Audits are now underway for proper use of funds, even as the reporting deadline approaches.
Many healthcare providers were recipients of provider relief funds (PRFs) during the COVID-19 pandemic. If providers received these funds, there were reporting requirements and use requirements. Now, audits are being conducted to ensure the funds’ proper use and reporting. Audits are being rolled out on two different fronts: by the U.S. Department of Health and Human Services (HHS) and the Health Resources Services Administration (HRSA).
On Feb. 25, 2022, the American Institute of Certified Public Accountants (AICPA) Government Audit Quality Center (GAQC) provided long-awaited guidance to for-profit healthcare organizations that are subject to the PRF audit requirements. The guidance came in the form of a practice aid titled HHS Audit Requirements for For-Profit Entities with Awards from the Provider Relief Fund Program and Other HHS Programs. Its goal was to provide clarity to for-profit healthcare entities that expended $750,000 or more in federal awards in a given reporting period, which includes the PRF, and other federal awards included in the Assistance Listing, but excludes Paycheck Protection Program funds.
Based on the practice aid, here is a summary of audit options available to for-profit entities to meet the HHS audit compliance requirements.
Uniform Guidance Audits
- Single Audit – A single audit requires an audit of both the financial statements under Generally Accepted Government Auditing Standards (GAGAS) and a compliance audit under Uniform Guidance. The compliance audit requires testing compliance with any major program(s), as defined by Uniform Guidance, as well as obtaining an understanding of and testing of the internal controls over compliance for each major program identified. The results are two auditor’s reports: one on the financial statements, and one on compliance and internal controls over compliance. This option is necessary if federal regulations require a financial statement audit. This option is available to entities with funding from multiple programs from any federal agency.
- Program-Specific Audit – The program-specific audit is similar to the single audit, except that it removes the financial statement audit requirement. Therefore, tests of compliance, an understanding of internal controls over compliance, and testing internal controls over compliance are required for this engagement. A schedule of a specific element of a financial statement would be prepared. The results are two auditor’s reports: one on the schedule of a specific element of a financial statement (the PRF funding), and one on compliance and internal controls over compliance. This option is only available if the entity has funding under one HHS program, such as the PRF.
- Financial-Related Audit Under GAGAS – A financial-related audit under GAGAS requires an audit to be conducted on only one schedule of a specific element of the financial statements. This option is only available if all federal funds expended during the period were from HHS programs. The schedule (the HHS Schedule) would include all federal awards from HHS, including the PRF. It does not require an audit of the financial statements or any testing of internal controls over compliance. It does require compliance testing, but no opinion on compliance is issued. The result is an auditor’s report only on the HHS Schedule.
There are four reporting periods that will be audited. Reporting for the fourth period is going on now. Providers that received a PRFs (General or Targeted) exceeding $10,000 in the aggregate from July 1, 2021 to Dec. 31, 2021, are required to report on their use of funds during the fourth period. The deadline to submit a report is March 31, 2023.
There is an appeal process if you receive a Final Repayment Notice. Once you receive a Final Repayment Notice, you have 60 days to either pay or appeal.
- Providers that do not take one of these actions within 60 days of HRSA’s Final Repayment Notice may be referred by HRSA to the HHS Program Support Center (PSC) for the initiation of debt collection activities.
- PSC, in coordination with the U.S. Department of Treasury, will issue formal debt collection letters to all providers that HRSA refers for debt collection. At this point, PSC and Treasury will take over all debt collection communications with referred providers. Debt collection activities may include accrual of interest, penalties, and recovery of funds by offsetting other federal payments allocated to the entity.
HRSA cannot establish payment plans for outstanding debts. Once the repayment amount has been referred to PSC and becomes official debt, providers can apply for repayment plans directly with PSC.