Recently, Federally Qualified Health Centers (FQHCs) received two sets of supplemental funding released by the Health Resources and Services Administration (HRSA) in response to the COVID-19 pandemic:

• $1.32 billion in CARES Supplemental Funding (H8D), appropriated through the CARES Act of 2020, and;
• $100 million in COVID-19 Supplemental Funding (H8C), appropriated through the Coronavirus Preparedness and Response Supplemental Appropriations Act of 2020.

The supplemental funding was distributed to FQHCs based on a formula – starting with a base value ($503,000 for H8D and $50,464 for H8C) and increased for total patients and total uninsured patients as reported in the 2018 Uniform Data System. The average distributions were roughly $950,000 for H8D, and $70,000 for H8C. The supplemental funding was provided directly to the FQHCs; no applications were deemed necessary.

HRSA Guidance Related to H8D Funding

The CARES Act award is permitted to be used to support expenses related to the COVID-19 emergency dating back to Jan. 20, 2020, specifically related to the detection and/or prevention, diagnosis and treatment of COVID-19, which includes maintaining or increasing health center capacity and staffing levels during this emergency. While there is flexibility in how this award may be used, there are certain costs that are considered ineligible, such as (but not limited to):

• Excessive executive pay;
• New construction activities (e.g., for a new stand-alone structure) to expand the total square footage of a facility;
• Major alteration or renovation (A/R) projects greater than $500,000;
• Installation of permanent modular or pre-fabricated buildings, and;
• Facility or land purchases.

FQHCs must certify that they will not use the funds to reimburse expenses or losses that have been reimbursed from other sources or that other sources are obligated to reimburse. This scope of this requirement is not clear, but FQHCs should consider identifying other sources of possible relief or reimbursement (i.e., insurance policies, grant funding, etc.), segregating any funds obtained from those sources and using those funds from other sources for non-overlapping expenses and lost revenues.

Note, if the FQHC receives subsequent reimbursement for expenses from other sources after receiving funding for the same expenses from H8D, then the FQHC will be required to repay the funding it received from H8D to avoid receiving funding twice for the same expense.

As stated on the H8D award letter, FQHCs are required to submit documentation supporting how this award was used through the HRSA Electronic Handbooks, including:

• A brief narrative describing how the funds were or are to be used consistent with the purpose of the award;
• A budget form (SF-424A) that includes only the H8D funds awarded;
• A budget narrative that details costs for each federal object class category, how each cost was derived and which should not include any ineligible costs;
• If the FQHC’s budget includes equipment purchases, an Equipment List Form is needed and;
• If the FQHC’s budget includes minor A/R projects of $500,000 or less, certain documentation supporting this spend is needed.

A complete list of terms and conditions can be found by clicking here.

HRSA Guidance Related to H8C Funding

The H8C funding is permitted to be used for the prevention, preparedness and response-related expenses dating back to Jan. 20, 2020. FQHCs have the flexibility to use these supplemental funds as circumstance and needs evolve. While GHJ did not see any reporting requirements for this award, the HRSA is requiring that FQHCs track and account the activities supported through this award, separate and apart from their primary funding award (H80) and the H8D CARES Act supplemental funding.

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The adoption of policies and procedures to ensure compliance with the terms and conditions is a best practice. As the majority of FQHCs already receive federal, state and local grants, the implementation or incorporation of these funds into existing policies and procedures should be an easy process.

However, it is important for FQHCs to remember to maintain records on how the H8D and H8C funds were spent for future audits and reviews. In accordance with the federal award, financial management regulations and federal award record retention and access regulations (45 CFR section 75) records should be maintained and available upon the request of the HHS Secretary.

If you have any questions regarding the compliance requirements, maintaining documentation and/or the creation and adoption of policies and procedures, please reach out to GHJ Nonprofit Industry Practice Leaders, who specialize in compliance requirements under federal, state and local grants.

Please reach out to GHJ’s COVID-19 Response Team if you have any questions as the firm has an experienced team of consultants specializing in cash-flow projections, strategy and operations consulting and re-organizations. We are here to assist organizations to succeed in these very challenging times.