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Read this if you are responsible for your bank’s fraud risk management.

Fraud in the banking industry is a persistent and evolving threat that has significant implications for financial institutions and their customers. As technology advances, so do the methods employed by fraudsters, making it crucial for banks to stay vigilant and proactive in their fraud prevention efforts. This article explores the current trends in banking fraud, highlighting traditional schemes, emerging threats, and effective preventive measures.

Introduction to banking fraud

Banking fraud is the illegal act of deceiving a financial institution or its customers for financial gain. This type of fraud has been a significant problem for centuries, impacting the banking sector in various ways. The consequences of banking fraud can be severe, including financial losses, damaged reputations, and legal repercussions. Moreover, it can erode trust in the banking system and affect the overall economy.

Traditional banking fraud schemes

One of the oldest and most common forms of banking fraud is check fraud. Despite the decline in the use of checks, they remain a prevalent payment method, making them a target for fraudsters. Check fraud can take several forms, including forgery, alteration, and counterfeiting. For instance, check washing involves stealing a check, erasing the original details, and altering the payee name and amount before cashing it. Another method is creating counterfeit checks using real account numbers but depositing them under fake identities.

The statistics are alarming. In 2022, there were 680,000 reports of check fraud, nearly double the number reported in 2021. The surge in mail-theft-related check fraud has also been significant, with a 161% increase in mail theft complaints from March 2020 to February 2021. Criminals have even resorted to armed robberies of postal carriers to obtain master keys that open mailboxes, providing easy access to checks.

Emerging banking fraud trends for 2025

As technology evolves, so do the methods employed by fraudsters. Identity theft and synthetic identity fraud are two emerging trends that pose significant threats to the banking industry. Identity theft involves stealing someone's personal information to obtain credit or other financial benefits, while synthetic identity fraud involves creating a fictitious identity using a combination of real and fake information. Both types of fraud can have serious consequences for victims, including financial losses and damage to their credit scores.

Phishing and social engineering attacks are also on the rise. Phishing attacks use email, messaging, or other means to trick individuals into divulging sensitive information, such as passwords or credit card numbers. Spear phishing attacks are more targeted, using personal information to make the attack seem more legitimate. Social engineering attacks manipulate individuals psychologically to obtain sensitive information.

The rise of artificial intelligence (AI) has introduced new dimensions to banking fraud. Fraudsters use AI-driven techniques, such as deep learning and natural language processing, to perpetrate fraud, including phishing and account takeover attacks. For example, deepfakes, a form of AI-generated media, can impersonate individuals and trick employees into transferring funds. In January 2024, a Hong Kong-based firm lost $25 million to fraudsters who used deepfake technology to impersonate the firm's chief financial officer on a video call.

Banking fraud: Preventive measures and detection techniques

Preventing and detecting banking fraud requires a multi-faceted approach. Traditional methods, such as signature verification and positive pay, remain effective in combating check fraud. Positive pay involves companies informing their bank about issued checks ahead of time, allowing the bank to verify the checks before processing them. Fraud detection software, which uses algorithms to analyze check data and identify potential instances of fraud, is also a valuable tool.

For emerging fraud trends, constant training and testing are essential. Periodic self-study trainings and fake phishing emails can help keep fraud red flags front of mind for employees. Acknowledging and celebrating individuals who follow bank policies and prevent fraudulent activity can also reinforce good practices.

AI-powered analytics tools can analyze large amounts of data and identify patterns and anomalies that may indicate fraudulent activity. Some banks are already using AI to automate fraud detection processes and send investigations to the appropriate teams. For instance, JPMorgan uses large language models to detect signs of fraud in email compromises, while Mastercard's Decision Intelligence tool scans a trillion data points to predict if a transaction is genuine.

Banking fraud is a complex and evolving challenge that requires continuous vigilance and adaptation. By understanding traditional fraud schemes and emerging trends, financial institutions can implement effective preventive measures and detection techniques to protect themselves and their customers. As fraudsters become more sophisticated, the banking industry must leverage technology, such as AI, to stay one step ahead and ensure the security and integrity of the financial system. As always, please don’t hesitate to reach out to the BerryDunn financial services team should you have any questions.

Read this if you are a FINOP.

We often see broker-dealers receive 12b-1 fees in the course of ordinary business. With these fees, we often see the broker-dealer acting as a pass-through, retaining these fees on its balance sheet until the ultimate payee requests such funds, typically for payment or reimbursement of expenses that are permissible to be paid from 12b-1 fees, as outlined in the distribution agreement. These fees can often be substantial and result in significant receivables on the broker-dealer’s balance sheet.

These receivables are generally considered unsecured and thus are not allowable assets for the purpose of calculating net capital under the Securities Exchange Act (SEA) Rule 15c3-1. However, in FINRA’s Regulatory Notice 21-27, published July 22, 2021, FINRA made updates to their interpretations of SEA Rule 15c3-1, which included adding an interpretation on unsecured receivables. This interpretation can be found in 15c3-1(c)(2)(iv)(C)/095 of FINRA’s interpretations. Specifically, broker-dealers may include unsecured receivables (such as 12b-1 fee receivables) as an allowable asset for purposes of calculating net capital if the following criteria are met:

1. The receivable is offset by a related payable.

2. A written contract exists between the broker-dealer and the payee, in which:

a. The broker-dealer’s liability for the amount payable is limited solely to the proceeds of the receivable; and
b. The payee waives payment of the amount payable until the broker-dealer has received payment of the related amount receivable; and

3. If the broker-dealer is subject to the Aggregate Indebtedness Standard of paragraph (a)(1)(i) of SEA Rule 15c3-1 and:

a. The portion of the payable due within 12 months is included in aggregate indebtedness; and
b. The broker-dealer’s net capital requirement shall be increased by an amount equal to 1% of the portion of the payable that was not included in aggregate indebtedness.

We often see 2b above being of most significance. It is essential that broker-dealers ensure such language is in their written contracts if they anticipate including 12b-1 fee receivables as an allowable asset in their net capital calculation. Being aware of this interpretation can also be helpful when initially writing distribution agreements, as broker-dealers can ensure such language is included in the original agreement, rather than possibly needing to revisit and amend at a later date.

Although technically a separate exercise, the above guidance can also have implications on revenue recognition. Broker-dealers must recognize revenue from contracts with customers under Accounting Standards Codification (ASC) Topic 606. Among other things, ASC Topic 606 establishes criteria for principal vs. agent considerations. In general, transactions in which the broker-dealer is determined to be acting in a principal capacity are recorded on a gross basis (the revenue and any related expenses are separately recorded on the broker-dealer’s income statement). In those instances where the broker-dealer determines it is acting as agent, the transaction is recorded on a net basis (the revenue and any related expenses are recorded on a net basis, with any residual revenue being recorded on the broker-dealer’s income statement).

Although the principal vs. agent determination is technically a separate exercise from determining if an asset is allowable or non-allowable, there could be some overlap amongst these exercises. For instance, ASC 606-10-55-39 provides various indicators to consider, one of which is “the entity is primarily responsible for fulfilling the promise to provide the specified good or service.” If the entity is primarily responsible, they are acting in a principal capacity. However, it could be determined the entity is not primarily responsible if they do not have a responsibility to make payment to the payee until they are in receipt of the funds.

That being said, even if this fact pattern exists, the other indicators listed in ASC 606-10-55-39 (and any others deemed to be relevant) still need to be considered in making the principal vs. agent determination. Furthermore, even if the broker-dealer is not obligated to pay the payee until they are in receipt of the 12b-1 fees, there may be other evidence that, when used in conjunction with this evidence, still makes the broker-dealer conclude it is acting in a principal capacity.

12b-1 fee receivables can be a significant portion of a broker-dealer’s assets. If determined to be non-allowable, this could have significant implications on a broker-dealer’s net capital compliance. However, as noted in 15c3-1(c)(2)(iv)(C)/095, such receivables can be considered allowable if certain criteria are met. It is important for broker-dealers who plan to include such receivables as allowable assets to closely review their 12b-1 fee arrangements to ensure these criteria are met. As always, if you have any questions, please don’t hesitate to reach out to the BerryDunn broker-dealer team.

Enterprise Resource Planning (ERP) systems provide a shared platform for people in your organization to work together––and the benefits can be game changing. That said, an effective strategy involves more than simply choosing the right software platform. Integrating your systems will change the way people in your organization work, and change can be challenging! For that reason, change management should be a key component of your ERP implementation project.

Here are eight key success factors to help guide your organization through an ERP implementation.

ERP implementation: The planning phase

ERP implementations rely on collaboration and communication across departments. So, from the start, set up your organization for success.

1. Stakeholder buy-in

Before you plunge in, you need everyone on board. That means helping employees understand the need for change and gaining buy-in from key stakeholders across departments who will help implement and later use the system. It’s critical to have senior management's sponsorship to reinforce decisions made along the way.

