In less than four months, the United States government has distributed (or is in the process of distributing) over $600 billion of funding to state and local governmental entities, and healthcare providers of almost all types. This funding was authorized in various spending bills between March and May of 2020, with the most substantial portion of this funding through the CARES Act. Further legislation that would potentially increase these amounts is currently being considered in Congress.
These funds include new programs, such as the Coronavirus Relief Fund and the Provider Relief Fund, distributed under the supervision of the United States Treasury and the Department of Health and Human Services, respectively. Significant funding was also provided through existing programs, notably HUD (Department of Housing and Urban Development) programs such as the Community Development Block Grant and FEMA Disaster Assistance funding. Additionally, institutes of higher education and K-12 institutions received funding through the Higher Education Emergency Relief Fund and the Education Stabilization Fund. Each of these various federal awarding agencies has its own separate rules and guidance related to the usage, reporting, and audit requirements for these funds.
Some guidance has been released by the Office of Management and Budget (“OMB”) and other federal agencies that specify the applicability of the Uniform Guidance (and associated “Single Audit” requirements) to these funding sources. Each year, OMB releases a Compliance Supplement for use in Single Audits. The 2020 Compliance Supplement has not yet been released. It appears that this year’s Compliance Supplement will be released in two parts – the first for “pre-COVID,” perhaps as early as July 2020, and the second for “post-COVID,” likely in the late summer/early fall timeframe. Many governmental entities and nonprofit healthcare providers will be familiar with the Single Audit and the requirements of the Uniform Guidance; however, the specific requirements that apply to COVID-19 related funding are subject to change.
Preliminary guidance from DHHS indicates that for-profit hospitals and healthcare entities that are commercial entities receiving funding from the Provider Relief Fund are subject to the Federal audit requirements – something that many of these entities will not be accustomed to, as commercial entities are not typically subject to the Uniform Guidance and Single Audit requirements. DHHS has stated that 45 CFR 75.216 applies to this funding, extending the Uniform Guidance audit requirements to all entities expending the funds. This law applies to for-profit (commercial) entities, many of which will not be accustomed to “Single Audits.” Commercial entities subject to this requirement may choose to undergo a financial-related audit of DHHS awards under Government Auditing Standards; or a full Single Audit.
While this audit requirement could be struck down in future legislation or rulemaking, as of the date of this posting, the requirements appear straightforward. As such, any healthcare provider, state, or local entity that has received COVID-19 funding exceeding $750,000 and spent those funds on qualifying expenditures in their fiscal year should prepare for a Single Audit. Such preparation includes a discussion with your current auditors, documentation of sources and usage of funds, and documentation and testing of internal controls. In many cases, this may require a recipient of the funding to bid out the potential audits.
Please contact your CRI governmental or healthcare expert for advice and answers to any questions you may have. We stand ready to assist you in these troubling times.