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Who this applies to: Compliance officers, risk managers, revenue cycle, or healthcare administrators in a specialty, primary care, prenatal, or pediatric practice, or Federally Qualified Health Center (FQHC).

Has your medical practice seen an increase in missed appointments? Is your practice seeking to improve attendance for preventive care services? If yes, are you evaluating whether to establish a patient incentive program? Before you proceed, there are federal and state rules that should be analyzed to determine whether to initiate a pilot incentive program.

Patient inducements

A well-designed incentive program must be structured neither to give the appearance of nor be perceived as a patient inducement, based on US Office of the Inspector General (OIG) guidance. The OIG’s nominal value threshold applies exclusively to non-cash items; cash in any form is prohibited, as are general-purpose prepaid cards. Cash equivalents are items that patients can convert to cash and use for any purpose, such as gift cards from “big box” stores. The nominal value (“de minimis”) threshold sets the following limits for gifts:

A. Per-item limit: No single gift can have a retail value above $15. 

B. Annual aggregate limit: The total value of all gifts to the same patient in a calendar year cannot exceed $75. 

The Beneficiary Inducement Prohibition of the Civil Monetary Penalties (CMP) Law 

This law differs from the scope of the federal Anti-Kickback Statute (AKS). The Beneficiary Inducements CMP provides for the imposition of financial penalties (i.e., CMPs) against any person who offers or transfers remuneration to a Medicare or Medicaid program beneficiary if this might influence the beneficiary’s selection of a particular provider or practitioner. Remuneration means anything of value, whether cash, cash equivalents, or below-market-value goods or services.

Violations of the Beneficiary Inducement Prohibition can result in monetary penalties, plus three times the amount claimed from federal programs, and potential exclusion from participation in federal healthcare programs. 

To determine whether a patient incentive program violates the Beneficiary Inducement Prohibition, the National Association for Community Health Centers (NACHC) recommends that an organization ask the following three questions:

1. Is your organization proposing to offer something of value (remuneration) to patients covered by Medicaid, the Children’s Health Insurance Program (CHIP), or Medicare?
2. Is the remuneration likely to influence patients’ decisions to receive goods and services for your organization?
3. Are the goods or services paid for by Medicaid, CHIP, or Medicare?

If the answer to all three questions is yes, then the patient incentive program violates the Beneficiary Inducement Prohibition unless it fits within an existing regulatory exception or safe harbor. 

What is a safe harbor?

The Department of Health and Human Services (HHS) has the authority to protect certain arrangements and payment practices (i.e., safe harbors) under the federal AKS. The safe harbor regulations are updated periodically to reflect changing business practices and technologies in the healthcare industry. These safe harbor provisions have been developed to limit the reach of the statute somewhat by permitting certain non-abusive arrangements (42 CFR 1001.952 Safe Harbors), while encouraging beneficial or innocuous arrangements.

One example is the Preventive Care Services Exception. The regulatory definition of preventive care, for purposes of this exception, means any service that: (1) is a prenatal service or a post-natal well-baby visit or is a specific clinical service described in the current US Preventive Services Task Force’s Guide to Clinical Preventive Services and (2) is reimbursable in whole or in part by a federal healthcare program.  

Clearly define your strategy

• Define the population of patients eligible for the incentive pilot program, purpose, types of eligible visits (i.e., those scheduled based on the treatment plan) and the criteria for earning an incentive. Consider limiting eligibility for participation in an incentive pilot program to established patients, patients at a certain stage of a treatment plan, and/or a particular program.
• Establish a documentation system to track the annual gift disbursement process.
• Refrain from advertising a pilot attendance incentive program in new patient brochures or other marketing collateral to avoid the appearance of improper patient inducement or recruitment.
• Document which safe harbor is relevant to your pilot program. If there are any questions about whether the proposed incentive program qualifies, your organization may seek an advisory opinion from the OIG.
• Confirm that your incentive strategy does not violate any state rules prior to implementation.

Does your state have rules pertaining to incentives, lotteries, and raffles? Depending on your healthcare organization’s corporate status, the term “raffle” may be impermissible. For example, California only permits raffles to be conducted by nonprofit organizations; interested nonprofit organizations must apply for a raffle registration on an annual basis.

BerryDunn can help

Has your healthcare organization evaluated its strategies to promote patients’ attendance for well-child visits or prenatal care or other ambulatory services? If you already have an existing incentive program, have you evaluated it recently to determine whether or not it falls within a safe harbor? Are there any relevant state regulatory requirements that should be evaluated? 

Our healthcare compliance team can help. We incorporate deep, hands-on knowledge with industry best practices to help your organization manage compliance and revenue integrity risks. Learn more about our healthcare compliance consulting team and services.

Additional resources:

• General Questions Regarding Certain Fraud and Abuse Authorities | Office of Inspector General | Government Oversight | U.S. Department of Health and Human Services 
• Federal Register: Medicare and State Health Care Programs: Fraud and Abuse; Revisions to Safe Harbors Under the Anti-Kickback Statute, and Civil Monetary Penalty Rules Regarding Beneficiary Inducements 
• Structuring Patient Incentive Programs to Minimize Risk Under Federal Laws
• https://www.nachc.org/nachc-content/uploads/2024/12/Issue-Brief-Structuring-Patient-Incentive-Programs-to-Minimize-Risk-Under-Federal-Laws
• HHS OIG Fact Sheet on Beneficiary Inducements
• Advisory Opinion Process | Office of Inspector General | Government Oversight | U.S. Department of Health and Human Services

Who this applies to: Chief Financial Officers, Chief Operating Officers, and Chief Compliance Officers at financial institutions.

Financial institutions rely heavily on third-party service providers to deliver critical technology, payment processing, online banking, compliance support, and other essential services. Recognizing the challenges many institutions face in managing these relationships, federal regulators recently issued a joint statement on core service providers and proposed updated third-party risk management guidance.

Focus on risk, not checklists

A central theme of the proposed guidance is that third-party risk management should be tailored to an institution's size, complexity, and risk profile. Regulators emphasize that not all vendor relationships present the same level of risk and that oversight should be tailored to the risks posed by each relationship. Instead, institutions are encouraged to focus resources on relationships that pose the greatest operational, financial, compliance, or customer impact. The regulators also reiterate that the guidance is principles-based rather than prescriptive, and that supervisory findings would be based on unsafe or unsound practices or legal violations rather than deviations from the guidance itself. 

