D (5:33)

So.

C (5:35)

Leader Schumer said, no thanks to that deal, they had the 10th vote today to actually do that simple extension that was voted down. And in a new wrinkle, the Republican leader Thune also brought up the defense appropriations bill, very bipartisan coming out of the committee house. Had passed it concept is let's pass the at least defense. Okay. And that would do two things. It would make sure the troops get paid. And I'm going to come back to that because those are significant inflection points. And then two, it could be a vehicle that other spending packages could be added to as a way to potentially get out of this. Again, Leader Schumer did not take that deal. He basically said we're going to vote against that unless you pair that with the HHS appropriations health care.

B (6:22)

So, Mark, can I ask you a question about that? I heard that Senator Thun was proposing clean, straight clean funding bills. Does that mean attaching them to the defense authorization that you were just talking about? So if I hear that in the news, is that a separate.

C (6:41)

That it would still be clean? It's just, it's two separate things. The clean continuation means that they are just extending current funding with nothing added to it. This is actually like the what the work they're supposed to be doing. Lisa, this is getting a bill done that's gone through committee and has passed the House. So that's, that's, there's probably three ways out of this. One is they do a long term extension at current funding levels. Okay. That's one way. Maybe it's long term. Maybe it's a matter of months. Maybe it gets us into the first quarter. They've done that in the past. That's a possibility. The next is that they get a bipartisan agreement so they actually negotiate a package that will get the 60 votes required that will have maybe that includes some extension of these tax premiums. Maybe it includes the other, the other tax bill. Excuse me, the other appropriations bills that are included in that. And maybe it goes for a full year. Who knows, you know, or last that they just, you know, this goes on for a while until they can kind of figure out it's a daily assessment of the politics on both sides. You know, like it or not, that's where they are. We do get to a point where there's a diminishing return on extending those tax credits because open season does start Nov. 1. That may change the situation. You know, we're going to again, we'll see how it plays out. Now let's look at next week. The House will announce tomorrow whether they're going to even come back. The way they've basically played this is that they voted for an extension. Their work is done. The Senate's got to figure out what they're going to do. And so they'll come back when there's a deal. They're going to announce tomorrow. We'll hear whether they're going to be back or not. We'll also hear exactly how the Senate is going to play out next week. I talked about the military pay. Where the political kind of rubber meets the road is payday. Right. We just blew through the 15th big tax date, but also payday for the military. And that's really where there's a lot of the political sympathy. The administration has announced an executive action where they were going to try and use some already program funds to reprogram to get the troops paid for the 15th. But the reason I'm assessing that this could go another couple of weeks is the next inflection point is November 1st or the end of the month for the next payday. And so the way Congress usually works is that they need a burning platform, so they need to have their backs against the next wall before they get to a decision. Now they could decide based on the politics. Next week is the day for the deal. There could be the ability, if something is put on the table, to peel off a handful of Democrats that are willing to work with the Republicans in order to do an extension. But they would get something, for example, maybe something less than permanent extension. All that still has to go back to the House of Representatives and it has to be something appealing enough to get 218 votes there. So a lot is up in the air. It's not a full shutdown. There is still essential jobs that are occurring. The teams that are working on the tariffs at treasury and at State are still in play. Those negotiations are going on, but some of these roles aren't being paid. So air traffic controller is another huge point. And even though they're essential, they have to report to work. They're not getting paid. And that means at some points they don't show up. And if they're not showing up, it has an impact on air traffic, which is in previous shutdown has been really the kind of the Point of when they get closer to a deal because people are feeling it. But we're going to take you through a lot of the impact on the agencies. And I think hopefully this is going to be helpful for folks to kind of navigate it for themselves and for their clients.

B (10:25)

Yeah, agreed. Mark. I'm also hearing that the farmer constituency is also feeling a lot of pain and facing some, you know, some challenging times with loan shutdowns and things like that.

C (10:38)

No, absolutely. And so you got the shutdown also coming off the uncertainty around tariffs. And so there is just a lot of economic uncertainty, which we've talked about on town halls all year. You know, interestingly, there hasn't been significant inflation. You know, the market has been kind of hanging in there. But can that continue to last as we move into the fourth quarter and you know, we're dealing with a shutdown which does cost money. The other question that has been inserted and we got to turn this over to the team is in order to put pressure on the negotiations the administration has talked about, well, we're going to move from furloughs to actually RIFs. So we'll take those people that weren't deemed essential and they'll actually be fired to put pressure on this. Whether that'll happen or not is uncertain. Whether there will be back pay. Historically, furloughed employees were ultimately paid. There is some question about whether that will happen or not. You know. And lastly, for those of you that are contractors or work for contractors, they're significantly impacted. There's a work stoppage and then there is no. There's no guarantee they're going to get paid at all.

B (11:44)

Yeah, agreed. Okay. A lot of uncertainty. Thanks, Mark. And we will stay tuned for the next breaking news. Let's bring in Melanie Lauritson. Melanie has been talking with the IRS and has some good questions that she's been getting from all of you. Melanie, happy October 16th. To all who celebrate, I'm hoping that a lot of our audience is relaxing a little bit today. If they are in that tax break.

A (12:14)

Prep space, I think they're able to catch their breath. Have a good day of that. But unfortunately, here we are talking about the government shutdown, which of course has implications and consequences to them. So let me go ahead and dive right in and start with the fact that on September 29th, we actually submitted a comment letter to the IRS. And this was before we knew exactly what was happening with the government shutdown. And we encouraged them to accept 100% of all of their employees because quite frankly, there are hardships that come from a shutdown shut down. And it's not just for taxpayers and us, but also for the IRS themselves. So we saw the first contingency plan that came out. And in that first contingency plan, they said that they would accept 100% of all IRS employees for five business days. And the plan also had a little piece in there that said they don't even think they're going to need the contingency plan, which I thought was a.

E (13:11)

Little bit.

A (13:14)

A little ahead of themselves to be able to say that, but anyhow, so as five days came to end, a lot of people started wondering what is happening? And sure enough, on October 8th, the IRS came forward and they furloughed 46% of the IRS employees. Now, who they're retaining. You know, you've heard Mark say about the essential and critical employees, that is who they are retaining. And if you take a look at the contingency plan, it's about 170, 67ish pages longs, and it's a little bit hard to read through and decipher exactly what is going on at the irs. But what it comes down to is the IRS definitely has some priorities. So for them for the 2026 filing season, being able to get that going, that is important. And we know that the IRS is actually retaining their IRS seasonal employees. Or why? Because they need to be trained and they need to be ready for when the filing season starts. And if they were laid off or furloughed, this wouldn't be a good time for that. They are also putting a priority on HR1. So they're making sure that the regulation that is needed, that the updates and improvements on the forms or changes in forms, that's going to come through. Another thing that they are focusing on is taxpayer services. And when you take a look at who got filled furloughed, about a third of the people furloughed were from compliance. And another area that's also important and of priority to the IRS has to do with the criminal investigations department. And that really mainly has to do with the data breaches, because we've seen data breaches for both taxpayers and for practitioners that are coming through, and they want to be able to take care of those without there being more complications. So moving on to the next slide.

E (15:04)

Next slide.

A (15:07)

