Presented by

David Fields, CPA, Senior Manager

October 9, 2013

1 // experience perspective

Pennsylvania Association of Community Health CentersPIN 2013-01 – Health Center Budgeting and Accounting Requirements

PIN 2013 - 01 Purpose:

Clarification & documentation? Who?

All CHCs including look-a-likes What?

Budgeting Documentation & accounting records Accounting for CHC scope of project funding Other lines of business outside of scope

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PIN 2013 - 01 Why?

GAO & OIG pressure to improve program integrity measures Warnings?

Your organization Who knows Who is responsible

Ignorance of law is no excuse

NACHC & BKD responses To do…

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HEADLINE ISSUE – COMPLIANCE OIG audits of CHCs New era of accountability – phrase spoken with

ARRA bill Seeing fruits of change – OIG est. 57 reports for 2013 Accountability, not new rules

HRSA scrutinized by OIG

OIG audits of CHCs

Significant questioned costs

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THE RULES Federal laws & regulations

Section 330 of the Public Health Services Act (42 U.S.C. 254b) Program specific: CHC (42 CFR 51c) & Migrant (42 CFR 56) Grant administrative regulations (OMB Circular A-110) :

45 CFR 74 ~ Non-profits 45 CFR 92 ~ State, Local, Tribal Government

Cost principles: 2 CFR part 230 (OMB Circular A-122) Audit requirements: OMB Circular A-133

THE RULES Awarding agency guidance

HHS Grants Policy Statement BPHC Policy Information Notices (“PINs”) & Program

Assistance Letters (“PALs”) Notice of grant award (“NGA”) terms & conditions

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FEDERAL REGULATION MAP

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PIN 2013-01 A GAME CHANGER Expectations gap

How CHCs are doing things? How the Bureau & OIG want CHCs to do things?

Documentation Segregate grant expenditures from non-grant funds Clarification needed: definition of non-grant funds

Program income Other income

8 // experience perspective

BUDGETING REQUIREMENTS

Section IV addresses budgeting requirements and requires that “appropriate HRSA approvals are requested and received” Is this just for 330 grants funds or for all funds? How will this approval be documented – a separate form?

EHB? Budget revisions required for all funds or just 330 grant

funds? Timing of approvals a concern

9 // experience perspective

GRANT FUNDS VS. NON-GRANT FUNDS

All Section 330 grant expenditures have to be documented in your accounting records

There are different requirements for grant expenditures vs. non-grant expenditures as OMB Circulars, CFRs, etc. generally do not apply to non-grant expenditures

This PIN adds new requirements for documentation of expenditures of non-grant funds

10 // experience perspective

GRANT FUNDS VS. NON-GRANT FUNDS

Some CHCs feel like: We spent the money Trust us its all in there If asked we can “come up with the expenses” No one ever asked before

The reality is: What do the rules say? Someone is asking

11 // experience perspective

NON-GRANT EXPENDITURES New PIN could conflict with other grant rules or donor

intentions HRSA approval for such activity?

PIN requires that every expenditure be matched with a corresponding revenue stream This is required to be documented

All expenditures require a price or cost analysis to be performed What does that mean?

12 // experience perspective

NON-GRANT EXPENDITURES Is the expectation that the new PIN requirements on

non-grant fund expenditures be tested by the Health Center’s external auditors and if so, are violations questioned costs?

PIN requires all non-grant funds be fully covered by a revenue stream – no more deficits?

13 // experience perspective

ACCEPTABLE NON-GRANT FUND EXPENDITURES Repair or minor renovations of physical plant not to exceed

$100,000

Building financial reserves up to 3 months

Interest payments on cash shortfalls

Salary cost over HRSA cap

Fundraising

Meals to board or employees in special situations

Incentives valued at $20 or less

Special one-time costs

14 // experience perspective

OTHER LINES OF BUSINESS

Health centers are prohibited by the PIN to transfer benefits received from being a Section 330 grantee (e.g. program income) to out of scope activities

All out of scope activities must be self sufficient and have adequate revenue streams to cover expenditures, including a reasonable allocation of overhead, if applicable

15 // experience perspective

PUBLIC COMMENTS - BKD Financial perspective Outlines significant administrative & grants

management changes Raises significant questions about implementation If implemented as published will have significant and

far reaching impact

16 // experience perspective

PUBLIC COMMENTS - NACHC Provides legislative context for PIN issues Strongly worded objections:

1. “It is contrary to law”

2. “It changes agency practice without explanation”

3. “It is a legislative rule that should be issue by regulation”

Challenges elements of the public & non-public parts of the PIN

17 // experience perspective

CONTEXT OF PUBLIC COMMENTS Not a license to ignore PIN Recognize the environment of more program

integrity measures not less Many of the concepts are not being debated The level of documentation may be argued, but more

documentation will be required

18 // experience perspective

ITEMS NOT BEING DEBATED That A-110 & A-122 rules that apply to federal grant

dollars including time & effort reporting Must have plan & budget that meets requirements of

PHS Act section 330(k)(3)(I)(i), even if disagreement about having two budgets

That program integrity measures have been increased “New Era of Accountability”

19 // experience perspective

ACTION PLAN

Know the rules…really know the rules Who in your Organization is responsible for which rules? Where & to whom do you go for answers?

Document your compliance What are your policies? Where is you documentation maintained? How well is your activity documented?

20 // experience perspective

ACTION PLAN

Stay informed & connected Be aware of NACHC & PACHC updates Look for final PIN

Take action Prioritize your weaknesses & fix now Despite dispute over some elements of PIN, address items

not up for debate

21 // experience perspective

ACTION PLAN

Track CHC grant funds closely Even if two budgets is challenged, identifying &

documenting grant expenditures is necessary Develop a game plan to ensure time and effort

reporting is in compliance Begin to consider the recording requirements of the

new PIN and develop a game plan to account for non-grant funds

22 // experience perspective

THANK YOU

FOR MORE INFORMATION // For a complete list of our offices and subsidiaries, visit bkd.com or contact:

Please feel free to contact

David Fields dfields@bkd.com

417.865.8701

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