The agencies also emphasize that effective risk management is about managing and understanding risk, not eliminating it entirely. Institutions may accept residual risks when doing so is consistent with their risk appetite and business objectives.

Regulators clarify their approach to core service providers

In a separate joint statement, regulators highlighted concerns about the market dynamics surrounding core service providers. Many financial institutions depend on a small number of large providers and often face challenges obtaining due diligence information, negotiating contracts, monitoring performance, or changing providers. 

To address these concerns, regulators indicated they will consider several factors when determining the level of supervisory attention directed toward core providers, including:

• Transparency in sharing due diligence and performance information 
• Timely disclosure of operational issues and cybersecurity incidents 
• Use of clear service-level agreements 
• Opaque pricing and billing practices 
• Contract provisions that restrict an institution's ability to switch providers or integrate with other vendors 
• Technology investments and operational resilience capabilities 

Accountability for core service providers may increase

Another noteworthy aspect of the regulators' joint statement is the reminder that, under certain circumstances, employees or agents of a core service provider may be considered Institution-Affiliated Parties (IAPs) of an institution. If an individual meets the statutory definition of an IAP, banking regulators may have authority to pursue enforcement actions directly against that individual for misconduct affecting a financial institution. The statement does not create new authority, but it signals regulators' willingness to consider existing enforcement tools when evaluating concerns involving third-party service providers. 

For institutions, this development could ultimately strengthen accountability within the vendor ecosystem. While institutions remain responsible for managing risks associated with outsourced activities, the statement suggests regulators are focused not only on how institutions oversee their core providers, but also on whether core providers and their personnel are meeting their own obligations to operate in a safe, sound, and transparent manner.

What financial institutions should do now

Financial institutions may wish to review their third-party risk management programs with an eye toward ensuring oversight efforts are aligned with actual risk levels. Institutions should also evaluate key core-provider contracts, service-level agreements, incident notification processes, and contingency plans for critical services.

The proposals suggest regulators are seeking to maintain a strong focus on material risks while encouraging a more tailored and efficient approach to third-party risk management. For institutions, that could mean more flexibility in managing lower-risk vendors while placing greater emphasis on understanding and managing relationships with critical service providers.

Bottom line for financial institutions

Regulators appear to be moving toward a more practical, risk-based supervisory framework that recognizes the realities institutions face when working with core providers and other third parties. Institutions should use this as an opportunity to ask whether their current vendor oversight is appropriately scaled to actual risk. In some cases, financial institutions may be applying the same level of documentation, review, and monitoring to lower-risk vendors as they do to critical service providers, creating unnecessary burden without meaningfully reducing risk. Vendors deemed to be low risk likely warrant a scaled-back oversight approach, allowing institutions to focus their oversight activities on vendors that truly represent the highest risk to the institution. Financial institutions that can demonstrate thoughtful risk assessment, proportional oversight, and sound governance should be well positioned under the evolving guidance and should use the guidance as an opportunity to level set their third-party risk management program.

Key takeaways

• Align third-party oversight activities with the actual risk posed by each vendor relationship rather than applying the same level of scrutiny across all providers.
• Focus risk management resources on third parties that present the greatest operational, financial, compliance, or customer impact.
• Evaluate contracts, service-level agreements, incident notification processes, and contingency plans for critical service providers. 
• Recognize that regulators are increasing their focus on core service providers, including transparency, operational resilience, and accountability for misconduct.
• Use the proposed guidance as an opportunity to reassess vendor risk classifications and scale oversight efforts appropriately for lower- and higher-risk relationships.

About BerryDunn

Our dedicated audit, tax, and consulting professionals understand the financial services industry and its challenges and are committed to helping you meet and exceed regulatory requirements. We partner with you to bring tailored approaches to fit your needs and operations and provide guidance on best practices and recommendations that make sense for you. Learn more about our services and team. 

Grants and contributions for capital asset purchases can affect how nonprofit organizations report revenue, assets, and net assets under US GAAP. This article explains the accounting considerations for nonprofits and nonprofit healthcare entities when funding is restricted for capital acquisitions after any conditions for recognition have been satisfied. It covers how to evaluate the terms and conditions of the funding, apply capitalization policies, determine when donor restrictions may expire, and shares best practices for documenting and reporting capital assets. Because the accounting for a grant or contribution and the related capital expenditure are separate considerations, proper treatment helps avoid reporting errors and supports audits, board reporting, and grant compliance.

Who this applies to: CFOs, controllers, finance and accounting professionals, and grant managers at nonprofits and nonprofit healthcare entities that receive grants or contributions for capital acquisitions. 

Understanding capital asset funding for nonprofits 

Capital asset funding refers to grants or contributions provided to buy, build, or improve long-term assets such as facilities, equipment, or technology. Examples of capital assets include:

• Construction to expand facilities
• Technology upgrades
• Equipment, for example, an X-ray machine

Accounting accurately for grants or contributions for capital asset purchases is particularly important because of:

• Increased funding opportunities for facility, equipment, and technology projects
• Limited room for accounting errors
• The need for accurate board reporting, grantor reporting, and financial statements
• Audit scrutiny and the potential for compliance findings

A key consideration is that the source of funding does not, by itself, determine the accounting treatment of the related expenditure. Organizations should separately evaluate the grant or contribution under applicable nonprofit accounting guidance and determine whether the underlying expenditure meets their capitalization policy.

Applicable US GAAP guidance

• ASC 958-605, Not-for-Profit Entities—Revenue Recognition: Provides guidance on accounting for contributions, including the evaluation of whether funding is conditional and whether it is donor-restricted.
• ASC 958-205, Not-for-Profit Entities—Presentation of Financial Statements: Provides guidance on the presentation of net assets and releases from donor restrictions.
• ASC 360, Property, Plant, and Equipment: Provides guidance on the accounting for long-lived assets, including capitalization and depreciation.

The accounting for the funding and the accounting for the related capital asset should be evaluated separately. ASC 958-605 addresses the grant or contribution, while ASC 360 addresses the underlying capital asset. ASC 958-205 addresses the presentation of net assets and releases from donor restrictions.

