With many organizations in the process of expending and reporting on their COVID-19 funding, we would like to provide some important updates:
Accounting Methods for Paycheck Protection Program (PPP) Loans:
- Accounting for PPP Loans as Debt: If you are accounting for PPP loans as debt, you should follow the Financial Accounting Standards Board Statement (FASB) Debt Topic 470 and recognize any amount forgiven as a gain on extinguishment of the debt. Forgiveness is defined as the legal release for derecognition. There will likely be a mismatch of expenses and forgiveness between reporting periods, but matching principle is not mandatory in U.S. Generally Accepted Accounting Principles (GAAP). There are no specific disclosure requirements that would differ from any other debt instrument (disclosure of general information including the amount borrowed, interest rate, repayment terms, maturity and outstanding at year-end).
- Accounting for PPP Loans as Government Grants: Should you choose to report your PPP loan as a government grant, you should follow FASB 958-605. Note you will not be permitted to apply a probability assessment when determining whether a barrier has been met, and barriers must be substantially met or explicitly waived. There are no specific disclosure requirements that would differ from any other debt instrument or those required under FASB 958-605 (disclosure of general information including the amount borrowed, interest rate, repayment terms, maturity, outstanding at year-end, and intention of forgiveness).
- PPP on Form 990: As PPP loans are not taxable, you will record the contribution in the year that loan has been forgiven.
Provider Relief Fund and American Rescue Plan Rural Distribution
- CARES Act Funding for Medicaid and CHIP Providers: Note that CARES Act funding for Medicaid and CHIP providers may be used for the following purposes: Supplies (masks, gowns, and cleaning agents); Equipment (HVAC systems, ventilators, etc.); Information Technology (Telehealth software and hardware, improved internet for remote working or new electronic medical records modules to support patient care); Facilities (temporary expansion and retrofits for improved infection control); Mortgage rent (rent for a clinical setting or medical office building); Insurance (property, malpractice, or other business insurance); Personnel (direct employee expenses for staff such as nurses, contractor payroll administrators, or support personnel); Fringe benefits (employee health insurance, childcare assistance, transportation, temporary housing, overtime pay, hiring bonuses, hazard pay, or recruitment and retention payments to expand or maintain patient/clinic care capacity); Utilities/operations (HVAC services, environmental services for cleaning, or food, and nutrition services)
- Calculation of lost revenue relates to patient care methods and there are three options: calculate the difference between actual patient care revenues using 2019 as the base calculated quarterly; calculate the difference between the budgeted and actual patient care revenues using 2020 and 2021 budgeted versus actual revenue calculated quarterly; or any reasonable method calculated on a quarterly basis.
- To avoid double dipping, please be careful to avoid that payroll costs paid with PPP loans or any other federal CARES Act programs must not be also charged to current federal awards, as it would result in the federal government paying for the same expenditures twice.
- For the presentation of this funding on your non-profit’s financial statements, you will need to follow FASB 958-605 as this is a conditional grant, with the right of return, and the barrier is allowable expenses or lost revenue. Note that outstanding liability is a refundable advance.
- When reporting Provider Relief Funds, you will need to be aware of the following upcoming deadlines. (Note that the reporting deadlines for reporting periods 1 and 2 have now passed). The following are the current/upcoming reporting periods: June 30, 2022-through June 29, 2023 fiscal year ends: July 1, 2022-September 30, 2022; December 31, 2022-June 29, 2023 fiscal year ends: January 1, 2023-March 31, 2023; June 30, 2023 fiscal year ends: July 1, 2023-September 30, 2023
Note that if you submitted a request to report late, you will get a notification from HRSA of approval/denial. Failure to report will result in non-compliance. For additional information, refer to the Health Resources and Services Administration website.
Rate Increases for Office of Developmental Programs (ODP): You should be aware of the following effective dates for the final rates:
-July 1, 2021: Fee schedule rates and department established fees for the majority of services funded through the adult autism waiver
-January 1, 2022: Fee schedule rates for the majority of services funded through the Consolidated, Community Living, and P/FDS Waivers and Base-Funded Program
-March 1, 2022: Fee schedule rates for agency with Choice Financial Management services.
The temporary increases to the Fee Schedule Rates for direct community participation support and transportation trips will remain in effect until six months after the expiration of the federal COVID-19 public health emergency.
ARPA – Recruitment, Retention and COVID-19 Related Staff Expenses: For funding received through the American Rescue Plan Act (ARPA) utilized from April 1, 2021 through March 31, 2022, ODP has stated payments for this initiative are considered vendor payments. The purpose of these payments is to cover COVID-19 related expenses for high staff vacancy and turnover rates. These expenses include hazard pay, recruitment efforts, sign-on bonuses, retention bonuses or other incentives. Any unused monies must be repaid.
ARPA – Staff Training, Credentialing, and Business Associates Programs for Employment: This type of funding is to be used for training activities as specified in ODP Announcement 22-031 as updated. These funds must be expended by October 31, 2023 and per FAQ’s dated April 4th, 2022, Subsection V#3 payments for this initiative will be considered subrecipient, federal, and subject to a Single Audit. Funding for this program is issued on a reimbursement basis and may be submitted for up to two progress payments.
ARPA – One Time Payment to Provide Funding for Technology that Enhances the Provision of Home and Community Based Services: Funding allocated through this program is used to enhance, expend or strengthen HCBS (Home and Community Based Services) beyond what is available under the Medicaid program. Refer to the list of allowable expenses in ODP Announcement 22-043. These funds are issued on a reimbursement basis, and recipient organizations can request a progress payment. Funds must be spent by October 31, 2023.
If you have any questions regarding these COVID-19 funding programs and their impact on your organization and reporting requirements, please contact a member of your audit team.