Many commercial entities have received funding from the federal government in various forms since 2020 in response to the COVID-19 pandemic. The Department of Health and Human Services (HHS) continues to be at the forefront, funding healthcare entities specifically with Provider Relief Funds (PRF) into 2022.
While these funds have been well deserved and well received, much of this activity is expected to generate thousands of new compliance audits — whether single audit, program-specific audit performed in accordance with 45 CRF 75 F, or financial audit in accordance with Government Auditing Standards — over the next few years. The financial audit in accordance with Government Auditing Standards seems to be gaining popularity as the preferred audit option for commercial entities.
So which types of commercial entities are likely subject to HHS federal audit requirements in 2022? Many of the entities listed below will, if they expend — including expenditures and lost revenues — more than $750,000 or more in annual awards:
Unless specifically excluded, all HHS awards are subject to the HHS commercial audit requirements. The amounts reported on the commercial entity’s schedule of HHS awards for its fiscal year that are subject to audit can be based on either GAAP or a special purpose framework, such as cash or income tax basis.
Recipients who received one or more PRF payment exceeding $10,000, in the aggregate, during a payment received period are required to report in each applicable reporting time period. Amounts reported on the schedule of HHS awards for a commercial entity’s fiscal year will align with the PRF period of availability. If the amounts included on the schedule are greater than $750,000, then your company will be subject to an audit for that fiscal year. FAQS released by the Health Resources and Services Administration (HRSA) clarify that compliance audits are due no later than nine months after your entity’s fiscal year.
The table below can help you determine what gets reported on the schedule of HHS awards for your commercial entity’s fiscal year.
|
Year-end |
What is included on the schedule of HHS awards? |
|---|---|
|
Before 6/30/21 |
No PRF |
|
6/30/21 through 12/30/21 |
Total expenditures and lost revenue from the Period 1 report submission to the HRSA PRF reporting portal |
|
12/31/21 through 6/29/22 |
Total expenditures and lost revenue from both Period 1 and Period 2 report submission to the HRSA PRF reporting portal |
|
6/30/22 through 12/30/22* |
Total expenditures and lost revenue from both Period 2 and Period 3 report submission to the HRSA PRF reporting portal |
|
12/31/22 through 6/29/23* |
Total expenditures and lost revenue from both Period 3 and Period 4 report submission to the HRSA PRF reporting portal |
|
6/30/23 and after* |
Reporting guidance related to Period 5 will be included in the 2023 Compliance Supplement |
*As indicated by the draft version of the Provider Relief Fund and American Rescue Plan (ARP) Rural Distribution section of the 2022 Compliance Supplement
If you are pulling together expenditure support and lost revenue calculations to complete your report submissions in the PRF reporting portal, you are already completing the first step for audit readiness! Maintaining records and documentation that support the amounts reported in the portal filing will be important to provide your auditors during the compliance audit.
Outside of PRF, amounts to be reported on the schedule of HHS awards for a commercial entity’s fiscal year are directly related to revenue and expenses recognized during the fiscal year.
It can be challenging to determine what funds go on an entity’s schedule of HHS awards for a commercial entity’s fiscal year, specifically as it relates to the PRF. Companies may need to seek assistance sooner rather than later to help ensure they are timely meeting the HHS federal audit requirements. Also, it is important to note that not all firms are qualified to perform audits under Government Auditing Standards. Therefore, it is even more important to perform appropriate due diligence procedures when hiring an audit firm to assist you in meeting the HHS federal audit requirements.
Contact Tina Dzik at tdzik@cohencpa.com or a member of your service team to discuss this topic further.
Cohen & Company is not rendering legal, accounting or other professional advice. Information contained in this post is considered accurate as of the date of publishing. Any action taken based on information in this blog should be taken only after a detailed review of the specific facts, circumstances and current law.