And you know, you heard Mark say and Lisa say that there's just lots of unknowns. And that really is the theme right now. And I guess the big question is, what does that contingency plan mean? In practicality and in order for me to answer it, let me take a step back and say that there are no winners when there is a government shutdown. Like I said, there is lost work from every single perspective into this. But if you take a look back in history, you know, Mark mentioned the longest shutdown that we had back in 2018, that went into 2019. When you take a look at that, there was a delay to the start of the filing season. And when you look at that particular year, there wasn't major law like HR1 that needed to get implemented into it. And this year there is so again, lots of unknowns. And we are communicating with the IRS on a constant basis and we are providing information to them. So let me go through what I do know. Okay, so I mentioned the critical and essential employees that are on staff right now. As the shutdown keeps going on, they will continue to reevaluate. We don't know how often, but they will bring back people as they feel it is necessary. The other piece that we also know is that there were reductions in force and there were many articles that said that the government had about 4,000 some reductions in force. Well, the IRS was no exception. And they about 1,400 of their people received a 60 day notice for reduction of force. And that means that their Last date is December 9th. What we know about those people that are getting the RIFs, it is that they are both furloughed and essential people. We also know that the majority of them are coming from compliance and enforcement. So like I said, we're still working with irs. We're still trying to determine certain things. What you see, what we also know is that the Priority Practitioner Service hotline is up and running. But one thing that needs to be said is our understanding is there's a skeleton crew, so it will be harder to be able to get through. Even within the irs, things are still changing on a daily basis. We're still figuring out what is operational, what's paused, what shut down every day keeps changing, the numbers keep shifting. But we do have a lot of questions and we do appreciate that feedback, particularly those open questions that we have. When we get that feedback, we're able to communicate directly with the irs. So that information is very valuable. So types of things that we are hearing from members is will the E filing be shut down on time to start preparing for the start of the next filing season? We don't know. Are refunds still being paid if the returns were electronically filed? We don't have an answer for that right now, when will the start of filing season be again? That was up in the air to begin with. And with a shutdown, we believe there will be a delay, but we don't have any concrete information from the IRS. The start of the implementation of HR1, is that on track? What is happening with that? Our understanding is IRS will provide insights in about a week or so once they're able to assess where they're at regarding notices. What's happening with that? They haven't said people had appointments at the Walk in center. The walk in centers are closed. And unfortunately the IRS didn't have time to send notices to those people to say that their appointments were canceled. And the biggest question or the biggest concern that I have has to do with the backlogs. So we all saw during COVID that There were over 2 million in backlogs and letters. And TIKTA actually came from forward with a report that said with an extended shutdown, there is a potential to have a backlog that is three times the length of the backlog that we saw in Covid. So hopefully that won't come about. Hopefully we'll continue moving things, which brings me onto our next slide. So immediately once we started to see the furloughs and what was happening, we decided to put together a letter and reach out to the irs. Because the aicpa, our members, do have a voice. And not only do we have a voice, we've heard from other stakeholders that the information, what we're sending to the IRS has been a powerful voice. And so again, I can't repeat enough that your feedback is important because we are able to portray that information not only to Congress, but also to the IRS. So what our letter said, the IRS should retain 100% of their employees during the shutdown. For the whole length of the shutdown, it's critical that they stay open. And at a minimum, a couple of things should happen. And we put together some recommendations that are fair, that are reasonable, they're practical, but most importantly that the IRS can implement that they are able to take action on. So the first one to discontinue compliance actions, that one is critical for those of you who've seen notices. A lot of times they're automated and involved. Until that notice is satisfied, they keep escalating more and more and it becomes a real problem, becomes a problem from the taxpayer. Clients kind of look at us like, why can't you get this result when you can't reach out to the irs? So really, the IRS just needs to discontinue all compliance actions for at least 60 days from when the shutdown is over. The next thing that we're also recommending is to maintain all online systems viable and working within the irs. Why? Because it is our lifeline right now to be able to be compliant, to be able to make payments, to be able to document information. So when we can't reach out to them, this is our lifeline. And the IRS really needs to pay attention that they are working smoothly and that they are operational for us. Another area that we've asked for is a streamlined reasonable cause penalty waiver for taxpayers at this time, because history has shown us that during these periods when penalties are assessed, most people would qualify for reasonable cause. But the reasonable cause process is lengthy, it requires letter writing, and oftentimes the IRS reject you the first time. You have to kind of keep going at it. And it sometimes takes so long that oftentimes people end up taking the first time of bait option, which that's really not fair because this really does qualify for reasonable cost. So we've asked the IRS to really streamline that process where it doesn't take all this work and doesn't create further backlogs. And finally, we've also asked for targeted estimates, a safe harbor for estimated and late payment penalty relief. Now, there's multiple reasons why we ask that, but very common things for those in tax practice. I'm sure every single one of us has had a member or client come in at the last minute saying, hey, here's some of my information. Can you file this retention tax return right away? And really, we have to pull transcripts, but with everything shut down, are we able to get a full transcript? Or what if we weren't able to pull it in time? What do you do? Because the deadlines are still applicable? Or another scenario is the estimated payments, because most people do get refunds, but estimated payments still need to happen. Think of the people in the gig economy and there's lots of questions with the no tax on tips or the overtime and people when they can't call the IRS to get that, what do they do with their estimated tax payments? They're going to take the best guess and there really shouldn't be penalties associated with that. So we've asked for a Safe harbor of 70% for those two. So again, these are practical things that we've asked the IRS to do. We know they're listening, we know they have their ears open, but we too have our listening ears from our members to be able to really take positive actions in this difficult time. So with that, I do want to bring up the National Tax Conference one more time. We will have information there. We've also managed to lock down Ken Corbin from the IRS and he's the person who actually is in charge of the filing season at the irs and he will be able to provide those updates on what is happening with HR1, what's happening with the start of the filing season. So we're going to get right real time information that is critical for us as we move forward. So please consider coming to the National Tax Conference.

B (23:26)

Melanie, thank you so much. That was quite the update. We, we appreciate all the advocacy efforts. You're getting a lot of thank yous for advocating for the particular issues that you have. A lot of a lot of good questions in there for you too. And we'll have you back at Open Forum. Thank you.

A (23:43)

Absolutely. Thanks.

B (23:44)

All right, so we're going to start with our round robin of other federal agencies and I'm going to ask Dan Noel, our vice president of financial Reporting and Audit Quality to join. Dan was a guest years ago and we're glad to have him back. Dan's area that he's going to be discussing is the SEC and the pcaob. So Dan, what's going on there?

D (24:09)

Well, I'll start by saying I'm glad I'm not Melanie. Hi everyone. We'll start with the doings of the sec. I suggest that you think about it as the SEC simply being shut for business with limited exceptions, almost emergency basis exceptions. So I'll say it another way. The likelihood is the typical way. If you practice in this space or you're a registrant in this space, the typical way you'd conduct affairs with human beings is shut down. And I'll just give you this heads up. The sec.gov website is as good as any government agency that I've seen where they really lay out a lot of the detailed implications depending on what your area of focus is. So and they commit that they're going to keep that updated real time. So that's a good one to peruse. Now the good news is the EDGAR filing system is alive and well. All the filing deadlines remain. Anything you think of 8Ks, 10Qs, Form 4 on Buys and sells of insiders, et cetera, et cetera, et cetera, all of that is still alive and deadlines are applicable and even the EDGAR site is accepting S1 IPO filings. I just checked before coming on and they're flowing. The IPO filings are flowing. The rub is that the SEC staff is not reviewing anything. So I'll give you ice in the winter by simply saying that once things do get up and running there will be bottlenecks. Some observations of the individual agencies or divisions that we have listed there. We'll start with corporate finance. Think about what they do. They review the filings that we just mentioned. They issue comment letters on the filings that we mentioned. They also issue guides on security laws, a host of other things all stopped during the shutdown. Corp Fin though does have a great Q and a on the sec.gov website, including some nuanced, nuanced stuff. Nuanced stuff that I've never even seen before or heard of. But it's good, it's really detailed. So if it applies to you, you may get the answers that you need right from that site. So a couple of the other divisions trading in markets said another way broken dealers shut down investment management. That's investment companies shut down. So in sum, the SEC is not answering questions from registrants or accounting firms. And this includes those of you who ever experience doing pre clearances with the Office of the Chief Accountant, which I will just by the way throw in a personal observation. I think that is as good a process as you'll see in the capital market system where registrants come in with their accounting firms and they look to get upfront answers where everybody can agree if the mantra is get it right up front this way there's no back end, gotcha, second guessing type stuff. But that too is shut down right now. So I think overall the emergency type exception that will get the SEC staff's attention is if bad actors come to the fore or if the capital markets start going haywire just to try to branch it out into some general concepts with the SEC will somehow be able to engage on to the pcaob. Their funding is not impacted so they are operational. But the things that the PCAOB relies on for the SEC are impacted. Things like their budget for the next operating cycle, things like if it's time to appoint new PCAOB board members or if the PCAOB had a final standard that they wanted to issue that the SEC had to review and approve. That type of thing is frozen. But otherwise PCAOB day to day is operational. So I too am going to plug one of our conferences and that's our annual AICPA SEC PCAOB conference during the shutdown, post shutdown and average day of the week. This is a great conference if you operate in space so as a, as a bonus, since I probably have a couple extra seconds, I'm going to throw in the accounting standard setters in this country. Both the FASB and the GASB are operational. Their funding is not impacted. But the Federal Accounting Standards Board known as faceab, they set the federal government accounting standards for agencies, federal agencies that actually have to follow gaap. They are shut down, they are not operational. So Lisa, I'll turn it back to you.

B (28:23)

Thank you Dan. That was great and really, really helpful for a lot of us. Next up we've got Sue Hicks. Sue's going to talk about the DOL and the PBGC bonus points if you know what PBGC stands for. Sue is the director of our Employee Benefit Plan Auditing and Accounting Team and she leads the Employee Benefit Plan Audit Quality Center. So there's your answer. PBGC and dol. Now you know what they stand for. Sue, what's going on with those?

F (28:55)

Thank you Lisa. So the good news is there's not a ton of negative impact from the department from the shutdown with the Department of Labor. But there are a few things that I wanted to talk about that really affect everyday Americans and then others that affect employee benefit plan auditors as well as employee benefit plan sponsors. There are a couple things I wanted to mention. About 25% of the employees at the Department of Labor are being retained during the shutdown. It's about I think 3,000 of their 12,000 some odd employees. The Secretary will maintain criminal authority under ERISA related to fraud and statutory civil remedies related to threats to human life. So the Secretary is still, still got the authorities needed for those things. The critical operations identified by the Department Department of Labor will continue. And those are things like the wage and hour division, child labor investigations, OSHA mine inspections, disaster grant applications and responding to imminent threats to life and property. Any non essential functions will be suspended. And that's things like regulatory work, making new regulations, compliance assistance audits and most worker protection investigations. Those will all lapse during the, during the shutdown. However, agencies that have permanent funding or funding from sources other than annual appropriations will continue as under normal operations. And those include things like benefits to workers under entitlement programs such as unemployment insurance benefits including funding to the states. Now while Medicare, Medicaid and Social Security aren't under the Department of Labor, it's my understanding that those benefits will continue as well because the funding will is built into the law. Data releases. Oh other, excuse me, other things that will continue to be funded are expenditures under the American Rescue Plan, Black lung benefits, other illness compensation benefits and such. I understand that data releases will continue for things like the Consumer Price Index or Labor Statistics, things like that, but they may be delayed. And then there's a caveat that once the government's reopened, it may require some restatements of that data. And so the next the agency that I work mostly with is the Employee Benefit Security Administration and that houses the Office of Chief Accountant and it basically is shut down. The the Assistant secretary of ebsa, who is Daniel Aronowitz, he was recently confirmed he's not subject to the shutdown because he is a political appointee, but pretty much everyone else has been instructed to do no work during the shutdown. That's in epsa. Some of the things that this could affect are the Form 5500 filings. The extended filing deadline ended yesterday, but I'm sure there's still a number of plans who have not yet filed. The good news is the EFAS 2 filing system remains functional and I've not heard from any of my experts that they've had any problems with the EFAST 2 filing system. However, there is no DOL staff available to assist with filings or filing questions or things like that, so that may have affected some plans ability to file. I will say that the Employee Benefit Plan Audit Quality center has been helping where we can by answering questions through the center mailbox and then also assisting the AICPA's technical hotline with answering questions. But until the government reopens, there won't be any assistance for filing. Other areas that it could affect are secure 2.0 act implementing regulations and other regulations that are in process by the Department of Labor. We're particularly interested in the regulations related to pooled employer plans. The DOL issued proposed regulations in March 2022, but there have been no additional actions related to those since then, and we are hoping for final regulations sometime soon. But the good news is that plans are able to rely on the proposed regulations if they are implemented in good faith. Another area that will cause some disruption, I guess, are delays in firm DOL firm and work paper reviews for their ongoing audit quality program. But I can't imagine that that's really going to cause a lot of heartburn for plan audit audit firms. I think they'll be okay with that, though. There will be delays in enforcement actions and resolutions, and this is where I'm not exactly sure what's going to happen. It's kind of similar to what Melanie was talking about earlier. There are Some penalties that are.

