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Audit Requirement Update for For-Profit Healthcare Entities

Karyn A. Nunn

December 17, 2020

There have been recent clarifications and additional questions issued relating to HHS Provider Relief Fund audit requirements of for-profit healthcare entities.

Clarifications

Currently, for-profit healthcare entities that RECEIVED $750,000 or more of HHS Provider Relief Funds trigger an audit requirement, and that audit must be performed in accordance with generally accepted government auditing standards (GAGAS). GAGAS has additional requirements above and beyond a standard audit regarding internal controls and compliance.  It was clarified that a GAGAS audit will be on a Schedule of Costs/Expenditures which lists the HHS expenditures and lost revenue only. 

So, what does this really mean for you? If you already have an audit completed, that audit reporting won’t change.  You will need to have a GAGAS audit done on the Schedule of Costs/Expenditures, but that will be separate from your main audit. If you’ve never had an audit, then you will also need to have a GAGAS audit done on the Schedule of Costs/Expenditures, instead of subjecting your entire operations to the audit.

Questions

As noted above, the current standards state that GAGAS audit requirements for a for-profit entity trigger based upon RECEIPTS of the HHS Provider Relief Funds of $750,000 or more. This is different than how single audits are triggered for non-profit entities, which are based upon expenditures of the funds. The American Institute of Certified Public Accounting (AICPA)’s Government Audit Quality Center (GAQC) has sent a request into HHS to clarify and request that for-profit audit requirements also be based upon expenditures instead of receipts. This is a critical differentiation. 

We are currently awaiting a response from HHS if they will change the for-profit entity audit trigger to expenditure based vs. receipt based. Also, the GAQC believes the for-profit GAGAS audits will have the same audit due date as non-profit Single Audits, which is nine months from the company’s year-end. Certain fiscal year-ends for non-profits have been granted extensions to this nine month due date, but it is unclear if for-profits will be granted those same extensions. For now, we are assuming that for-profit GAGAS audits will keep the nine month due date.

Looking ahead

GAGAS audits require specialized training and auditor skills. We have extensive experience with GAGAS and would be happy to assist your organization with any GAGAS audit needs. As always, we will keep you updated as additional information becomes available.

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