pattern a Red Flag?

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91

The Audit Expectations Gap

“The difference between what the public and financial statement users believe auditors are responsible for and what auditors themselves believe their responsibilities are.” (AICPA, 1992)

Public Perception

Private Practice

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Public Perception Private Practice

Auditors are responsible for F/S Management is responsible for F/S

Auditors certify/guarantee F/S Auditors opine on F/S

Unmodified opinion = “clean” Unmodified opinion = “reasonably free”

Audits should detect fraud Audits should be designed to detect material fraud

“Why didn’t auditors catch this?” “Why didn’t client’s controls catch this?”

Auditors should use common sense Auditors should use professional judgment

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• Five audit facts that may surprise you:o #5: Audits are primarily risk-basedo #4: Every audit contains “significant risks”

which must be addressed by auditoro #3: Audit procedures are not one-size-fits-

allo #2: Audits are not designed to detect all

fraudo #1: Auditing is fun!

165


“If history repeats itself, and the unexpected always happens, how incapable must Man be of learning from experience.” (George Bernard Shaw, 1856-1950)

166


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Financial Statement Audits

167


The primary objective of an audit:Auditor’s ResponsibilityOur responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free from material misstatement. OpinionIn our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Organization as of December 31, 2012 and 2011, and the changes in its net assets and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

(Excerpts from a standard, unmodified Independent Auditor’s Report, emphasis added)168


94


• Foundational Auditing Principles:o Independenceo Professional skepticismo Knowledge of client industryo Adequate supervision of

engagemento Quality control At engagement level, and At firm level

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• Specific Audit Procedureso Obtain an understanding of entityo Risk assessmento Preliminary analyticso Interviews with members of

mgmt. & governanceo Tests of design of internal controls o Brainstorming meetingo Evaluate significant transactionso Review significant estimateso Review board minutes

o Test for pending/threatened litigation

o Tests of Details/samplingo Tests of Operating

Effectiveness of Internal Controls

o Confirmationso Test journal entrieso Test for mgmt. overrideso Review insurance coverageso Incorporate an element of

unpredictabilityo Review F/S disclosures


170


95


Limited Procedures(analytics)

Expanded Procedures(vouching)

Full Procedures(Tests of Details/

Controls)

LOW MID HIGH171

Best Practices for Fraud PreventionConfidential hotline

Fraud awareness training

Vendor controls

Budget-to-actual reviews

Electronic banking controls

Cash receipt controls

Good HR practices

Inventory control

Positive Pay / Dual signers on manual checksMandatory vacations

P card / reimbursementpolicies

Dual authorization oninvestment sales

Fraud risk assessment

Write-off controls

Data mining / analytics

Management reviews

Segregation of duties

Code of Conduct

Create the right culture

Tone-at-the-top

Prosecute perpetrators

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96

Invoice

Invoice

Print Job

Legit Vendor

Employee –Graphic Designer

Straw Vendor

Client Company

With 40 % Mark-up

173

1. Confidential Hotline

• Single most cost effective anti-fraud action you can take

• Tips are number one way that frauds are detected• Most tips come from employees• Both deterrent & detection method• Lower losses are observed where hotline is present• Puts employees on notice that you want to know

“Providing individuals a means to report suspicious activity is a critical part of an anti-fraud program.”

Association of Certified Fraud Examiners

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97

Detection of Fraud Schemes

Initial Detection of Occupational Frauds

175

Detection of Fraud Schemes

Source of Tips

176


98

Patient Protection and Affordable Care Act

• Section 6102(b)(1)o By March 23, 2013, facility or entity (5 or

more facilities) is required to have “in operation a compliance and ethics program that is effective in preventing and detecting criminal, civil, and administrative violations… and in promoting quality of care consistent with regulations developed [under the Act]”

177 // experience access177

Seven Elements of an Effective Compliance Program1) Developing written Policies and Procedures2) Designating a Compliance Officer and Committee3) Conducting Effective Training and Education4) Developing Effective Lines of Communication5) Enforcing Standards through well publicized

Disciplinary Guidelines6) Performing audits and monitoring risk areas7) Responding to detected offenses and developing

Corrective Action Initiatives

Source: OIG Compliance Program Compliance Guidance for Nursing Facilities –March 16, 2000

178 // experience access178


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IntegraReport Web Reporting

IntegraReport.com

179

180


100

2. Bank Account Controls

• Positive payo Protects bank account against counterfeit checkso Protects against schemes you have no other way to

prevento Over past few years, most corporate account holders

have implemented

• ACH block & filtero Corporate account takeover is latest fraud plagueo If you don’t utilize ACH transactions, block them with

your banko If you do utilize ACH transactions, place restrictions with

your banko Protect credentials

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2. Bank Account Controls

• Wire transfer controlso Most banks have good systems available nowo Tiered approvalso Multiple approvals required for high-dollar transactionso Protect your credentials

• Lockboxo Great options availableo Same-day deposito Same-day access to images of checks received

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101

3. Vendor Controls

• Seeing more mandatory approved vendor lists• Control over selection of new vendors

o Who can select?o How are they selected?

• Due diligence performed on new vendorso Is vendor real?o Is pricing reasonable?o Is vendor related to an employee?

• Periodically reassess vendor relationships• Minimize or eliminate conflicts of interest

183

©2012 by the Association of Certified Fraud Examiners, Inc.


102

©2012 by the Association of Certified Fraud Examiners, Inc.185

186


103

4. Budget-to-Actual Process

• Reliable budget• Examine variances monthly• Understand what is REALLY causing variances• Identify & follow up on any unusual trends

187

5. Data Mining & Continuous Auditing

• Especially related to accounts payable & vendors• Pattern recognition• Identify patterns indicative of fraud schemes• Find things you’ll never find by looking at

documents

188


104

The Classic Fraud Red Flag Revisited

$-

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

1/21/2006 2/21/2006 3/21/2006 4/21/2006 5/21/2006 6/21/2006 7/21/2006 8/21/2006

189

Common Data Mining Areas

• Employees & Payroll• Vendors & Accounts Payable• P-Cards & Credit Cards• Expense Reimbursement• Inventory (not as common)

190


105

Questions?





192


106






193

CPE Credit



194


107

Thank You



Tax Update & New DevelopmentsPresented byMike Engle, CPA, PartnerRita Worster, CPA, Senior ManagerOctober 9, 2013


108

Tax Update & New Developments

• Alternative Investments• IRS activity in 2013

o College & University Final Report UBTI & Compensation focus

o Regulationso Guidance

197

Why Invest in Alternative Investments?• Higher returns???• Asset allocation

o Better diversification

• Sophisticated exempt entitieso Sexy

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109

Reporting & Tax issues with Alternative Investments• Unrelated Business Income (UBI)

o How to determine UBI? K-1 Reporting – Line 20V

What if there is no K-1 reporting? What if there is no K-1?

