The State of Charter Schools in New York

The State of Charter Schools in New York

Charter schools are an alternative to public schools. They are paid for with taxpayer dollars, but are privately run and not subject to the rules of the local school district. Advocates assert these schools fill gaps and provide opportunities that would otherwise be unavailable, especially for our most disadvantaged populations. Critics maintain they take money away from public school students’ education and benefit from it.

There are over 350 charter schools operating in New York State alone, with greater freedom to tailor learning to better meet the needs of their students. A closer look shows they also promote diversity, inclusion, and equity in education. Take New York City as an example. The NYS Department of Education reported that for the 2020-2021 school year, 50% of students in the charter school system identified as Black; 40% identified as Latinx; 79% were economically challenged; 9.3% lived in temporary housing; and 8% were multilingual. (Beer, Song. New York City charter schools continue to emerge as an inclusive new opportunity.

Still, differing opinions about charter schools are reflected in a number of conflicting actions being taken at local, state, and federal levels.

In New York City, advocates are rallying to have charters reissued for schools previously closed and to make charter school seats available to more children. Thanks to Bloomberg Philanthropies, charter schools could apply for a portion of the $50 million in grants made available for elementary school children to attend school this summer and make-up for educational gaps created during COVID. What’s more, the 2023 state budget increases per-pupil funding at New York City charter schools by 4.7% to promote innovation, the recruitment of high quality teachers, and give families and students options.

At the federal level, there are new rules governing the Charter Program, including decreased funding and more transparency requirements to obtain grants (Strauss, Valerie. What the Biden Administration’s new rules for charter schools say. In addition, as reported by EducationWeek, “Incoming charter schools will have to gather community input and prove they aren’t managed by a for-profit company to receive federal funding under the Biden administration’s finalized Charter School Program rules.”

No doubt, there is more to come. Regardless of which side you stand on the charter school debate, we want you to know RBT CPAs is here to help all schools – public, private, and charter – uphold their financial disclosure requirements, as well as accounting, tax, and audit accountabilities. Find out what we can do for your school or school district – give us a call today.

New York State Unemployment Interest Assessment Surcharge: What Businesses Need to Know

New York State Unemployment Interest Assessment Surcharge: What Businesses Need to Know

Starting this month, don’t be surprised if you receive a bill for an Interest Assessment Surcharge (IAS) from the government. It’s for interest New York State owes the federal government on loans it took out to maintain unemployment and pandemic benefits between March 2020 and September 2021 for COVID-related programs.

New York’s Unemployment Insurance Trust Fund loan amounted to $9.2 billion. The Department of Labor (DOL) has already paid back 11% or more than $1 billion and is working with state leaders to aggressively reduce the principal balance. State law requires employers who make unemployment insurance contributions to pay the IAS on the federal loan annually, until all interest has been paid off.

Notifications about the surcharge started going out to employers, with information about the IAS rate (.23%), the annual charge for 2022 (about $27.60 per employee), and how to pay. Payment must be made within 30 days of date of the notice (and by September 30, 2022 at the latest).

If you have an account on NYS Online, you can find your payment amount on NYS-45, line 6: “UI Previously underpaid with interest.” If payment is not made when e-filing your 2nd quarter 2022 NYS-45, make a check payable to NYS Unemployment Insurance. We recommend noting your NYS Unemployment Insurance Employer Number and “IAS” on the memo line. Then mail it to:

NYS Unemployment Insurance
P.O. Box 4301
Binghamton, NY 13902-4301

For more details and information, visit the New York State DOL website’s IAS page. If you have questions, call the NYS DOL’s Employer Hotline at 1-888-899-8810 (select One for Main Menu, and then One for Employer Accounts Adjustment Section of the Unemployment Insurance Division).

As always, you can reach out to your person at RBT CPAs, LLP/Sickler, Torchia, Allen & Churchill CPAs, P.C. if you need any additional assistance with this or other accounting, tax, and auditing matters.

Reporting for Certain DB & DC Benefit Plans Is Changing

Reporting for Certain DB & DC Benefit Plans Is Changing

If you sponsor a defined benefit plan and/or defined contribution multi-employer plan, take note! There are a few updates to Form 5500 effective for 2022 plan year reporting (Source:; “Latest Form 5500 Updates”).

