Reporting and Audit Requirements for Provider Relief Fund Recipients

When Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act, it established the Provider Relief Fund (PRF) to support American families, workers and healthcare providers in the battle against COVID-19.
 
Through the CARES Act and supplemental funding from the Coronavirus Response and Relief Supplemental Appropriations (CRRSA) Act, the U.S. Department of Health and Human Services (HHS) is in the process of distributing $178 billion to hospitals and healthcare providers on the front lines of coronavirus response and relief efforts. Qualified providers of healthcare, services and support may receive PRF payments for healthcare-related expenses or lost revenue due to COVID-19. While these distributions do not need to be repaid to the U.S. government—so long as providers comply with the terms and conditions established by HHS—the funds come with unique compliance, reporting and audit requirements that recipients must adhere to once they attest to the receipt of these funds. 

Reporting Requirements

On January 15, 2021, HHS released updated guidance on the PRF reporting requirements. Below, we outline what has changed since their last communication on November 2, 2020. This amended guidance is in response to the Coronavirus Response and Relief Supplemental Appropriations (CRRSA) Act, which was passed in December 2020 and added $3 billion to the PRF (increasing the total funding from $175 to $178 billion) along with new language regarding reporting requirements.

Please note this is a summary of information and additional detail and guidance can be found in the reporting and auditing FAQ section of HHS.gov.
  • On January 15, 2021, HHS announced a delay in reporting of the PRF. HHS has not yet communicated further details on the deadline for this reporting. Recipients of PRF payments greater than $10,000 may register to report on their use of funds as of December 31, 2020 starting January 15, 2021. Healthcare providers should go into the portal, register and establish an account now so that when the portal is open for reporting, they are prepared to fulfill their reporting requirements.
  • Recipients who have not used all of the funds after December 31, 2020 have from January 1 – June 30, 2021 to use the remaining funds. Healthcare organizations will have to submit a second report before July 31, 2021 on how funds were utilized for that six-month period.
  • The new guidelines further define the reporting entity and how to report if there is a parent company with subsidiaries for both General and Targeted Distributions:
    • Parent organizations with multiple Taxpayer Identification Numbers (TINs) that received General distributions or TINs that received them from parent organizations can report the usage of these funds even if the parent was not the entity that completed the attestation.
    • While a Targeted Distribution may now be transferred from the receiving subsidiary to another subsidiary by the parent organization, the original subsidiary receiving the Targeted Distribution must report any of the Targeted Distribution it received that was transferred.
    • The new guidance does state that distribution of Transferred Targeted Distributions will likely fall under increased scrutiny through an audit by the Health Resources and Services Administration (HRSA).
  • The calculation of lost revenue has been modified by HHS through this new guidance. Lost revenue is calculated for the full year and can be calculated using one of the following methods:
    • Difference between 2019 and 2020 actual patient care revenue. The revenue must be submitted by patient care mix and by quarter for the 2019 year.
    • Difference between 2020 budgeted and 2020 actual patient care revenue. The budget must have been established and approved prior to March 26, 2020. This budget, as well as an attestation from the CEO or CFO that it was submitted and approved prior to March. 26, 2020, will have to be submitted.
    • Reasonable method of estimating revenue. An explanation of the methodology, why it is reasonable and how the lost revenue was caused by coronavirus and not another source will need to be submitted.
  • Recipients with unexpended PRF funds in full after the end of calendar year 2020 have an additional six months to utilize remaining funds for expenses or lost revenue attributable to coronavirus in an amount not to exceed the difference between:
    • 2019 quarter one to quarter two and 2021 quarter one to quarter two actual revenue,
    • 2020 quarter one to quarter two budgeted revenue and 2021 quarter one to quarter two actual revenue.
Audit and Compliance Requirements

Based on current information from HHS, provider relief funds are also subject to audit if more than $750,000 has been expended during an entity’s fiscal year.