2. Strong project management

Establish your project management team right away. Create clearly defined roles and responsibilities, protocols for team collaboration, and project governance structures for decision-making. Senior management’s role is to set the tone and direction of the project and provide visible and active executive sponsorship throughout the process.

ERP implementation: The platform and vendor selection phase

The next milestone is to choose your ERP solution through an RFP process. The RFP should clearly define the functional and technical requirements of the ideal solution and also describe your organization’s business process.

3. Early vendor engagement

Engage vendors through pre-RFP activities such as vendor outreach sessions. This gives your team the opportunity to familiarize themselves with potential partners, explore options, and assess vendor compatibility issues.

4. Partner with the vendor

Plan the ERP implementation with your vendor. Based on the scope of work, set realistic expectations and timelines that take into consideration the staff involved and other responsibilities they may have. As soon as possible, work with the vendor to begin data conversion, interface planning, training, and testing.

ERP implementation: Launch phase

Organizations are often challenged during the ERP implementation process by their staff’s reluctance to accept new roles and responsibilities. An internal change management focus can help maintain staff confidence and keep stakeholders engaged.

5. Prepare your organization for change

Consistent communication is vital. Keep your employees engaged and empowered to do their best by providing regular updates, reaffirming confidence in your staff and empathy for their challenges, and showing active, visible executive support.

6. Test, test, test

In the course of an ERP implementation, you can expect crashes and bugs––even with the most well-designed software. Test at the early stages and continue throughout the implementation to ensure your ERP system functions properly and any issues are identified and fixed before going live.

7. Train, train, train

It’s easy to underestimate the time it takes to train people on new systems and processes. Discuss a plan for customized training with your vendor early on. To make end-user training successful, training should begin before the implementation phase and continue beyond it. Customize your training programs and materials and hold regular cross-functional team meetings.

ERP implementation: Stabilization phase

Stabilization is a process of optimizing your ERP system so that your organization can get the most out of its investment. This includes identifying post-go-live assistance, developing a plan for further training and support, and confirming roles and responsibilities for IT and key users of the system.

8. Reinforce the change

Continue to communicate with your staff about the reasons you began your ERP journey in the first place––the benefits of sticking with the plan. Embed the ERP system within your culture and practices, beware of backsliding, and develop a plan for maintenance and continuous improvement.

BerryDunn’s local government team partners with municipal, county, regional, and quasi-governmental entities to meet the most critical needs of your community. Whether we’re helping clients with strategic planning, economic development, public safety, or organizational excellence, we take pride in tailoring our projects to fit your unique needs, either at the enterprise level or within and across departments. We care about what we do, and we care about the people impacted by our work.  

BerryDunn provides ERP consulting to local and state governments, higher education institutions, and for-profit organizations. Learn more about our ERP consulting services. 

Read this if you administer a 401(k) or 403(b) plan.

On December 20, 2019, the Setting Every Community Up for Retirement Enhancement (SECURE) Act was signed into law, with SECURE Act. 2.0 signed into law December 23, 2022 (the SECURE Acts). The SECURE Acts made several changes to 401(k) and 403(b) plan requirements. Among those changes is a change to the permissible minimum service requirements.

Many 401(k) retirement plan sponsors have elected to set up minimum service requirements for their plan. Such requirements help eliminate the administrative burden of offering participation to part-time employees who may then participate in the plan for a short period of time and then keep their balance within the plan. Although plan sponsors do have the ability to process force-out distributions for smaller account balances, a minimum service requirement, such as one year of service, can help eliminate this situation altogether.

Although 403(b) plans are required to offer universal eligibility, plans may exclude employees who are expected to work less than 20 hours a week from the plan. Such employees are often excluded for the same administrative burden reason mentioned above.

The SECURE Acts will require “long-term part-time employees” to be offered participation in 401(k) and 403(b) plans (subject to ERISA) if they are over the age of 21. The idea behind the requirement is that 401(k) and 403(b) plans are responsible for an increasingly larger amount of employees’ retirement income. Therefore, it is essential that part-time employees, some of whom may not have a full-time job, have the ability to save for retirement.

Under the SECURE Act, ”long-term part-time” is defined as any employee who works three consecutive years with 500 or more hours worked each year. This new secondary service requirement became effective January 1, 2021. The SECURE Act 2.0 then reduced the three-year period to two years for plan years beginning after December 31, 2024. Previous employment prior to January 1, 2021, will not count toward the three-year requirement. Therefore, the earliest a long-term part-time employee may have become eligible to participate in a plan under the secondary service requirement was January 1, 2024. These employees also earn vesting service for years with 500 hours of service.