Discussions with managers of alternative investments How do they make the “call” on UBI

Potential filings in multiple states

199

Reporting & Tax Issues with Alternative Investments• Reporting UBI on Form 990-T

o Ordinary incomeo Interest incomeo Dividend incomeo Rental incomeo Capital gaino Capital loss

200


110

Reporting & Tax Issues with Alternative Investments – cont’d• Expenses Associated with UBI from alternative

Investmentso Allocation of investment management feeso Allocation of staff salaries & benefitso State taxeso Charitable contributions – 512(b)(10)

201

Reporting & Tax Issues with Alternative Investments – cont’d• Exempt Partners should consider certain issues when

reporting UBIo Charitable contributions may be deducted whether or not

contribution is directly connected to UBIo May deduct capital losses only to extent of capital gainso Partnership losses may be deducted only to extent of

adjusted basis in Alternative Investment

202


111

Reporting & Tax Issues with Alternative Investments – cont’d• Estimated tax payments

o Safe basiso Annualized

How to get information to Annualize

203

Reporting & Tax Issues with Alternative Investments – cont’d• International filing requirements

o Investments in foreign partnerships either directly or indirectly may need to file Form 8865

o Investment in foreign corporations either directly or indirectly may need to file Form 926

o Exempt entities may also need to file Form 5471 & Form 8621

204


112

Alternative Investments

• Number of AI drastically increased over last 10 years• AI usually partnership in private equity, real estate,

offshore investments • Communication between Investment & Accounting

personnel• Tax review prior to investment• Impact on tax preparation time

205

College & University Final Report

• Released on April 25, 2013• Focuses on examination results

o Underreporting of Unrelated Business Taxable Incomeo Compensation & Comparability Datao Examinations of 34 colleges & universities

• IRS next stepso Look at UBI reporting more broadlyo Ensure that tax-exempt orgs are aware of importance of

using appropriate comparability data when setting compensation

206


113

Unrelated Business Taxable Income

• Examinations have resulted ino Increases on 90% of exams totaling about $90 milliono Over 180 changes to UBTI reporting. More than half

related to (in order of frequency): Fitness & rec centers and sports camps Advertising Facility rentals Arenas Golf courses

o Disallowance on 75% of returns examined totaling more than $170 million in losses & Net Operating Losses Mostly NOL carry forwards

207

Increases in UBTI

• Disallowing expenses not connected to unrelated business activities

o Lack of profit motiveo Improper expense allocation

• Errors in computation or substantiationo NOLs either improperly calculated or substantiated on 1/3

of returns which resulted in $19 million disallowed

• Reclassifying exempt activities as unrelatedo 40% had activities that should have been on 990-T with

adjustments nearly $4 million

208


114

Disallowance of expenses & losses

• UBI is generated only from a trade or businesso One aspect of a trade or business is intention of making a

profit

• Most common reason for disallowance of losses & NOLs was a pattern of years of sustained losses

• Allocated expenses must have a proximate & primary relationship to activities to which they are attributed (exempt & unrelated business activities)

o Expenses were disallowed on more than 60% of exams

209

Compensation

• Exams focused on compliance with Section 4958 –excess benefit transactions for disqualified persons

• IRS looked at process & comparability data relied upon in establishing rebuttable presumption of reasonableness

o Independent body to review & establish compensationo Comparability datao Contemporaneous documentation

210


115

Compensation - continued

• 20% failed to meet rebuttable presumption standard related to problems with comparability data

o Institutions were not similarly situated based on location, endowment size, revenues, total net assets, number of students or selectivity

o Studies didn’t document selection criteria used or why schools were deemed comparable

o Comp surveys did not specify whether amounts reported only salary or included total other types of compensation

211

Employment Taxes

• IRS looked at employment tax returns at about 1/3 of C&U examined

• All resulted in adjustments but some are contested• Wage adjustments total $36 million, taxes &

penalties assessed $7 million• IRS looked at retirement plan reporting at about ¼ of

C&U examined• About half had problems• Wage adjustments total $1 million, $200,000 taxes &

penalties 212


116

IRS Regulations

• Final Regulations for Type III Supporting Orgso Reg §1.509(a)-4 published December 28, 2012 o Substantially similar to last proposed regulationso Payout requirement for attentiveness test reducedo Definition of supported organization modifiedo Prohibit contributions to Type I & Type III from persons

who directly or indirectly control governing body of supported organization

o Guidance on definition of control to be issued shortly

213

Type III Supporting Organization

• Reg §1.509(a)-4(i) Meaning of operated in connection with

o Notification requiremento Responsiveness testo Integral part test

Functionally integrated Non-functionally integrated

Distribution requirement Attentiveness requirement

214


117

Community Health Needs Assessment

• April 2013 - Proposed regs on Code Sec. 501(r)(3) to provide guidance on CHNA requirements, related excise tax & reporting obligations along with clarification of consequences for failing to meet requirements

• August 2013 - Temporary & proposed regs on how & when to file returns reporting $50,000 excise tax for failure to meet CHNA requirements

215

Other Guidance

• June 24th IRS announced expedited approval process for applications for Code Sec 501(c)(4) status that have been pending for more than 120 days as of May 28, 2013

• July 1, 2013 e-filing of FBAR Forms is mandatoryo FinCEN uses BSA E-filing System for many forms, including

FBAR

• July 10th IRS updated Q&A for compensation information

216


118

Updated Compensation Q&A

• Added question about key employee determination• Added question about current year compensation

that was reported on a prior year Form 990• Added question on how to know if compensation is

reasonable• Added section for political organizations

217

Questions

218


119



• Complete group attendance sheet (will be passed around at end of day)

o Print your company nameo Your printed name, email address, time in, time out & signature


219




situation requires careful consideration of facts & circumstances. Consult your BKD advisor before acting


220


120

CPE Credit



221

Thank You




121

Single Audit Update 2013

Presented byKatie Willemarck, CPA, Senior ManagerJami Johnson, CPA, Manager October 9, 2013

Overview

• Most Common Issues• 2013 OMB Circular A-133

Compliance Supplement• Proposed Changes• Available Resources

224


122

Most Common Issues - SEFA

• Disclosures missing• Does not reference CFDA numbers • Does not identify pass-through entities• Not totaled by Federal Program• Does not indicate total Federal

expenditures• SEFA does not reconcile to financial

records225

2013 Compliance Supplement

• Four new programs• Twenty-three deleted programs• Four changes in program titles to

match Catalog of Federal Domestic Assistance (CFDA)

• Appendix V – Lists changes for 2013 Compliance Supplement

Adobe Acrobat Document

226


123

2013 Compliance SupplementPart 2 – Matrix of Compliance Requirements

• Added & removed programs• Modified to eliminate some compliance

requirements previously identified with a “Y”• Requirements primarily affected

o Equipment & Real Propertyo Procurement & Suspension and Debarmento Program Incomeo Real Property Acquisition & Relocation

Assistance227

2013 Compliance SupplementPart 3 – Compliance Requirements

Procurement and Suspension and Debarment• Added procurement is subject to OMB Circular A-110• Clarified what is included as a covered transaction• Clarified procurement thresholds

o $100,000 threshold under grants will be changed to $150,000 once financial reform completed