E (35:10)

Enforced.

F (35:11)

By the Department of Labor or imposed on plan sponsors and they increase daily or their daily penalties that are issued. And so I don't know if those will be suspended during the shutdown or they will continue to accrue for every day that the government is shut down. And that will have to wait to see what happens when that government opens back up.

B (35:38)

Sue, let's hit PBGC super quick and then we can give a quick plug for your conferences that you've got.

F (35:44)

Okay, yeah, sure. The Pension Benefit Guarantee Corporations operations are continuing without interruption and so there should be no delays in PBGC and plan termination determinations. Just want to mention really quickly that if you need audit resources for employee benefit plan audits, the Audit Quality center members have access to our resources on the center website, which is linked in this slide. And then we have two employee benefit plan conferences coming up. One in December, it's a little bit higher level. It's accounting, auditing and regulatory updates online only. And then in May we have an in person and online conference at the Gaylord Palms Resort and Convention center in Kissimmee, Florida. And hopefully DOL will be able to participate this year.

B (36:43)

That's great. Thank you, Sue. I know that DOL is a big hot topic and those EBP plans are important to a lot of our accounting firms and their clients. So thanks for the update. And with that we're going to bring up Lindsey Kinnamer. Lindsey is the senior Director of our Governmental Auditing and Accounting team and she is leading the Governmental Audit Quality Center. Welcome Lindsey. Thanks for A joining the AICPA team and B making your town hall debut.

E (37:15)

