Dear
Part A and Part B Ryan White HIV/AIDS
Program Grantees:
As a result of new requirements contained
in Title XXVI of the Public Health Service
(PHS) Act, as amended by the Ryan White
HIV/AIDS Treatment Modernization Act of
2006, PL 109-415, the HIV/AIDS Bureau
(HAB) has developed the attached policy
notice regarding unobligated balances
of grant funds.
New
language contained in the law in section
2603(c) and section 2622 delineates specific
requirements with regard to the reporting
and use of unobligated balances of grant
funds, effective with the fiscal year
(FY) 2007 grant. The attached document
has been developed by HAB in order to
clarify the new requirements, emphasize
the difference between "obligation"
and "expenditure" of grant funds,
and explain potential penalties imposed
on grantees who do not comply with the
new requirements. A copy of the policy,
along with a glossary, a question and
answer document, and two illustrative
flowcharts, accompany this letter.
Because
of the impact of these new requirements,
HAB plans to provide, in addition to this
mailing, broad technical assistance to
grantees regarding unobligated balances
of grant funds.
If you have any questions regarding the
content of this HAB policy notice, please
contact your project officer. Thank you
for your attention to this important matter.
Deborah Parham Hopson, Ph.D., R.N.
Assistant Surgeon General
Associate Administrator
Attachments
Policy Notice
07-09: The Unobligated Balances Provision
The purpose of all Ryan White HIV/AIDS Program funds is to ensure
that eligible HIV-infected persons and families gain and/or maintain
access to medical care. In accordance with the provisions of Title
XXVI of the Public Health Service PHS) Act, as amended by the Ryan
White HIV/AIDS Treatment Modernization Act of 2006 (Ryan White HIV/AIDS
Program), the following policy establishes guidelines for the unobligated
balances provision.
Affected
Grantees
under Parts A and B, including eligible metropolitan areas (EMAs),
transitional grant areas (TGAs), States and United States (U.S.)
Territories, and emerging communities.
Background
Prior
to the 2006 amendments to Title XXVI of the PHS Act, the Health
Resources and Services Administration (HRSA) lacked the authority
to reallocate unexpended grant funds to areas demonstrating need
for supplemental funds. As a result, the Secretary was unable
to direct these unobligated funds to areas with demonstrated need
and these funds were instead canceled and returned to the Treasury.
The Ryan White HIV/AIDS Treatment Modernization Act of 2006 gives
the Secretary authority to recover unobligated amounts from grantees'
awards and the ability to redistribute these funds to areas most
in need (rather than redistributing resources based on the formula).
The unobligated balances provision is found in sections 2603(c)
and 2622 of the PHS Act . These unobligated funds are first subject
to the hold harmless provision and are then made available as
additional amounts for competitive supplemental grants to EMAs
(section 2603(b)) and TGAs (section 2609(d)(2)) under Part A and
for States and U.S. Territories under Part B (section 2620).
Discussion
The
unobligated balances provision applies to grant awards under Parts
A and B and affects both formula and supplemental funds that are
not obligated by the end of the grant year. Unobligated supplemental
funds under Part A and Part B (AIDS Drug Assistance Program (ADAP)
supplemental, new supplemental program and emerging communities),
shall be canceled and made available to the Secretary as additional
amounts for supplemental grants under the respective Parts, after
first being used to satisfy any hold harmless requirements. The
unobligated balance provision does not apply to funds from drug
rebates under Part B or to funds granted through the Minority
AIDS Initiative (MAI). According to the statute, drug rebate amounts
are not considered part of the grant award and are not subject
to the unobligated balances provision. In the case of MAI funds,
States, EMAs, and TGAs will track and carryover MAI funds to address
the disproportionate impact of HIV/AIDS on racial and ethnic minorities.
Unobligated formula funds awarded under Part A and Part B (both
ADAP and base awards), are available for expenditure by the grantee
for a 1-year period, beginning upon the expiration of the grant
year, with HRSA approval of a carryover waiver. If not expended
at the end of the 1-year period, such funds shall be canceled
and made available to the Secretary as additional amounts for
supplemental awards.