• Audit Procedures to review entities procedures for covered transactions

228


124


Reporting - Federal Funding Accountability and Transparency (FFATA)• Federal award reporting requirements for direct

recipients of non- Recovery Act Federal awards• Required to report certain first-tier subawards• Also applies to contractors that award first-tier

contracts• If a subaward is made using both Recovery Act & non-

Recovery Act funding sources:o Section 1512 reporting applies to Recovery Act portiono FFATA reporting applies to non-Recovery Act funds229


Reporting – FFATA - When does it apply?State makes subaward of

Federal Funds to local governments

Not-for profit expends federal funds received

from local governments & makes no subaward

Local government expends direct federal

funds but make no subaward

FFATA may apply to state (but not local gov’ts

unless they receive other direct awards & make

subaward)

FFATA does not apply to local government (makes

no subaward)

FFATA does not apply to non-for-profit (not a

direct recipient)

230


125

2013 Compliance SupplementPart 4 – Agency Program Requirements• Numerous changes to agency program requirements for

individual programs• See Appendix V for detailed list of changes

o Several new requirements in 2013 Supplement (CFDA 93.224, 93.917 & 93.918) in Special Tests & Provisions

o 2013 Supplement removes compliance requirement for 340B program (based on HRSA memo to grantees)

o See Appendix VII for above language concerning effect of this removal

231

2013 Compliance SupplementPart 5 – Clusters of Programs• Many ARRA programs removed from clusters• OMB expected to add guidance to Appendix VII to

address major program determination when an entity has expended Federal awards in audit year for these deleted programo Program would not be considered as part of cluster for periods covered by

2013 Supplement, as 2013 Supplement doesn’t include program in clustero If program was part of cluster that was audited as major program in prior

year, it would be considered as audited in that prior year for purposes of major program determination, including consideration of any audit findings

o In determining major programs, Appendix VII provisions titled “effect of Expenditures of ARRA Awards on Major Program Determination” would apply

232


126

2013 Compliance SupplementPart 5 – Clusters of Programs

Student Financial Assistance Cluster• Removed the following CFDA’s

o 84.032 o 84.375o 84.376o 84.407

• Updated appendix A eligibility requirements • Added new appendix B for verification requirements

233

2013 Compliance SupplementPart 5 – Clusters of Programs

National Science Foundation (NSF)• All awards issued by NSF meet the definition of

“Research & Development” (R&D)• Auditees should identify NSF awards as part of R&D

cluster on their SEFA• NSF Recognized that some awards may have another

classification for purpoof indirect costs• See Appendix VII which gives described guidance on NSF

awards

234


127

2013 Compliance SupplementAppendix VII – Other OMB Circular A-133 Advisories

• Recovery Acto Recovery Act funds dwindling but may still affect some

auditeeso Updated list of ARRA programs not covered in Part 4 or 5 of

supplement but potentially subject to A-133 audit

• 2013 Compliance Supplemento Cluster of programs with new Recovery Act CFDA number

would fail two-year look back & have to be audited (excludes R&D & SFA)

o Type A programs having Recovery Act expenditures generally would not be low-risk unless they meet defined exception

o Type B programs still considered higher risk235

OMB Proposed Changes

• Proposed OMB Uniform Guidance: Cost Principles, Audits & Administrative Requirementso Issued in Federal Register on February 1, 2013o Comment deadline extended to June 2, 2013o Reforms finalized by end of 2013

236


128


• Purposeo President issued several directives to U.S.

Office of Management and Budget (OMB) & federal agencies to evaluate potential reforms to federal grant polices to improve efficiency & effectiveness of federal programs while maintaining high level of accountability to prevent waste, fraud & abuse

237

• What is included?o Reforms to audit requirementso Reforms to cost principleso Reforms to administrative requirements


238


129

1. Audit Thresholdo Increasing audit threshold from $500,000 to

$750,000o The proposed “more focused” single audits

expending between $1-$3 million has been deleted

OMB Proposed Changes –Audit Requirements

239

2. Major Program Determinationo Increase minimum threshold for Type A program from

$300,000 to $500,000 No change in alternative 3% of total federal funds expended

o Refocus criteria for Type A program to qualify as high-risk Designated high-risk only when in most recent period

Program failed to receive an unqualified opinion Material weakness in internal controls Questioned costs exceeding 5% of program’s expenditures


240


130

2. Major Program Determinationo Reduce burden associated with Type B programs

Reduce number of high risk Type B programs that must be tested as a major program from at least 50% to at least 25% of number of low-risk type A programs

Allow auditor to stop Type B program risk assessment process after this number of high risk Type B programs

o Reduce minimum coverage required from 50% for a regular auditee & 25% for a low risk auditee to: 40% for a regular auditee 20% for a low-risk auditee


241

3. Questioned Costso Increase minimum threshold for reporting from $10,000

to $25,000o Goal – to help focus audit findings presenting greatest

risk


242


131

4. Streamline universal compliance requirements in Circular A-133, Compliance Supplemento The Keepers (7)

Activities Allowed or Unallowed Cost Principles Cash Management Eligibility Reporting Subrecipient Monitoring Special Tests & Provisions


243

4. Streamline universal compliance requirements in Circular A-133, Compliance Supplemento Eliminated (7)

Davis Bacon Equipment & Real Property Management Matching, Level of Effort & Earmarking Period of Availability of federal funds (except where tested with

allowed or unallowed costs) Procurement and Suspension and Debarment Program Income Real Property Acquisition & Relocation Assistance


244


132

4. Streamline universal compliance requirements in Circular A-133, Compliance Supplemento OMB will consider requests from agencies to add one or more

compliance requirements back under Special Tests and Provisionso To be considered:

Compliance must be required by statute or regulationAnd Federal award agency must

Make a strong case of how non-compliance could result in increased risk

Provides a targeted compliance supplement write-up identifying improper payment risks & focusing on audit tests to address these risks


245

• More coordination & oversight by federal awarding agencies & elimination of duplicative follow-up by pass-through entitieso Pass-through entities would no longer be required to perform

the following Normal audit follow-up Issue management decisions on audit findings Provide support for implementing changes in operations of

subrecipientso Pass-through entities would be required to provide additional

oversight in ensuring subrecipients comply with audit resolution issued by federal agencies

OMB Proposed Changes –Pass-through Entities & Subrecipients

246


133

• Indirect costso Goals: Reduce burden associated with indirect

cost rate calculations & negotiations & reduce overall indirect costs Use flat rate vs. negotiated rates

Option A: Establish mandatory flat rate that is discounted from recipient’s already negotiated rate

Option B: Option of accepting flat rate or negotiating rate

OMB Proposed Changes –Cost Principles

247

• Proposes an option to extend negotiated rates for 4 years

• Creates a minimum 10% rate• Simplifies reporting requirements for time &

effort reporting for salaries & wages• Clarify that budgeting for contingency funds with

a federal award of IT systems are okay• Allow for idle capacity in data centers


248


134

• Applies to following cost principleso Circular A-21, Cost Principles for Educational Institutionso Circular A-87, Cost Principles for State, Local & Indian