Form 5500 is used to report about a plan’s qualification, financial condition, investments, and operation. All defined benefit and defined contribution plan sponsors are required to submit a Form 5500 to the IRS and Department of Labor each year.

If you sponsor your own defined benefit plan (referred to as a single-employer defined benefit plan), actuarial information required is changing. First, any plan insured by the Pension Benefit Guaranty Corporation (PBGC) that has at least 1,000 participants must provide 50 years of projected benefits for active, terminated vested and in-pay status – this must be reported in a separate attachment to line 26. Second, plans must report if you elected the 15-year shortfall amortization relief under the American Rescue Plan of 2021.

For multi-employer defined benefit plans, there are changes to Schedule MB and certain existing requirements.

  • Plans that attach reporting withdrawal liability amounts that are part of employer contributions must identify which amounts are periodic and which are lump sum payments.
  • For interest rates, plans must report the rate used for employer withdrawal liability assessment or attach a description of the interest rate assumption.
  • PBGC-covered plans with at least 500 participants will need to project benefits for a 50-year period for active, terminated vested and in-pay participants; they will also have to provide a 10-year projection of employer contributions and withdrawal liability payments.
  • PBGC-covered plans with at least 1,000 active participants must provide average accrued monthly benefits in an age/service scatter.
  • In Retirement Plan Information Schedule R, plans must include the 10 participating employers contributing the highest amounts.

For both single and multi-employer plans, reporting can be in the form of a spreadsheet for 50-year expected benefit payment projects and age/service scatter of active participants. The same applies to withdrawal liability amounts and projected employer contributions and withdrawal liability (Schedule MB only).

When it comes to defined contribution multi-employer plans (MEPs), including pooled employer plans (PEPs), there are a couple of changes to Form 5500 and Form 5500-SF instructions, including new plan characteristic codes to identify the type of DC MEP and clarification about who to name as plan sponsor and administrator.

The changes apply to filings for plan years starting January 1, 2022 or later. 2022 plan year filings are generally due seven months after the end of the plan year. So, the 2022 filing must occur by July 31, 2023 for plans that run on a calendar year. (You can file for a 2 ½ month extension with Form 5558.)

Additional changes are expected in the future. For now, if you have any questions or need assistance gathering information for your Form 5500 or Form 5500-SF, let us know. Click here to get in touch with RBT CPAs.

Note: Form 5500 changes are governed by final rules issued by the Internal Revenue Service, Employee Benefits Security Administration, and the Pension Benefit Guaranty Corporation. If there are any conflicts between the information in this article and the official final rules, the official final rules govern.

Four Ways to Address the Labor Shortage

Four Ways to Address the Labor Shortage

Isn’t it ironic? Just when prospects for record-setting spending in construction lay on the horizon thanks to the infrastructure law, you’re likely short on workers due to a labor shortage that is hitting the construction industry harder than most. What can you do?

While construction has been facing labor shortages for decades, the number of construction workers ages 25-54 decreased 8% in the last ten years alone. With an average retirement age of 61 and nearly 20% of current construction workers over age 55, the gap between the number of jobs and workers available is likely to widen.

According to a model created by the Associated Builders and Contractors, this year the construction industry will need to attract almost 650,000 new workers – that’s in addition to regular hiring demands.  Shortages are reported to cause project delays, quality issues, worker safety concerns, productivity decreases, and higher payrolls. Even though spending on construction is currently sluggish, the talent shortage remains the industry’s top challenge.

As reported by McKinsey & Company, construction companies must proactively address the labor challenge on three fronts: productivity; talent attraction and retention; and senior leadership engagement.


Focus on new ways to approach project planning and delivery, with an eye towards reducing labor required by rethinking project design and reinventing how work gets done.

  • Off-site and modular construction offers numerous benefits.
  • Digital technologies and analytics can help identify the best way to work and keep projects moving.
  • Adopting lean construction practices can shrink waste while driving sustainable improvements.

Talent Attraction and Retention

Every step in the talent attraction, acquisition, and retention process presents opportunities to improve.

