Home · Online Publications · Journal of Accountancy · Online Issues · October 1999 · News

NEWSREPORT

New Opportunities for Practitioners

In response to a surge in Medicare, Medicaid and private health care insurance fraud and abuse, a special AICPA task force issued SOP 99-1—guidance for CPAs whose clients have settled claims with the Department of Health and Human Services (HHS). (The text of the SOP, without appendices, appeared in the JofA, July99, pages 102106.)

According to HHS officials, such fraud and abuse allegations are likely to continue to grow. To resolve the allegations, a health care provider usually enters into a corporate integrity agreement (CIA) with the HHS. The CIA specifies what the provider is required to do to set up a corporatewide integrity and compliance program. It also requires that the provider's management annually report on and have an assessment made of its compliance with the CIA. The assessment, which a CPA can perform, includes an agreed-upon procedures report and a billing analysis.

"The HHS inspector general was concerned because the reports have been inconsistent—too short and incomplete or too long and lost in detail," said William Titera, chairman of the AICPA health care task force.

"We need assurance that providers are adhering to the CIA requirements," said Dennis J. Duquette, the HHS deputy inspector general for management and policy. "To achieve that assurance, we needed a common approach."

Duquette told the JofA that SOP 99-1, intended to assist providers in strengthening their internal controls and identifying current and emerging problems, is "a firewall against fraud and abuse."

SOP 99-1, Guidance to Practitioners in Conducting and Reporting on an Agreed-Upon Procedures Engagement to Assist Management in Evaluating the Effectiveness of Its Corporate Compliance Program (product no. 014921JA), is available from the AICPA order department for $10.50 ($13 for nonmembers) at 888-777-7077.

PwC Relaxes Position on Employee Investments

Faced with a mutiny in its ranks, PricewaterhouseCoopers LLP backed down on a policy aimed at limiting employee investments in companies for which the firm performs audit engagements. Within a month of directing its employees to dump all of their investments in the affected companies, the firm softened its stance.

PricewaterhouseCoopers had ordered all employees above the rank of manager to sell, by the end of August, stocks, bonds and long or short positions in any company it audits. The policy, which applied to the spouses, cohabitants and dependents of employees as well, also prohibited investments in firm-audited mutual funds. Employees were responsible for any taxes, expenses and losses incurred as a result of the divestitures.

After employees complained that divestitures would create economic turmoil for them, the firm agreed to allow them to keep investments acquired before June 17, the date the policy was adopted.

PricewaterhouseCoopers had initiated the procedures after being censured in January by the SEC for violating conflict-of-interest and accounting regulations.

"Partners of an audit firm may not own stock in an audit client," said Randall J. Fons, regional director of the SEC's Southeast regional office, about auditor independence. "Partners have a direct financial interest in the audit firm and, therefore, should not have a direct financial interest in any audit client."

The SEC charged that partners of PricewaterhouseCoopers, (then Coopers & Lybrand, LLP) violated auditor independence rules by making investments in companies the firm audited. (Price Waterhouse and Coopers & Lybrand merged in 1998.)

The SEC charges stemmed from investment activity between 1996 and 1998, which included

• Four instances in which certain Coopers & Lybrand professionals owned securities of publicly held audit clients for which the firm provided audit services.
• Thirty-one instances in which partners or managers owned securities of publicly held companies for which they personally provided no professional services but which were clients of Coopers & Lybrand.
• Forty-five instances in which the firm's retirement plan owned securities of publicly held companies that were audit clients of either Coopers & Lybrand or Price Waterhouse.

The SEC censured PricewaterhouseCoopers and ordered it to establish a $2.5 million fund to increase awareness of the independence requirements for public accounting firms throughout the profession. The SEC also directed the firm to establish procedures for monitoring its adherence to independence rules and a database to verify its compliance with those rules. PricewaterhouseCoopers consented to the SEC's order without admitting or denying its findings.

Young Adults Support Social Security

New research revealed there is no generation gap on the issue of Social Security. A poll of people ages 18 to 34 showed that saving the government benefits plan is not just an issue for senior citizens. In fact, most young people strongly believed shoring up Social Security should be Congress's number one priority.

Even though only 15% of the respondents expected to receive the same level of benefits retirees enjoy today, the survey results showed that younger workers did not begrudge current retirees the benefits they receive. Eighty-five percent said seniors deserved them.

A majority of young people polled (59%) in the survey commissioned by the 2030 Center, a public policy institute for young adults, favored using budget surpluses to shore up Social Security over using surpluses for tax cuts.

According to the survey results, young adults also disagreed with the notion that Social Security would be defunct by the time they retired. Sixty-seven percent of the respondents said the system could work for members of their generation when they retire; only 29% believed Social Security should be scrapped and replaced with another system.

Moreover, the young people surveyed voiced more concern about "making sure people receive a decent, guaranteed monthly retirement benefit" (55%) than they did about "making sure that people receive a better rate of return on their payroll taxes" (39%). The poll indicated that a plan providing full benefits with no private accounts was more popular with the majority of the respondents (69%) than reform options that had private accounts but required various levels of benefit reductions.

FASB Provides New NPO Guidance

To answer questions about which not-for-profit organization reports a contribution when a donor specifies another entity to ultimately receive a gift's benefits, FASB issued Statement no. 136, Transfers of Assets to a Not-for-Profit Organization or Charitable Trust That Raises or Holds Contributions for Others. The eagerly awaited statement also addresses whether the specified beneficiary should report as an asset its interest in the gift.

While Statement no. 136 is of particular interest to federated fund-raising organizations, community foundations, institutionally related foundations and similar organizations that raise or hold contributions for others, it could also affect any organization specified as the beneficiary in a transaction. Kit Conroy, controller of the New York Community Trust, the largest community foundation in the United States, says FASB is seeking to clear up confusion that has existed since the issuance of Statement no. 116, Accounting for Contributions Received and Contributions Made. "When is a recipient organization acting as an agent, and for whom are they acting? We asked FASB to distinguish between accounting for funds going to a community foundation and those going to so-called donor-choice programs, where an organization such as United Way receives money and then pays it out exactly as the donor requested, without any discretion."

Conroy says community foundations "got caught up" because they have different types of funds, including designated funds, where the donor leaves money to a community foundation, asking that the income go to a specified charity. "The discretionary power we have to redirect those funds makes them very different from a pass-through donor-choice arrangement." Even after additional guidance, Conroy says, FASB left "wide open" how a beneficiary organization should account for the funds it received. "We were confused; there were a lot of different practices out in the field."

Conroy describes the task community foundations like hers face in implementing Statement no. 136 as "mixed." While the statement includes what Conroy calls "great guidance going forward," some of the affected transactions "go back over time to include things that have been around for 10 or 20 years." They may or may not need to be accounted for differently. Right now, Conroy and others are working with FASB to make the transition easier. "We were happy for the delay to 2000 to implement the changes. We think we are going to need a little more time to sort out how some existing transactions are best accounted for."

Statement no. 136 is effective for calendar year 2000 financial statements. FASB, however, encourages earlier application. Copies are available from the FASB order department, 800-748-0659.

CPE DIRECT: Major Benefits for Journal Readers Now there's another good reason for keeping up with the Journal. American Institute of CPAs members can earn up to 24 continuing education credits per year by reading selected Journal articles, completing four quarterly study guides and passing four quarterly examinations. An annual subscription costs $159. For information or to order, call 888-777-7077 and select option #1.

©1999 AICPA