Tribal Governmentso Circular A-122, Cost Principles for Non-Profit

Organizationso Cost Principles for Hospitals

• Goal: To consolidate cost principles into single document, with limited variations by type of entity


249

Data Collection Formo Purpose – to allow federal agencies to identify types of audit

findings reportedo Proposed Change – Timeliness

Reduction of amount of time for audit submission from nine months to six months

Legislative change required for timeliness changeo Released May 9, 2013o Comments due July 8, 2013 o Proposed form replaces for audit periods ending in 2013, 2014

& 2015

OMB Proposed Changes –Reporting

Adobe Acrobat Document

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135

Data Collection Form – What’s Newo Auditor EINo Was award a loan or loan guarantee (Y/N)o Findings

Number of findings on each award reported & then detail of each finding (part III – item 6K & item 7)

Standard Format for Findings – four digit audit year – three digit sequence

Finding Reference must match those reported in Schedule of Findings & Questioned Costs & single audit report

Type of Deficiency – Modified opinion, other noncompliance, material weakness, significant deficiency, other

Questioned Costs (Y/N)

OMB Proposed Changes –Reporting

251

Goal: To create consolidated, uniform set of administrative requirements for all grant recipients

o Require pre-award consideration of each proposal’s merit & each applicant’s financial risk

o Notice of funding opportunities are open for a minimum 30 day period on grants.gov

OMB Proposed Changes –Administrative Requirements

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136

What’s Next ?

• OMB to develop proposed amendments due to come out later this year for public comment

• OMB will issue final notice adopting set of reforms

253

Available Resources

• Catalog of Federal Domestic Assistanceo www.cfda.gov

• OMB Circularso www.whitehouse.gov/omb/financial_offm_circulars/

• Government Audit Quality Centero Gaqc.aicpa.org (no WWW.)

• ARRAo www.recovery.gov o www.gao.gov/recovery

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137

Questions?





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257

CPE Credit



258


139

Thank You



Not-For-Profit Track (Auditorium – Remain Here)

Health Care Track (Martin Room – 4th Floor)

Afternoon Snack will be provided in both locations.

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140

Not-For-Profit Track

261

Overhaul of AICPA Audit & Accounting Guide for Not-for-Profit Entities

Presented by Lea Geiser Hayler, CPA, DirectorOctober 9, 2013


141

NFP Audit & Accounting Guide

• On 03/01/13 AICPA released an overhaul of the Guideo This new Guide addresses many new

accounting issues that have emerged over the years & includes guidance dedicated specifically to not-for-profit entities

263

Focus of NFP Guide

• Not-for-profit entities• GAAP-basis financial statements• Audited financial statements

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142

NFP Audit & Accounting Guide

• What it is• Not authoritative guidance

265

NFP Audit & Accounting Guide Update

• Changes include 1. Chapter 3, “Basic Financial Statements and

General Financial Reporting Matters” 2. Chapter 5, “Contributions Received and

Agency Transactions”3. Chapter 8, “Programmatic Investments”

This is a new chapter on program-related investments & microfinance loans

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143

• Changes include4. Chapter 10, “Debt and Other Liabilities”5. Chapter 11, “Net Assets”6. Chapter 15, “Tax and Regulatory

Considerations”


267

• Layout of the Guide - 16 Chapterso Underlined words are changes in chapter titles in

new Guideo Chapters

1. Introduction2. General Auditing Considerations3. Basic Financial Statements & General Financial Reporting

Matters4. Cash & Cash Equivalents & Investments5. Contributions Received & Agency Transactions6. Split Interest Agreements & Beneficial Interests In Trusts7. Other Assets8. Programmatic Investments


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144

• Layout of the Guide – continuedo Chapters

9. Property, Plant & Equipment10. Debt & Other Liabilities11. Net Assets & Reclassification of Net Assets12. Revenues & Receivables from Exchange Transactions13. Expenses, Gains & Losses14. Reports of Independent Auditors15. Tax & Regulatory Considerations16. Fund Accounting


269

• Chapters 1 & 2o Who the Guide was intended foro What basis of accounting in the Guide o Considerations for auditors


270


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Chapter 2, General Auditing Guidance

• Conformed to Clarity project; includes NFP-specific guidance, e.g., fraud risks specific to NFPs

• Other guide chapters have NFP-specific suggested audit procedures relating to chapter’s topic

271

• Chapter 3 o Basic Financial Statements & General

Financial Reporting Matters What’s covered What’s new in the Guide


272


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Enhancements to the Guide – Chapter 3

• Expanded section about reporting relationships with other entities such aso For-profit corporationso Limited liability partnershipso General partnershipso Financially interrelated entities

273

Chapter 3 Relationships – 1

• The new Guide provides a more detailed discussion on initial assessment of whether related entity is a for-profit entity or an NFP

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147

Chapter 3 Relationships – 2

• Tables in Chapter 3 guide you through reporting/presentation options ofo Equity methodo Report at fair valueo Consolidationo Financial statement disclosure only

275

Excerpt from Exhibit 3-2

Relationship

Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Reference

Discussion in This Chapter

Reporting entity controls another NFP through majority voting interest in its board and has economic interest in that other entity

Use guidance in FASB ASC 958-810-25-3.

Paragraphs 3.67-.69

Reporting entity controls NFP through form other than majority ownership, sole corporate membership or majority voting interest in board of other entity and has economic interest in that other entity


Paragraph 3.70

Reporting entity has control over another NFP or economic interest in other, but not both


Paragraph 3.71

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Chapter 3, Financial Statements, the Reporting Entity & General Financial Reporting Matters

• Statement of functional expenseso Required as basic financial statement

for voluntary health & welfare entitieso FinREC encourages presentation by all

NFPs that are supported by general public

277

• Chapter 4 o Cash, Cash Equivalents & Investments What’s covered Investments are now here, but used to

be found in Chapter 8


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Chapter 4, Cash, Cash Equivalents & Investments

• Significantly expanded guidance on common investments by NFPso Summary chart of examples that

reference sections of both Guide & FASB ASC

279

Excerpt from Exhibit 4-1

Relationship

Financial Accounting Standards Board (FASB) Accounting StandardsCodification (ASC) Reference

Discussion in This Chapter

Relationships with Entities Held for InvestmentReporting entity owns 50% or less of common voting stock of investee & reporting entity neithercontrols nor can exercise significant influence over investee’s operating & financial policies. Stock is equity security that has readily determinable fair value

FASC ASC 958-320-35-1 Paragraph 4.17

Reporting entity owns 50% or less of common voting stock of investee & reporting entity neither controls nor can exercise significant influence over investee’s operating & financial policies. Stock does not have readily determinable fair value