  • Know where to find talent, with targeted job sites like;; and
  • Accelerate recruiting, interviewing, hiring, and onboarding by reducing timelines, cutting out extra steps, and automating with technology (the longer the process takes, the more likely you’ll be ghosted – a.k.a. blown off – especially by the younger generation).
  • Strengthen retention by finding out what your employees want beyond competitive pay – there’s growing interest in autonomy, flexibility, support, and upward mobility. Focus groups and surveys can help you gain insights into what matters most.
  • Build a talent pipeline with programs that support and promote skill development. Build relationships with high schools, trade schools, and colleges to create pathways to careers. Mentoring and apprenticeships are growing in popularity.
  • Consider non-traditional talent pools like veterans or formerly incarcerated individuals or returnships for people looking to return to the workforce after retiring. Diversify with more women and under-represented groups.

Senior Leadership Engagement

Protecting income and profits is a senior leader priority so getting them involved in supporting talent acquisition and retention shouldn’t be hard because of the direct link between the two.

  • Invite a senior leader to sponsor talent acquisition and retention as a strategic priority.
  • Work with leaders to establish Key Performance Indices (KPIs) to track and measure progress specifically related to talent and addressing labor costs across the value chaing.
  • Work with leaders to create a culture employees want to be part of and contribute to.
  • Invite leaders to celebrate and recognize talent.

What About the Fourth Way?

That’s only three ways – the title says four. We know, we’re accountants. We’re taking liberty to add the fourth category: technology. While it’s inherent in the first three, it bears having its own discussion, because beyond solutions that can help drive productivity, streamline recruiting and retention, and track KPIs, there’s big perception value around having state-of-the-art technology.

Up-and-coming workers don’t know a world without it. They understand how to use it better than anyone else to streamline communications, processes, intelligence gathering and sharing, project management, and more. If you want to show new workforce entrants that your company is a place where they can leverage higher skillsets and continually develop knowledge, the latest in technology is like food, water, and air to them – they can’t live without it.


While focusing on your staffing challenges, why not partner with RBT CPAs to handle all of your accounting and tax challenges? We’re the largest CPA firm in the Hudson Valley and recognized as a Great Place to Work. You can trust that we’ll do everything right the first time, so you can focus on other priorities – like labor. Find out what we can do for you — give us a call.

OSHA Updates: What’s New & What’s Coming

OSHA Updates: What’s New & What’s Coming

Even though summer has started, OSHA never takes a vacation. Here are a few highlights of Federal OSHA activities you may want to keep on your radar.

OSHA’s Heat Illness National Emphasis Program (NEP)

Federal OSHA’s Heat Illness NEP is leading the way to prevent heat-related illnesses and injuries at work.  On days when the heat index is 80 degrees F or higher, Federal OSHA intends to do field inspections; ask employers about heat hazard prevention programs; and assess the potential for heat-related illnesses and injuries. It will prioritize inspections for complaints and employer-reported hospitalization for heat hazards, while also conducting random inspections of employers in 70 high-risk industries on days when a heat warning or advisory is issued.

To protect your employees from heat-related dangers, educate them about heat-related illnesses; provide rest breaks, shade, and cold drinking water; and develop a heat illness prevention plan. Indoors, make sure cooling fans, air conditioning, and adequate ventilation is available. If you’re interested in doing more or learning more, here are some OSHA resources to help you get started.

OSHA starts process to update rules for occupational lead exposure.

According to recent research, adverse health effects from lead exposure can occur at lower blood levels than recognized in OSHA’s lead standards. Recognizing this, OSHA published an Advance Notice of Proposed Rulemaking to revise the standards and is seeking public input to help prevent harmful health effects in workers exposed to lead. The public is invited to comment on blood lead level triggers for medical removal protection; medical surveillance provisions; exposure limits; and provisions for personal protective equipment, housekeeping, hygiene, and training. Submit comments online by August 29, 2022 (refer to Docket No. OSHA-2018-0004). 

Proposed recordkeeping rule has state support.

OSHA’s proposed reporting rule for injury and illness has the support of 17 state Attorneys General. The proposed rule would require certain high-hazard industry establishments to electronically submit more information from Log of Work-Related Injuries and Illnesses plus Injury and Illness Incident Reports annually and to include company name on submissions. The Attorneys General believe this will help employees and consumers take workplace safety into consideration when deciding where to work and what to buy, while empowering states to target enforcement. They are also encouraging that the proposed rule cover all workers (not just employees). If you have some thoughts about this matter, now’s your chance to be heard. Submit comments via the Federal e-Rulemaking Portal.

