COVID-19 relief programs have dispensed millions of dollars in funding for organizations impacted by the pandemic. But how do you ensure the funding doesn’t need to be paid back? The short answer is by complying with the terms and conditions of each program.
However, each program is complex, and program terms and conditions continue to change and develop. COVID-19 relief programs, including the HHS Provider Relief Fund (PRF) and SBA Paycheck Protection Program (PPP), continue to clarify program terms and conditions, but many are still subject to interpretation, and even more are likely to change. The SBA indicated they will audit all entities receiving more than $2 million, and the HHS has indicated PRF receipts will be subject to single audits under the Uniform Guidance and could be subject to separate audits by the HHS, OIG or other oversight entities.
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Track Your Expenditures
A major provision for most COVID-19 relief programs is a prohibition against “double dipping,” or utilizing funds from multiple sources to pay for the same cost. While it is sometimes difficult to prove double dipping occurred, lack of support for expenditures assigned to each specific program may be enough to cause expenditures to be considered invalid out of a presumption of double dipping. Additionally, each program defines certain types of expenditures as allowable, and each have different limitations, such as employee pay rates. Using a generic “group” of expenditures, such as anything not covered by the PPP program, increases the risk of unallowed expenditures because that group may contain unallowed activities, highly compensated individuals, etc., even though there are likely adequate eligible expenses in the group as well.
We recommend all entities receiving funding utilize a mechanism to identify and assign specific expenditures to relevant relief programs. Using a spreadsheet, log or other tool to track all of these programs in one location could prove even more valuable as program terms are clarified. When all costs are tracked in a single location, it is much easier to support a position that double dipping was avoided. It also ensures that each of those costs can be (and should be) compared to the relevant terms and conditions of the program to which they are assigned. As program terms are clarified, modifications to assigned costs becomes much easier, as does continued compliance.
We also recommend that adequate detail be provided in the cost tracking to allow for an external audit. For example, external expenditures should be traceable to specific invoices and internal expenditures should be supported by payroll records, including timesheets, etc. Once again, this reduces the risk that any single expenditure is used for more than one program. As expenditures are identified, you can use this detailed information to strategically analyze the assignment of costs to programs. For example, if you receive ongoing federal grants and have an indirect cost rate, avoiding the use of indirect costs would be an advantage because it avoids a lower future indirect rate or the potential for double dipping. Similarly, if you have cost-reimbursed departments, it may be advantageous to utilize costs from other departments, if available, should CMS decide to offset costs on a cost report.
Document Your Rationale
Remember that last time someone asked you what you were thinking 6 months ago? Now, imagine that your organization’s ability to retain millions of dollars is subject to your memory and someone else’s decision to accept that explanation! Most often, there is a valid and supportable rationale for assigning costs to these programs or determining measurement methodologies, such as for lost revenues. It is imperative to document those considerations. It is even better to have documentation to support specific terms and conditions. This can be done in a number of ways, from separate memos to notes on invoices to explanations on tools you are utilizing. The key is making sure it gets done.
As an example, let’s say you replaced all of the furniture in procedure rooms and considered those eligible for COVID-specific PRF funds. Why is replacing furniture an eligible expense? Well, if you previously had cloth material, which could not be disinfected appropriately between patients, and purchased items that can be sanitized, that would seem to qualify.
Or, let’s say you utilize a forecast methodology in calculating the lost revenue incurred by your facility. Why is this considered more appropriate than a budget to actual or comparison to the same period in the prior year, which may show less lost revenue? If the forecast more accurately represents the changes in patient volumes and third-party reimbursement you were experiencing leading up to the pandemic, that would seem to be supportable.
If You Haven’t Started Your Documentation Yet, Start Now!
The reporting tools that the HHS plans to release before August 17, 2020, should provide additional clarification. Additionally, the reports will not be due until February 14, 2021. However, do not use this as an excuse to delay. As noted above, some simple steps provide you with the opportunity to be nimble as these clarifications continue.
Unfortunately, everyone is currently wearing multiple hats, and the capacity to “add” more work just does not seem palatable. However, if you look at the risk of potentially paying these funds back, it is easy to see how proper documentation could become the most valuable task to complete.
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