FASB ASC 958-325-35 Paragraph 4.37

280


150

• Chapter 5 o Contributions Received & Agency

Transactions What’s covered What’s new in the Guide


281

Enhancements to the Guide – Chapter 5

• Reporting & measuring noncash gifts1. Gifts in kind2. Contribution of fundraising materials3. Informational materials4. Advertising & media time or space5. Below market interest rate loans6. Bargain purchases

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151

Chapter 5, Contributions Received & Agency Transactions

• Receipt of resources by NFP—contribution or exchange transaction?o Flowchart (Table 5-1)o When elements of both are present,

divide transaction in two, measuring exchange first

• Exampleso Membership dueso Grants

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• Membership dueso Is value received by member commensurate with dues

paid?o Often elements of both contribution & exchange Measure exchange portion first & recognize as revenue as

earnings process is completed Remainder is contribution, recognize as revenue upon

receiptExample – Aquarium offers varying levels of membership; each level receives annual admission; varying other benefits depending on level

284


152


• Grantso Use Table 5-1 to determine if grant is

contribution or exchange based on facts & circumstances

o If contribution – Consider if any conditions exist, consider donor restrictions

o If exchange – Determine revenue recognitiono NFP should establish accounting policy for

grants so they are accounted for consistently

285


• Administrative costs of restricted contributionso Policy of designated certain percentage of

restricted gifts to offset costs of raising & administering those gifts Example – Policy that 5% of contributions to

scholarship fund go to pay administrative costs; so $95 of $100 gift is restricted for scholarship fund

o Policy needs to be effectively communicated to or from donor prior to receipt of contribution If not, then 100% of gift should be donor restricted

286


153

• Chapter 6 o Split-Interest Agreements & Beneficial

Interests in Trusts What’s covered


287

Chapter 6, Split Interest Agreements & Beneficial Interests in Trust

• Beneficial interests in trust held by another entity – Questionso What if NFP isn’t notified about trust until

years after it is created?o What if NFP is unable to obtain information

to verify it is named as irrevocable beneficiary?

o What if NFP is unable to obtain information to measure beneficial interests?

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154


• Answerso NFP generally needs following information in

order to record beneficial interests in trust Copy of executed trust document, statement

from trustee or other information to verify existence

Sufficient information about trust in order to value it, e.g., trust assets, payout rate/amount, age of life beneficiaries

o Make reasonable efforts to obtain necessary information

289


• Answerso Recognize beneficial interests in trust &

contribution revenue in first year necessary information becomes available

o Should not record prior period adjustment if NFP made & continues to make, reasonable efforts to obtain necessary information

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155

• Chapter 7 o Other Assets What’s covered Among other things, this is where you

would find guidance on» Collections & Works of Art, Historical

Treasures & Similar Assets


291

• Chapter 8 (entirely new in the Guide)o Programmatic Investments What’s covered Program-related investments &

microfinance loans Difference between Programmatic

Investments & Investments in Chapter 4


292


156

• Chapter 9 o Property, Plant & Equipment What’s covered Covers contributed property & equipment Use of property owned by others


293

• Chapter 10 o Debt & Other Liabilities What’s covered What’s new in the Guide


294


157

• Chapter 11o Net Assets & Reclassification of Net

Assets What’s covered What’s new in the Guide


295

Enhancements to the Guide

• Guidance for reporting expiration of donor-imposed restrictions (11.30)o Timing of when to recognize

expiration of a restrictiono Paragraphs 11.33 - .51 provide

information for specific situations

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158

• Chapter 12o Revenue & Receivables from

Exchange Transactions What’s covered


297

• Chapter 13o Expenses, Gains & Losses What’s covered


298


159

• Chapter 14o Reports of Independent Auditors What’s covered


299

• Chapter 15o Tax & Regulatory Considerations What’s covered What’s new in the Guide


300


160

Enhancements to the Guide

• Expanded discussion about legal & regulatory environment in which not-for-profit entities operate discussed throughout

301

• Chapter 16o Fund Accounting What’s covered


302


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Questions?





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305

CPE Credit



306


163

Thank You



NFP Industry Update (Giving Trends, Regulatory & Financial Update)

Presented byNikki Kubly, CPA, Senior ManagerLisa Zuech, CPA, Senior AssociateOctober 9, 2013


164

Overview

• NFP Advisory Committee• 2013 Audit Risk Alert• Accounting Standards Update• Giving USA 2013 – The Annual Report on

Philanthropy for the Year 2012

309

What is the NFP Advisory Committee?

• Purposeo Provide input on existing guidance, current and

proposed technical agenda projectso Assist FASB in its communication and outreach

activities to the not-for-profit sector

• Committee Compositiono Approximately 15 members appointed by the FASB

chairman for 3 year terms

• Meetingso Advisory meetings held 2 to 3 times a yearo Open to the public in-person and webcast310


165

September 2012 NAC Meeting

Topic 1: Recent Trends, Concerns and Observations• Main Issue – Accounting for Gifts-in-Kind

o Valuation and Recognition of gifts-in-kindo Determining whether the guidance in FAS 136 was

sufficiently clear for distinguishing between contributions and receipts for which the NFP is acting as an agency

o It was determined that FAS 136 does not appear to be misleading

311

September 2012 NAC Meeting (continued)

Topic 2: Standard-Setting Developments and Issues• Status of SEC Decision Regarding IFRS

o The SEC issued its report on the work plan which made no specific recommendations

o The SEC will continue to work with the IASB, focusing on four main areas: leases, revenue recognition, financial instruments, and insurance

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166


Topic 2: Standard-Setting Developments and Issues• Private Company Council (PCC)

o PCC acts as a body that provides proposals to modifications to GAAP for private companies

• Private Company Decision-Making Frameworko Serves as a tool to assist the PCC and FASBo NFPs have varying degrees of public and private company

attributes and the Framework discusses flexibility in applying the guidance.

313


Topic 2: Standard-Setting Developments and Issues• AICPA Update on Reporting for SME’s

o Main Focus: Create a financial reporting framework that blends accrual basis and income tax basis

o The AICPA’s guidelines do not define SME’s

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167


Topic 2: Standard-Setting Developments and Issues• Nonpublic Entity Definition Project

o Focuses on defining what constitutes a private companyo Address whether there should be any distinctions between

NFP’s for financial reporting purposeso Suggestions Using a matrix approach to identify and assess characteristics Issue scale parameters and treat smaller NFP’s that do not

apply GAAP as private companies

315


Topic 3: Updates and Discussions of FASB Projects• Insurance Project

o FASB decided to scope out Charitable Gift Annuities from the insurance contract project

• EITF Issueso Donated securities classified as an operating cash receipt if they

are directed for sale upon receipto Personnel services received from an affiliate for which the affiliate

does not seek compensation

• Revenue Recognition Projecto Final standard is expected by the first half of 2013

316


168


Topic 4: NFP Financial Reporting Project• Research shows general lack of liquidity and forward-

looking information• Information to be included:

o Programmatic outcomeso Results of operationso Economic, industry, or other risk factorso Liquidity information

• The FASB projects on financial presentation could significantly influence MD&A

317


Liquidity Risk Disclosures• Concern

o The proposed liquidity requirements would not enhance information about exposures to risk

• Suggestiono The Board should consider disclosures within the context

of Its larger effort to increase the effectiveness of disclosures The purpose and design of the financial reporting model for

NFP’s Required disclosures regarding donor-restricted net assets

318


169


Topic 5: Disclosure Framework Project• Focuses on providing information most important to

investors and creditorso Is the information for assessing the prospects for net

cash flows to an entity relevant to other users?