While you’re working hard to keep your employees, customers, and the public safe and healthy, you can depend on RBT CPAs to ensure your audits, financial statements, taxes, and more are healthy and beyond scrutiny. What’s more, our Human Resources Services division is available to assist you with all employee-related matters, including OSHA. To find out more about what we can do for you, give us a call today.

Don’t Get FOILed by FOIL Requests: Be Prepared to Move Fast

Don’t Get FOILed by FOIL Requests: Be Prepared to Move Fast

Updates to New York’s Freedom of Information Law (FOIL) on March 22 (and retroactive to December 29, 2021) are designed to make it easier to access public records by speeding up responses to requests for information and providing more detailed justifications for denials. Are your municipal agencies and public authorities ready to respond?

New York state leadership is taking responsibility for transparency seriously, as seen by not one but two FOIL amendments within the last year – one at the end of 2021 and another in March of 2022. FOIL is intended to provide the public – whether it’s a taxpayer, a reporter, a defense attorney, or someone else – with access to public records from government agencies.

As a result of amendments, ABC 50 Now (via reported FOIL requests now go directly to the agency managing the information (rather than starting with an Executive Chamber review) and each agency must post commonly requested information online to eliminate the need for a FOIL request.

Section 86 defines agency as “any state or municipal department, board, bureau, division, commission, committee, public authority, public corporation, council, office or other governmental entity performing a governmental or proprietary function for the state or any one or more municipalities thereof, except the judiciary or the state legislature.”

FOIL is overseen by The Committee on Open Government. Its Model Rules for Agencies, Section 5 Requests for public access to records details how and when an agency should respond to a FOIL request. Some noteworthy items:

  • A request can be verbal if records are readily available on the internet.
  • Within five days of receipt of a request, a response must be provided. This includes:
    – Asking for more details;
    – Granting or denying the request;
    – Acknowledging receipt of the request and providing an approximate date for granting or denying the request (which must be within 20 business days from the acknowledgement unless a written explanation is provided about why there is a delay and when the request will be fulfilled); or
    – If after acknowledging the request, disclosure can’t be met by the date noted, a written explanation for the delay and the date the request will be granted must be provided.
  • Several factors are used to determine a reasonable time to fulfill a request, including how big the request is, how easy it is to get the records, request complexity, the number of requests received by an agency, and more.
  • Failing to comply with time limits is construed to be a denial that can be appealed. This includes:
    – Failing to provide access to requested records;
    – Failing to acknowledge in writing receipt of request or denial within five business days;
    – Failing to provide an approximate date for fulfilling the request in whole or in part;
    – Approximating a date for fulfilling the request that is unreasonable;
    – Failing to respond within a reasonable time after the approximate date provided or within 20 days of acknowledging receipt of a request;
    – Granting a request within 20 business days of acknowledging receipt of the request, but failing to do so and failing to explain why in writing and when the request will be granted in whole or in part;
    – Failing to grant a request and provide a written explanation why and when it will be granted in whole or in part; or
    – Responding to a request stating more than 20 business days is needed and stating when the request will be fulfilled but that date is unreasonable based on the request.

Other changes related to the updated law include the elimination of a judicial hearing for a public records request as long as an investigating agency confirms release of information could hurt investigations or lives (Bliss, 2022, What’s more, failing to fulfill a request and having a viable reason for doing so could result in having to pay a requestor’s attorney’s fees should the matter be litigated.

While FOIL has been around since the 1970s, renewed focus on transparency and trust in government as a New York state priority likely means the recent law changes are a beginning rather than an end, and more is likely to come in terms of enforcement and precedence. New York’s Committee on Open Government website has more information to help you learn about and navigate FOIL (including training materials). It’s worth a visit every once and a while to ensure compliance.

