Oig Reports Problems With Assisted Living Providers’ Use Of Covid-19 Funds, Calls For Repayment

A federal audit found nine of 30 assisted living providers misstated or improperly spent Covid-19 pandemic-era relief funding, according to a report by the U.S. Department of Health and Human Services’ Office of the Inspector General (OIG).

Federal auditors found the selected assisted living providers had complied with Provider Relief Fund (PRF) rules but some operators reported a total of $283,000 in “unallowable PRF expenditures,” and two AL providers inaccurately reported $11 million in lost revenue, the report stated.

During the pandemic, Congress approved $178 billion for provider expenses and lost revenue due to the impact of Covid-19. Between 2020 and 2021, 3,690 AL providers received and kept one or more PRF payments totaling $640.7 million. The “nonstatistical sample” of 30 providers received $156.1 million based on “risk analysis” tied to “high-impact areas” of the pandemic spanning both rural and urban areas, total PRF payment amounts and organizational structure.

Findings for the report were collected between April 2023 and August 2025.

The nine providers implicated in the report for improper use of funds received a total of $25.6 million in PRF payments. The OIG recommends the Health Resources and Services Administration (HRSA) require the providers return the unallowed funds in question or “properly account for these” expenses and lost revenue. HRSA concurred with the recommendation.

The HRSA recommends the seven AL providers that used PRF payments for unallowable expenses return the funds, while recommending that two providers that were found to have inaccurately calculated and reported lost revenue of $11 million return that amount to the federal government.

The report also concluded that lawmakers and federal agencies should “look for additional ways to safeguard federal funds when rapidly disbursing assistance payments to providers in response to future public health emergencies.”

The issues from AL providers stemmed from making clerical errors in reporting, not correctly interpreting HRSA guidance or not having procedures to verify lost revenue calculations, the report found. In the context of “extraordinary challenges” from Covid-19.

The HRSA’s goal at the start of the public health emergency was to quickly dispose of funds to providers that requested it.

“These and other unprecedented challenges of the pandemic may have contributed to clerical errors when reporting PRF expenditures or caused staff to misinterpret HRSA’s guidance,” auditors wrote.

One provider referenced in the report used PRF payments to compensate two executives making $300,000 respectively, which exceeded the Executive Level II salary scale by $205,400, the report stated.

The report found missing or insufficient support for approximately $57,000 in reported costs, with issues including unsupported estimates or missing receipts. For example, one AL provider used $52,856 to cover food expenses and “did not maintain supporting documentation for the actual food costs.” In response, the provider believed maintaining documentation for estimated food cost “was adequate.”

Another provider used payments to cover a subsidiary’s expenses of $3,780, for which the provider did not provide necessary documentation. In that instance, the provider told federal auditors the needed documentation was not available due to the subsidiary being sold.

In a third example, a provider referenced in the report did not keep documentation related to the purchase of blood-oxygen readers for $300, with the provider noting it had lost the receipt for the purchase.

Recipients of PRF dollars were required to disclose financial results of each federal award and identify the source and application of the funds. In one instance, an AL provider recorded $57,616 of expenses based on purchase order amounts, but the “actual invoices and payment amounts totaled $46,326.”

One provider used PRF payments to cover expenses that were not attributable to the pandemic, the report found.

The provider used aid payments to cover the purchase of “alcoholic beverages” totaling $1,430. The provider told federal auditors the expense was misstated and the company reviewed whether Covid-19 related funding amounts “were appropriately coded.”

Recording of lost revenue issues also emerged in the report, with two AL providers inaccurately calculating reported lost revenue of $11 million. The entities “overstated” lost revenue by $9.3 million and $1.7 million, respectively, tied to communities “they no longer owned.”

“This occurred because the ALFs included 2020 budgeted net patient service revenues for these facilities in the baseline to calculate their lost revenues,” the report stated.

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