Over the past 18 months, many commercial entities have received federal grant funding for the first time due to COVID-19. The information regarding how and when to use such grant funds has been limited, vague, or not provided until months after funding is received. To further complicate things, guidance is continually changing.

Entities expending more than $750,000 of federal grant funding in a year are required to have a financial statement and compliance audit referred to as a Single Audit. Organizations without prior audit requirements may now have an audit requirement due to federal funding received/spent during 2020/2021. As these federal funds are new and have limited or changing guidance, receiving organizations should work with their accounting firms and granting agencies to ensure compliance. Proper documentation is also key in the future when granting agencies or auditors have questions.

Single Audits are conducted under Subpart F of the Office of Management and Budget’s (OMB) Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. OMB annually issues a Compliance Supplement, which identifies compliance requirements and suggests audit procedures for numerous federal grant programs. The 2021 Compliance Supplement (July 2021), and an addendum for specific programs unrelated to commercial entities (December 2021) to address COVID funding.

One common grant received by healthcare service businesses was Provider Relief Funds (PRF). Entities that received monies include, but are not limited to, medical and dental practices, nursing homes, assisted living facilities, vision practices, and behavioral health practices. This money has been disbursed through several different phases. The first payments were deposited in bank accounts on April 10, 2020, and payments are continuing. 

The PRF expenses must have a direct COVID affiliation and cannot be reported as having been spent on PRF if already reimbursed from another grant. For example, if a business received a Paycheck Protection Program (PPP) loan that was reported as having been spent with payroll, those same payroll funds cannot be spent again on PRF. Most expenses are allowed to be charged to PRF if they are used in preparing for and/or responding to the pandemic. Additional examples include costs incurred to purchase personal protective equipment, barriers for social distancing, expanded hardware or software to allow for remote work by employees, or enhancing telemedicine, just to name a few. If payroll is being considered as a PRF expense, remember it must have a COVID tie. A nurse working a shift to treat non-COVID patients in the normal course of business is not allowable. 

In addition to COVID-related expenses, organizations can also use PRF monies for lost revenue. For these instances, businesses will enter quarterly information for two years into the Health Resources and Services Administration (HRSA) portal and lost revenue will be calculated based on quarterly figures. An entity might have more revenue in calendar 2020 than in 2019, but may have losses by quarter for the PRF lost revenue calculation.

Normally, federal funding is reported on a Schedule of Expenditures of Federal Awards (SEFA) when funds are spent. However, PRF funding is reported on the SEFA depending on when organizations are required to report in the HRSA portal. See table below for reference on when portal and corresponding SEFA reporting are required.   

Reporting in the HRSA portal is not allowed prior to the portal reporting period dates noted above. Additionally, if a business is unable to show the PRF funds as having been spent, the PRF funds must be returned within 30 days after the reporting time period. 

The OMB has indicated commercial entities will have different options to comply with the Uniform Guidance audit requirement for PRF monies than non-profit and governmental entities have. However, as of the date of this article, those options have not yet been released.

The compliance professionals at Ketel Thorstenson, LLP can help you navigate the Uniform Guidance requirements. Please contact us to answer questions and for additional guidance.