As anyone in the healthcare field knows, the demands of the pandemic stretched and strained their resources, both human and financial, at unprecedented levels. To meet the task of caring for those afflicted by COVID-19, your healthcare entity may have availed itself of Federal funds provided through two Department of Health and Human Services (HHS) programs, the “Provider Relief Fund” and “Testing for the Uninsured.”
As might be expected, monies received from these Federal programs will need to be accounted for through reports, and possibly audits. For not-for-profit healthcare providers accustomed to receiving Federal awards such as these, this will be nothing new. However, for commercial health care organizations new to HHS funding they may be subject to an audit, and it is important to remember this:
There is nothing new about these audit requirements. In this article, we will focus on the dollar amounts of HHS assistance received by commercial healthcare organizations and how that affects the possibility of an audit.
In the simplest of terms, with both programs there is a $750,000 audit threshold. That is, whatever the amount of Federal funds your commercial healthcare organization requests and receives, if you spend less than $750,000 of those funds in a fiscal year, you will not be audited. If you spend $750,000 or more of the amount received in a fiscal year, you will automatically be audited. Let’s look at two examples:
Example One—No Audit
Let’s say Healthcare Entity A has an October 31 year end and receives $800,000 of Provider Relief Funds in July 2020. As of October 31, Entity A has spent $700,000 of its Provider Relief Funds. Considering that Entity A did not spend at least $750,000 of the funds during its fiscal year, they are not subject to an audit.
Example Two—Audit Required
Now, looking at Healthcare Entity B, it also has an October 31 year end and also receives $800,000 of Provider Relief Funds in July 2020. BUT: As of October 31, Entity B has spent all $800,000 of its Provider Relief Funds. As Entity B spent $750,000 or more during its fiscal year, Entity B is subject to an audit.
The above two examples illustrate entities receiving an award from the Provider Relief Fund. But, what if a commercial healthcare provider accesses funds from that program and the other program we mentioned earlier, Testing for the Uninsured?
Example Three—Two Programs Accessed & Audit Required
Like Entities A and B, Entity C also has an October 31 year end and receives $500,000 of Provider Relief Funds. BUT, it also receives $1,000,000 from the COVID-19 Testing for the Uninsured program. As of October 31, Entity C has spent $400,000 of Provider Relief Funds and $1,000,000 of COVID-19 Testing for the Uninsured funds. In short, the combined spending from the two programs is well above the $750,000 cutoff, and so Entity C will be subject to an audit.
Regarding audits, the good news Entities B and C, or any commercial healthcare company spending over $750,000 of HHS money, is that these audit requirements are not new and have been part of the Code of Federal Regulations for a number of years. Also, commercial organizations that receive awards (including for-profit hospitals) have two options regarding audits:
Option 1: A financial related audit of the award (s), done in accordance with Generally Accepted Government Auditing Standards issued by the Comptroller General of the United States (GAGAS).
Option 2: An audit that meets the requirements contained in the Uniform Guidance (a single audit or a program specific audit).
As you might imagine, there is a whole lot more detail to those audit options, the kind of details better left in the hands of your accountant and/or a firm like ours. But, again, the good news is there really isn’t any new news regarding the audit requirements, and if we may say, we at Prager Metis are very, very familiar with them all.