The Internal Revenue Service (IRS) issued proposed regulations in 2023 covering the new long-term part-time service requirement and, on October 3, 2024, issued IRS Notice 2024-73, which, among other things, indicates that the final regulation the Treasury Department and IRS intend to issue related to this matter will apply no earlier than to plan years that begin on or after January 1, 2026. The IRS Notice also clarifies that 403(b) plans that exclude students from plan eligibility will not be required to make the plan available to such students if they meet the long-term part-time rules. This is because the student employee exclusion is a statutory exclusion based on a classification rather than on service.

Originally, this provision was only applicable to 401(k) plans; however, SECURE Act 2.0 expanded this provision’s reach to 403(b) plans as well. Furthermore, although long-term part-time employees will be allowed to make elective deferrals into 401(k) and 403(b) plans, management may choose whether to provide non-elective or matching contributions to such participants. These participants also may be excluded from nondiscrimination and top-heavy requirements.

This requirement will create unique tracking challenges as plans will need to track hours worked for recurring part-time employees over multiple years. For instance, seasonal employees who elect to work multiple seasons may inadvertently become eligible. We recommend plans work with their recordkeepers and/or third-party administrators to implement a tracking system to ensure participation is offered to those who meet this new secondary service requirement. If a feasible tracking solution does not exist, or plans do not want to deal with the burden of tracking such information, plans may also consider amending their minimum service requirements by reducing the hours of service requirement from 1,000 hours to 500 hours or less. Or, in the case of 403(b) plans, plans may consider allowing those employees who are expected to work less than 20 hours per week the opportunity to participate in the plan. However, this may allow more employees to participate than under the two-year, 500-hour requirement and may increase the employer contributions each year if there is not a different service requirement for employer contributions.

If you have questions regarding your particular situation, please contact our Employee Benefit Audits team. We’re here to help.

Read this if you work for a healthcare organization in a patient access or revenue cycle leadership or optimization role.  

We’ve written before about the importance of the patient access check-in process in your revenue cycle. One of the key strategies to making the check-in process a good experience for patients, while also gathering the most important information for billing, is to have clear scripts for your patient access staff to leverage. 

Five steps to creating an effective patient access script 

1. Consider what information you need to collect and when 

The best practice is to proactively collect and/or confirm insurance and patient demographic information at each encounter. If a patient carries more than one insurance, be sure to clarify which insurance should be primary. Doing this correctly up front will save time and prevent denials and associated workload and revenue loss. 

2. Be clear about the information you need and don’t make assumptions 

When you ask a patient if any information has changed since the last time they were in, they likely don’t remember. Instead, it is critical to ask the patient to confirm or provide their information each time.  

Example: When proactively collecting patient information  

Instead of "Have there been any changes to your information since you were last seen here?" 

Say this: "To ensure your account is as accurate as possible, we require all patients to present a minimum amount of information."  

3. Be direct about payments 

Many patient access team members may try to soften the language about making payments in an effort to be polite and create a good experience. Providing scripting around this can help. Scripting should be polite but direct.  

Example: When collecting co-pays  

Instead of "You have a $20 co-pay today. Would you like to pay it?"

Say this: "You have a $20 co-pay today. How would you like to pay it: Cash, credit card, or check?"   

4. Provide context 

The majority of patients don’t completely understand the healthcare system in general, or your systems in particular. If the patient is required to do something, provide context so they understand. Always help patients understand the "why." 

Example: When connecting a self-pay patient to a Financial Counselor  

Instead of: "We can’t schedule you until you speak with someone in finance."

Say this: "Before scheduling your appointment, I will connect you with a financial counselor who can determine if you qualify for assistance and help you understand your financial obligations."

 5. Stay positive 

Changes to the patient check-in process can be frustrating to staff. Change is hard. If you’re implementing new workflows or processes that the staff is still learning, providing scripting can help them explain, in a positive way, to patients why the process is slower than usual. 

Example: When establishing a new patient culture  

Instead of: "I’m sorry, I have to do these new workflows."

Say this: "Our healthcare system has recently implemented improved processes to ensure that you are receiving the highest level of care. "

Communicating clearly, consistently, and positively is important to put patients at ease, and to make sure that you collect the most accurate and up-to-date information from patients. Once you’ve created scripting to support your processes, the next step is to train staff on the scripting provided. Providing ongoing support and feedback to patient access staff will help them feel more confident in their day-to-day communications.  