Carryover
Waivers
Unobligated
supplemental grant dollars, regardless of the remaining amount,
will be canceled and returned without the option of a waiver.
A waiver to request carryover of unobligated formula and ADAP
base funds is necessary regardless of the amount of remaining
funds. A carryover waiver application must be submitted to HRSA/HAB
60 days before the end of the grant year stating the purpose for
which such funds will be expended during the carryover year. The
exact amount of unobligated funds will be reported on Financial
Status Reports (FSR) submitted 90 days after the end of the grant
year. It is, however, the grantee's responsibility to track and
project any unobligated amount before the end of the grant year
and apply for a waiver accordingly. If a waiver for carryover
is denied or, if at the end of the carryover year funds remain
unexpended, the amounts will be canceled and made available to
the Secretary for reallocation through supplemental awards. For
a grantee having greater than 2 percent in unobligated formula
or ADAP base funds at the end of its grant year, whether it receives
a waiver or not, there are penalties and adjustments that will
affect future awards.
Penalties
and Adjustments to Future Awards
Unobligated
formula grant funds up to 2 percent of the award do not incur
a future corresponding reduction in future grant awards, however,
there are penalties and adjustments related to unobligated grants
funds that are over 2 percent of the grant award. Unobligated
formula grant funds in excess of 2 percent of the grant award
will result in a corresponding reduction in grant funds beginning
in the first fiscal year after the fiscal year in which such information
is available to the Secretary. For example, if such unobligated
amounts are first reported in the grantee's fiscal year (FY) 2007
FSRs, due 90 days after the end of the 2007 grant year, the reduction
in grant of the unobligated amount will affect the FY 2009 grant
award and not the FY 2008 grant award. The grant funds involved
in such a reduction will be made available for supplemental grants.
In addition
to a corresponding reduction in award funds, grantees with an
unobligated balance of greater than 2 percent of formula or ADAP
base funds (whether or not they received a carryover waiver) are
not eligible to receive supplemental grant awards in the year
following the year in which this information becomes available
to the Secretary. For Part A grantees, this would mean ineligibility
to receive competitive supplemental grant funds under the existing
supplemental grant program. For Part B grantees, this would mean
ineligibility for the new supplemental grant program.
Issues
The
unobligated balances provision raises several implementation issues
to be faced at the grantee-level, including the tracking and reporting
of unobligated funds, the late start-up of the new TGA grantees,
and the impact of ineligibility for supplemental grants, along
with the potential loss in funds to areas in future years.
Grantee
Tracking and Reporting of Unobligated Balances
While
the most significant implication for grantees is the potential
loss of grant dollars resulting from penalties related to the
unobligated balances provision, grantees are also required to
institute rigorous tracking and reporting provisions to monitor
grant funds. Similar to past procedures for requesting a carryover
of funds, grantees will be required to estimate, before the end
of the grant year, if any funds will remain unobligated for that
year. The difference now is that grantees will need to separately
report the obligation of supplemental and formula funds and be
able to project any remaining unobligated amounts from either
funding source. In addition, approved carryover funds must be
tracked and reported separately from current year grant award
funds. It is anticipated that grantees will be required to file
multiple FSRs in order to account separately for the obligation
of formula, supplemental, and carryover funds. Failure to manage
effectively funds in this way may result in the penalties discussed
above. In addition to a more rigorous strategy for account tracking,
grantees may need to develop more accurate methods of projecting
program needs in order to budget efficiently. HRSA/HAB will provide
grantees with technical assistance regarding the best strategies
for obligation of grant funds, in ways that minimize the likelihood
of diminished future funding.
Transitional
Grant Areas Late Start-up
A
total of five new TGAs were funded in FY 07. These new grantees
received their grant awards in April (over 1 month into the grant
year). The new unobligated balances provision may impact these
areas in ways these areas could not have anticipated. New program
start-up requires time and planning that is not addressed in the
unobligated balances provision. Although grant funds are available
for the 12-month period beginning on the date of award receipt
and many grantees will be able to bill retroactively for expenses
incurred in the month preceding the award of funds, there may
be some grantees who experience difficulty obligating all of their
FY 07 grant dollars due to the delay of funds. This is particularly
likely in the case of the five new TGAs that require initial start-up
planning and development. Consequently, there is a strong likelihood
that these five TGAs will have over 2 percent in unobligated formula
funds at the end of FY 07 which will mean future year reductions
in grants and ineligibility for supplemental funds.
