During the pandemic, a number of providers – in addition to PPP funding – applied for and received distributions through the Cares Act Provider Relief Fund from the U.S. Department of Health and Human Services.
The U.S. Office of Inspector General recently updated its Work Plan (available HERE), and the plan now affirmatively states that the U.S. Office of Audit Services will be auditing providers for compliance with the Provider Relief Fund requirements. Specifically, the government will “perform a series of audits of funds related to the three phases of the General Distribution to determine whether payments were: (1) correctly calculated for providers that applied for these payments, (2) supported by appropriate and reasonable documentation, and (3) made to eligible providers.” The audit activity is expected to be initiated sometime in 2022. The OIG website, however, does not specify when in 2022 such audits will begin.
Providers that have applied for and received Provider Relief Funds should take the time now to work with counsel and accountants to properly document the expenditures of any Provider Relief Funds, to ensure that they can justify the expenditure to government regulators in the event of an audit. There may be adverse legal consequences based on who applied for and received the funds, and how the funds were spent. Thus, providers would be well served by taking the time to seriously prepare their books for any potential audit into their receipt and expenditure of Provider Relief Funds. In preparing their records for an audit, providers should strive to shield from the government all documentation, information, and discussions regarding the Provider Relief Funds through the attorney-client privilege. Generally, information shared by providers with accountants or consultants is not protected by any privilege, and providers may be required to disclose to government regulators any information (or potentially incriminating discussions, such as emails) with accountants or consultants. However, in certain circumstances, the “Kovel Doctrine” will allow the attorney-client privilege to extend to conversations with third-party consultants and accountants. Thus, to the extent sensitive issues need to be discussed and strategized regarding the Provider Relief Funds, providers should work closely with counsel to ensure that the attorney-client privilege is properly implemented and extends to all parties (including consultants) who may be involved in assisting the provider.
If your agency has received Provider Relief Funds and you need assistance in preparing for an audit regarding those funds, please let us know.