While this article reviews key highlights, we need to say and can’t emphasize enough that this is a legal matter. If your agency is subject to FOIL, you should seek legal counsel to ensure compliance. In the meantime, it is important to recognize that a broad spectrum of subjects – including finance-related ones – are subject to FOIL. That makes using a respected, professional accountant with a track record for excellence even more important – why not give RBT CPAs a call to see what we can do for you?

NY Homeowner Tax Rebate Checks Are in the Mail

NY Homeowner Tax Rebate Checks Are in the Mail

Good news! New York State is giving residents who are homeowners a little respite from all of the talk about inflation, stock market drops, interest rates, and recessions. Homeowner tax rebate checks are in the mail and should arrive in mailboxes across the state this month!

Residents who earn less than $250,000 and are eligible for the STAR (school property tax rebate program) will receive a check. The value will be based on income, where the house is located, and the type of STAR rebate you are eligible for – basic or enhanced. Almost 3 million New York residents will receive checks.

You don’t have to do anything – the state is determining eligibility and payment amounts. If eligible, you’ll automatically receive payment this month (early July, at the latest).

For complete details, visit the New York State Department of Taxation and Finance website. There are answers to frequently asked questions and a “Check Lookup” tool to help you determine how much you may receive.

As always, if you have any questions about tax implications, RBT CPAs is here to help. Give us a call today.

More Tech Can Mean More Threats: Keeping Schools Secure

More Tech Can Mean More Threats: Keeping Schools Secure

The pandemic shed light on what many Americans already knew: internet access is a necessity for everyday life. The Digital Divide was perhaps the most pronounced within the country’s outdated education infrastructure. Digital learning proved particularly challenging for rural and lower-income neighborhoods as well as in communities of color.

To get students everywhere up to speed with internet access at the height of the pandemic, communities scrambled to allocate funds to pay for laptops, tablets, modems, Wi-Fi hotspots, routers, and other broadband devices. To date, New York State has been granted billions in general aid for elementary and secondary education administered by the State Education Department to support pandemic preparedness and response efforts, including maintaining operations, staff training and educational technology, and addressing learning loss related to the pandemic. Of the $14 billion in anticipated resources, $2 billion was spent from 2021-22, and the balance is expected to be spent in subsequent years through 2025.

Now as we head into the upcoming academic year, what happens with all the new technology school systems have invested in over the past few years?

Technology adopted out of necessity during statewide shutdowns is largely here to stay. According to two years’ worth of EdWeek Research Center Data, video conferencing tools remain in high demand even as the nation’s schools are largely back to full-time in-person instruction. Applications include parent-teacher conferences, guest-speaker programs, school board meetings, teacher professional development, telemedicine appointments, online tutoring programs, and full-time remote learning options that districts have created in record numbers. This becomes particularly important with a projected 20 percent of K-12 central-office employees expected to work remotely or both remotely and in person. Educators and administrators are also reportedly continuing to invest in social-emotional learning tools and digital math tools.

Of course, with new technology comes additional heightened security risks. In its annual State of K–12 Cybersecurity Year in Review report released early this year, national nonprofit K–12 Security Information Exchange revealed that ransomware has become the most common type of publicly disclosed cyber incident at U.S. schools. According to the Federal Bureau of Investigation (FBI) and the Department of Defense’s Defense Technical Information Center, some of the most common types of digital threats include:

  • Data Breaches: Leaks of sensitive, protected, or confidential data from a secure to an insecure environment that are then copied, transmitted, viewed, stolen, or used in an unauthorized manner.
  • Denial of Service: When a server is deliberately overloaded with requests such that the Website shuts down.
  • Spoofing/Phishing: Both spoofing and phishing involve the use of fake electronic documents.
  • Malware/Scareware: Malware is illicit software that damages or disables computers or computer systems. Like malware is scareware, which is malware that uses social engineering to cause fear or anxiety so that a user buys unwanted and unneeded software, such as antivirus software
  • Ransomware: A form of malware in which perpetrators encrypt users’ files, then demand the payment of a ransom—typically in virtual currency such as Bitcoin—for the users to regain access to their data. Ransomware can also include an element of extortion, in which the perpetrator threatens to publish data or images if the victim does not pay.

The U.S. Department of Education’s Office of Safe and Supportive Schools administered the REMS TA Center to help issue guidance to help schools stay protected from cyber threats that are inevitable with the integration of modern and emerging technologies. There are a lot of useful resources here but we will summarize some of the most effective ways to keep your school protected.