Glossary
of terms
Eligible
Metropolitan Area (EMA)
An area with a cumulative total of at least 2,000 AIDS cases reported
during the most recent 5 years and a population of 50,000 or more.
There are 22 EMAs in FY 07.
Transitional
Grant Area (TGA)
An area with a cumulative total of at least 1,000 but fewer than
2,000 AIDS cases during the most recent 5 years. There are 34
TGAs in FY 07.
State
Includes the each of the 50 U.S. States, the District of Columbia,
and each of the 8 territories.
Emerging
Community (EC)
An area with a cumulative total of at least 500 but fewer than
1,000 AIDS cases during the most recent 5 years. There are 19
ECs in FY 07.
Obligated
funds
Monies that have been committed/promised/assigned/set aside for
a specific purpose and will require payment during the same or
a future period.
Unobligated
balance
Monies that have not been committed/promised/assigned/set aside
for a specific purpose by the end of the grant year.
Unexpended
funds (Unliquidated obligations)
Obligated funds that have not been paid out.
Canceled
funds
Funds that the grantee no longer has the authority to expend.
Carryover
The allowance of unobligated funds, upon receipt of a waiver,
to be expended for the one-year period beginning upon the expiration
of the grant year. Any carryover funds not expended within the
one-year timeframe of the carryover year, will be canceled and
returned to the Secretary.
Demonstrated
need
To be determined by Secretary and replaces and expands the definition
of "severe need" provided in the previous law.
Hold harmless
provision
For FY 2007: 95 percent of FY 2006 amounts; for FY 2008 and FY
2009: 100 percent of FY 2007 amounts; through FY 2009, funds for
increase shall come from a Pro Rata Reduction if Supplemental
funds are insufficient for necessary compliance.
Supplemental
grant (Part A)
Based on "demonstrated need." Distribution based on
2/3 formula, 1/3 supplemental for both EMAs and TGAs. Priority
in making grants is given to areas experiencing a "decline
or disruption" of all Area-provided services.
Supplemental
grant (Part B)
New competitive grant based on "demonstrated need."
Source for Part B hold harmless.
Attachment to Policy Notice 07-09
The Unobligated
Balances Provision (Part A and Part B)
Questions and Answers
The following
series of questions has been generated in order to guide and inform
Part A and Part B grantees about the implementation of the unobligated
balances provisions. The questions are loosely divided into four
broad categories: [1] Clarification; [2] Tracking and Reporting;
[3] Compliance; and [4] the Waiver.
Clarification
1. Will
a three year appropriation allow enough time for the funds to
be obligated, canceled and returned, and then made available for
additional awards in subsequent fiscal years?
The
law states that the funds returned shall be made available as
additional amounts for supplemental awards for the first fiscal
year (FY) beginning after the FY in which the Secretary obtains
the information necessary for determining that the balance is
required to be canceled. As these are three year appropriations,
initial obligation, cancellation, return, and then re-competition
would need to occur within the three year-window. In the case
of formula awards, the carryover year will need to be incorporated
into this three year window.
2. What
happens if I have an unobligated balance of formula funds greater
than 2%?
If
a grantee has an unobligated balance greater than 2% of their
formula award, the grantee's formula award will be reduced by
that same amount in the fiscal year after it is reported to the
Secretary. Additionally, in that same year, the grantee will be
ineligible to compete for a supplemental award regardless of the
whether they received a carryover waiver. Grantees are encouraged
to efficiently allocate and expend funds. If the grantee does
not require the use of all funds, the return of those funds affords
the Secretary greater flexibility in the reallocation of unobligated
funds to where they are greatly needed.
