1. Have you or your organization received support under the CARES Act Provider Relief Fund (PRF)?

The U.S. Department of Health and Human Services (HHS) was authorized under the CARES Act to distribute $175 billion to hospitals and healthcare providers on the front lines of the coronavirus response.  Of this amount, approximately $130 billion has been distributed (or is in the process of distribution), with the remainder yet to be allocated. The Provider Relief Fund supports American families, workers, and the heroic healthcare providers in the battle against the COVID-19 outbreak.

2. Did you know that receiving those funds may trigger an audit requirement – even for commercial (i.e., for-profit) organizations? What might trigger an audit requirement?

PRF recipients awarded and expending more than $750,000 in a fiscal year must provide audits per the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for HHS Awards, as dictated by 45 CFR Part 75.

3. If an audit is required, then what are the options?

Under the HHS rules, commercial organizations may conduct either:

  1. A financial-related audit, as defined in the Government Accountability Office’s (GAO) “Yellow Book,” in accordance with generally accepted government auditing standards (GAGAS), or
  2. A single audit meeting HHS requirements contained in Title 45 CFR Subpart F.

CRInsight: We believe that many organizations receiving PRF have never been audited, and those that have been audited in the past were likely not subject to either Yellow Book or Single Audit requirements. For those entities, the below points will be new requirements to meet.

4. What do we currently know about the PRF audit requirements?

The audit:

  1. is in addition to any audit under auditing standards generally accepted in the U.S. (GAAS) or GAGAS on the organization’s financial statements prepared under the appropriate framework (e.g., GAAP) (i.e., the audit is in addition to the GAAP audit); and
  2. must be performed by an auditor certified as a public accountant or a federal, state, or local government audit organization, and meet the GAGAS general standards.

The auditor’s report(s) will include, among other things:

  1. a report on internal control over financial reporting and compliance with laws and regulations that could affect financial statements, and
  2. a schedule of findings and questioned costs.

CRInsight: While these requisites will be familiar to not-for-profit organizations regularly awarded federal funding, these provisions will be incremental and unfamiliar burdens to many recipients. 

5. Have the PRF audit requirements been finalized, or are there questions yet to be answered?

Audit questions remain, and the government is updating the relevant guidance to address the unique nature of this program. Items under consideration include, but are not limited to:

  1. potential treatment of the PRF payments as lost revenue attributable to COVID-19; and
  2. guidance regarding consolidating multiple providers (including providers in MSO-PC structures) for determining if they received more than the $750,000, and if one audit can be conducted for all entities falling under a consolidated structure, or if multiple grant audits will be required based on the funding recipient.

CRInsight: These and other questions are likely to be answered later in the government’s updated guidance. To stay current, please visit CRIcpa.com and HHS PRF FAQs.

6. Are there things we can do now to prepare for the PRF audit(s)?

PRF is unique, and many organizations will have to meet new requirements; therefore, we recommend the following:

  1. Become familiar with the relevant portions of 45 CFR Part 75 and 45 CFR Subpart F.
  2. If you’ve never had an audit, additional accounting controls will need to be adopted this year, and new documentation of relevant processes will be required. Consider an engagement with a CPA firm to assist in putting such controls in place this year (the year you are spending the government funding).
  3. If the organization generally complies with government regulations based on their most recent audit, then a pre-audit to “dry-run” what other controls, process documentation, support for qualifying expenditures, etc., would help to comply with these federal requirements.
  4. In either case b. or c., consider engaging a team with the experience to mitigate negative findings submitted to the government. Be aware that any findings in a federal grant audit must be both submitted to the grantor agency (HHS) and remediated (corrected) by the entity and tested in the following year.
  5. Also, continue to review HHS’ guidance, which will continue to evolve. Notably, the Office of Management & Budget (“OMB”) will release a COVID-19 specific Compliance Supplement, currently targeted for October 2020.

CRInsight:  To stay current, visit CRIcpa.com and HHS PRF FAQs. Also, CRI will be providing COVID Quick Hits, offering insights into the relevant portions of these requirements and helpful tips to prepare for PRF audits. Please join us live or sign-up to receive the recording to view at your convenience.

7. Does HHS have PRF reporting requirements incremental to the PRF audit requirements?

HHS has announced that for providers receiving over $10,000, an annual report to HHS will be required before February 15, 2021, with a subsequent report due July 31, 2021, if the provider continues to expend PRF payments in 2021. We anticipate release, by August 17, 2020, of additional information about PRF reporting requirements. This reporting requirement will apply to most providers and is incremental (additional) to any auditing requirement imposed on larger recipients. Until more information is available, and the reporting system opens (on October 1, 2020), HHS has provided a notice of reporting requirements.