Preparing for Threats

Schools and school districts can take a variety of actions to prevent, protect from, mitigate the effects of, respond to, and recover from cyber threats. These can be conducted before, during, and after an incident. To protect networks and systems as part of an overall preparedness program, schools and school districts can do the following:

Develop and promote policies: Before students, teachers, or staff access the school’s or school district’s networks and systems, they should be aware of any policies, rules, or laws regarding their use. IT staff should also be aware of local, state, and Federal regulations regarding information security and privacy.

Proper Data Storage: Store data securely to ensure that the whole school community’s data are kept private and to comply with the Family Educational Rights and Privacy Act (FERPA). Ease of access to and use of cloud-based software makes this issue particularly important, as this technology allows teachers and staff members to easily store and share students’ personal information.

Have a Back-Up Plan: Schools and school districts also need to regularly back up their data in case of accidental or deliberate corruption or destruction of data. Create firewalls and an approved list of individuals who have access to the school’s or school district’s networks and systems. The list should be regularly reviewed to ensure that only those individuals who have permission to access the systems can do so.

With more emerging tech being integrated into schools every year, it’s more important than ever before to monitor networks continually to assess the risk from cyber threats. As always, your partners at RBT CPAs are available to help you chart your financial course so you can maximize funding opportunities and navigate the financial planning that comes with newly adopted technology. Find out how – contact us today.

New Project & Expenditure (P&E) Report Requirements for Recovery Funds Start July 31

New Project & Expenditure (P&E) Report Requirements for Recovery Funds Start July 31

With the second quarter ending, you may want to get acquainted with updated guidance the U.S. Treasury provided for American Rescue Plan Act (ARPA) State and Local Fiscal Recovery Funds (SLFRF) Project and Expenditure (P&E) Reports. The next one is due July 31 and there are several new requirements.

On June 17th, updates were issued by the U.S. Treasury for State and Local Fiscal Recovery Funds Compliance and Reporting Guidance.  Quarterly P&E reports are due from States and U.S. territories; tribal governments allocated more than $30 million in SLFRF funding; metropolitan cities and counties with more than 250,000 residents; metropolitan cities and counties with less than 250,000 residents allocated more than $10 million in SLFRF funds; and Non-Entitlement Units (NEUs) allocated more than $10 million in SLFRF funding.

The next report is due July 31 for the quarter ending June 30. If your municipality is required to submit a P&E, get acquainted with the updated reporting guidelines. Changes for quarterly and annual reports, as reported by the National Association of Counties, include:

  • Reveal the type of capital expenditure per enumerated uses (found on pages 27 and 28 of the S. Treasury Compliance and Reporting Guidance, Section 2, Capital Expenditures).
  • Provide written justification for capital expenditures in projects expected to total $10 million or more for enumerated uses or $1 million or more for an “other” use. (Exception: This does not apply to Tribal governments.)
  • Provide labor reporting (outlined on pages 30 and 31 of the S. Treasury Compliance and Reporting Guidance) for projects with total expected capital expenditures of over $10 million.
  • Provide additional information for Broadband projects (outlined on pages 32 and 33 of the S. Treasury Compliance and Reporting Guidance).
  • Provide additional data for projects in expenditure categories (outlined on page 33 of the S. Treasury Compliance and Reporting Guidance). This applies to States, U.S. territories, and metropolitan cities and counties with more than 250,000 residents.
  • New Recovery Plan Template required to be published annually on the recipient’s website and provided to.

For additional resources, including guides and webinars, visit the U.S. Department of the Treasury website.

On a different note, as reported by the New York Government Finance Officer’s Association (NYGFOA), – the Federal System of Award Management – is having some issues. If you’re experiencing delays or having issues completing reauthorization or registration, in order to get your Unique Entity Identifier (UEI) needed to apply for Federal funding opportunities, there are a number of resources that can help: UEI FAQ document published by the General Services Administration (GSA); Help webpage; and the GSA Federal Service Help Desk.