Capitalization policies 

Every organization should have a capitalization policy that provides guidelines for accounting for capital assets. The organization should first determine whether a purchase meets its definition of a capital asset and exceeds its capitalization threshold. This informs how to account for it: 

• Below the threshold: Generally, treat it as an expense.
• Above the threshold: Capitalize the asset and depreciate it over time.

The capitalization analysis should be performed consistently regardless of whether the asset is funded through a grant, contribution, debt, or the organization's operating funds.

For example, if a Federally Qualified Health Center (FQHC) receives a grant to purchase a $100,000 piece of medical equipment and the equipment meets the organization's capitalization policy, the organization would generally record the equipment as a capital asset rather than an operating expense. The fact that grant funding was used does not change the underlying capitalization analysis.

Determining if funding is donor-restricted 

If a grant or contribution is restricted for a capital purpose, the organization should classify the funding based on the terms of the grant agreement, contract, or donor letter. The related asset should be capitalized if it meets the organization’s policy and depreciated over its useful life.

The timing of the restriction release depends on the applicable donor stipulations and the nature of the capital asset. For some capital purchases, like equipment purchases, that may occur when the asset is placed in service. For larger projects, such as construction or facility expansion, the restriction generally expires when the acquired or constructed asset is placed in service, absent donor stipulations that impose additional restrictions on the use of the asset. 
 
Projects that cross fiscal year-end require additional attention. If the asset is still under construction or not yet placed in service, the related contribution generally remains in net assets with donor restrictions until the acquired or constructed asset is placed in service, absent other applicable donor stipulations.

When the restriction expires, the organization reclassifies the related amount from net assets with donor restrictions to net assets without donor restrictions. This release is a change in net asset classification; it does not change the accounting for the underlying capital asset.

Understanding the financial statement impact

The accounting for the capital asset and the related grant or contribution should be considered separately. If the expenditure meets the organization’s capitalization policy, the purchase is recorded as a capital asset rather than an operating expense. The asset is then depreciated over its useful life.

The related grant or contribution is accounted for separately under ASC 958. When a contribution is restricted for the acquisition or construction of a long-lived asset, the contribution is generally reported as an increase in net assets with donor restrictions until the restriction expires. Once the asset is placed in service, absent additional donor stipulations, the restriction generally expires, and the related amount is reclassified to net assets without donor restrictions.

This means the release of the donor restriction should not be confused with an operating expense or with the capitalization of the underlying asset. The capital asset remains on the balance sheet, and depreciation is recognized over its useful life, while the release of the donor restriction affects the classification of net assets.

For nonprofits, understanding these separate accounting impacts is important when evaluating operating results. A significant capital purchase funded by a restricted grant may increase capital assets without creating an equivalent operating expense in the period of purchase, while the related depreciation will affect operations over subsequent periods.

Grant compliance and US GAAP

Organizations receiving federal awards should also distinguish between US GAAP accounting and grant compliance requirements. Grant requirements, including those under 2 CFR Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, may determine whether an expenditure is allowable under a federal award. Those requirements are separate from the organization's US GAAP accounting policies.

An expenditure may be allowable under a grant while still requiring capitalization under the organization's accounting policies. Organizations should therefore evaluate both the grant requirements and the applicable accounting guidance.

Best practices for documenting and reporting capital assets

• Review and follow grant and donor agreements carefully to identify restrictions.
• Apply your organization’s capitalization policies consistently, confirming whether purchases meet capital asset criteria and the capitalization threshold.
• Track project costs, funding sources, and asset status in the general ledger.
• Monitor projects that cross fiscal years to determine when donor restrictions may expire.
• Maintain accurate documentation for auditors, funders, and board reporting.
• Reconcile grant and contribution funding to the related capital expenditures and fixed asset records. 
• Document when capital assets are placed in service and the related expiration of donor restrictions.

About BerryDunn

BerryDunn is a full-service assurance, tax, and advisory firm serving healthcare organizations and nonprofits nationwide. We work with hospitals, health systems, FQHCs, and mission-driven organizations to navigate complex regulatory, financial, and operational environments. Our teams bring deep experience in healthcare and nonprofit audits, compliance, and governance, along with specialized grant consulting services that help organizations strengthen internal controls, manage federal funding responsibly, and remain audit-ready. Through a practical, collaborative approach, BerryDunn helps organizations protect critical funding streams and sustain their mission.

Who this applies to: Read this article if your organization receives charitable donations. 

As summer gives way to autumn and year-end draws closer, many individuals turn their attention to charitable giving. With donations often increasing during this time of year, we want to share some best practices and considerations to help nonprofit organizations navigate the season of giving.

Donor acknowledgment letters

It is important for organizations receiving gifts to consider the following guidelines, as doing some work now may save you time (and maybe a fine or two) later.

Charitable (i.e., 501(c)(3)) organizations are required to provide a timely donor acknowledgment letter to all donors who contribute $250 or more to the organization, whether it be cash or non-cash items (e.g., publicly traded securities, real estate, artwork, vehicles) received. The letter should include the following:

• Name of the organization
• Amount of cash contribution
• Description of non-cash items (but not the value)
• Statement that no goods and services were provided (assuming this is the case)
• Description and good faith estimate of the value of goods and services provided by the organization in return for the contribution

Additionally, when a donor makes a payment greater than $75 to a charitable organization partly as a contribution and partly as a payment for goods and services, a disclosure statement is required to notify the donor of the value of the goods and services received in order for the donor to determine the charitable contribution component of their payment.

If a charitable organization receives noncash donations, it may be asked to sign Form 8283. This form is required to be filed by the donor and included with their personal income tax return. If a donor contributes noncash property (excluding publicly traded securities) valued at over $5,000, the organization will need to sign Form 8283, Section B, Part IV, acknowledging receipt of the noncash item(s) received.

For noncash items such as cars, boats, and even airplanes that are donated, there is a separate Form 1098-C, Contributions of Motor Vehicles, Boats, and Airplanes, which the donee organization must file. A copy of the Form 1098-C is provided to the donor and acts as acknowledgment of the gift. For more information, you can read our article on donor acknowledgments.

Gifts to employees

Many employers also find themselves in a giving spirit, wishing to reward employees for another year of hard work. While this generosity is well-intended, gifts to employees can be fraught with potential tax consequences organizations should be aware of. Here’s what you need to know about the rules on employee gifts:

First and foremost, the IRS is very clear that cash and cash equivalents (specifically gift cards) are always included as taxable income when provided by the employer, regardless of amount, with no exceptions. This means that if you plan to give your employees cash or a gift card this year, the value must be included in the employees’ wages and is subject to all payroll taxes.

