Over the last year, health care providers (“Recipients”) have received billions of dollars in relief fund payments from the Provider Relief Fund (“Relief Fund”) created by the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) signed into law in March. Recipients of Relief Fund payments are required to comply with certain auditing and reporting requirements as specified by the Department of Health and Human Services (“HHS”).

Although the COVID-19 public health emergency continues, the reporting and auditing obligations are starting and Recipients need to continue to monitor upcoming deadlines.

For reporting, providers who received more than $10,000 in relief fund payments must report COVID expenses and lost revenue through an HHS online portal that is scheduled to open January 15. Recipients that received more than $750,000 in Relief Fund payments and other federal awards will also be subject to the HHS single audit process. Finally, the Office of Inspector General (“OIG”) has signaled that it will audit Recipients to confirm that Recipients are complying with federal requirements and the terms and conditions for reporting and expending the Relief Fund payments

Takeaways

  • Continue to prepare information for the Relief Fund Reporting and monitor updates on guidance and reporting instructions.
  • Determine if you are subject to the Single Audit Requirement, review the process, prepare for the audit and meet the reporting deadlines.
  • Monitor the OIG Relief Fund reviews and enforcement actions.

Relief Fund Reporting

The Relief Fund reporting portal is scheduled to open January 15 with an initial report due February 15, 2021 (though there is a possibility HHS will delay the deadline for the first report). The initial reporting period will cover COVID-19-related expenses and lost revenue for Recipients through December 31, 2020. Recipients that do not use all funds by end of 2020 must submit a second and final report no later than July 31, 2021 for COVID-19-related expenses and lost revenue amounts for the period of January 1– June 30, 2021.

HHS published Final Provider Relief Fund Reporting Guidelines (“Reporting Guidelines”), which include detailed information on provider reporting guidelines, use of funds and the specific data elements that Recipients must report. The Reporting Guidelines were updated multiple times between August and November 2020.

Since the publication of the most recent Reporting Guidelines, however, the Consolidated Appropriations Act, 2021 (the “Act”) was signed into law and it included two key changes for the Relief Fund:

  • Lost revenue: First, it clarified how Recipients calculate COVID-19-related “lost revenue.” The Act provides that Recipients can calculate lost revenues consistent with HHS guidance issued in June 2020. This means Recipients are no longer restricted to calculating lost revenue based on a year‑to‑year actual patient care revenue comparison as described in current HHS guidance.
  • System Allocation of Targeted Funds: Second, the Act allows parent organizations to allocate Targeted Distributions to subsidiaries, flexibility that was previously limited to General Distribution payments.

HHS will need to update the Reporting Guidelines once again to account for these changes. It is important to note that a number of the FAQ responses are now obsolete, given the changes in the Act. How HHS will interpret and apply the Act’s changes is still an open question. Recipients should consider waiting until updated guidance is issued before completing their initial report.

Single Audit Requirements

HHS stated Provider Relief Fund payments and payments for Uninsured Testing and Treatment must be included in determining annual total federal fund expenditures for nonfederal entities (“COVID Federal Fund Exp.”). If a Recipient receives at least $750,000 in total federal fund expenditures (which included the COVID Federal Fund Exp.), the entity is required to have a single audit consistent with 45 CFR Part 75, Subpart F (“Single Audit”). This requirement applies to non-federal entities and commercial organizations, and nonprofit organizations may find they are obligated to have a Single Audit for the first time.

The purpose of the Single Audit is to ensure that entities that receive at least $750,000 in federal funds engage an outside auditor to test internal controls and compliance in order to provide an opinion on the entity’s compliance with the requirements of retaining the federal funds, which in this case is the COVID Federal Fund Exp. The auditors then issue a report related to the Single Audit that would identify any reportable findings or questioned costs.

The Office of Management and Budget (“OMB”) released a Compliance Supplement Addendum in December 2020 to address, in part, the Single Audit requirement for COVID Federal Fund Exp. (“Compliance Supplement Addendum”). This Compliance Supplement Addendum, along with the Compliance Supplement issued in August 2020, describes the requirements and process for the Single Audit.

The Compliance Supplement Addendum instructs the auditors to audit three requirements for each category of COVID Federal Fund Exp. For COVID Testing for the Uninsured, auditors will review Allowed and Unallowed Activities, Allowable Costs/Cost Principles and Eligibility. For Provider Relief Funds, auditors will review Allowed and Unallowed Activities, Allowable Costs/Cost Principles and Reporting. The requirements and the related audit procedures are described in detail in the Compliance Supplement and the Compliance Supplement Addendum. Single Audits are normally due nine months after the organization’s fiscal year-end, which means that an organization with a June 30, 2020 year-end would have to file its Single Audit Report by March 31, 2021. However, the OMB extended the audit deadline for three months for organizations whose Single Audit Reports were due between October 1, 2020 through June 30, 2021. Organizations must provide a reason for a delayed filing but do not need to obtain approval for the extension. Recipients subject to the Single Audit requirement for the first time should not delay on procuring an auditor for the Single Audit.

OIG Review of CARES Act Funds

The OIG currently has six items on its Work Plan related to CARES Act Funding. These include the following:

  1. Audit of HRSA’s Controls Over Medicare Providers’ Compliance with the Attestation, Submitted-Revenue-Information, and Quarterly Use-of-Funds Reporting Requirements Related to the $50 Billion General Distribution of the Provider Relief Fund;
  2. Audit of HRSA’s COVID-19 Uninsured Program;
  3. COVID-19 Testing Data from Federal Programs;
  4. Audit of CARES Act Provider Relief Funds – General and Targeted Distributions to Hospitals;
  5. Audit of CMS’s Controls over the Expanded Accelerated and Advance Payment Program Payments and Recovery; and
  6. Audit of CARES Act Provider Relief Funds – Distribution of $50 Billion to Health Care Providers.

The inclusion of these items on the OIG Work Plan helps emphasize that the distribution of these funds and compliance obligations conditioned on receipt of relief funds will be subject to scrutiny at multiple levels including at the federal agency levels.