Get more patient check-in tips to help your revenue cycle.  

BerryDunn's audit, tax, clinical, and consulting professionals, focused on specific healthcare industry areas, understand the biggest challenges facing healthcare leaders, and are committed to helping you meet and exceed regulatory requirements, maximize your revenue, minimize your risk, improve your operations—and most importantly—facilitate positive outcomes. Learn more about our healthcare consulting team. 

The BerryDunn Parks, Recreation, and Libraries team is thrilled to share our highlights from the 2024 NRPA Annual Conference in Atlanta, which showcased the vibrant future of parks and recreation through exciting sessions, meaningful connections, and moments of celebration.

One of the true highlights of the conference was the chance to connect with professionals across the field. Our booth on the exhibit hall floor was buzzing with energy as we reconnected with past clients, built new relationships, and had insightful conversations with park and recreation professionals from across the country.

We had the honor of leading several sessions during the conference, many with current and past clients, including:

• “Planting the Seeds of Success: Cultivating a Positive Workplace Culture, Strategically!” with Nikki Ginger
• “Artificial Intelligence: A Panel Discussion,” with Ryan Hegreness and Lakita Frazier
• “Squirrel! … Staying Focused With a Coworker Who Has ADHD” with Dannielle Wilson
• “Unveiling the Wizardry Behind a Career in Consulting” with Barbara Heller, Elsa Fischer, and Nikki Ginger
• “Parks and Recreation in the Age of Artificial Intelligence,” and “Artificial Intelligence: Productivity and Pitfalls” with Ryan Hegreness
• “Parks Level of Service – How a Data-Driven Approach Can Help Create a More Equitable Park System” with Jeff Milkes
• “Excellent Operations: Data, Dashboards, and Smart Decisions” with Becky Dunlap

Beyond our own involvement, we had the pleasure of celebrating the remarkable achievements of several our current clients. A special congratulations to the South Suburban Park and Recreation District (CO), City of New Braunfels Parks and Recreation (TX), and Douglasville Parks and Recreation (GA), all of whom were awarded Grand Plaques in the 2024 NRPA Gold Medal Awards! These honors are a testament to their exceptional work in long-term planning, resource management, and community engagement, and we couldn’t be more proud to partner with them.

We also had the privilege of contributing to NRPA’s strategic vision as a sponsor of the NRPA Business Council. It was incredible to witness how the work we were able to collaborate on to shape NRPA’s new strategic plan came to life in the keynote speeches and discussions throughout the conference.

The 2024 NRPA Annual Conference reminded us why we are so passionate about what we do. Every conversation, every session, and every connection strengthened our belief that parks and recreation is not only thriving but poised for even greater things. Let’s keep moving forward, together!

The Federal Deposit Insurance Corporation (FDIC) recently issued its second quarter 2024 Quarterly Banking Profile. The report provides financial information based on call reports filed by 4,539 FDIC-insured commercial banks and savings institutions. The report also contains a section specific to community bank performance. In the second quarter of 2024, this section included the financial information of 4,104 FDIC-insured community banks. BerryDunn’s key takeaways from the report are as follows:

Second quarter of 2024 resulted in community banks’ quarterly net income increasing $72.6 million from the previous quarter.

Quarterly net income for community banks increased 1.1% in second quarter 2024, resulting in $6.4 billion in quarterly net income. This increase was the result of higher net interest and noninterest income, which more than exceeded the increase in noninterest expense. Despite the increase in quarterly net income, full year net income declined. Compared to second quarter 2023, net income had decreased $568.9 million, or 8.2%. More than half (61.6%) of all community banks reported an increase in net income compared to first quarter 2024.

Net interest margin (NIM) sees its first quarterly increase to 3.30% since fourth quarter 2022, but continues to remain below the average quarterly NIM of 3.51% over the past 10 years.

Community banks’ NIM increased 7 basis points from the prior quarter. However, NIM was down 9 basis points from the year-ago quarter. The yield on earning assets increased 54 basis points while the cost of funds increased 63 basis points from the year-ago quarter. Community banks’ NIM performance continued to prevail over the overall banking industry’s NIM of 3.16%, which declined 1 basis point in second quarter 2024. Community banks have only shown quarter-over-quarter NIM growth while the overall banking industry showed a decline once over the past five years.

Loan and lease balances continued to grow in second quarter 2024, with 75.7% of community banks reporting quarterly loan growth. 