Ineligibility
for the ADAP supplemental is based on a grantee's failure to obligate
at least 75% of its grant award within 120 days and to report
this obligation within 150 days on a Financial Status Report (FSR).
Any portion of the grant that has not been obligated up to at
least 75% will be canceled and made available in the supplemental
pool. There is no option of a carryover waiver for any funds less
than 75% that were not obligated within the timeframe.
For example,
if a State obligates 72% of its grant funds within 120 days of
the award, 3% of remaining funds (the difference from 75% that
was to be obligated within that timeframe) is canceled and returned
for distribution in the supplemental grant pool. According to
the eligibility criteria for the ADAP supplemental, the grantee
is no longer eligible for ADAP supplemental funds in the following
year. Penalties and adjustments related to the year-end unobligated
balances provision do not apply to unobligated Part B formula
funds at 120 days.
3. What
happens if I have an unobligated balance of supplemental funds?
If
the grantee has an unobligated supplemental balance at the end
of the grant year, the balance is canceled and returned to the
Secretary for redistribution through supplemental awards. The
penalties and adjustments that relate to unobligated formula amounts
do not apply to unobligated supplemental amounts. The grantee
will remain eligible for supplemental funds and future year award
amounts will not be reduced by a corresponding amount.
4. How
is the new supplemental grant program under Part B funded?
The
new supplemental grant pool under Part B has three funding streams:
[1] one-third of new monies appropriated over the FY 2006 amounts;
[2] canceled and returned unobligated balances; and [3] grant
funds involved in the corresponding reduction of award for any
grantee who it was determined had an unobligated balance of greater
than 2% in FY 2007, FY 2008, or FY 2009. Each stream is first
applied to satisfy any hold harmless provisions. The continuing
resolution (CR) for FY 2007 provided approximately $75 million
above the amounts appropriated in FY 2006 for the Ryan White program,
therefore roughly $25 million of that was eligible for the new
Part B supplemental but has already been utilized to hold States
harmless. This means that there are no funds available for competitive
grant awards through the new Part B supplemental in FY 2007.
5. Does
HRSA/HAB anticipate there being opportunity for competition under
the new Part B supplemental before the law is repealed at the
end of FY 2009?
The
law states that, before funds can be allocated to the newly created
supplemental pool under Part B, they must first be used to hold
states harmless. At this time it is impossible to anticipate whether
the amount of new monies appropriated over the FY 2006 amounts
in addition to any unobligated funds or corresponding reductions
in future grant awards will exceed the amount required for hold
harmless. However, an application process is under development
and HRSA/HAB encourages grantees to submit competing applications
to receive such funds as they become available.
6. What
happens to unobligated drug rebate funds at the end of the grant
year?
Drug
rebate dollars are not considered to be part of the grant award,
therefore any unobligated drug rebate funds are not subject to
the unobligated balances provision. Such amounts are considered
program income and are reported on a grantee's year-end FSR.
It is HAB's
policy, given the specific nature of the "earmark" for
the AIDS Drug Assistance Program (ADAP) funds, to consider such
funds obligated by the State upon receipt of the Part B grant
award provided that some contractual or other arrangement, already
in place, demonstrates the State's commitment to spend the funds
for ADAP purposes. For example, a State's agreement to pay pharmacies
for prescriptions as they come in would satisfy the obligation
requirement.
Tracking
and Reporting
7. Does
HRSA/HAB recommend a tracking method for grantees to utilize when
managing the various funding streams (formula, supplemental, current-year,
carryover) within their Part A and Part B awards?
HRSA/HAB
is in the process of developing efficient and uniform budget collection
tools based on the reauthorized statute. Until these standardized
measurements are finalized, grantees are encouraged to utilize
technical assistance provided by the HAB in order to develop a
tracking method that works best for them and will result in fiscal
management that is in line with statutory requirements.
Unlike unobligated
formula funds, any supplemental funds that remain unobligated
at the end of the grant year are automatically canceled and returned
to the Secretary without the option of a carryover waiver.
8. Is
there a tracking/accounts management system that HRSA/HAB recommends
grantees use when trying to project an unobligated balance as
accurately as possible before the end of the grant year?