You probably have a lot more to do navigating all of these new requirements and processes. RBT CPAs can help. We’re available to partner with you on all of audit, tax, and accounting needs, so you have peace of mind these responsibilities are covered by one of the largest firms in the Hudson Valley, a top 100 firm in New York and a top 250 firm nationwide. That way, you’re freed up to focus on new and growing responsibilities to help plan for, secure, and track valuable funds for your community’s future.

Year-End Is Too Late to Get Started on ASC 842 – The Time to Act Is Now

Year-End Is Too Late to Get Started on ASC 842 – The Time to Act Is Now

The new lease accounting standard – ACS 842 – took effect for private and non-profit organizations for fiscal years starting January 1, 2022 (or 2023 for non-calendar year-end entities). While that means at the earliest your organization must account for all leases on your financial statements by the end of this year, there’s a lot of work to be done to meet the new standards. If you haven’t started, now is the time. If you wait until year-end, it will probably be too late.

First, a number of departments/functions may be affected by the change. This includes accounting, tax, real estate, equipment leasing, procurement, treasury, information technology, and legal. Consider creating a task force with representation from all impacted areas to put together a project timeline and plan.

Second, there are several activities you’ll need to complete, from policy development to data management and extraction to technology design, workflow, implementation, and more.  Perhaps one of the biggest considerations is whether you should be adopting a technology solution to automate identifying lease language, monitoring, bookkeeping and more, which is something we strongly recommend.

So, if you haven’t already started, you need to catch up now.  Waiting for year-end is not an option. If you need a refresher or to get reacquainted with ACS 842, following is an overview (originally published by RBT CPAs in August 2021 and updated for healthcare providers). As always, the RBT CPA professionals are available to answer any questions you may have and to support your tax and accounting needs. Give us a call.

Did you know that, in a matter of months, your leases will be accounted for differently due to the new lease accounting standard? While previously only capital leases were recorded on the balance sheet, effective for fiscal years beginning after December 15, 2021, all leases will be on the balance sheet. That translates to January 1, 2022 for calendar year entities, and fiscal 2023 for non-calendar year end entities.

What does this mean moving forward? It means all healthcare organizations – public, private, and non-profit — need to make sure they have a thorough handle on all of their leases that are for longer than 12 months, including those related to real estate and operations. Especially if your organization has grown in recent years by opening new locations outside of its original footprint – which likely required leasing more equipment, the number of leases you may need to review and track could have grown exponentially. Now is the time to review and evaluate contracts.

The new definition of a lease under ASC 842: “a contract, or part of a contract, that conveys the right to control the use of identified property, plant, or equipment (an identified asset) for a period of time in exchange for consideration.” This slight change means that all contracts should be evaluated to determine if they fall within the scope of this new criteria. Contracts that were previously considered leases may no longer meet the lease criteria and vice versa. Be mindful of lease language when you are reviewing your contracts.

There will still be two categories of leases. The leases formerly known as capital will now be called finance leases. The classification criteria remain essentially the same as under the existing standard; the only major difference is the elimination of the bright-line percentages.  All leases that do not meet one of those criteria will be classified as operating.

If a lease contract includes a non-lease element, that non-lease component must be accounted for as a separate contract distinct from the lease itself. For example, the cost of an equipment lease that includes a maintenance contract must be allocated between the two elements and accounted for separately.

Lease liabilities for operating and finance leases will all be accounted for in the liability section the same way capital leases currently are: split between current and long-term. The offset to the liability will be a right of use (ROU) asset. There will be two lines: a ROU asset – operating lease line, and a ROU asset – finance lease line. These ROU assets are all long-term.

The new standard was designed so that there should be minimal impact to your income statement. Operating leases will continue to be recognized as a straight-line expense over the life of the lease. Finance leases will continue to be frontend loaded because the interest is higher at the beginning of the lease than at the end.

The most significant impact will be on the company’s current ratio. Because the ROU assets are all long-term, but the lease liability is split between current and long-term, the current ratio will be negatively impacted. This change will be particularly important for entities with debt covenants that reference the current ratio. If you have significant operating leases that may create an issue with your debt covenants, connect with your bankers now.

Ultimately, it’s important that both the borrower and the lender understand that this is a reporting change, not a change in a company’s financial situation. Having this conversation early on instead of waiting until the last minute will avoid confusion, and a lot of headaches.