There are, however, a few ways to make nontaxable gifts to employees. IRS Publication 15 offers a variety of examples of de minimis (minimal) benefits, defined as any property or service you provide to an employee that has a minimal value, making the accounting for it unreasonable and administratively impracticable. Examples include holiday or birthday gifts, like flowers, a fruit basket, or occasional tickets for theater or sporting events.

Additionally, holiday gifts can also be nontaxable if they are in the form of a gift coupon and if given for a specific item (with no redeemable cash value). A common example would be issuing a coupon to your employee for a free holiday ham or turkey redeemable at the local grocery store. For more information, please see our article on employee gifts.

Other year-end filing requirements

As the end of the calendar year approaches, it is also important to start thinking about Form 1099 filing requirements. There are various 1099 forms, including 1099-INT to report interest income, 1099-DIV to report dividend income, 1099-NEC to report nonemployee compensation, and 1099-MISC to report other miscellaneous income.

Form 1099-NEC reports non-employment income, which is not included on a W-2. Organizations must issue 1099-NECs to payees (there are some exclusions) who receive at least $2,000 in non-employment income during the calendar year. This $2,000 threshold is new for 2026—up from the previous $600 limit, which was in place for years. In future years, the threshold will be increased annually (adjusted for inflation). A non-employee may be an independent contractor or a person hired on a contract basis to complete work, such as a graphic designer. Payments to attorneys or CPAs for services rendered that exceed $2,000 for the tax year must be reported on a Form 1099-NEC. However, a 1099-MISC would be sent to an attorney for payments of settlements. For additional questions on which 1099 form to use, please contact your tax advisor.

While federal income tax is not always required to be withheld, there are some instances when it is. If a payee does not furnish their Tax Identification Number (TIN) to the organization, then the organization is required to withhold taxes on payments reported in box 1 of Form 1099-NEC. There are other instances, and the rates can differ, so if you have questions, please reach out to your tax advisor. 1099 forms are due to the recipient and the IRS by January 31.

While the seasons may change, tax reporting and compliance remain reliably consistent. We hope the information above is helpful to organizations as we approach the year's end. As always, BerryDunn’s nonprofit tax team is ready to offer support and guidance. 

Who this applies to: CFOs, controllers, finance directors, HR directors, benefits administrators, and plan administrators at employers that sponsor 403(b) plans using pre-approved documents.

The IRS has established a critical compliance deadline for 403(b) plan sponsors: all pre-approved 403(b) plan documents must be restated under Cycle 2 no later than December 31, 2026. Failure to meet this deadline could jeopardize a plan’s tax-advantaged status—creating significant operational, financial, and fiduciary risk. 

While the requirement itself is not new, many plan sponsors have not yet begun the restatement process. As year-end approaches, capacity constraints at document providers, recordkeepers, and advisors may create bottlenecks. Acting now will help ensure timely compliance and avoid last-minute complications.

Why the Cycle 2 restatement matters 

The IRS requires periodic restatements of pre-approved 403(b) plans to incorporate: 

• Legislative and regulatory changes 
• IRS guidance issued since the prior cycle 
• Updates to plan language and operational requirements 

The Cycle 2 restatement reflects changes since the first remedial amendment cycle for 403(b) plans, including updates related to hardship distributions, loan rules, and required minimum distributions, among others. 

Importantly, this restatement is not optional—it is a condition of maintaining the plan’s qualified status under Internal Revenue Code Section 403(b).

Who is affected?

This requirement applies to employers sponsoring 403(b) plans that use pre-approved plan documents, including: 

• Public schools and educational organizations 
• Tax-exempt organizations under IRC Section 501(c)(3) 
• Certain ministers and church-related organizations (depending on document structure) 

If your plan is individually designed, different rules may apply—but most 403(b) plans today utilize pre-approved document formats. 

Key action steps for plan sponsors

To help ensure compliance ahead of the December 31, 2026 deadline, we recommend the following steps:

1. Confirm your plan document type 

Determine whether your 403(b) plan uses a pre-approved document (vs. individually designed). 

• If you are unsure, consult with your recordkeeper, third-party administrator (TPA), or ERISA counsel. 
• This step is critical, as the Cycle 2 requirement specifically applies to pre-approved plans. 

2. Review the Cycle 2 restated document 

Once your provider issues the updated plan document: 

• Review the restated provisions carefully. 
• Pay close attention to operational changes that may affect plan administration or participant eligibility. 
• Coordinate with your advisor to understand any new responsibilities or compliance considerations. 

3. Adopt the restated plan by December 31, 2026 

Formal adoption must occur by the IRS deadline: 

• Execution typically requires an authorized employer representative. 
• Late adoption may require correction under the IRS Employee Plans Compliance Resolution System (EPCRS), which can involve additional cost and administrative burden. 

4. Retain the executed document 

Maintain a fully signed copy of the restated plan document: 

• Store it with your permanent plan records in your ERISA file. 
• Ensure it is accessible for auditors, regulators, or internal governance reviews. 

5. Distribute an updated Summary Plan Description (SPD) 

An updated SPD reflecting the restated plan provisions: 

• Must be provided to participants within 210 days following plan adoption.
• Should clearly communicate plan terms in a participant-friendly format.

6. Communicate material changes 

If the restatement introduces material changes impacting participant rights or benefits: 

• Provide clear and timely communication to participants. 
• Consider targeted messaging to affected populations. 
• Align communications with fiduciary best practices for transparency. 

Avoiding year-end capacity constraints 

A key practical consideration for 2026 is vendor capacity. Historically, plan sponsors that wait until the fourth quarter to begin restatement: 

• Experience delays in receiving documents 
• Encounter limited availability from TPAs and advisors 
• Risk missing the adoption deadline 

Starting the process early allows for: 

• Thorough document review 
• Adequate time for internal approvals 
• Proper coordination of participant communications 

Fiduciary considerations 

From a fiduciary perspective, timely compliance with the Cycle 2 restatement requirement is part of maintaining prudent plan governance. Failure to act could result in: 

• Plan disqualification risk 
• Increased scrutiny during audits 
• Operational failures requiring correction 

Proactive planning, documentation, and communication demonstrate sound fiduciary oversight and help protect both the plan sponsor and participants. 