Well, thank you, Lisa. I'm happy to be here. And hello everybody. I'm going to be talking a little bit about omb, HUD and hhs. So I'll start by talking about HUD and or, excuse me, about omb. And we have included their contingency plan here in the slide. The main question that we're getting from members is primarily in regard to the 2025 compliance supplement. It was delayed prior to the shutdown. We would normally have this document typically in May or June or maybe late summer. So we were already in communication with omb. So the shutdowns really just kind of further complicated the issue. We have been in communication with OMB since the shutdown continue to stress why this is so important, what the disruption could cause in the audit community. The further that the delay can use things like audit backlogs, compressed audit timelines, potentially disrupted funding decisions. If those decisions are contingent on a completed audit report for the prior year, you know, during the shutdown, the expectation is that it's unlikely that we're going to see the release of the final supplement because it's not one of the accepted activities from our understanding. In the meantime, we were given a draft of the supplement back in August, and that was posted to the GAQC's website. We included a link here in the slides, in case you haven't been able to access it. It's available both for members and for non members. It was given to us for planning purposes, which is what we communicated in our GAQC alerts and what's on our website. Kind of from a practical standpoint, the longer that the delay continues. Some things that we've observed from the center are some firms have decided to move forward with issuing those June 30, 2025 single audits. We've been monitoring the Federal Audit Clearinghouse and continue to see submissions made. I think we've seen around over 300 at this point, which we assume are being performed Based on the 2025 draft of the supplement. We've seen many other firms that are holding those reports, so they may have substantially completed most of their audit work and are really just holding for final issuance until the final supplement is released. Since we haven't had that final clearance yet. Some other things that we've been hearing in the last couple of weeks are firms asking about moving forward with issuing their financial statement audit separately from their Uniform Guidance audit, specifically for certain regulatory deadlines. We've heard from firms that audit school districts that their state Department of Education may have regulatory deadlines that are coming up quickly. I think the quickest we've heard is November 1st in a couple of weeks. And that particular state has given some grace on doing the Uniform Guidance audit part until the final supplement is released, but is holding steady on their Nov. 1 deadline for the financial statement audit. You know, in most cases that's allowable unless you have a firm policy stating otherwise. And we've been directing firms to review our Government and Single Audit Guide, which does walk through when you're in that situation. Some things to consider, and we even have some illustrative report examples that are included. And so we put a link here in the slides to the 2025 guide for those that would like to purchase that if you need to go through these steps. It's certainly a good resource for that. We'll continue to be in contact with OMB as soon as we have information, you know, we'll be putting those in alerts to our members. So that moves us into talking a little bit about hud. Again, we have the contingency plan link here as well. And both for hud, HHS, and really for any of the federal agencies that you may be working with, if you have specific questions about grant programs, you know, I would certainly recommend going to that contingency plan, which is going to have more details as far as the specific operations for certain activities. So for HUD and hhs, we've pulled most of this primarily from their contingency plans and just put some of the highlights. So in regards to hud, we have seen some reports that have that say that there's around 84% on average of staff being furloughed. And so of course that's affecting things like grant processing and oversight. According to the contingency plan, monthly subsidy programs will continue while funding remains available. However, the longer the shutdown continues, that risk increases that that funding could dry up. For pre obligated grant funds, those should in most cases continue to operate if they were obligated prior to the shutdown. With one caveat, that if you did have a program where it may require HUD to do some type of review and approval for that draw of the disbursement for certain programs, those disbursements will not be available until after the shutdown. But again, review through their contingency plans. If you do have questions about a specific program moving to hhs, again, we have the link there for their contingency plan. And when you go to their plan, at the bottom, it has links for all the different divisions so you can see specifically for the programs they administer how they'll be operating during the shutdown. According to their plan, around 41% of their staff will be furloughed. And it depends on the division, so that varies depending on where those employees are located. Medicare, Medicaid and CHIP will continue. There could be some potential operational disruptions due to staff reductions. Head Start should also continue. However, Head Start is a discretionary grant. So our understanding based on the contingency plan is if you had, you know, a grant already in place prior to the shutdown, that would continue to operate. But it depends on the timing of your grant cycles. So it doesn't appear that they're going to be issuing any new awards for Head Start. During the shutdown, non exempt and non accepted activities will be paused and we've included a few examples of those activities on the slide here. For accepted Programs, program support centers, the Financial Management Portfolio, the Payment Management Services and Division of Payment Management will all stay operational to make sure that they can deliver those grant payments. Reduced staff affects monitoring, audits and customer service. But HHS will maintain the grants.gov system in an operational status, but with reduced support. The CDC and NIH research and public health initiatives, including outreach and education, those types of things may be slowed or paused. So just kind of from an overarching view of our observations for most federal agencies and things that auditors and auditees should be aware of is, you know, generally speaking, we're expecting that, you know, you may see funding delays for certain programs which if an entity was heavily reliant on that funding, could disrupt their day to day operations. You know, we'll likely see delays or pauses in reviewing grant applications and issuing new grant awards or even approving changes to existing grant awards, you know, budget amendments, indirect cost rates and those kinds of things. We may see delays in responding to grantee questions as well as delays or pauses in federal financial oversight enforcement actions and OIG audits and investigations. So with all of that, we continue to stress the importance of, you know, keeping that open line of communication between auditors, the auditees, their grantors, as well as their other regulators. And JQC will, you know, continue advocacy efforts. And as quickly as we can get information, we'll be putting those alerts to our members and, you know, including resources on our website. So, you know, keep your eyes peeled for future alerts as soon as we get more information available. And if you have additional questions, you can always reach out to GAQC through the email.

B (44:50)

Lindsey, that was fantastic. And I think it shows the broad range of agencies that affect us or affect our clients. And so we're just trying to help those of you who are impacted by some of these agency shutdowns to know what we know. And so hopefully that'll help you as you're communicating with your clients. Appreciate it, Lindsey, thank you. Next we've got Jason Brodmerkel and Jason's going to hit very quickly our federal banking and credit union agencies.

C (45:23)

Sure.

G (45:25)

Great to meet everyone. Jason Bromerckle of the Washington, D.C. officer I also work for the Accounting Standards Group with a focus on financial institutions and to just share some background as this is a highly regulated industry. There are four specific agencies involved in this process and those include the Federal Reserve Board, the frb, the Office of Comptroller of Currency or the occ, the Federal Deposit Insurance Corporation, fdic, and with a focus on credit unions, the National Credit Union Administration or the ncua, and with a little background of what these what these agencies cover. They are tasked with overseeing the safety and soundness of the banking and credit union system and they also help protect consumers by setting and enforcing rules, conducting examinations and ensuring deposits. Now that said, these agencies are independently funded by assessments and fees by institutions and credit unions they supervise, so they do not rely on congressional appropriations. Better said, all four agencies are operational with limited disruptions during the shutdown, including their examination process. From an accounting perspective, the chief accountant's office for each agency stands by ready to take questions and are functioning as they normally do on a day to day basis. That said, there has been indirect impact from the shutdown, including the National Flood Insurance Program and their ability to process applications and a timely basis for loans. Specifically, the agencies released a statement on October 1st clarifying that institutions should continue to make loans while those applications are being processed. We've also noticed a slowdown in processing delays with loans at the Small Business Administration along with the Community Development Financial Institution Program, which may indirectly affect the internal loan process at institutions. And finally, we should note for the accountants out there or the firms that the key statistics in essential economic data that may affect forecasting data for institutions when determining their allowance for credit losses may be affected.

