By Justin Leverette, Senior Manager, Audit
The Rural Health Transformation (RHT) Program is bringing $50 billion in federal investment into rural healthcare over five fiscal years. As states move from award to implementation, participating organizations will need disciplined financial controls, clear documentation, reliable reporting, and the ability to demonstrate how funds supported approved program objectives.
Building that infrastructure early can reduce compliance risk and make future reporting and audit requests easier to manage. Audit readiness should begin before funds are spent — not when a deadline or audit request arrives.
Key Takeaways
- Build audit readiness from day one. Establish accounting, approval, documentation, and reporting processes before RHT funds are spent.
- Create a clear trail for every RHT dollar. Each expenditure should connect to an allowable purpose, supporting documentation, and an approved transformation objective.
- Treat readiness as an ongoing discipline. Regular reconciliations, compliance reviews, reporting, and a centralized audit binder can help identify gaps before they become larger issues.
Build the infrastructure before RHT funds are spent
One of the most important steps an organization can take is establishing its compliance infrastructure early.
Management should determine upfront:
- How RHT funds will be tracked
- Who can approve expenditures
- What documentation must support transactions
- How spending will be tied to approved RHT objectives
- How financial, operational, and compliance information will be captured for reporting
- How applicable procurement, conflict-of-interest, and subrecipient monitoring requirements will be documented
Core records may include award and allocation documents, the approved RHT transformation plan, contracts and subawards, general ledger detail, invoices, payroll records, approvals, reconciliations, project milestones, and progress reporting.
Strong internal controls are especially important. Without defined procedures for authorizing, recording, and reviewing expenditures, organizations may discover after the fact that spending was inadequately supported or did not follow established approval procedures.
How should RHT expenditures be tracked and documented?
A practical starting point is establishing a dedicated general ledger fund, cost center, or project code for RHT-related activity.
RHT expenses should be charged directly to the appropriate code rather than commingled with unrelated operating costs. Organizations should also consider tracking separate initiatives individually so management can identify the spending and documentation associated with each project.
For every expenditure, organizations should be prepared to answer three questions:
- What was purchased?
- Why was it allowable under the RHT plan?
- Where is the supporting evidence?
Supporting records may include invoices, contracts, purchase orders, proof of payment, approvals, payroll records, allocation methodologies, and other evidence appropriate to the expenditure.
Personnel and shared costs may require additional attention. When employee time is supported with RHT funds, organizations may need payroll registers, time or allocation records, salary and benefit calculations, and management approval of the effort charged to the program. Shared-cost methodologies should also be documented and applied consistently.
Organizations that have managed other federal healthcare funding programs may also find LBMC’s guidance on Provider Relief Fund reporting and audits useful as related background on documenting healthcare funding and preparing for oversight.
The objective is straightforward: the accounting records, supporting documentation, and rationale for the expenditure should tell the same story.
RHT Audit Readiness Checklist
Organizations can use this framework as a starting point:
- Establish a dedicated GL fund, cost center, or project code.
- Map expenditures to approved RHT initiatives.
- Define approval and documentation requirements.
- Reconcile spending to the general ledger and budget regularly.
- Maintain required reporting and compliance records.
- Keep a centralized audit binder tied to program outcomes.
The goal is to create a traceable path from funding received → spending → supporting documentation → program outcomes.
Want a copy your team can use?
Download the RHT Audit Readiness Checklist to help your finance, compliance, and operational teams track the documentation and controls needed throughout the funding period.
Maintain a regular RHT readiness cadence
Audit readiness should be built into the funding period rather than treated as a single year-end exercise.
- Monthly: Reconcile RHT expenditures to the general ledger, compare spending with budget, investigate variances, verify costs remain aligned with approved activities, and identify missing support.
- Periodically or quarterly: Review compliance, reporting, documentation, and subrecipient monitoring while transactions are still recent.
- Approximately 60–90 days before year-end: Reconcile all RHT activity, compile supporting records, validate significant costs for allowability, and confirm applicable procurement, reporting, approval, monitoring, and certification requirements have been addressed.