Over the next two years, many entities who have received PRF exceeding the $750,000 threshold may require an audit for the first time. For nonprofit, for-profit and government entities, this would result in a Single Audit under the Office of Management and Budget’s (OMB) Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards (Uniform Guidance). A program-specific audit option may also be available under 2 Code of Federal Regulations (CFR) 200 Subpart F Section 200.501(c) if an auditee expends federal awards under only one federal program (excluding Research and Development). HHS has also noted that for-profit entities that received these funds have a third option, which would be a financial audit under Generally Accepted Government Auditing Standards (GAGAS) also referred to as the Yellow Book. There is still pending guidance from HHS around this third option in the areas of expenditures versus receipts, disclosures and timing of the report. However, what is fairly certain is that this type of audit would be conducted under Section AU-C 805 “Special Considerations—Audits of Single Financial Statements and Specific Elements, Accounts, or items of a Financial Statement” and will require the inclusion of a Statement of Costs and Lost Revenues in relation to any HHS federal awards.

Additionally, there may be some confusion and uncertainty among recipients who require a Single or program-specific audit for the first time. These auditees may be unfamiliar with the audit expectations and preparations that need to take place in order to respond to federal compliance requirements. Determination of what should be reported on the Schedule of Expenditures of Federal Awards (the SEFA) may be challenging at first, especially since the federal guidance surrounding the PRF has been continuously evolving. 
 
There are some timing nuances and questions on what amounts (i.e., expenditures and lost revenues) should be reported for PRF (Catalog of Federal Domestic Assistance (CFDA) 93.498) on the SEFA by recipients for fiscal year-ends prior to December 31, 2020. The “Other Information” section in the PRF section of the OMB Compliance Supplement Addendum (Addendum) issued on December 22, 2020 addresses this by stating that “PRF expenditures and lost revenue will not be included on SEFAs until December 30, 2020 year-ends and later.” Rather, for fiscal years ended earlier than December 31, 2020, recipients will report the 2020 93.498 expenditures and lost revenue in the 2021 audit. Keep in mind that this timing provision only affects the PRF program and is not applicable to other COVID-19 funding that healthcare entities may have received such as CFDA 93.461, COVID-19 Testing for the Uninsured or CFDA 93.697, COVID-19 Testing for Rural Health Clinics. For fiscal years ended December 31, 2020 and later, the amounts reported on the SEFA (expenditures and lost revenue) should match the amounts submitted in the calendar year-end reporting required to be made directly to the HHS portal. 

The deadline for the submission of the Single Audit reporting package to the Federal Audit Clearinghouse (FAC) is within the earlier of 30 calendar days after the Single Audit report’s issuance or nine months after year-end. However, Appendix VII of the Addendum allows recipients and subrecipients that received COVID-19 funding with original due dates from October 1, 2020 through June 30, 2021 to have a three-month extension beyond the normal due date. There is no requirement for individual recipients and subrecipients to seek approval for the extension, but recipients and subrecipients should maintain documentation of the reason for the delayed filing. However, if PRF is the only COVID-19 award on the SEFA, this extension would not come into play since these funds are not subject to Single Audit until fiscal years ended December 31, 2020 or later.  

Next Steps for PRF Recipients

In the wake of this new guidance, PRF recipients should take the following steps:
  • Register in the HHS portal and establish an account as soon as possible
  • Revisit lost revenue calculations to determine if current methodology is appropriate or if an updated methodology would be more appropriate under the new guidance
  • Understand the ability to transfer General and Targeted distributions and the impact on reporting of these funds
  • Develop reporting procedures for lost revenue and increased expense for reporting in the HHS portal
  • Confirm whether your organization is subject to the Single Audit. For preparation tips, visit BDO’s Single Audit FAQ
  • Review audit and compliance requirements that pertain to your organization
 
For additional information about PRF compliance, audit and reporting requirements and answers to common questions, download BDO’s PRF FAQ.

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