Providers face uncertain guidance, certain scrutiny
The Rural Health Transformation Program (RHTP) is subject to Uniform Guidance and Single Audit requirements. RHTP recipients should treat documentation and audit readiness as front-end compliance requirements, not year-end cleanup tasks. Learn what providers should document to maintain compliance and prepare for audit scrutiny as funds are received and used.
What is the Rural Health Transformation Program?
RHTP is a $50 billion federal initiative administered by the Centers for Medicare & Medicaid Services that distributes funding to states over five years beginning in fiscal year 2026. Its purpose is to improve access, quality, and sustainability of rural healthcare. RHTP funds are federal financial assistance subject to Uniform Guidance (2 CFR Part 200), including Single Audit requirements.
A Historic Investment with Accelerated Expectations
RHPT represents one of the largest federal investments in rural healthcare to date.
While the size and ambition of the program are unprecedented, the pace of implementation is equally notable. States began receiving funding in early 2026 following approval of their transformation plans, and many are now under significant pressure to deploy and obligate funds within compressed timelines. At the same time, subrecipient funding opportunities are actively being released, with providers, health systems, and community organizations moving quickly to access available dollars.
This situation creates a familiar challenge: Funding must be deployed immediately, while detailed regulatory guidance continues to evolve.
A New Program with Familiar Compliance Requirements
Although RHTP is a new program, the Uniform Guidance compliance framework governing it is not.
Under Uniform Guidance:
- Non-federal entities expending $1 million or more in federal awards annually are required to undergo a Single Audit.
- A Single Audit includes both financial statement auditing and compliance testing of federal programs, with a focus on internal controls, allowable costs, and reporting accuracy.
In practice, this means organizations will be evaluated not only on how RHTP funds are being used but also on whether they can clearly demonstrate compliance through contemporaneous documentation, consistent application of policy, and effective internal controls.
For many RHTP recipients, particularly subrecipients such as smaller provider organizations, this audit requirement may represent their first experience operating under the full scope of federal grant compliance and audit scrutiny.
Key Distinctions from the Provider Relief Fund
Many providers are familiar with the COVID-19-era Provider Relief Fund (PRF). It provides a useful comparison point; however, key structural differences between PRF and RHTP have meaningful compliance implications:
- Funding structure
- PRF: Included prospective payments
- RHTP: Structured as a cost-reimbursable grant, requiring clear linkage between claimed expenditures and approved activities
- Distribution model
- PRF: Funds flowed directly from the federal government to providers
- RHTP: Funds are awarded to states, which in turn distribute funds to subrecipients, increasing layers of oversight and compliance responsibility
- Program design
- PRF: Federally prescribed eligibility and payment calculations
- RHTP: Requires state-developed transformation plans, introducing variability in requirements and interpretation
- Purpose of funding
- PRF: Focused on replacing lost revenue and covering pandemic-related costs
- RHTP: Designed to support long-term transformation and sustainability of rural health systems, often involving more complex, multi-year initiatives
Collectively, these distinctions elevate the importance of programmatic alignment, documentation, and internal controls, as PRF audits revealed.
Lessons Learned from PRF Audits: A Preview of What’s to Come with RHTP
Federal oversight experience under PRF provides a clear signal of what to expect under RHTP. In 2025, the U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) conducted a series of audits to determine the use of PRF funds. Two that included rural providers found a total of $134 million in unallowable expenditures, and both found providers had misstated lost revenue calculations, signaling broader reporting issues.
As a result of the audits, HHS required repayment of funds associated with noncompliance if the providers were not able to come into compliance with the PRF requirements. Importantly, the root causes of noncompliance were not intentional misuse but often the result of clerical errors, misinterpreted evolving guidance, failure to maintain supporting documentation, and lack of procedures to verify calculations.
Providers expecting to receive RHTP funds can learn from these examples: Compliance failures are often rooted in documentation, interpretation, and internal control weaknesses, not in program intent, and are likely preventable with stronger documentation, clearer interpretation protocols, and effective review controls.
What Organizations Should Be Doing Now
Given the parallels to prior federal funding programs and the certainty of audit oversight, organizations expecting to receive RHTP funding should prioritize audit readiness at the outset.
- Prepare for Single Audit Requirements Immediately
Organizations should assume that audit compliance begins when funds are received, not at year-end. This includes
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- Identifying whether RHTP funds will trigger Single Audit thresholds
- Identifying internal ownership of compliance and reporting
- Aligning accounting treatment, reporting, and documentation practices with Uniform Guidance
- Strengthen Procurement and Cost Compliance Controls
As a cost-reimbursable program, RHTP requires clear adherence to Uniform Guidance cost principles. Organizations should ensure
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- Costs are allowable, allocable, and reasonable
- Procurement processes comply with federal standards
- Documentation supports both the nature and purpose of expenditures
- Build Audit-Ready Documentation Frameworks
Documentation should support not only financial reporting but also programmatic justification. Key considerations include
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- What was the approved activity?
- How does the cost relate to that activity?
- Who approved it and under what authority?
- Is there clear evidence of performance and benefit?
Documentation should be complete, contemporaneous, and clearly organized to withstand audit review. Organizations should also consider how documentation will be evaluated retrospectively. In practice, this means documentation must enable an independent party, whether an auditor or regulator, to understand not only what decision was made but also why it was made, based on the information available at the time.
- Establish Review and Validation Procedures
Compliance challenges often arise from insufficient procedures to verify reported amounts and gaps in supporting documentation. Review and validation procedures include
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- Secondary review of cost classifications
- Validation of calculations
- Periodic compliance checks throughout the funding period
These procedures serve as an early warning system—identifying issues before they become audit findings.
- Recognize First-Time Audit Exposure
For some entities, particularly subrecipients, RHTP funding may represent their first experience with federal audit requirements. Training and communication are critical to ensure staff understand
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- Documentation expectations
- Reporting timelines
- Consequences of noncompliance
The Audit Clock Is Already Running
RHTP represents a transformative investment in rural healthcare, but it also brings well-established compliance expectations. While program guidance may continue to evolve, audit standards will not.
Organizations expecting to receive RHTP funding should begin preparing for Single Audit requirements now, not after funds are received. Early investment in compliance infrastructure, including documentation, internal controls, and review processes, will be critical. A reasonable place to start is by documenting the logic and calculations that went into developing the entity’s original grant application(s) as well as all information relied upon during that process.
By the time detailed audit guidance is fully developed, the audit clock will already be running.
PYA Can Help
If your organization expects to receive RHTP funding and has questions about Single Audit requirements, documentation frameworks, or compliance readiness, PYA can help. PYA’s Rural Health Transformation Team assists rural providers with applying for, operationalizing, developing documentation and compliance protocols, and prioritizing audit readiness for RHTP funding.