For significant expenditures, management should be able to document:
- What was purchased
- Why it was necessary
- Which RHT objective it supported
- Who approved it
About 30 days before an audit or formal review: Consider preparing a concise summary package covering budget-to-actual spending, RHT expenditure detail, outstanding obligations, applicable accruals, project milestones, key performance measures, internal control documentation, monitoring activities, and applicable certifications.
Organizations should also maintain supporting documentation throughout the applicable record-retention period.
What should an RHT audit binder include?
A centralized electronic audit binder can make readiness easier to maintain and help organizations respond efficiently to information requests.
The binder may be housed in SharePoint or another controlled document-management environment and should be organized by project or initiative.
Section | Examples |
Funding & program | Award documents, approved RHT plan, project plans |
Financial | Budgets, GL detail, expenditure reports, reconciliations |
Transactions | Contracts, invoices, purchase orders, payment support |
Payroll | Payroll records and allocation support |
Compliance | Approvals, procurement records, certifications, subrecipient monitoring |
Performance | Milestones, metrics, progress and outcome reporting |
The practical standard is simple: financial, operational, and compliance documentation should be organized so support for a requested transaction can be produced within minutes rather than reconstructed over days.
Connect RHT spending to program outcomes
Audit readiness extends beyond proving that money was spent.
Organizations should also be prepared to connect funded activity with measures such as rural healthcare access, quality and outcomes, workforce recruitment and retention, technology implementation, and provider or hospital sustainability.
Management should be able to answer six fundamental questions:
- How much RHT funding was received?
- How much was spent?
- What was it spent on?
- Were the expenditures allowable?
- What evidence supports those expenditures?
- What outcomes were achieved?
If those questions can be answered quickly and consistently, the organization is likely to be in a stronger position when reporting requirements or audit requests arise.
For broader insight into financial, operational, and strategic issues affecting providers, explore LBMC’s healthcare industry resources and advisory capabilities.
When outside assistance may make sense
A readiness assessment may be useful when:
- Multiple projects, entities, or subrecipients are involved
- Significant payroll or shared-cost allocations are being charged
- Reporting or documentation requirements are unclear
- Management cannot quickly produce support for sampled expenditures
Organizations should also determine whether the amount and structure of federal funding received could trigger additional audit requirements, including potentially applicable Single Audit requirements.
LBMC professionals can help organizations evaluate applicable requirements, assess readiness, review financial and compliance processes, and identify documentation or control gaps before they become larger issues.
Depending on the engagement and the organization’s relationship with LBMC, applicable auditor independence requirements must also be considered.
Learn more about LBMC’s Audit & Assurance services.
Prepare now for the questions that may come later
RHT funding has the potential to support meaningful improvements in rural healthcare, but organizations should expect to demonstrate both stewardship of the funds and the results those investments produce.
A dedicated accounting structure, consistent documentation, disciplined reconciliations, reliable reporting, effective controls, and a centralized audit binder can make that responsibility easier to manage.
For rural healthcare leaders, the objective is straightforward: Know where every RHT dollar went, why it was allowable, and what evidence proves it.
Have Questions About RHT Audit Readiness?
If your organization is preparing to receive or deploy Rural Health Transformation funding, Justin Leverette can help you evaluate whether your accounting structure, documentation processes, reporting framework, and internal controls are positioned to support ongoing compliance and future audit requirements.
Justin is a Senior Manager in LBMC’s Audit Division.
You can also learn more about LBMC’s healthcare advisory and audit capabilities through our healthcare team.
Rural Health Transformation Program FAQs
When should an organization begin preparing for RHT audit readiness?
Organizations should begin before significant RHT funds are spent. Accounting structures, approval processes, documentation requirements, reporting procedures, and project records are easier to establish upfront than reconstruct later.
How should RHT funds be tracked?
Organizations should consider a dedicated general ledger fund, cost center, or project code that separates RHT activity from normal operating costs. Separate initiatives may also warrant individual project tracking.
What documentation should support RHT expenditures?
Depending on the transaction, documentation may include invoices, contracts, purchase orders, proof of payment, approvals, payroll records, cost-allocation support, and evidence showing how the expenditure aligns with an approved RHT objective.
