Ryan & Wetmore, PC Do You Need a Single Due to COVID Relief?

Pete Ryan, Partner, CPA, & MBA Tu Nguyen, Senior Finance Consultant Carrie Karn, CPA & Senior Manager Healthcare providers may not be aware that they are subject to a Single Audit (A-133 audit). Many healthcare providers faced significant financial changes due to the COVID-19 pandemic, including the following changes felt by many organizations.

Additional costs associated with purchasing needed PPE Costs of additional support provided to your workers losses from cancelled surgeries and other services Deferred elective and preventive visits Costs to implement telehealth and other innovations

In response, the government provided numerous COVID relief packages. As a result of receiving these relief funds, many entities will need a Single Audit for the first time, including healthcare providers and non- profits.

Are you subject to the Single Audit? Did you receive and expend more than $750,000 in COVID relief, including the following or other relief funds?

Provider Relief Fund (PRF) Coronavirus Relief Fund (CRF) Education Stabilization Fund (ESF)

SBA has confirmed that Paycheck Protection Program (PPP) loans are not subject to Single Audit.

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Overview of the Single Audit

A Single Audit is required when a non-federal entity expends $750,000 or more of federal awards in a fiscal year.

If an organization expended less than $750,000 in a given fiscal year, a Single Audit requirement does not apply. Note that the amounts that trigger a Single Audit are the amounts of funds expended, not received.

The Single Audit Act Amendments of 1996 was enacted to streamline and improve the effectiveness of of federal awards and to reduce the audit burden on states, local governments, and not-for- profit entities. It is also referred to as a Uniform Guidance Single Audit. The regulation contains detailed implementation requirements.

Objective and Scope of the Single Audit

The goal of a Single Audit is for the federal government to determine if you have complied with federal statutes and regulations.

The scope covers the entire operations of the entity, including both:

a audit, and a federal award audit.

04 healthcare alert following: The auditeeornon-federalentityis responsibleforthe the EntityBeing Audited)? Audit Responsibilities (as What areYourSingle Requirements forFederalAwards,SubpartF. Administrative Requirements,CostPrinciples,andAudit 3. UniformGuidance-2CFRPart200, (GAO) –referredtoasthe“YellowBook” States throughtheU.S.GovernmentAccountabilityOffice Standards issuedbytheComptrollerGeneralofUnited 2. GAGAS-GenerallyAcceptedGovernmentAuditing the AICPA 1. GAAS-Generallyacceptedauditingstandardsissuedby professional auditingstandardsandrequirements: A SingleAuditisperformedfollowingthreesetsof federal awards. statutes, regulationsandthetermsconditionsof auditor providesanopiniononcompliancewithfederal and testsinternalcontrolovercompliance.Additionally,the statements arepresentedfairly,gainsanunderstandingof, The auditorprovidesanopiniononwhetherthefinancial Prepare theappropriate financialstatements performed andsubmitted timely Arrange forsingleauditandensure itisproperly

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Prepare the Schedule of Expenditures of Federal Awards (SEFA) Promptly follow up and take corrective action on audit findings Prepare summary schedule of prior audit findings (if any prior audits) Gather required data elements of the data collection form (DCF) Provide the auditor with access to personnel, accounts, books, records, supporting documentation, and other information as needed Schedule of Expenditures of Federal Awards (SEFA)

You are required to prepare the SEFA. If you are not familiar with this schedule, your or auditor may be able to assist with this.

All expenditures of Federal funds must be accounted for in the annual SEFA, whether funds are received directly from a Federal agency or indirectly from a pass-through entity. You must list individual federal programs by federal agency.

06 The SEFA must be prepared by management and must reconcile to records used in preparing the financial statements. Completeness and accuracy of the SEFA is critical to avoid programs being missed. For loan or loan guarantee programs, you need to identify the balances outstanding at the end of the audit period. Additionally, you are required to describe the significant accounting policies used in preparing the SEFA.