Plan sponsors should act now

The Cycle 2 restatement deadline of December 31, 2026 is fast approaching. While the process is manageable, it requires coordination and timely action. Plan sponsors should act now to confirm their document status, engage their service providers, and begin the review and adoption process well in advance of year-end.

Key takeaways

• Confirm whether your 403(b) plan uses a pre-approved document, because the Cycle 2 restatement requirement applies specifically to pre-approved plans. 
• Adopt the restated 403(b) plan document by December 31, 2026, to help maintain the plan’s tax-advantaged status. 
• Review the updated plan provisions for changes that may affect plan administration, participant eligibility, or compliance responsibilities. 
• Retain the fully executed restated plan document with permanent plan records, so it is available for audits, regulators, or governance reviews. 
• Communicate updated plan terms and any material changes to participants within the required time frame.

Need help or have questions? Reach out to your BerryDunn or Creative Planning Retirement Services teams. 

Who this article applies to: Read this if you are a CEO, CFO, board member, or other professional involved in the Form 990 reporting process at a nonprofit organization that files Form 990.

You've probably heard the phrase "show the receipts." In today's world, this means being able to support your claims with clear evidence and documentation. While transparency has always been a cornerstone of the nonprofit sector, lawmakers and regulators are looking to place even more emphasis on transparency, accountability, and disclosure.

In April 2026, the US Department of the Treasury announced plans to revise Form 990. According to the announcement, the proposed revisions are intended to improve transparency, strengthen tax administration, and enhance reporting related to certain activities of organizations exempt under Internal Revenue Code Section 501(c)(3), including government contracts, government grants, and fiscal sponsorship arrangements. Treasury officials have indicated the initiative is intended to improve visibility into how charitable organizations receive and use funds, particularly where complex organizational structures exist.

Five legislative proposals focused on nonprofit transparency

In July, as a follow-up to the Treasury’s April announcement, the House Ways and Means Committee—the chief tax-writing committee in the US House of Representatives—approved five proposed pieces of legislation aimed at increasing transparency and accountability within the nonprofit sector.

1) Foreign Funding Transparency Act (H.R. 9772) – House Ways and Means Committee memo

• Requires tax-exempt organizations to collect and report to the IRS the aggregate amount of donations received from foreign nationals. 
• Mandates that tax-exempt organizations include as a separate line item the aggregate amount of donations received from those foreign nationals who are from a foreign country of concern (i.e., China, North Korea, Russia, Iran). 
• Addresses how dual citizenship is reported for foreign nationals from a country of concern to ensure accurate reporting.

2) Stopping Foreign Influence in Elections Act of 2026 (H.R. 9771) – House Ways and Means Committee memo

• Enacts a penalty on tax-exempt organizations that receive contributions from foreign nationals and then donate to a Political Action Committee (PAC) or a 501(c)(4). Penalty is twice the amount of the contribution given to the entity.
• Establishes secondary excise tax on tax-exempt organizations that contribute to a PAC or 501(c)(4) organization if they have received a contribution or gift from a foreign national within the last two years.
  • Excise tax on the first contribution is equal to 100% of the contribution to the PAC.
  • Excise tax on the second contribution is equal to 200% of the contribution to the PAC. 
• Suspends tax-exempt status for two years, beginning on the date a tax-exempt organization makes a third contribution to a PAC, and imposes an additional 200% excise tax.

3) Fiscal Sponsorship Transparency Act (H.R. 9721) – House Ways and Means Committee memo

• Requires tax-exempt organizations to disclose the following information regarding certain fiscally sponsored projects:
  • Name of each party, other than any individuals, subject to the arrangement
  • Aggregate amount of funds made available or transferred to the project
  • Description of the activities related to the amounts made available or transferred
  • Name of the individual designated as the principal officer managing the fiscal sponsorship arrangement on behalf of the organization
  • Date on which the arrangement began, and if applicable, the date on which the arrangement ended
• Imposes excise taxes on organizations acting merely as a conduit for a third party that is not tax-exempt.

4) Fair Treatment of Religious Organizations Act of 2026 (H.R. 9722) – House Ways and Means Committee memo

• Amends IRC §501 to require that determinations of religious purpose be made without regard to an organization's beliefs or practices concerning marriage, sexuality, or gender identity—even if inconsistent with public policy. Protections extend to §501(c) status, eligibility for deductible contributions, and any other federal benefit tied to charitable status. 
• Clarifies that a belief does not fail to be treated as a religious belief merely because it is not compelled by or central to a system of religion. 
• Applies to taxable years beginning after December 31, 2025.

5) Tax Exempt Hospital Transparency Act (H.R. 9504) – House Ways and Means Committee memo

• Amends IRC § 6033 governing disclosure to require additional reporting from all tax-exempt hospitals, including: 
  • CMS certification number for each hospital facility
  • Value of the financial assistance provided during a taxable year
  • Number of completed financial assistance applications received, granted, and denied during a taxable year
• Requires the following additional reporting from large tax-exempt hospitals that have more than 100 inpatient beds:
  • Amount of spending to address the three highest priority health needs identified in the most recent Community Health Needs Assessment and a description of actions taken during the taxable year to meet each need
  • Amount of spending on: 
    • Quality improvement
    • Nonclinical programming
    • Other community benefits that the Secretary may prescribe
• Requires the following additional reporting from high revenue tax-exempt hospitals that have more than $100 million in net patient revenue: 
  • Spending on advertising costs
  • Information on health service lines
  • Information on 340B drug discount program

Importantly, while the House Ways and Means Committee has approved these proposals, they must complete the legislative process before becoming law. While specific details regarding potential changes to Form 990 remain unclear, the message from policymakers is not: changes are likely on the horizon.

What does this mean for tax-exempt organizations?

Currently, there are no immediate changes to Form 990 reporting requirements. Further, if history is any indication, modifications to Form 990 traditionally move at a deliberate pace and involve an extensive review and development process. This includes public comment periods, which allow practitioners, organizations, and other stakeholders an opportunity to provide feedback, ask questions, and seek clarification before any new requirements are finalized or enacted.

These recent developments serve as a helpful reminder that strong recordkeeping and documentation efforts remain crucial. Organizations should continue maintaining thorough support for their activities, grants, government funding, transactions, and governance practices. If future reporting requirements do emerge, an organization with sound documentation processes in place will generally fare better than those who do not.