B (47:25)

That's a lot to consider. And I know there'll be implications from slowdowns in SBA loans and the CDFI loans in the National Flood Insurance Program. Those are all important to a lot of us. All right, thank you, Jason.

F (47:38)

Thank you.

B (47:39)

And next as we continue in our round robin, we've got Stephanie Otero. Stephanie is our new vice president and small firm advocate. And I'd like to welcome you, Stephanie. Stephanie brings a background that we're not going to dive into today just for the interest of time, but she has considerable experience with large not for profits. She also had her own accounting firm and she's been with us for a few years prior to taking on the small firm advocate role as she was in our not for profit section. So, Stephanie, welcome and tell me what you're thinking about how this government shutdown might be impacting nonprofits. Sure.

H (48:19)

Thanks, Lisa. Hi everyone. So prior to coming to the aicpa, I was the CEO of a large nonprofit. So I did reach out to my nonprofit network. Before coming on Town Hall. I just wanted to assess how everybody was feeling, touch base on any insights, see how maybe the shutdown was impacting them. So on the good news, I'll share that most of them are sharing just a Couple of weeks into the shutdown. The shutdown is not really impacting them right now, which is really good news. And I also sense general calm. So for nonprofits, this is not their first rodeo. They are no stranger to having to navigate uncertainty. They had the pandemic, they had the federal funding delay in January. They had another government shutdown that they had to navigate through. So if anything, they have shown that they are resourceful and resilient. However, I thought, and as Mark alluded to earlier, that this shutdown may not be quick. We may see it going into months rather than just weeks. And should that be the case, I think this will have impact on nonprofits, particularly those who rely heavily on federal funding. So some of the impacts, risks that they maybe may see with a prolonged shutdown would be obviously, as Lindsey mentioned, delay in federal grant payments, particular maybe impact nonprofits who operate on a cost reimbursement plan. So this is a case where they have to upfront those costs and then later get reimbursed by the government. That could impact operations. Obviously, if a nonprofit relies heavily on federal funding, they may experience some cash flow strain, see a reduction in their operating cash. This could impact them negatively if they don't have reserves that they can lean on. The cash flow strain could then lead to mission or program disruptions. May have to reduce program in some cases, may even have to close down some programs that they offer. This could then lead to operational challenges. Some of my nonprofit network friends let me know that they are proceeding with caution right now, being conservative in their spending, not hiring at this point, just to see how long the shutdown may last. I think that's safe for them to do that. I think that's really cautionary just based on experience. This could also lead to reporting and audit challenges. Lindsey mentioned a few there, so I won't go into detail there. And then, of course, a catch 22 for nonprofits is they may see a reduction in funding, but then at the same time see an increase in demand for their services. We saw this during the pandemic in the last shutdown. As federal employees are not receiving income, they turn to nonprofits for temporary assistance. But the good news is, Lisa, is we have strategies and things that nonprofits can do now and also ways that CPA firms who maybe have not for profit clients can help right now. So I think these are ways to really be proactive rather than having to be reactive later. So obviously, what I would recommend doing is really nonprofits doing an inventory of the federal funding that they currently have. And assessing how that would impact their programs in the future. If it's not having an impact now, this will help them in their further communications later on down the road. Really being transparent with the recipients who rely on their services. Obviously monitoring cash flow is going to be of utmost importance right now, monitoring that regularly. Should this government shutdown extend all the way into December, I think really knowing where their cash is at is going to be pertinent at this time. Communication is really key. We learned that during the pandemic. Just having open, transparent communication with your team members, with your board members, with stakeholders, with donors, I think that'll really help. And sometimes just sharing that no news, it's not impacting you right now, is also good news to share. Documentation is also a good thing to really do right now. It's hard to remember a year from now what was happening in October, November, December. So documenting how the shutdown is impacting you, impacting operations, impacting your programs, it'll help you really share your story when you're applying for grants, when you're meeting with donors, help your story when you do your annual report. So I really do recommend documenting everything right now because it's hard to remember that later. Another option for nonprofits if they find that they're impacted by the shutdown is seek alternative funding. Some ways to do that is maybe to. To speak with donors about restricted funding and see if you can release those, get those restrictions released and use those funds for operating, perhaps opening a line of credit just to get you through temporarily. If there's a cash shortfall right now, there could be possibly borrowing from endowment funds, seeking opportunity with private foundations for other grant opportunities. Lots of ways to seek alternative funding. Of course, I always say if your revenue isn't diversified, you don't want to put all your eggs in one bag basket. So really a great time to try to diversify that revenue and have different avenues of revenue flowing in. Another opportunity is to be able to negotiate with your vendors. I find that vendors and nonprofits have an advantage here. Businesses really want to help, especially when you're a nonprofit and they know that you're doing good. So there may be some opportunity there to negotiate with vendors and then obviously just proceeding with caution right now, reducing discretionary spending. And if you are a CPA firm who has nonprofit clients, I think this is a. A perfect opportunity right now to step in as a trusted advisor, particularly if you're a small firm. I think small firms have the advantage of being able to adapt quickly, to be really fluid. So I think just communicating with your nonprofit clients right now, even if they're not being impacted, letting them know that you're there to help them to ease their transition through this government shutdown. You can help with budgeting, forecasting, even communicating with board members, helping have to have those conversations if their operations will be impacted and then just educating them. Sharing what you learned today on the town hall with your clients I think would be extremely helpful. There's a lot of unknowns, but I think even communicating that there are unknowns will be extremely helpful. And lastly, I just want to share. We have a ton of resources for you at the AICPA to help you navigate this. The cpea, which is the center for Plain English Accounting, issued a report back to in March in response to the January federal funding delay. That resource is the first one listed. The other three resources are from the not for Profit section. If you are not a not for profit section member, but you have nonprofit clients or you work for a not for profit, I highly recommend looking at becoming a section member. This is just a few of the resources they have in a vast library. Lisa, I know that was a lot, but I know we were pressed for time.

