Skip Navigation HRSA - Health Resources and Service Administration U.S. Department of Health & Human Services
Home
Questions
Order Publications
 
Grants Find Help Service Delivery Data Health System Concerns About HRSA

The HIV/AIDS Program: Caring for the Underserved

 

Policy Notice - Notice 07-09 - The Unobligated Balances Provision

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.