Loan and lease balances continued to see widespread growth in second quarter 2024. Community banks saw loan growth in all major portfolios. Nonfarm, nonresidential commercial real estate (CRE) loans exhibited the most growth from first quarter ($7.9 billion or 1.4%), followed closely by residential real estate ($7.8 billion, 1.7%). Total loans and leases grew 6.3% from one year ago. This year-over-year growth was also driven by residential real estate and nonfarm, nonresidential CRE loans, which showed growth year-over-year of $30.5 billion (7.0%) and $33.9 billion (6.3%), respectively. The largest loan growth year-over-year, percentage-wise, was with farm loans, which saw a 7.2% increase.

The gap between the quarterly net charge-off rate for community banks and all other banks continues to build. 

Community banks witnessed a 2 basis point increase from the prior quarter and a 5 basis point increase from the prior year. However, the ratio remains 1 basis point lower than the pre-pandemic average of 0.15%. The increase was significantly impacted by the nearly 39% annual increase in net charge-off volume in the moderately sized loan portfolio of commercial and industrial loans (represents 12.8% of total loan balances for community banks). The net charge-off rate for commercial and industrial loans increased 16 basis points from one year earlier to 0.37%. The industry’s net charge-off rate increased 3 basis points to 0.68% from the prior quarter and was 20 basis points higher than one year earlier and the pre-pandemic average. The industry banks’ net charge-off rate for the quarter was the highest reported rate since second quarter 2013.

In September, the Federal Reserve cut interest rates by 50 basis points, the first time the Federal Reserve has cut interest rates since 2020. Although most were speculating that a rate cut was imminent, there was some dissent as to the magnitude of the rate cut and whether it would be 50 basis points or a more modest 25 basis points. Even with the more aggressive 50 basis point cut, the Federal Reserve has signaled that more rate cuts in 2024 are likely. With the reduction in rates, and the expectation this will only bolster bank profitability in the long run, attention has returned to bank merger and acquisition (M&A) activity. As indicated in the second quarter Quarterly Banking Profile, in quarter 2 alone, community banks declined to 4,104, down 27 from the previous quarter. This decline was primarily due to M&A, with 22 out of the 27 community banks having merged out of existence during the quarter. Many believe this is just the beginning. As the need for cutting-edge technology becomes more prevalent to remain competitive, some banks are being squeezed out of the industry as the upfront technology investment needed to remain competitive is too steep.

Another notable trend from quarter 1 to quarter 2 2024 was an increase in the number of institutions on the FDIC’s “Problem Bank List,” which increased from 63 to 66 (this stat is for all banks, not just community banks). This jives with the increases in the net charge-off ratios, as noted above. The consensus we’ve received from those with “boots on the ground” is that regulators are laser-focused on well-defined weaknesses in credits and are being more stringent and unwavering on ratios that are indicative of a needed downgrade. For instance, if debt service coverage ratio is below 1, unless liquidity and/or guarantor strength is a mitigant to downgrade and there is clear support for this mitigant, that relationship should be downgraded to a classified risk rating category. If anything, this is a sign of the regulators’ concerns about credit quality, even with the possibility of a “soft landing” seemingly on the rise. As always, please don’t hesitate to reach out to your BerryDunn’s Financial Services team should you have any questions.

In April 2024, the Governmental Accounting Standards Board (GASB) issued GASB Statement No. 103, Financial Reporting Model Improvements. The objective of this statement is to improve key components of the financial reporting model to enhance its effectiveness in providing information that is essential for decision-making and assessing a government’s accountability.

The biggest news about GASB Statement No. 103 is that it did not change the basis of accounting or presentation of governmental fund financial statements as we all had anticipated. For the past 10 years, GASB was reexamining the effectiveness of GASB Statement No. 34 Basic Financial Statements – and Management’s Discussion and Analysis – For State and Local Governments. Through this re-examination, they found the guidance was working well, but there were opportunities to make targeted improvements.

Previously, BerryDunn issued an article that, at a high level, summarized GASB Statement No. 103. In this article, we are going to focus specifically on the impact that GASB Statement No. 103 has on your Management's Discussion and Analysis (MD&A).

GASB Statement No. 103 reestablished a full set of requirements for the MD&A. This encourages governments to take a fresh look at the effectiveness of their MD&A. The new guidance directs governments not to just describe what changed during the reporting period, and by how much, but to also explain why those changes occurred. The guidance now requires greater description and detail about items discussed as currently known facts, decisions, or conditions expected to have a significant financial impact in the subsequent reporting period.

