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AICPA issuance of “Health Care Industry COVID-19 Issues and FAQs”

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In early August, the AICPA issued a resources document discussing the impact of various COVID-19 considerations on health care auditors and financial statement preparers.  The document covers the following topics:

  1. PPP loans
  2. Taxability of forgiveness income and expenses
  3. CPA services to a client
  4. FEMA funding
  5. 2020 payroll tax deferral under the CARES Act
  6. Employee Retention Credit

Each of these sections provides a summary of key accounting and/or tax considerations for the topic in question and can serve as a quick primer for a new reader or a good reference summary of the topics for auditors and clients.

I would like to draw your attention to two items covered in this resources document that have received less publicity and may be of particular interest to senior living/long-term care providers.

Single Audit Requirements

These requirements dictate the need for a Federal Single Audit to be performed of a grant recipient’s annual financial statements if expenditures of federal grant funds exceed $750,000 during the period.  The Small Business Administration (SBA) has confirmed that PPP loan funding will not be subject to Federal Single Audit requirements.  However, the U.S. Department of Health and Human Services (HHS) has indicated that amounts expended under the Provider Relief Fund (PRF) program will be subject to single audit requirements.  The additional variable to be determined here is whether CARES Act funds granted to providers via individual states will also be subject to single audit requirements.  Our understanding is that the AICPA Government Audit Quality Center has inquired with the federal government for clarification on whether single audit regulations will apply to this category of funding.  We will share an update once that clarification occurs.

Please note that this Federal Single Audit requirement applies to not only non-profit providers but also to for-profit providers as well.  Many of these for-profit providers have not historically undergone a single audit and, in some cases, may not currently receive a financial statement audit on an annual basis.  As such, it will be critical for companies to forecast how much they expect to spend against the PRF grants received (as well as the state programs funded by federal dollars) during their current fiscal year and see if their expenditures will result in the requirement of a Federal Single Audit of their 2020 financial statements.

Unfortunately, the compliance supplement indicating the specific audit tests required for the CARES Act grants has not yet been published.  It is currently expected to be issued this autumn.  We will provide follow-up guidance once the compliance supplement comes out.

FEMA Funding

The AICPA resources document also includes some relevant details on the FEMA application process available to non-profit providers.  Consistent with the various CARES Act programs, FEMA will not provide funding assistance for expenses covered by another source (that is, no “double dipping”).  For non-profit providers with significant COVID-19 costs that exceed other available funding sources, however, FEMA may be a valuable source of additional funds.

 

Disclaimer:  The contents of this resource are for general informational purposes only. While every effort has been made to ensure its accuracy, the information is provided “as is” and no representations are made that the content is error-free. We have no obligation to update any content, comments or other information for retroactive or prospective interpretations or guidance provided by regulators, financial institutions or others. The information is not intended to constitute legal advice or replace the advice of a qualified professional. There are areas of the CARES Act where additional clarification from the Treasury Department and the SBA is needed. Your judgment and interpretation of the act may be needed. Users should consult with their legal counsel and representatives of the lending institution regarding the proper completion of their application and supporting documentation.

 

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