• Suggestionso Overall build more flexibility into standardso Include a stewardship concepto Tiered requirements

319

February 2013 NAC Meeting

Topic 1: Recent Trends, Concerns and Observations• In regard to comparative statements, encourage full

GAAP disclosures for prior years• Suggested that they continue to follow developments

regarding mission outcomes• As NFP’s enter into international markets, there needs

to be clear guidance• Focus on revenue recognition in the health care

industry

320


170

February 2013 NAC Meeting (continued)

Topic 2: Update and Discussion of NFP Projects• Improvements needed in the clarity of the financial

statements, including disclosures and other financial statement itemso Several recommendations including everything from

optional board framework to a required SEC-like MD&A

• Important Focuseso Day-in, day-out activityo Ordinary versus extraordinaryo Current versus non-current

321

February 2013 NAC Meeting (continued)

Topic 5: Updates & Discussions of Certain FASB Projects• Disclosure Framework Project

o Next Steps: a comment letter summary has been completed and the Board will address issues on the project webpage

o Concerns: Issue of disclosure overload Disclosures which are taken out may be second-guessed

by auditors322


171

2013 Audit Risk Alert for Non-Profit Entities

• Provides details of the current economic conditions and related riskso For auditors – plan and perform auditso For internal management – provide overview of

potential areas of significant risk

• Perform accurate risk and opportunity assessment based on current year data

• Issued annually by the AICPA

323

2013 Audit Risk Alert (continued)The State of NFP’s

Social Impact Bonds• Contract with the public sector in which a

commitment is made to pay for improved social outcomes that result in public sector savings

• New York City Example

The State of Higher Education• Moody’s outlook was changed to “negative” for the

entire U.S. higher education sector

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172

2013 Audit Risk Alert (continued)The Auditing Standards Board’s Clarity ProjectObjective

• Designed to make the standards easier to read, understand, and apply

• Specifies more clearly the auditor’s objectives and requirements

Substantive Changes• AU-C section 600, Special Considerations –

Audits of Group Financial Statements (Including the Work of Component Auditors)

• AU-C section 705, Modifications to the Opinion in the Independent Auditor’s Report325

2013 Audit Risk Alert (continued)The Auditing Standards Board’s Clarity Project

Primarily Clarifying Changes• The new requirements may not have a substantial

effect but may result in adjustments to the timing and responsibilities

• AU-C section 402, Audit Considerations Relating to an Entity Using a Service Organization

• AU-C section 620, Using the Work of an Auditor’s Specialist

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173

2013 Audit Risk Alert (continued)

ASU 2012-05 • Classification of Cash from the Sale of Donated

Assetso Operating – if there are no limitations and can be

converted immediately to casho Financing– donor restricted use of funds for long-term

purposeso Investing – all other instances

327

• Functional Expense Allocation To the extent that expenses are reported in a form

other than their natural classification, they should be reported by their natural classification if a statement of functional expenses is presented

Consider the cost and benefit Can be difficult to create and apply consistent

allocation methods

• Overhaul Project – AICPA Audit and Accounting Guide Effective March 1, 2013 Have you used it yet?

2013 Audit Risk Alert (continued)

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2013 Audit Risk Alert (continued)Accounting Pipeline

• Status of ongoing FASB projects available at www.fasb.org

• Project of interest to NFP’s Revenue Recognition Financial Instruments NFP Financial Reporting: Financial Statements NFP Financial Reporting: Other Financial

Communications

329

Giving USA 2013 – Key Findings

+ 3.5% total estimated charitable giving in the US

+ 3.9% giving by individuals- 7.0% charitable bequests+12.2% corporate giving+ 4.4% giving by foundations

Note: all numbers have been adjusted for inflation330


175

Giving USA 2013 – Contributions by Type

331

Giving USA 2013 – Contributions by Source

332


176

Giving USA 2013 – Giving in Total

333

Giving USA 2013 – Giving by Foundations

334


177

Giving USA 2013 – Giving by Corporations

335

Giving USA 2013 – Number of 501(c)(3) Organizations

336


178

Questions?


• Complete individual CPE credit form with o Title and date of live seminar o Your company name o Your printed name, signature and email address o Circle sessions attendedo Calculate your total credit in minuteso Hand in sheet at end of seminar

• Complete group attendance sheet (will be passed around at the end of the day)o Print your company nameo Your printed name, email address, time in, time out and signature


338


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339

CPE Credit


• For questions, concerns or comments regarding CPE credit, please email the BKD Learning and Development Department at [email protected]

340


180

Thank You



To Recognize or Not to Recognize: That is the Question…for NFPs

Lindie Sailor, CPA, Senior AssociateSteven Sauer, CPA, ManagerOctober 9, 2013


181

What ARE the Questions?

• Agendao Revenue recognitiono Net asset classificationo Fair value considerations

343

Pop Quiz Questions

• Question #1What is the following transaction called: A transaction where there is a transfer of assets in exchange for benefits of similar value

a. Exchangeb. Non-exchangec. Breakeven

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182

Pop Quiz Questions

• Question #2If an organization receives a 3-year, unconditional grant, when & how much of grant should be recorded as revenue in year one?

a. Recorded when notified; year one’s amount onlyb. Recorded when notified; entire grant amountc. Recorded when cash payment is received each yeard. Not recorded until grant is completed

345

Pop Quiz Questions

• Question #3A contribution where donor specifies a future & uncertain event, & transfer of assets is dependent upon occurrence of event is called

a. Conditionalb. Restrictedc. Grantd. Useless

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183

Pop Quiz Questions

• Question #4Arms-length contributions are initially recorded using which accounting method

a. Fair valueb. Historical costc. Lower of Cost or Market (LCM)d. Net Realizable Value (NRV)

347

Pop Quiz Questions

• Question #5NFP A receives a 3-year contribution from Company A. What discount rate (if any) should generally be utilizeda. Unsecured borrowing rateb. Rate equivalent to JA Southern Colorado debtc. US T-Note rated. No discount rate is necessary

348


184

What are the ANSWERS?

• Revenue Recognitiono Exchange vs. non-exchange transactionso Agency transactionso Contributions receivableo Gifts in kind

349

Revenue Recognition

Exchange vs. Non-Exchange Transactions

Exchange Transaction Non-Exchange Transaction

Definition: A reciprocal transfer of equal value between resource provider & recipient

Definition: A transfer to a recipient that produces incidental value to resource provider

350


185

Revenue Recognition

Indicator Exchange Transaction

Non-Exchange Transaction

Recipient NFP’s intent in solicitingasset

Recipient NFP asserts that it is seeking resources in exchange for specified benefits

Recipient NFP asserts that it is soliciting asset as a contribution

Exchange vs. Non-Exchange Transactions (cont.)

