The U.S. Department of Health and Human Services (HHS) recently issued new guidance regarding reporting and auditing requirements that may impact providers and suppliers who retain payments received from the Public Health and Social Services Emergency Fund (Relief Fund). The guidance clarifies reporting requirements outlined in the Terms and Conditions (T&C) and the applicability of auditing requirements found in existing HHS regulations.
Reporting Required Under the Relief Fund Terms and Conditions
Among other things, the T&C require Relief Fund payment recipients to submit reports to HHS in the form, and with such content, as specified by the HHS Secretary. On July 20, 2020, HHS released a Post-Payment Notice of Reporting Requirements (Notice) to inform recipients that retain Relief Fund payments exceeding $10,000 in the aggregate of the timing of this reporting requirement.
The Notice also confirms the requirement will apply regardless of whether a recipient retains payments from the General Distributions (including both rounds of Medicare distributions and the distribution for Medicaid, CHIP and dental providers) or Targeted Distributions (including those for high impact areas, rural providers, skilled nursing facilities and safety-net hospitals).
The reports will be aimed at having recipients demonstrate compliance with the T&C, including the use of funds for allowable purposes, for each Relief Fund payment received. Detailed instructions for the reports and a data collection template will be released by August 17, with the reporting system becoming available on October 1.
Based on the guidance released thus far, recipients will be required to report within 45 days of the end of calendar year 2020 on their expenditures through December 31, 2020. Recipients who have completely expended Relief Fund payments before December 31, 2020, will be permitted to submit a single, final report at any time from October 1, 2020 (when the reporting system becomes available) through February 15, 2021.
Recipients who have not completely expended their Relief Fund payments before December 31, 2020, will be required to submit a second and final report no later than July 31, 2021. Notably, HHS has advised that it “expects that providers will fully expend their payments” by the final report deadline of July 31, 2021.
In addition to setting forth the reporting requirements above, HHS has clarified that Relief Fund payment recipients do not need to engage in quarterly reporting as referenced in the T&C. The T&C provide that recipients who receive more than $150,000 in the aggregate from any statute that primarily makes appropriations for COVID-19 response efforts (including those made to the Relief Fund), must submit quarterly reports to HHS and the Pandemic Response Accountability Committee.
Although HHS previously released a Frequently Asked Question (FAQ) indicating that recipients would need to submit a quarterly report beginning for the quarter ending June 30, 2020, HHS later deleted this guidance.
Also, HHS later issued a new FAQ, which explains that the quarterly reporting requirement referenced in the T&C will be satisfied by HHS given that the agency is posting names of payment recipients and their payment amounts on its website and at USAspending.gov.
Relief Fund Auditing Requirements
New HHS FAQs further indicate that Relief Fund payment recipients may also be subject to the agency’s existing, and more general, audit requirements. Regarding commercial/for-profit organizations, such requirements are triggered if, during the organization’s fiscal year, it receives $750,000 or more under HHS awards and at least one award is an HHS grant or subgrant. (Auditing requirements may differ for other types of organizations including local governments, institutions of higher education, and nonprofit organizations.)
HHS FAQs clarify that Relief Fund General and Targeted Distribution payments, as well as Uninsured Testing and Treatment reimbursement payments, must be counted toward the $750,000 threshold in determining whether an audit is required. Although the agency has not explicitly stated as such, this auditing requirement appears to be distinct from the reporting requirement described above; for example, the T&C-based reporting requirement applies to organizations that receive more than $10,000 in Relief Fund payments while the auditing requirement applies to organizations that receive more than $750,000 in federal awards during a fiscal year.
HHS requires commercial organizations to conduct audits annually for each fiscal year that the threshold – i.e., receipt of over $750,000 in federal awards – is met. Commercial organizations that meet this threshold have two options regarding the type of audit that they may conduct. Namely, commercial organizations may conduct either of the following:
- A financial-related audit (as defined in the Government Accountability Office’s “Yellow Book”) in accordance with generally accepted government auditing standards (GAGAS).
- A single audit that meets the requirements contained in HHS’ regulations at Title 45 CFR Subpart F.
Per the relevant auditing regulations and guidance, the audit must be performed by an auditor that is a public accountant or a federal, state or local government audit organization, which meets the general standards specified in the GAGAS. The auditor must prepare a report that includes, among other things, a report on internal control over financial reporting and compliance with laws and regulations that could affect financial statements, and a schedule of findings and questioned costs.
Generally speaking, audits must be completed and submitted within the earlier of 30 days after receipt of the auditor’s report or nine months after the end of the organization’s audit period/fiscal year. However, in light of the COVID-19 public health emergency, the Office of Management and Budget (OMB) has granted a six-month deadline extension for any single audit that has not been filed as of March 19, 2020, and for all entities with fiscal year-ends through June 30, 2020.
Recipients are not required to seek approval for the extension but should maintain documentation that includes the reasons for the delayed filing. The OMB memorandum that issued the extension refers only to single audits and, accordingly, may not apply to financial-related audits. Completed audit reports are electronically submitted to HHS’ Audit Resolution Division at AuditResolution@hhs.gov.
Finally, we note that the agency may issue further detail regarding applicable auditing requirements. HHS has warned it will have “significant anti-fraud monitoring of the funds distributed” and that the HHS Office of Inspector General will provide oversight “to ensure that Federal dollars are used appropriately.” This warning emphasizes the importance for providers who have received Relief Fund payments to ensure they maintain the documentation needed to support the payments and closely follow the instructions related to the auditing requirements to avoid potential liability.
Providers should also continue to stay up to date on new guidance as HHS continues to refine its instructions related to the Relief Fund.
We are continuing to monitor for additional guidance regarding such requirements.