Despite past precedent, could changes still be coming for the 2026 Form 990 as we approach the end of the year? Absolutely.

Key takeaways

• Recognize that proposed Form 990 revisions are intended to increase transparency around government grants, contracts, fiscal sponsorship arrangements, and other activities of tax-exempt organizations.
• Monitor the five nonprofit transparency bills approved by the House Ways and Means Committee, which must still move through the full legislative process before becoming law.
• Understand that no immediate Form 990 reporting changes apply yet, and any revisions may still involve review, development, and public comment.
• Maintain thorough documentation for activities, grants, government funding, transactions, and governance practices to better prepare for potential new reporting requirements.

About BerryDunn

The transparency conversation is still unfolding, and BerryDunn is actively monitoring all legislative and regulatory developments potentially affecting tax-exempt organizations. As additional guidance becomes available, we will continue to keep clients informed and help organizations understand what these developments may mean. Until then, we recommend watching for more developments and keeping your receipts. Learn more about our team and services.

Who this applies to: Broker-dealers and their audit committees/boards. 

The Public Company Accounting Oversight Board (PCAOB) recently released its 2025 Annual Report on the Interim Inspection Program Related to Audits of Brokers and Dealers, providing insight into the quality of broker-dealer audits and attestation engagements performed by PCAOB-registered firms. 

While the PCAOB reported improved inspection results in 2025, many of the deficiencies occurred in areas that remain a focus for SEC, FINRA, and PCAOB oversight. Broker-dealers should view the report as a roadmap to the areas most likely to attract regulatory scrutiny.

Inspection results continue to improve

The PCAOB inspected 61 firms and reviewed 103 broker-dealer audits during 2025. In its review, the PCAOB focused on areas involving heightened risk to investors and the protection of customer assets. Overall, inspection results improved across examination engagements, review engagements, and financial statement audits. 

The PCAOB found the following:

• Deficiencies in examination engagements (broker-dealers filing compliance reports) decreased to 40%, compared to 59% in 2024. 
• Deficiencies in review engagements (broker-dealers filing exemption reports) were 41%, generally consistent with the prior year. 
• Deficiencies related to sufficient or appropriate evidence in financial statement audits declined to 56%, compared to 66% in 2024.

While inspection results improved, deficiencies remain common across broker-dealer audits and attestation engagements. 

Revenue remains the leading source of audit deficiencies 

Revenue testing was once again the area with the highest number of deficiencies. The PCAOB identified revenue-related deficiencies in 38 of 102 audits in which revenue was reviewed (37%).  

Common issues included: 

• Insufficient testing of commission, underwriting fee, and advisory fee calculations 
• Inadequate procedures to support revenue recognition under ASC 606, including the evaluation of performance obligations and related disclosures 
• Overreliance on information provided by broker-dealers or service organizations without sufficient testing 

Revenue is often one of a broker-dealer's most significant accounts and frequently involves management judgment and complex accounting considerations. Deficiencies in this area can result in audit adjustments, disclosure issues, and increased scrutiny from regulators, and they can potentially delay the completion of financial statement audits. Broker-dealers should ensure revenue streams are well documented and supported by controls that demonstrate compliance with ASC 606 and other applicable reporting requirements.

Continued scrutiny of customer protection and compliance requirements 

For broker-dealers that hold customer assets or are subject to customer protection requirements, the PCAOB again identified deficiencies related to compliance examinations. Many of these findings involved insufficient testing of controls over compliance with SEC financial responsibility rules.  

Key observations included:

• Insufficient testing of controls related to customer reserve calculations and possession or control requirements under the Customer Protection Rule 
• Failure to adequately evaluate important controls governing customer assets, including management review controls and controls over information used in regulatory calculations 
• Deficiencies in testing information produced by service organizations and information technology controls 

For broker-dealers subject to SEC Rule 15c3-3 or other financial responsibility requirements, weaknesses in compliance controls can lead to regulatory findings, increased examination activity, and questions about the safeguarding of customer assets. Strong documentation and effective controls are essential not only for audit purposes but also for demonstrating ongoing regulatory compliance. 

Evaluating audit results remains a challenge 

The PCAOB observed an increase in deficiencies related to auditors' evaluation of financial statement presentation and disclosures. Deficiencies in this area were identified in 27 audits (26%), up from 16% in the prior year.  

Examples included failures to identify:

• Incomplete or inaccurate disclosures related to revenue recognition under ASC 606, including required information about performance obligations 
• Financial statement presentation and disclosure issues involving cash flows, fair value measurements, and income taxes 
• Omitted or incomplete disclosures associated with related-party transactions, segment reporting, fair value measurements, and other required GAAP disclosures 

These findings highlight the importance of not only accurate accounting but also thorough disclosure reviews during the financial reporting process. 

Related-party relationships and transactions remain a regulatory focus 

The PCAOB continues to identify deficiencies associated with auditors' evaluation of related-party relationships and transactions. In 2025, deficiencies were identified in five of the 30 audits in which related-party relationships and transactions were reviewed (17%), compared to 36% in 2024. While this represents improvement from prior years, related-party arrangements remain an area of heightened scrutiny due to the unique business structures commonly found within broker-dealer organizations. 

Common findings included: 

• Insufficient testing of revenue and expense allocations between broker-dealers and affiliated entities 
• Failure to verify the accuracy and completeness of data used in allocating revenues and expenses between broker-dealers and their affiliates 
• Inadequate evaluation of whether allocations were consistent with written intercompany agreements 
• Omitted or incomplete related-party disclosures required under ASC 850 
• Insufficient communication of related-party matters to those charged with governance

Broker-dealers frequently operate within networks of affiliated entities and may share personnel, facilities, technology platforms, and operating costs across those entities. As a result, expense-sharing arrangements, management fee allocations, clearing relationships, and other affiliated transactions often attract audit and regulatory attention. Management should periodically review related-party agreements, ensure allocation methodologies are consistently applied and supported, and confirm that all required disclosures are complete and accurate.

Fraud-related procedures continue to attract attention 

The PCAOB also identified recurring issues related to journal entry testing and fraud risk considerations.  