What makes a good MD&A and what your organization should focus on

The MD&A should be a story of your financial statements and an explanation of the significant changes in your entity’s finances from the prior year. When well written, the MD&A provides readers of the financial statements highly valuable information.

GASB Statement No. 103 emphasizes the following:

• The MD&A should be written for a reader who may not have a detailed knowledge of governmental accounting and financial reporting and may not be from the government’s geographical area.
• The MD&A should assist the reader in understanding why finances changed from the prior year, NOT just present the amount of the change.
• Encourage governments to avoid repetitive explanations in multiple sections of the MD&A.
• Clarify that the MD&A should discuss significant long-term financing activity during the year, not just debt, but leases, subscription-based information technology arrangements, and all other forms of long-term borrowing.

GASB states that the information presented in the MD&A should be confined to the following five sections:

1. Overview of the Financial Statements
2. Financial Summary
3. Detailed Analyses
4. Significant Capital Asset and Long-Term Financing Activity
5. Currently Known Facts, Decisions, or Conditions

Helpful tips when preparing your MD&A

To assist your entity in preparing the MD&A, we’ve laid out some helpful tips below.

• Write in a manner that is easily readable and can be understood by users who may not have a detailed knowledge of governmental accounting and financial reporting.
• Use charts, graphs, and tables to enhance the understandability of the information.
• Avoid unnecessary duplication.
• Avoid “boilerplate” discussion.
• Focus on the “why” and explanations.

The MD&A should include explanations and interpretations that explain the why. Some specific examples include:

• Increase in intergovernmental grant revenues
• Growth in revenues due to specific economic circumstances
• Increases in specific programs and functions
• Transfers to other funds
• Expenditures due to specific events

Use visuals to make information clear

To make the MD&A more visual and help the reader understand critical information, you can incorporate charts, graphs, and tables.

Below are a few examples that could be incorporated:

Contents of the Basic Financial Statements

Governmental Activities Revenues by Source

Governmental Activities Expenses by Source

If your organization follows the above tips, you will have an impactful MD&A that will be beneficial to the readers of your financial statements. Be sure to check out Exhibit 1 that is included in GASB Statement No. 103 for an example MD&A.

Be on the lookout for future GASB Statement No. 103 articles and how this new standard impacts your entity. When it comes to writing an impactful MD&A, BerryDunn’s Governmental Accounting Team can be a resource to your organization.

Read this if you work within a State Medicaid Agency (SMA). This is the fifth and final article in a series of articles published in follow-up to the Medicaid Enterprise Systems Conference (MESC) 2024. Prior articles highlighted industry MES trends, the value of the CMS and SMA MES partnership, the roles outcomes play in supporting enterprises, how SMAs can embrace Artificial Intelligence (AI), and further support their teams in achieving organizational excellence. 

If you attended the Medicaid Enterprise Systems Conference (MESC) back in August, you likely had the opportunity to join one of the many exciting workshops on day one of the conference. One of those workshops was focused on leading people through change. Facilitators guided attendees through an interactive exercise that replicated the chaos and confusion experienced during change. This exercise quickly became a frequent topic of conversation among MESC attendees because it demonstrated the importance of building and executing a plan that attends to communication, education, and motivation during times of change. The workshop, along with a handful of sessions throughout the week, highlighted the importance of having a people-focused strategy, and the resulting power from doing so. These refreshing conference topics gave meaningful insight into the pain points of invested MES parties, as well as practical solutions to help support them. 

So how can we all maintain focus on the people? 

• Be in tune with the energy (positive or negative) and engagement (high or low) of the group. If you’re not, find someone who is, and then build and maintain high energy and positive engagement through open communication, milestone celebration, collaboration, support, and recognition.  
• Identify resistance and address it quickly. Ask people about their concerns to help you understand their resistance. 
• Tactfully involve resistors in helping solve the problems they see. 
• Remember your "why" and find the reasoning. Why are we here? Why do we do what we do, and why are we changing? What are the benefits associated with this change? 
• Focus on the areas where you have influence. 
• Be sure team members have clarity and are committed to the project and its approach before jumping in. 
• Identify how you as a project team will be flexible: Flexibility is knowing the approach that was previously successful might not work the next time. 
• Collaborate with invested parties to identify and integrate lessons learned from prior efforts into existing ones. 
• Strategically identify and leverage your change catalysts as influencers to early adopters.  
• Consider how to contain and support the ‘fervent resistors’ to prevent increasing the resistance of the late adopters. 
• When leading, designing, and driving change, create a strategy and plan that pays attention to communication, education, and motivation. 

