Payments from the Provider Relief Fund (PRF), distributed at the federal and state level as part of the CARES Act, offered a much-needed financial boost to healthcare providers impacted by coronavirus. Recipients of these funds must follow rigorous guidelines for attestation, use, tracking and reporting, but there is one more compliance obligation that may fall under the radar of many providers: a single audit over a certain expenditure threshold ($750,000 or more). This single audit requirement may be a new compliance dimension for some PRF recipients, and will likely affect mostly large single-site and multi-site organizations.
Read on for more information on the single audit requirement and considerations as providers approach their June 2020 and December 2020 annual audits.
What is a single audit?
Any organization that receives federal grant funding is required to undergo a single audit to ensure compliance with the grant’s rules and regulations. It is called a single audit because it is a standardized approach used by all federal agencies, covering financial statements and records, expenditures and internal controls, as well as elements specific to the grant itself. The single audit requirement kicks in for grantees who spend more than $750,000 in federal dollars in any given year. Funding issued under PRF is expected to be catalogued as CFDA 93.498 Provider Relief Fund and CFDA 21.019 Coronavirus Relief Fund.
What are the ramifications of the single audit for a provider?
The single audit required by the U.S. Department of Health and Human Services (HHS), and potentially state health departments, will add compliance requirements to an organization’s annual audit that will require more time and resources. The annual audit broadly takes stock of an organization’s financial position, whereas the single audit reviews a targeted funding source for allowable costs incurred within the allowable time period and proper reporting to HHS.
For the single audit, auditors will be required to test internal controls over financial reporting and compliance, an audit approach that will be familiar only to larger organization (or ones that already undergo a single audit). In perhaps the most notable distinction between traditional and single audits, financial statements and findings (including deficiencies) will be made public as part of the standard process.
What should recipients discuss with their auditors?
If applicability of this compliance requirement is unclear, PRF recipients should contact their auditors to measure the PRF payments received to determine need for a single audit. Not all auditors are yellow-book/single audit compliant, so it is important to ensure the audit team’s approach and structure meet these standards. RKL’s team of assurance professionals have deep expertise with single audits and grant compliance.
Working with a single audit compliant advisor, the organization should coordinate the necessary documentation for single audit testing and take stock of how the additional work for the single audit will impact audit timelines and fee structure. These discussions ensure that everyone is on the same page and knows what to expect during the process.
What can PRF recipients do internally to prepare for the single audit?
There are a number of steps a PRF recipient can take to prepare for a single audit, including:
- Separately track all PRF receipts and receipts from other programs, such as loans or hazard grants, for visibility.
- Establish a method for calculating and tracking charges against the funds, which for PRF must be pandemic-related expenses and lost revenues. RKL’s healthcare consulting team developed a customizable tool to help PRF recipients track all funding sources and COVID-19 related expenses and lost revenue, both on a monthly and cumulative basis.
- Review internal control practices and firm up documentation where possible, knowing that audit findings previously communicated only internally will now be filed publicly.
There is continued industry and stakeholder inquiry on the applicability of the single audit for PRF funds to make sure it does not result in unintended burdens or consequences as providers continue to grapple with the pandemic. There is no indication that HHS and the Office of Management and Budget will roll back to the single audit obligation, and work continues to develop specific regulations at both the federal and state level.
As we await publication of final requirements expected this fall, RKL’s team of healthcare advisors and assurance professionals continue to track program developments and advise providers on PRF and other pandemic relief measures.
Have questions about single audits and PRF payments? Contact your RKL professional or use the contact form below to get started.