Common findings included: 

• Failure to select journal entries with fraud-related characteristics 
• Incomplete journal entry populations 
• Insufficient testing of supporting documentation 
• Lack of rationale for excluding journal entries from testing 

Broker-dealers should view these findings as a reminder that fraud risk assessment extends beyond the audit process. Strong internal controls, management oversight, and monitoring activities can help identify unusual transactions before they become regulatory or financial reporting issues. Because fraud-related procedures remain a core PCAOB focus, weaknesses in these areas may attract increased attention during both audits and inspections.

Turning inspection findings into action 

The PCAOB's report is more than a summary of audit deficiencies. It provides broker-dealers and those charged with governance with valuable insight into the financial reporting, compliance, and control areas receiving the greatest regulatory attention. By understanding these common inspection findings, management can strengthen controls, improve documentation, enhance disclosures, and better position the organization for audits, examinations, and ongoing regulatory oversight.  

For broker-dealers, the strongest response to the PCAOB's inspection findings is a proactive one: 

• Identify gaps before the audit begins. 
• Strengthen controls before regulators identify deficiencies. 
• Maintain a year-round focus on financial reporting and compliance risks. 

Key takeaways

• Monitor PCAOB inspection findings to understand which broker-dealer audit and attestation areas are most likely to receive regulatory scrutiny. 
• Strengthen documentation, controls, and disclosures around revenue recognition, customer protection, related-party transactions, and fraud procedures. 
• Review audit readiness throughout the year so financial reporting and compliance issues can be addressed before audits, examinations, or inspections.

About BerryDunn

Our financial services team understands the complex regulatory environment that broker-dealers operate in and provides practical solutions to help you stay ahead of requirements. From broker-dealer financial statement audits to tax preparation, compliance, and consulting services, we tailor our services to meet your unique needs. Learn more about our team and services. 

Who this applies to: Those responsible for price transparency reporting, revenue cycle/registration, or contracting at an Inpatient Prospective Payment System (IPPS) hospital or in a reimbursement department at a healthcare facility. 

The Centers for Medicare and Medicaid Services (CMS) introduced Worksheet S-12 to Form CMS-2552-10, adding a new reporting requirement for certain IPPS hospitals. Effective for cost reporting periods ending on or after January 1, 2026, applicable hospitals must report the weighted median Medicare Advantage Organization (MAO) payer-specific negotiated charge by Medicare Severity Diagnosis Related Group (MS-DRG) for inpatient discharges during the cost reporting period.

What Worksheet S-12 measures and why it matters 

Although the worksheet refers to negotiated “charges,” the reported amount is better understood as the negotiated payment rate or estimated payment amount associated with a Medicare Advantage contract for a specific MS-DRG. These amounts generally do not tie directly to the actual payment received on each individual claim. Instead, the worksheet is intended to capture a standardized, discharge-weighted median negotiated amount for each applicable MS-DRG. 

CMS created Worksheet S-12 to collect MS-DRG-specific payment data for use in developing a market-based MS-DRG relative weight methodology beginning in FY 2029. Because CMS has stated that they may refine this methodology through future rulemaking before implementation, hospitals should monitor future rules and related guidance for updates.

Who must complete Worksheet S-12? 

Worksheet S-12 applies to subsection (d) hospitals, including applicable IPPS hospitals and subsection (d) Puerto Rico hospitals. The requirement does not apply to Critical Access Hospitals, inpatient psychiatric hospitals, inpatient rehabilitation hospitals, children’s hospitals, and cancer hospitals. CMS instructions also identify other limited exemptions, such as hospitals that do not negotiate payment rates and only receive non-negotiated payments, as well as hospitals paid under the Maryland Total Cost of Care Model during the model’s performance period.  

Hospitals should carefully evaluate whether they are subject to the requirement before preparing the cost report. Failure to complete the worksheet may result in the cost report being rejected, making early assessment and data preparation important. 

Core data needed to complete Worksheet S-12 

• The hospital’s most recent Hospital Price Transparency Machine-Readable File (MRF) as of the hospital’s cost report filing date, which should include MAO payer-specific negotiated charges 
• Detailed inpatient discharge data from the hospital’s Electronic Medical Record (EMR) or patient accounting system, organized by payer, plan, and MS-DRG 
• Identification of capitated and non-capitated Medicare Advantage plans, because capitated arrangements are excluded from the weighted median calculation but may still be needed for reconciliation and audit support 
• MS-DRG grouping or mapping information, particularly when negotiated charges are not identified directly at the MS-DRG level and must be cross-walked from another classification system 

Why the MFRs matters 

The Hospital Price Transparency MRF is central to Worksheet S-12 because it is the source for the MAO payer-specific negotiated charges. Hospitals should confirm that their file is available, complete, and formatted in a way that allows negotiated charges to be matched to MAO plans and MS-DRGs. If the file is incomplete or difficult to use, the hospital may face significant challenges preparing the worksheet accurately and timely.

Building the discharge detail file 

The discharge detail file should be developed from the hospital’s EMR or patient accounting system and should include one line per inpatient discharge. The file should be based on discharge dates within the hospital’s fiscal year and should include inpatient bill types, such as 11x claims, while allowing the hospital to identify transfers, denied claims, outpatient accounts, and claims pending appeal. 

• Account number or other unique discharge identifier 
• Discharge date 
• Discharge disposition or other indicator used to distinguish true discharges from transfers 
• Financial class 
• Payer plan name 
• Payer plan code 
• MS-DRG 
• Capitation indicator 
• Claim status, including indicators for denied claims, outpatient claims, and claims pending appeal 

A clean discharge detail file is essential because the weighted median calculation depends on matching each applicable Medicare Advantage discharge to the correct negotiated charge. Each discharge should appear on a single line so that the data can be sorted, filtered, reconciled, and matched consistently.

How to calculate the weighted median negotiated charge 

To calculate the weighted median Medicare Advantage payer-specific negotiated charge, the hospital should first isolate inpatient discharges associated with Medicare Advantage plans. The negotiated charge from the MFR should then be matched to each discharge based on the MAO payer and the applicable MS-DRG. If a discharge or negotiated charge is not already identified at the MS-DRG level, the hospital must perform an appropriate crosswalk or grouping process. 