Other insights to help support your team, help ensure people come first, and help achieve success in your multimodule multivendor environment include the following: 

What’s Your North Star? Establish a vision that is the product of your agency and the people it serves. To establish a vision, SMAs should engage leadership and other invested parties to identify and align on long-term goals. This typically involves conducting a situational analysis (i.e., SWOT), clarifying the mission and values, and facilitating collaborative workshops to generate ideas on the agency’s vision. Once established, speak it, maintain it, and discuss how you’re achieving it. If you really want to be an all-star, identify your vision’s goals, outcomes, and metrics…then track against it! 

Workload: Be mindful of your SMA capacity. Measuring an organization’s capacity involves assessing its ability to deliver services, manage resources, and achieve goals. Key areas to evaluate include human resources, operational efficiency, technology, financial health, and strategic alignment. Tools like capacity assessments, KPIs, and process analysis help identify gaps and measure performance, while regular evaluation of these areas helps ensure the organization can be well positioned for growth, resilience, and effective decision-making.  

Portfolio, Program, and Project Management: Establish consistent processes (risk and issue management, change request process, etc.) across all invested parties (i.e., vendors and staff) and educate them during onboarding. Typically, MES organizational layers like a portfolio, program, and/or project management office can help establish, implement, and maintain these processes. Consistent processes are vital for ensuring the successful execution and governance of projects across an SMA. This uniformity not only reduces risks and operational inefficiencies but also supports scalability and continuous improvement, ensuring that the portfolio of initiatives delivers maximum value to the organization. 

Governance: Governance is critical for MES projects within an SMA involving multiple vendors because it ensures accountability, alignment, and oversight across all project activities. A strong governance framework provides clear decision-making structures, establishes performance metrics, and enforces compliance with state and federal regulations. This helps manage risks, streamlines communication, and ensures that vendors work collaboratively toward the SMA’s strategic goals, ultimately improving project outcomes and service delivery for Medicaid beneficiaries. 

Organizational Change Management (OCM): OCM is crucial for SMA initiatives (technology or otherwise) as it helps ensure that the change brought about by an initiative aligns with the needs and concerns of the people impacted by the change. By prioritizing activities such as communication, training, and support, OCM helps ease the transition for invested parties, facilitating buy-in and reducing resistance. This focus on the human element not only enhances user adoption of new programs, policies, systems, and processes but also promotes a positive organizational culture, ensuring that the implementation leads to sustainable improvements in service delivery and overall agency effectiveness. 

Collaboration: Effective collaboration within an SMA for MES projects involves establishing clear roles and responsibilities, using centralized communication tools, and following standardized project management practices. Engaging invested parties early, focusing on data-driven decision-making, and fostering transparency are key to helping ensure alignment and continuous improvement.  

Timely Issue Identification, Resolution, and Communication: Early identification allows for timely resolution, minimizes disruptions, and helps maintain project momentum. It also fosters transparency and trust within teams, ensuring that all invested parties are informed and can collaborate on effective solutions. Swift issue escalation promotes better decision-making and reduces the risk of missed deadlines or budget overruns. Be sure to also communicate the root cause and solution in place to address issues in order to further foster buy-in and credibility.  

Leading through change isn’t just about managing tasks—it’s about guiding people. By focusing on communication, education, and motivation, we help ensure our teams are not only prepared for change but empowered by it. As we navigate the complexities of our work, let’s remember that real progress comes from putting people first, fostering collaboration, and maintaining a clear vision. With these principles at the forefront, we’re not just managing change—we’re driving meaningful transformation. 

Although MESC 2024 has come to a close, conference presentations, innovative discussions, and the work of the industry’s brightest minds live on. Conferences like MESC and the upcoming Information Technology Solutions Management for Human Services (ISM) reaffirm the importance of collaboration, adaptability, and putting people first in our journey toward modernizing HHS programs and the technology needed to support them. As we move ahead, let's remain focused on building strong relationships, staying adaptable in the face of change, and continuously aligning our efforts with the ultimate goal: Better serving the country’s most vulnerable populations. Together, through thoughtful leadership and strategic partnership, we can transform challenges into opportunities for meaningful impact. 

Previous articles in this series: 

CMS is your enterprise partner: Are you leaning in yet?

MITA 4.0, APDs, and more: Clearer guidance and helpful templates are coming!

Medicaid outcomes, measures, and metrics are here to stay

Practical Approaches to Using Artificial Intelligence in State Medicaid Agencies