In 2021, the Florida House of Representatives drafted legislation requiring skilled nursing facilities to annually submit unaudited financials to the Agency for Health Care Administration (Florida Medicaid, commonly known as “AHCA”). This data was to be certified as complete and accurate by the chief financial officer of the skilled nursing facility.

The format of the intended reporting appears to closely resemble the information currently required of hospitals, including statistical data, along with the fiscal year-end balance sheet, income statement, statement of cash flow, and statement of retained earnings. However, unlike hospitals, skilled nursing facilities were not required to have this data audited*.

Florida House Bill 539 was introduced in 2022 to address this perceived oversight. The legislation passed and was signed by Governor DeSantis into law in April, requiring the financial reports of skilled nursing facilities to be audited. With this new legislation taking effect as of July 1, 2022, nearly 700 licensed skilled nursing facilities now find themselves in need of an audit*—many for the first time. As such, many within the skilled nursing facility community are left seeking answers for where to start with an audit.

What Is an Audit*?

A financial statement audit is rigorous and complex; however, to put it simply, any organization’s goal for an audit is for the auditors to express an “unqualified” opinion that the financial statements are free of material misstatement, as presented, and in accordance with accounting principles generally accepted in the United States.

When Does My Audit Need to Take Place?

Per House Bill 539, skilled nursing facilities must submit the required annual reporting (including the fiscal year-end balance sheet, income statement, statement of cash flow, and statement of retained earnings) and the financial statement audit to the state within 120 days of the end of their fiscal year-end. While we await final rule-making* from AHCA that may alter these requirements for the first year, the 120-day requirement is the current expectation for future years. This means should a facility’s fiscal year end in December, they have until the end of April to complete an audit and submit these documents to the state.

As auditing firms were already experiencing capacity issues due to increased auditing requirements associated with federal and state COVID-19 relief efforts, it is vitally important that you begin to plan for your upcoming audit now, if you are impacted, and discuss with your chosen audit firm as far in advance of the deadline as possible.

How Do I Prepare for an Audit?

It is important to note that the auditing process takes time. The first-year audit of skilled nursing facilities will involve two years of financial data, as the auditors must have a “starting point” for the year being audited (the previous fiscal year-end). Therefore, it will be a more involved (and more costly) engagement in the first year.

As such, it is imperative to start early and prepare. A few steps to increase your chances of an efficient financial statement audit include:

• GET ORGANIZED: Start collecting items your auditors will need in a central location and in a format friendly to the process (electronic), so you are ready when they arrive.
• KEEP THE BOOKS TIDY: Reconcile bank statements and all significant accounts, conduct inventory counts and adjust your accounts for the results, and ensure your patient receivables are fully collectible. Doing so not only improves your process but also allows you to identify any issues earlier. If the auditors have a “clean” set of records to start with, the overall time spent (and, ideally, the cost of the audit) should be less.
• MAINTAIN GOOD RECORDS: Collect as much transaction data as possible throughout the year and make it searchable. Organized data speeds up the audit and helps you and your auditor meet required deadlines.

Even though the word “audit” can be intimidating, it doesn’t have to be. Skilled nursing facilities should seek help from qualified and experienced auditors familiar with the rules and regulations of AHCA and the State of Florida. At CRI, our dedicated healthcare team possesses industry-specific expertise and experience to increase your efficiencies and provide unparalleled client service. We pride ourselves on providing hands-on involvement, ongoing open and honest communication, and tailored solutions designed to increase your efficiencies and provide exceptional client service.

Let our team of seasoned healthcare professionals assist you with these new requirements. We are ready to see you through each step of the way.

* As of the date of posting, final rules are pending release from the State of Florida, including AHCA, that will provide further guidance as to the timing of the initial year audit requirement.  This post will be updated when additional information is released.