1. Assign each Medicare Advantage inpatient discharge a payer-specific negotiated charge using the MAO plan and coded MS-DRG. 
2. If the discharge is not coded to an MS-DRG, map the applicable classification, such as an APR-DRG, to the appropriate MS-DRG for matching. 
3. Exclude capitated discharges and other accounts that should not be included in the calculation, while retaining them as needed for reconciliation and a solid audit trail. 
4. Sort the remaining records by MS-DRG and negotiated charge from lowest to highest. 
5. For each MS-DRG, identify the median negotiated charge. If the number of discharges is odd, use the middle value. If the number of discharges is even, average the two middle values. 
6. Enter the resulting median negotiated charge on Worksheet S-12 only for MS-DRGs that had applicable discharges during the fiscal year. 

How to prepare for Worksheet S-12 

Hospitals should begin preparing for Worksheet S-12 well before the cost report filing deadline.  

Key steps to take now:  

1. Validate the hospital’s MRF. 
2. Confirm Medicare Advantage payer mappings. 
3. Develop a discharge-level data extract. 
4. Identify capitated arrangements. 
5. Test the median calculation process. 

Early preparation can help reduce filing risk, support reconciliation, and avoid last-minute issues with cost report software edits. 

Because Worksheet S-12 connects Hospital Price Transparency data, Medicare Advantage contracting information, and Medicare cost report reporting, the preparation process will likely require coordination among reimbursement, finance, revenue cycle, contracting, and information technology teams.

Key takeaways

• Determine whether your hospital is required to complete Worksheet S-12 before beginning Medicare cost report preparation. 
• Validate the hospital’s MRF to confirm Medicare Advantage negotiated charge data is complete and usable. 
• Build a discharge-level data file that connects Medicare Advantage inpatient discharges to payer plans and MS-DRGs. 
• Exclude capitated arrangements and other non-applicable accounts from the weighted median calculation while retaining support for reconciliation. 
• Coordinate across reimbursement, finance, revenue cycle, contracting, and IT teams to reduce filing risk and support timely reporting.

About BerryDunn

BerryDunn’s healthcare reimbursement team can help hospitals prepare for Worksheet S-12 by evaluating applicability, reviewing MRF readiness, developing discharge-level data extracts, mapping Medicare Advantage plans and MS-DRGs, and creating a defensible approach to the weighted median calculation. If your organization has questions about this new Medicare cost report requirement or needs support preparing for implementation, we can help. Learn more about our team and services.

Who this article applies to: Compliance officers, revenue integrity directors, clinical documentation improvement specialists, clinical documentation and coding auditors, and healthcare providers at healthcare facilities or medical practices. 

It may feel at times like CPT® (Current Procedural Terminology) coding never changes—until it does. The American Medical Association (AMA) annually updates the CPT code set, with main revisions becoming effective January 1, 2027. These changes often require organizations to rethink documentation, coding, workflows, education, and auditing. CPT coding updates may be sporadic and unique, but early organizational preparation can minimize disruptions.

The impacts of CPT code changes may reverberate well beyond the coding department. Significant CPT revisions can affect the productivity, coding accuracy, denial rates, reimbursement patterns, compliance monitoring, Electronic Health Record (EHR) builds, payer contract assumptions, and audit findings of coding and revenue cycle teams. Even seemingly straightforward code changes can trigger extensive downstream impacts if documentation expectations, charge capture workflows, and system configurations are misaligned. Organizations should therefore approach major CPT updates as cross-functional operational changes, rather than as isolated coding updates, and prepare early. 

One CPT change, organization-wide impact 

The upcoming 2027 obstetric coding changes provide an excellent example of the broad impact code changes can have across an organization. Beginning January 1, 2027, maternity care reporting will undergo one of its most significant changes in decades, bringing an end to the long-used global obstetric package model. The resulting increase in Evaluation and Management (E/M) service reporting will require complete and accurate documentation to support code selection.

This shift to increased E/M coding for obstetric services reinforces an important lesson that is applicable to other service lines. Major CPT revisions, such as for obstetrics, rarely involve code changes alone. In the obstetrical example, use of increased E/M coding will require documentation improvements and EHR template revision, workflow redesign, provider education, and ongoing auditing to ensure compliance with the resulting changes.

Preparation will be especially important for these code sets because many patients receiving antepartum services in 2026 may continue their maternity care into 2027, when the new reporting structure takes effect. Organizations will need to consider how visits, documentation, charge capture, payer requirements, and patient encounters that cross the implementation date will be managed. Without proactive planning, organizations put themselves at increased risk for a cascade of events beginning with incomplete documentation and inconsistent coding, leading to potential delayed claims, payer denials, and confusion among providers and revenue cycle teams. Developing clear guidance before the updated code implementation will help ensure continuity of care, accurate reporting, and a smoother operational transition. 

Six steps to prepare for CPT changes

1. Start planning early. Identify affected specialties, workflows, payer policies, and EHR implications to allow time for meaningful education and implementation of changes. 
2. Engage multiple departments. Build a multidisciplinary workgroup that includes coding, compliance, revenue cycle, clinical leaders, operational leaders, and information technology representatives. 
3. Focus on documentation, not just codes. New codes often introduce new documentation requirements that all clinical staff, coders, providers, and auditors should be aware of. Perform documentation gap assessments to identify where provider education may be needed before the effective date. 
4. Evaluate technology. Validate EHR templates, charge capture tools, coding edits, payer rules, reporting systems, and analytics dashboards prior to January 1. 
5. Monitor performance after implementation. Conduct focused post-implementation audits of documentation, coding accuracy, denial trends, and reimbursement patterns to identify improvement opportunities and provide feedback. Use findings to provide timely feedback and make necessary adjustments.  
6. Communicate consistently. Provide staff and colleagues with regular updates and clear guidance throughout the transition period. Having a clear point of contact gives everyone a reliable resource for questions throughout the transition. 

Plan now for upcoming CPT code changes 

Major CPT revisions rarely involve coding changes alone; rather, they prompt cascading operational changes. Successful implementations occur when coding, documentation, compliance, clinical operations, IT, and revenue cycle teams begin planning well before the effective date. Organizations that start now will be best positioned to maintain compliance, support accurate reimbursement, and minimize operational disruption when the next major CPT update arrives. Now is the time to begin. 

BerryDunn can help  

Our healthcare compliance team can help. We incorporate deep, hands-on knowledge with industry best practices to help your organization manage compliance and revenue integrity risks. Learn more about our healthcare compliance consulting team and services.