351



Resource provider’s expressed intent about purpose of asset to be provided by recipient NFP

Resource provider asserts that it is transferring resources in exchange for specified benefits

Resource providerasserts that it is making a donation to support NFP’s programs

Revenue RecognitionExchange vs. Non-Exchange Transactions (cont.)

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186

Indicator Exchange Transaction Non-Exchange Transaction

Method of delivery Method of delivery of asset to be provided by recipient NFP to third-party recipients is specified by resource provider

Time or place of delivery (variance power) of asset to be provided by recipient NFP to third-party recipients is at discretion of NFP


353


Method of determining amount of payment

Payment by source provider is based on value of assets to be provided by recipient NFP, or asset cost plus markup

Resource providerdetermines amount of payment


354


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Penalties assessed if NFP fails to make timely delivery of assets

Provisions for economic penalties exist beyond amount of payment (NFP is penalized for nonperformance)

Penalties are limited to delivery of assets already produced & return of unspent amount (NFP is not penalized for nonperformance)


355



Delivery of assets to be provided by recipient NFP

Assets are to be delivered to resource provider or to individuals or organizations closely connected to resource provider

Assets are to be delivered to individuals or organizations other than resource provider


356


188

Revenue Recognition

• Exchange vs. Non-exchange exampleso Company A sponsors research & development activities at

NFP A where Company A specifies protocol of testing so outcomes are of particular value to their company

o Company A provides NFP A with a grant where Company A retains exclusive knowledge of research outcomes. To NFP A, outcomes are sacrifices of little or no value

357

Revenue Recognition

• Agency Transactions, requiring liability treatmento Agento Trusteeo Intermediary

358


189

Revenue Recognition

• Contributions Receivableo Recognized as revenue when notification of intent is

received by NFP Promise vs. Intent

o Reported as restricted, unless explicit donor stipulations make clear that donor intended contribution to be used to support activities of current period

359

Revenue Recognition• Gifts in Kind: Products & Services

o Recognition criteria – Products Gift can be used in operations or sold, during normal course of

businesso Recognition criteria – Services

Create or enhance nonfinancial assets Require specialized skills, are provided by individuals possessing

those skills, & would typically be purchased if not provided by donation

o Both are recorded at FMV

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190


• Net Asset Classificationo Contributions receivableo Restriction vs. Condition

361

Net Asset Classification

• Contributions receivableo Specified future due dates generally indicate temporary

restriction for timeo Time restrictions typically lapse when receivable is dueo Consider facts & circumstances

362


191


• Contributions receivable (cont.)o Purpose restriction of contribution is met prior to due date

of contribution Example – Company A contributes 3-year pledge to NFP A

Purpose & time restriction Effect of expiration of restrictions is recognized in period in which

last remaining restriction has expired

363


• Restriction vs. Conditiono Restriction: Externally imposed to limit use of contributed

assetso Condition: Transfer of assets is dependent upon

occurrence of specified future, uncertain event Recognize revenue when conditions are substantially met Considered unconditional if possibility of condition not being met

is remote

o If ambiguity, presumption is conditional

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192

Example

• Company A provides three choices for donors in its annual campaign

1. Give without restriction2. Direct their gifts to one of four community needs identified by

Company A3. Specify their gift to be transferred to organization of donor’s

choice

365

Example (cont.)

1. Give without restrictiono So long as cash or a promise to give is made to Company

A, variance power is granted to Company A, no conditions are specified, and no restrictions are imposed… Unrestricted contribution

366


193

Example (cont.)

2. Direct their gifts to one of four community needs identified by Company A

o Same as #1 (except that restrictions are imposed) Temporarily restricted contribution

367

Example (cont.)

3. Specify their gift to be transferred to an organization of donor’s choice

o No variance power Company A: Liability to specified organizations Specified organization: Contributions receivable & temporarily

restricted contribution revenueo Variance power

Company A: Contribution revenue Specified organization: No entry

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194


• Fair Value Considerationso Difficulties in applying FMVo Method & rate options

369

Fair Value Considerations

• Difficulties in applying FMVo Lack of active markets for certain accountso Lack of available market data / observable inputs for

certain accountso Lack of practical alternatives to applying FMV to certain

accounts

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195

Fair Value ConsiderationsDiscount Rate Adjustment

(DRA) Method• Calculated as gross cash

flow * risk-adjusted discount rate

• Recommended rate for Indiv.: Unsecured borrowing rate

• Recommended rate for Corp/FND: Publicly traded debt rate

Expected Present Value (EPV) Method

• Calculated as expected (weighted) cash flow * risk-free rate

• Recommended rate for Indiv. & Corp/FND: US T-Note rate

371

Questions?


196

Resources

• FASB ASC 958-605 Revenue Recognition for Not-for-Profit entities

• AICPA’s Not-for-Profit Entities Audit & Accounting Guide, Chapter 5: Contributions Received & Agency Transactions, March 2012

• AICPA’s Financial Reporting Whitepaper Measurement of Fair Value of Certain Transactions of Not-for-Profit Entities, October 2011

373





374


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375

CPE Credit



376


198

Thank You



Health Care Track

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199

“Improving the health of our community through collaboration”

Carol Bruce-Fritz, CEO

• Spiraling health care costs – 17.9% of GDP • Americans spent more on health care per

capita than any other nation - $8,608• American life expectancy ranks 27th among 34

industrialized countries• Doctors graduate from medical school with an

average $476,000 in debt

Setting the Stage

380


200

• 62.1% of bankruptcies are due to medical expenses

• 25% of all seniors declare bankruptcy due to medical expenses

381

• By 2020, two thirds of the American public will get their health care from a government-sponsored program

• Fee-for-Service = Fee-for-Volume• The system must change to meet growing

needs

What’s Coming

382


201

Effect on Health Care System

• More demand on primary care physicians to accept Medicaid

• Increase in uncompensated care due to small employers opting out of the market

• Shifting payer mix to lower paying governmental programs - decreased levels of reimbursement

• More cost shifting, with resulting “Death Spiral” for commercial insurance premiums

383

The Premise:• Increases quality and affordability of

health insurance• Lowers the number of uninsured

Americans• Reduces health care costs for

individuals and the government

Patient Protection and Affordable Care Act

384


202

• Essential Health Benefits• Pre-Existing Conditions• Increased Medicaid Eligibility• Employer Mandate (delayed to 2015)• Small Business Subsidies

Access to Health Insurance

385

• Private Insurance Carriers• Minimum Required Benefits• Subsidies for Low Income Residents• Small Business Plans• Fully Operational January 2014

Health Insurance Exchange

386


203

• Pay for value, not volume• Higher quality at a lower cost• Proactive by design, not reactive by design• Marriage of payment reform and delivery

reform• Improved health, lower cost, better patient

experience

What Will the Future Bring?