Single Audit Benefits and Potential Results of Noncompliance

Benefits of having a Single Audit include:

Confirmation that you have met the requirements of receiving federal or state funding An objective look at your internal controls over both financial and grant programs Audited financial statements may be used to obtain future funding Recommendations related to industry best practices

What happens if the auditor identifies a compliance finding?

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If an audit identifies internal control issues or instances of noncompliance, this will be reported to you in writing. Noncompliance could invoice various items, including regulations related to federal or state grants, violations or debt covenants, or other internal control items that might affect the financial statements.

A compliance finding related to internal control may be able to be resolved by fixing the deficiency going forward.

If you are required to complete a Single Audit and do not do so, you may be added to a list of organizations that are delinquent. You likely will receive a letter requesting that the Single Audit be completed.

This may also be reported to your funding agency.

Other possible results of noncompliance or findings could include:

Draw-down restriction Reimbursable draw-down Withholding a percentage of federal funds Suspending federal funds Termination of grant

08 healthcare alert In March2021,theOMBissued funding foryearendsthroughSept30,2020. for SingleAuditsorganizationsthatreceivedCOVID-19 Given thetiming,OMBprovidedathree-monthextension Compliance Supplement(theAddendum). (OMB)releasedthe On December22,2020,theOfficeofManagementand extensions havebeengranted. the entity’syear-end.However,duetocoronavirus, program specificaudittobecompletedwithin9monthsof The UniformGuidancerequirestheSingleAuditand Single AuditDueDates reason forthedelayedfiling. However, theyshouldmaintaindocumentationofthe this extensionwithouthavingtoseekapproval. Recipients andsubrecipientsareautomaticallyqualifiedfor which bringittoa6-monthextension. extend theSingleAuditduedatesforanother3months, Addendum tothe2020

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Per section 200.512 of the Uniform Guidance, if the due date falls on a Saturday, Sunday, or Federal holiday, the reporting package is due the next business day. Dates in these columns have not been adjusted accordingly.

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Interaction Between Reporting in the HHS Portal and the Single Audit

Healthcare providers who received more than $10,000 in one or more PRF payments must register in the Provider Relief Fund Reporting Portal and report their use of funds.

The simplified grid below summarizes the requirements that trigger reporting in HHS portal and/or the Single Audit.

The two reports (HHS portal submission and SEFA) are connected in the sense that the SEFA must agree to the amount of expenditures and lost revenue reported in the HHS portal submission. Thus, providers cannot have the Single Audit fully completed until the HHS reporting has been completed.

11 At present, there is no deadline for completing registration in the HHS reporting portal as we previously reported on the delay of the HHS portal opening for reporting of PRF. HHS notes that recipients will later receive a notification about when they should complete the second step of submitting reporting requirements information on the use of funds.

What Can Providers do to Prepare for the Single Audit?

Be aware of your deadline and procure an auditor early. Consider a multi-year engagement to avoid searching for an auditor each year.

Keep books and records in order to ensure an efficient audit process and to avoid increased testing which may result in delays. Your auditor will provide an initial list of information needed, including:

access to your accounting system, or year-end and general , documentation related to the organization’s significant and liabilities, and documentation of the organization’s procedures.

The best way to prepare for a Single Audit is to talk to your auditor about what the process will be like and what supporting documentation you will need to provide. This might include award letters, 12 healthcare alert

agreements, and other communications with the awarding agency. It is important to keep supporting documentation readily available for the audit.

Regardless of the need to submit an audit, all financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years.

Federal compliance can be tricky to navigate, especially if your organization is undergoing the Single Audit for the first time. If your entity has expended over $750,000 in federal funding, reach out to us to discuss next steps.

About Ryan & Wetmore, PC

Ryan & Wetmore works with individual physician and group practices. We proudly offer these services to practices in all stages of the business lifecycle.

If you are searching for a provider that understands the healthcare industry then contact us today!

email phone [email protected] (301) 585-0506

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