By Melisa Galasso, CPA, CSP, CPTD
This article originally appeared in the Winter 2023 issue of the South Carolina CPA Report.
As a result of a plethora of federal funding, many for-profit entities received pandemic-related funding. To ease the burden on these entities and their auditors, the federal government is, in some cases permitting alternative engagements (i.e., Yellow Book Financial Audits).
Since many of these entities have never had a Single Audit, many of their auditors have limited to no experience with these engagement alternatives. A future audit quality study is expected. These alternative engagements will be subject to greater scrutiny as the federal government heavily relies on them as part of its oversight responsibilities.
While several programs impact for-profit entities, we’ll focus on the impact of Provider Relief Funds here.
Provider Relief Funds (93.498)
“The PRF and ARP Rural Distribution are administered by the Health Resources and Services Administration (HRSA) and support eligible healthcare providers in the battle against the COVID-19 pandemic. PRF provides relief funds to eligible providers of health care services and support for health care-related expenses or lost revenues attributable to coronavirus.”1 This program totals around $187 billion, which came in multiple phases. A mix of for-profit and non-federal entities (governments and nonprofit healthcare organizations) received this funding. Recipients included hospitals, physician groups, assisted living facilities, hospice providers, ambulatory health care facilities, and vision services providers. Nonprofit and governmental recipients are subject to Single Audit requirements (although they may qualify for a program-specific audit).
For-profit entities that expend $750,000 or more in DHHS funding in a fiscal year are subject to the HHS for-profit audit requirements. This amount includes both PRF expenditures and lost revenues. While this is often referred to as a PRF requirement, in reality, all HHS awards are subject to the HHS for-profit audit requirements including:
- 93.498, Provider Relief Fund and American Rescue Plan (ARP) Rural Distribution;
- 93.461, HRSA COVID-19 Claims Reimbursement for the Uninsured Program and the COVID-19 Coverage Assistance Fund; and
- 93.697, COVID-19 Testing and Mitigation for Rural Health Clinics.
It does not include other non-HHS federal sources (e.g., Coronavirus Relief Fund awards from a state pass-through entity). The requirements also explicitly exclude Medicare from the “expended” determination.
Determining the amount “expended” for PRF is consistent with the guidance for non-federal entities and based on reporting in the DHHS portal, not on when the funds are truly expended, which has added complexity. This summary of the reporting requirements can be found in the 2022 Compliance Supplement. “Payment Received Period” refers to payments exceeding $10,000 in aggregate received.: