New HHS Initiative Targets Audit Compliance Failures, Identifies ‘Hundreds’ of Noncompliant HHS Grantees

The U.S. Department of Health and Human Services (HHS), through the Office of the Assistant Secretary of Financial Resources (ASFR), announced a new program integrity initiative focused on persistent single audit noncompliance among federal grantees.

The initiative, referred to as the Audit Enforcement and Risk Oversight (AERO) initiative, uses advanced data analytics, including AI-enabled tools, to analyze single audit submission and identify patterns of noncompliance across states and federal grantees.

According to HHS, initial findings from the AERO initiative indicate that:

• Hundreds of HHS grantees have not submitted their required audits, with some late by more than two years.
• Both states and grantees had repeated and unresolved internal control findings, with some persisting for three to five years or longer.

HHS indicated that it recently notified states that chronic audit noncompliance, unresolved findings and delinquent audit submissions are unacceptable. It is not clear how and when individual grantees will receive formal notifications under the initiative.

HHS stated that it would work collaboratively with states and grantees to resolve audit findings and strengthen internal controls. At the same time, HHS indicated that if issues remain unresolved, it may pursue remedies permitted by law, including:

• Temporarily withholding payments until corrective action is taken;
• Disallowing costs for noncompliance activities;
• Suspending or terminating the award in whole or in part;
• Initiating suspension or debarment proceedings;
• Withholding future federal funds (new awards or continuation funding) for the project or program; and/or
• Pursuing other legally available enforcement actions.

BPHC Program Updates

The announcement of the AERO initiative aligns with remarks made during this week’s Bureau of Primary Health Care (BPHC) Program Updates webcast, where HRSA/BPHC officials reiterated expectations regarding single audit compliance. During the session, BPHC referenced the following single audit thresholds in their presentation slides:

• 2 CFR 200.501(a): “$1,000,000 or more…must have a single or program-specific audit” for fiscal years starting on or after October 1, 2024.
• 45 CFR 75.501(a): “$750,000 or more…must have a single or program-specific audit” for fiscal years starting on or after September 30, 2024.

BPHC also stated that failure to comply with the single audit requirements may result in enforcement actions, including:

• Drawdown restrictions
• Reimbursable drawdown restrictions
• Withholding a percentage of federal funds
• Suspending federal funds
• Termination of grant(s)

Key Takeaways for Health Centers

The AERO initiative reflects increased federal emphasis on timely submission of single audits and resolution of audit findings. For health centers, this reinforces the importance of:

• Timely submission of annual single audits;
• Prompt corrective action on internal control findings; and
• Strong documentation of federal award expenditures.