387

Convergence of Key Reform Efforts

H. Miller

Delivery of Care

Payment Reform Better

Care & Lower Costs

388


204

Family Doctor

HMO/Managed Care

Accountable Care

The Evolution of American Health Care

389

• Improve care, share common care plans, and eliminate duplication

• Manage population health

Health Information Exchange

390


205

Our Community Today

Medicare

Medicaid

Child Health Plan

TriCare

Veterans Affairs

Uninsured

Insured

391

The Promise:• Reduce Medicaid spending and

improve health outcomes through Regional Collaborative Care Organizations

Colorado’s Innovation in Medicaid

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206

Regional Collaborative Care Organizations

• Implemented summer of 2011• State divided into 7 geographic regions• Total of 350,000 enrolled currently• Reduce ED use, reduce hospital

readmissions, reduce expensive imaging, increase well child visits

• Reduce overall cost of care

393

Keeping Health Care Local

• Doing what is right for each community• Make Medicaid more rational• Care coordination at the core• Patient-centered medical home as

foundation• Moving from volume-based to quality-

based payment systems394


207

“According to the American College of Physicians, primary care is critical in providing better health outcomes at lower costs. Access to primary care supports higher quality of life, increased productivity, and longevity. It also reduces costs as a result of fewer hospitalizations, improved prevention, and better chronic disease management.”

Medical Home Model

395

Colorado’s Innovation in Medicaid

396


208

QuestionsCarol Bruce-Fritz, CEO

Community Health [email protected]

719-632-5096

AICPA Health Care Expert Panel Update

Kimberly McKay, CPA, PartnerAICPA Health Care Expert Panel MemberOctober 9, 2013


209

AICPA Health Care Expert Panel Projects

• EHR white paper for Critical Access Hospitals (CAH)o Published in Journal of Accountancy of August 21, 2013o View A – payment for patient services - immediate

revenue recognition when meaningful use is met as no further requirements to keep EHR monies

o View B – acceleration of capital reimbursement – defer revenue & recognize as patient revenue over life of asset

o View C – payment to induce purchase of capital asset –grant to buy equipment – defer revenue & recognize as other income over life of asset

399

FASB/IASB Convergence Projects

• Financial Instruments/Fair Value Measurements• Revenue Recognition• Leases

400


210

FASB/IASB Revenue Recognition TIMELINE

2008 2009 2010 2011 2012 2013 2017

January 1stEffective Date

for public entities

NovemberRevised

Exposure Draft

December

Discussion Paper

Planned for 2013

Final Standard

September

Beginning of Revenue Project

June

Initial Exposure Draft

2002 2003

401

401

• Revised Exposure Draft Issued November 14, 2011 —Revenue Recognition (Topic 605) Revenue from Contracts with Customers

• FASB currently has 200+ rules very industry specific

• IASB has two main standards that are difficult to apply

• Effective for nonpublic entities for periods beginning after December 15, 2017

• Public entities for periods beginning after December 15, 2016

• Early adoption prohibited for public entities

Revenue Recognition Project Recap

402

402


211

Comment Letter Summary

403

Source: IFRS Foundation & FASB Staff Paper , Project Revenue Recognition, 21-25 May 2012

403

Source: IFRS Foundation & FASB Staff Paper , Project Revenue Recognition, 21-25 May 2012

404

Comment Letter Summary

404


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• Objectiveso Remove inconsistencies in existing revenue requirementso Provide a more robust revenue frameworko Improve comparability across industries & entitieso Provide more useful information through disclosure

requirementso Simplify preparation of financial statements by reducing

number of requirements which an entity must refer

Revenue Recognition Project Recap

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A single contract

may have multiple

performance obligations

Recognize revenue as performance obligations are satisfied 5

Proposed Recognition Model — Steps Involved

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Allocate price to performance obligations

Determine transaction price

Identify separate performance obligations in contract

Identify contract with customer 1

2

3

4

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AICPA Revenue Recognition Task Force

• Final Standard anticipated release by 4th quarter 2013 or 1st Quarter 2014

• AICPA is developing a Revenue Recognition Guideo 15 industries representedo Separate chapters for both Health Care & Not-for-profits

• Health Care RRTF – 19 members which includes providers

• Goal is to provide implementation guidance, including illustrative examples

• 14 health care issues have been identified thus far407

1. Self Pay revenue recognitiono Do self pay patients have a contract?o Price Concessions versus bad debto Collectability – still debating by FASB/IASBo Constraint test – significant revenue reversalo Reporting of bad debt expense

2. Third party settlements – use of probability weighted method & best estimate method

3. Contracts with multiple relationships – insurance company, patient, physician


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4. Prepaid health definition o Originally prepaid health plans were a part of definition of

a health care entity. Concern that definition will be eliminated.

o A plan where a provider is compensated in an advance by a sponsoring entity.

o Financial risk of delivering health care is transferred to provider of services.


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5. Prepaid health services scopeo Included in Insurance Exposure Draft or Revenue

Recognition guideo Insurance exposure draft issued June 27, 2013o New guidance would be determined by contract not by

entityScope

Current U.S. GAAP Proposed Model

Only insurance companies All entities issuing contracts that meet

definition of an insurance contract


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• Insurance contract – a contract in which one party accepts significant insurance risk (underwriting or timing risk) from another party

• Most long-term contracts would follow building block approacho Measure contracts by estimating net cash flows expected

to be received, discounted to present valueo Excess of cash inflows over outflows would be deferred &

amortized into income in future periodso Loss would be immediately recognized


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• Exclusionso Self-insured contractso Charitable gift annuitieso Retirement benefit obligations

• Fixed fee arrangements & capitation arrangements are examples where fixed-fee exclusion could apply


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6. Prepaid health acquisition costso Revenue Recognition standard proposes to capitalize

contract acquisition costs

7. Disclosureso ASU 2011-07 presentation of bad debts

8. Accountable Care Organizationso Joint white paper on ACO accounting by HFMA Principles

& Practices Board & AICPA Expert Panel


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CCRC issues9. Refundable Upon Re-Occupancy Contracts10.Monthly/periodic fees11.Time Value of Money

o Entity must adjust consideration received to reflect time value of money if contract has a financing component

o Divergence in how to apply time value of money Hypothetical pricing structure Imputed interest


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CCRC issues12.Obligation to provide future services

o Pattern of transfer over timeo Different interpretations could exist

Practical expedient within proposal could allow for a single performance obligation

Pattern of transfer could be determined to be IL, AL & SNF Re-occupancy contracts could lead to a different pattern of transfer How would time value of money impact a FSO calculation

13.Contract acquisitions costs14.Lease standard vs Revenue recognition standard


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Other Projects

• Financial Instruments• Leases• Health Care Audit Risk Alert• FASB’s Not-for-profit Advisory Committee

o NFP reporting modelo Public versus Non-public entity definition

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Questions?





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CPE Credit



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Thank You




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Wednesday, October 9, 2013 8:00 a.m. registration 8:30 a.m ... · 8:30 a.m. to 4:35 p.m. seminar...

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