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Audit Requirements for Commercial Organizations receiving Provider Relief Funds and Other U.S. Department of Health and Human Services Funding

Commercial Organizations that received provider relief funds and other U.S. Department of Health and Human Services (HHS) federal funds have been anxiously waiting for additional guidance on how to meet the federal program audit requirements. The wait is finally over!

The AICPA’s Governmental Audit Quality Center provided additional guidance during their January 20, 2022, web event on how commercial organizations should handle the HHS Audit Requirements for federal funds.

As defined by the Federal Regulation 45 CFR § 75.2, a commercial organization is an organization, institution, corporation, or other legal entity, including, but not limited to, partnerships, sole proprietorships, and limited liability companies, that is organized or operated for the profit or benefit of its shareholders or other owners. The term includes small and large businesses and is used interchangeably with for-profit organizations.

Commercial organizations that expend $750,000 or more in annual awards, based on the organization’s fiscal year-end, are subject to the HHS for-profit audit requirements. For this purpose, amounts expended include both expenditures and lost revenues per the Health Resources and Services Administration (HRSA) FAQs.

Federal funding from HHS subject to the HHS for-profit audit requirements include the following Assistance Listings, formerly Catalog of Federal Domestic Assistance (CFDA):

  • Assistance Listing# 93.498 – Provider Relief Funds and American Rescue Plan (ARP) Rural Distribution
  • Assistance Listing# 93.461 – COVID-19 Claims Reimbursement for the Uninsured Program and the COVID-19 Coverage Assistance Funds
  • Assistance Listing# 93.697 – COVID-19 Testing and Mitigation for Rural Health Clinics
  • Other HHS Awards such as NIH Research and Development grants
  • Other HHS Awards received unless specifically excluded

Commercial organizations have three options to meet the HHS for-profit audit requirements.

Single Audit (2 CFR 200/45 CFR Section 75)

    1. Requires an audit of the entity’s financial statements under Generally Accepted Government Auditing Standards (GAGAS).
    2. A Schedule of Expenditures and Federal Awards (SEFA) must be reported along with an in-relation to opinion on the SEFA.
    3. GAGAS reporting on internal control over financial reporting and compliance and other matters as it relates to the financial statements as a whole.
    4. Auditor opinion on compliance and reporting on internal control over compliance is required.
    5. The commercial organization has awards under one or multiple HHS programs

Program-Specific Audit (2 CFR 200/45 CFR Section 75)

  1. Does not require an audit of the entity’s financial statements under GAGAS.
  2. Requires a schedule of Specific Element of Financial Statement along with an opinion on the schedule under AU-C 805.
  3. GAGAS reporting on internal control over financial reporting and compliance and other matters.
  4. Auditor opinion on compliance and reporting on internal control over compliance is required.
  5. The commercial organization has awards under only one HHS program.

GAGAS Financial Audit (45 CFR Section 75.216)

  1. Does not require an audit of the entity’s financial statements under GAGAS.
  2. Requires a Schedule of Specific Element of Financial Statement along with an opinion on the schedule under AU-C 805.
  3. GAGAS reporting on internal control over financial reporting and compliance and other matters as it relates to the schedule under AU-C 805.
  4. Does not require an auditor opinion on compliance and reporting on internal control over compliance.
  5. The commercial organization has awards under one or multiple HHS programs.

Each commercial organization will need to determine which of the three options is best for their organization depending on the type of funding received and whether or not they receive a financial statement audit.

The HHS audits are due the earlier of 30 calendar days after the receipt of the audit report or 9 months after the fiscal year. If a commercial organization chooses options two or three above the audit report is the HHS audit report not the financial statement audit.

Commercial organization audits must be submitted electronically via email to HRSA’s Division of Financial Integrity at PRFAudits@hrsa.gov.

Commercial organizations receiving federal funds and requiring an audit of federal programs is new territory since the COVID-19 pandemic. If you are a commercial organization that received provider relief funds or other HHS awards and have further questions about HHS audit requirements, please contact our experienced professionals. Learn more about McKonly & Asbury’s Healthcare Practice or by contacting the Healthcare Practice Director, Janice Snyder, Partner.


About the Author

Kady Hand

Kady joined McKonly & Asbury in 2016 and is currently a Manager with the firm. As a member of the Audit & Assurance Segment, she focuses on providing client services, particularly in the areas of healthcare entity audits and single… Read more

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