B (54:51)

That was wonderful. Thank you, Stephanie. We appreciate the practical insights into what both the leaders of Nonprofits and their CPAs can be doing right now. All right, we're going to have a full house for open forum and it's going to be really quick. So, Mark, I'm going to throw a question at you and it's about whether or not the Senate can do anything with the nuclear option and maybe pass some funding bills with less than 60 votes.

C (55:18)

Yeah, it's been discussed. I do not believe that the leadership will want to do that once the nuclear option. Basically it's a procedural mechanism where you can get by using a simple majority. It has been used for Supreme Court nominations and confirmations. It's been used just recently for other confirmations in the administration. Once that is open, that procedure has changed, it will never go back. And so I think there's a big hesitancy to do it. It's possible. It's been discussed. I think unlikely.

B (55:52)

Thank you, Mark. Anyone else have a final closing comment? Otherwise, we'll move into some of our other resources. Anything you missed that you wanted to say? All right. Thank you all so much. This has been an amazing opportunity to showcase the expertise and all of the different levels of advocacy that we do within the aicpa. And I'm so thankful, thankful to all of you for sharing your insights with us today. For those of you that are new to the AICPA Town hall, we have quite a few of you on today's show. This is just an example of what a fast paced hour we have for you for every open every AICPA Town hall. And we do hope that you'll continue to join us regularly and join the thousands of members of our AICPA Town hall community that we love so much. So as we wrap up this special edition focused on the government shutdown, I wanted to call to your attention that we do have a resource center focused on the shutdown itself. So we've outlined some of the potential impacts. You'll be able to find the latest news that advocacy that we're doing, some of it in front of the scenes, some of it behind the scenes, and also some client resources that might be of help for you as well. So those are open to all AICP members. I wanted to invite everyone to a special global webcast that is on November 10th. And this is all about. So I'm doing a big huge zig. Maybe I should start with that big zig. Let's talk about what the future of the profession looks like as a group of professionals engaged and involved in setting our future. So we have a webcast coming up again November 10th. It is two and a half hours, which is a lot, but you're going to learn a lot, you're going to get your wheels turning and we'll be co sourcing what the future of the profession looks like. I wanted to also point out some of our October hot topics and October is Cybersecurity Awareness Month. So we've got a new tool that I wanted to make sure I pointed out to you again. And also a resource from our AICPA Member insurance program. It's a CPA firm's guide to cyber liability basics and I look at it as a resource to level set but also to help understand what some of the ways to approach cyber liability insurance can be. We also have two upcoming webcasts around mental health and hopefully some of you were able to celebrate Mental Health Awareness Day last Friday. So we've got those coming up for you as well. We also have our Transforming youg Business Model webcast series that we would encourage you to participate in and set your path for the future. We are down to five town halls for the rest of the year. We'll see you next week live at the wrap up of the AICPA Governing Council meeting and then hopefully you'll get the rest of these dates on your calendar and we will see you then. As a reminder, you're always able to find Town hall resources in our CPA.com townhall portal. You'll get the latest slides, you'll be able to listen to the podcast or the replay. And just as a quick reminder, this is a special edition. We are not going to rebroadcast this one on Monday for cpe. However, you are still able to access this via the podcast or via the YouTube replay, so you'll find all of that information in upcoming communications. To you. Thank you all for joining us and we appreciate you.

A (59:40)

Thank you for your participation. You can also subscribe to the AICPA Town hall series on your favorite podcast platform, as well as watch archives on YouTube and find resources@cpa.com Townhall Tune in for live broadcasts Thursdays at 3pm Eastern Time.

C (60:01)

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