Some healthcare providers—along with states, universities and other organizations—are getting an extra three months to audit their COVID-19 relief aid.
The White House's Office of Management and Budget on Tuesday released guidance with instructions on how to audit money received under its COVID-19 relief distributions, including the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act. The rules extend the audit deadline, as many had anticipated. Health systems that received Provider Relief Fund grants had held off on auditing that money while they waited for specific rules.
Some healthcare providers will need to have their auditors perform a type of audit they've never been subject to before. So-called single audits are required when not-for-profit and governmental entities receive more than $750,000 in federal grant awards, which does not include Medicare and Medicaid.
Many providers received more than $750,000 in Provider Relief Fund grants alone. As of October, Congress had set aside $175 million for the fund. The newest COVID relief package Congress unveiled Monday adds another $3 billion.
While federal grants are routine for state governments and universities, they're not as common for healthcare providers. For some providers, this could be their first time receiving a federal grant, or more than $750,000 worth, said Mary Foelster, senior director of governmental auditing and accounting with the American Institute of Certified Public Accountants.
"For some of them it's a newer concept in many cases," she said.
The OMB issues new rules every year around how it expects federal grants to be audited. The guidance covers audit procedures and how recipients can spend the money. This year, those rules came out in August.
However, the August release did not include guidance on auditing CARES Act money and other COVID-19 relief programs, as they were just being rolled out. That's included in Tuesday's compliance supplement.
Single audits are normally due 9 months after the organization's fiscal year-end. That means an organization with a June 30, 2020 year-end would have to file by March 31, 2021.
The OMB's guidance said some organizations will have an extra three months to file their single audits. That applies to those whose original due dates were between Oct. 1, 2020 through June 30, 2021. The OMB added that recipients do not need to seek approval for the extensions, but they do need to provide a reason for the delayed filing.
"I'm guessing that healthcare providers will be very happy with that," Foelster said of the extended deadline.
The extra three months will be important to providers because the rules thus far been unclear and many hospitals are still inundated with COVID-19 patients while also trying to vaccinate their front-line workers, said Aparna Venkateswaran, a senior manager with Moss Adams.
"There's just a lot going on that I think 3 months would be helpful," she said.
The extended deadline is only for entities that received COVID relief funding.
Some Provider Relief Fund-specific rules included in the OMB's addendum:
- Grants can go toward preparing for, preventing and responding to the coronavirus. That encompasses building temporary structures, property rentals, medical supplies and equipment, including personal protective equipment and testing supplies, increased workforce and training, emergency operation centers, retrofitting facilities and adding surge capacity.
- Grants distributed under the Skilled Nursing Facility Infection Control Distribution can only be used to administer specific COVID-19 tests, report those tests to local, state and federal governments and hire staff to provide care or administrative support. They can also reimburse for infection control activities and services for residents like technology to connect with family members who can't visit.
- As expected, the OMB said the money can't reimburse expenses or losses expected to be reimbursed by other sources or that other sources are obligated to reimburse. That includes the Federal Emergency Management Agency, for example.
- The guidance also has detailed instructions on when and where to report COVID-related expenses and lost revenues. It says that keeping the grant money for at least 90 days without contacting HHS is deemed to have accepted the terms and conditions.
The new COVID relief package again relaxes the terms for letting providers keep the grant funds. Providers can now put the grants toward lost revenue compared with budgeted revenue for 2020, instead of actual revenue for 2019. That's in line with HHS' original guidance from June, which the agency then flip-flopped on numerous times before finally being overruled by Congress.
Federal grant programs typically only allow recipients to submit for expense reimbursement, so when Congress allowed entities to use the money on lost revenue, that was a "new concept in the world of single audits," Foelster said. That's also why the guidance has been a moving target.
Rather than performing a single audit, for-profit providers have the option of performing an audit under Government Auditing Standards, which focuses more on the Provider Relief Fund grants than the entire entity, Foelster said.
In some cases, this might be the first time a healthcare provider will be subject to the single audit, especially since Medicare and Medicaid are scoped out programs that aren't subject to the single audit, said Kinman Tong, a partner with Moss Adams.
"So this is potentially, hopefully, their once-in-a-lifetime of that organization that requires the single audit," he said.
The OMB's addendum also directs organizations that received donated personal protective equipment purchased using federal assistance funds to provide the fair market value of those supplies as a standalone footnote in their list of grant expenditures. That money is not audited, nor does it count toward the $750,000 single audit threshold, per the OMB.