Your organization may have been fortunate enough to have received an influx of funding from several federal stimulus sources in response to the coronavirus pandemic. These sources may have included the U.S. Department of Health & Human Services (HHS) Provider Relief Funds and COVID-19 Uninsured Program Portal funding. While this additional support can help your organization maintain capacity through future coronavirus-related business concerns, it comes with terms, conditions, and regulatory guidance that must be followed. Keep these considerations in mind as you navigate the use of these additional funding sources.
1. Be sure that your organization is clear on the spending timelines and reporting requirements for the usage of funds.
Provider Relief Fund guidance was updated as of Jan. 15, 2021, and the Provider Relief Fund Reporting Portal was opened for registration. All entities that have received $10,001 or more in the aggregate must register in this portal. Currently, there is no deadline that HHS has mandated for completing this registration. PRF recipients will receive an email notification about when they should complete the submission of the required reporting information on the usage of the funds. Registration should be completed as soon as possible to ensure that timely communication is received from HHS. Providers will have an additional opportunity to report by July 31, 2021, on the usage of funds not expended prior to Dec. 31, 2020. The Jan. 15 update to the Post-Payment Notice of Reporting Requirements included additional guidance as to reporting on expenses attributable to COVID-19 and lost revenues. Provider Relief Fund FAQs are posted frequently; be sure to check the HHS website for updates on a regular basis.
2. Have you considered Uniform Guidance Single Audit implications?
Provider Relief Fund General and Targeted Distribution payments (CFDA 93.498) and Uninsured Testing and Treatment reimbursement payments (CFDA 93.461) are federal awards and subject to Single Audit. Subparts B (General Provisions), D (Post Federal Award Requirements), E (Cost Principles), and F (Audit Requirements) of the Uniform Guidance apply to Provider Relief Funds. Commercial organizations that receive $750,000 or more in annual federal awards have two options:
a. A financial audit conducted in accordance with Generally Accepted Government Auditing Standards (45 CFR 75.216), or
b. A Single Audit in conformance with the requirements under 45 CFR 75 Subpart F.
If you’re unsure as to which of these options best fits your organization, reach out to your trusted advisor. There are a series of key attributes to take into account in each situation.
3. Have you implemented sufficient procedures for tracking the use of funds?
The use of all funding streams will need to be diligently documented for use during the reporting process to be sure that organizations can clearly show that multiple funding streams were not being used for the same expenses (an issue also known as “double-dipping”). This will also facilitate the reporting that will ultimately need to be completed for all funding streams to confirm that you have used funding aligned with the terms and conditions outlined on usage. Expenses charged to each funding source should be clearly documented in the accounting records to be able to stand up to audit.
4. Have you considered the tax impact of the Provider Relief Funds?
The federal income tax rules are complicated. No doubt, the IRS applies a broad definition of “income,” especially when a company receives cash. Even though the government intended to provide a benefit with the Provider Relief Funds, the receipt of the funding could come at a (tax) cost to the company. When your company pays tax – and how much tax it pays in connection with the receipt of Provider Relief Funds – is a function of when cash is received and spent (e.g., you could have a potential addition to taxable income in 2020 and then a corresponding expense in 2021). Tax treatments may differ based on whether the company uses the accrual method or cash method of accounting.
If you have received HHS Provider Relief Funds, talk to a CohnReznick tax professional to learn more about the potential tax ramifications arising from the receipt of these funds and whether you can take steps to mitigate or defer any taxes that you would otherwise owe.
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