There
are some grantees that currently have management systems in place
that allow them to consistently draw down funds in a way that
enables them to ration funds over the course of the year. Grantees
with this type of accounting system may find it easier to more
accurately project any funds that may be left over at the end
of the grant year. Nevertheless, these grantees will still need
to distinguish between the drawdown of formula and supplemental
funds.
Furthermore,
HRSA/HAB recommends that grantees project the largest possible
unobligated balance on their waiver application. Grantees should
keep this in mind to ensure waiver coverage of any unobligated
funds that may exceed conservative budget estimates of Ryan White
Program grant dollars. Final waiver and possible penalty decisions
will be based on the amount of unobligated Ryan White Program
grant dollars reflected on the FSR.
Compliance
9. What
is the correct procedure for reporting and returning end-of-year
unobligated funds?
Reporting
of unobligated balances occurs at two separate times - once 60
days before the end of the grant year and once 90 days after in
the form of FSRs. Before the end of the grant year, a grantee
must report a projected balance of its formula and ADAP base award
(if applicable). The grantee may decide to apply for a waiver
of that remaining balance. It is up to the grantee if they wish
to pursue the waiver, keeping in mind that any amount not requested
for carryover and without a waiver, will be automatically canceled
and returned to the Secretary.
Canceled
funds will be captured following the receipt of FSRs. Any unobligated
funds from the formula or ADAP base awards that are not covered
under a waiver, and any unobligated funds from a supplemental
award will be canceled and returned to the Secretary.
10. Does
the unobligated balances provision apply to subgrantees?
The
provision applies to the grantee of record. This may result in
increased oversight of subgrantees, but responsibility for efficient
obligation ultimately rests with the grantee of record in receipt
of funds directly from HRSA/HAB.
Waiver
11. When
can I apply for a carryover wavier?
A
waiver to carryover an unobligated formula award balance must
be submitted before the end of the grant year. A waiver application
should be submitted to HAB no later than 60 days before the end
of the grant year.
12. How
do I apply for a carryover waiver?
HRSA/HAB
is in the process of developing a waiver application process specific
to the unobligated balances provision. Applications must be signed
and submitted in writing by the chief elected official and must
include a description of the purposes for which the funds will
be spent.
13. I
will not know the exact amount of unobligated funds before the
end of the grant year. In the past, this information was reported
on the FSR. How will I know, prior to the end of the grant year,
if I will have an unobligated balance?
Grantees
will need to estimate - before the end of the grant year - what
funds (if any) will remain unobligated at the end of the year.
If the grantee anticipates an unobligated balance, it is recommended
that the grantee apply for a waiver. Unobligated amounts will
be confirmed on the FSRs submitted no later than 90 days after
the expiration of the grant year.
14. When
will I be notified if my carryover waiver has been granted?
Grantees
will be notified if their application for a waiver was successful
within 30 days of receipt of the formula FSR.
15. If
I apply for a waiver based on projections of an unobligated balance
of greater than 2% but my FSR documents an unobligated balance
less than or equal to 2% will I still be penalized by a corresponding
reduction in funds the next year along with an ineligibility for
supplemental funds?
No,
the actual amount of unobligated funds for the original grant
year as reported in the FSRs will determine whether or not a penalty
or adjustment in a future year's award is warranted.
16. What
happens if, at the end of my carryover year, I have a remaining
unexpended balance?
Any
unexpended carryover amounts will be canceled without penalty
and returned to the Secretary for redistribution as supplemental
grant funds.
Legislative
Citation
"
Obligation and Expenditure of Grant Funds Section 2603(c), 2622.
" Grantee ineligibility to receive supplemental grant funds
with unobligated balances >2 percent: Part A Section 2603(b)(1)(H);
Part B, Section 2620(a).
" Use of unobligated balances for hold harmless (Part A)
Section 2603(a)(4) referenced in Section 2603(c)(3)(D)(ii); (Part
B) Section 2618(a)(2)(H) referenced in Section 2622 (c)(4)(B).
" Use of unobligated funds for new supplemental grants under
Part B, Section 2620.