My Practice Needs a Single Audit! What Now?
Originally published on August 19, 2020
Updated on November 1st, 2023
The Provider Relief Fund (PRF) portion of the CARES Act has helped healthcare businesses stay afloat during a critical time. It has also introduced a complication not often seen by private practices—the single audit.
The U.S. Department of Health and Human Services is now requiring single audits for all non-federal entities receiving and spending $750,000 or more in PRF funds. While nonprofit healthcare facilities are likely familiar with single audit requirements, it’s new territory for the private sector.
If your practice is facing a single audit for the first time, you no doubt have questions. Here are the basics you need to know about this process.
What is a single audit?
A single audit examines how an organization spends federal funding. It examines not only expenditures, but also the soundness of spending processes and reporting. The goal is simple—to ensure you’re spending the money as intended.
If your entity spends over $750,000 in federal funding, you are required by federal law to undergo a federal single audit. This is the reason for the newly announced requirement from HHS. The auditor will determine what programs are “major programs,” which normally amount to your largest funding sources. They will then test various compliance items related to those programs. (A single audit is the part of a financial statement audit that examines major programs.)
Most private practices facing single audits for the first time have no federal funding sources other than the PRF. Chances are you fall under this category; if so, you can elect to undergo a program-specific single audit. This stripped-down version of a full single audit is limited to an audit of the schedule of expenditures of federal awards (SEFA) and the internal controls surrounding that major program.
What does the audit look like?
Your auditors will consider roughly a dozen criteria, including your practice’s eligibility for the funds, cash management and allowable costs. They’ll pull samples such as invoices, documented processes and segregation of duties and examine them for HHS compliance.
While your auditors will be thorough in their examinations, a program-specific audit generally lasts two or three days at most. (Single audits take a week or longer.) So it shouldn’t be too disruptive to your operations. These audits can also be done remotely instead of on site—a plus during a pandemic, when limiting personal contact is important.
How can I help ensure that things go smoothly?
Simply put, be organized. Have your invoices and other documentation ready and available for the auditors. If your spending records are thorough and organized, it helps your auditor complete the engagement quickly and with minimal disruption to your staff.
It also helps to be readily available should your auditor have questions or need to address something with you. If the audit is being performed remotely, make sure you’re reachable by phone, messaging apps or other means.
When does my practice have to complete its single audit?
A single audit is typically due within nine months after the end of the audit period. Since your program-specific audit would cover the 2020 calendar year, this creates a due date of Sept. 30, 2021. Extensions might be granted on a case-by-case basis given the current situation. At this point, however, it’s too early to tell.
What should I look for in an auditor?
For starters, hire a firm with plenty of single audit expertise. This is especially important when it’s your first time with such an engagement. Nonprofit CPAs, for example, have extensive experience since many nonprofit organizations undergo single audits.
You should also seek CPAs specializing in healthcare clients. Through their work, they’ve developed in-depth understanding of how practices operate. When you combine their knowledge with the nonprofit/single audit side, you’ll have the best of both worlds.
Finally, ask a firm about their work involving CARES Act provisions and other COVID-19 legislation. Make sure they provide the resources you need to get your practice through the pandemic.
While a single audit might sound intimidating, most of the stress lies in the unknown. With a little preparation, research and help, you can make it as smooth a process as possible.
All content provided in this article is for informational purposes only. Matters discussed in this article are subject to change. For up-to-date information on this subject please contact a James Moore professional. James Moore will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.
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