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ADAP Manual - 2003 Version

III.  Grant Administration

3.  State Matching Fund Requirements: DSS Issue Paper

Chapter Summary
Introduction

1. Legislative Background
2. Program Principles and Definitions
3. Expectations

 Chapter Summary  TOP

This chapter summarizes the State Matching Fund Requirements for Title II, as explained in the Health Resources and Services Administration’s (HRSA) HIV/AIDS Bureau’s (HAB) Division of Service Systems’ (DSS) Issue Paper, released in October 1997.

 Introduction  TOP

The CARE Act of 1996 requires that States with more than one percent of the U.S. AIDS cases reported for the two most recent fiscal years match the Title II HIV CARE grants received. The rate of matching is specified in the Act and ranges from a low of $1 for each $5 of Federal funds to a maximum of $1 for each $2 of Federal funds. The required matching rate is based on the number of years the State meets the 1 percent threshold. The State match requirement issue is particularly critical given the ever-increasing rise in drug costs and client enrollment.

This issue paper: describes how the required State match ratio is determined for States subject to this requirement; defines elements that constitute the State match; clarifies Title II grantee documentation requirements; and describes mechanisms for the Division of Service Systems (DSS) and Grants Management Branch (GMB) of the HIV/AIDS Bureau, Health Resources and Services Administration (HRSA), to monitor compliance.

 Legislative Background TOP

Subsection (d) of Section 2617 of the CARE Act contains language concerning State-matching requirements.

This subsection requires the following:

States (with the exception of Puerto Rico) for which the number of AIDS cases reported to and confirmed by the CDC for the two most recent fiscal years exceeds one percent of the total reported AIDS cases for the two most recent fiscal years are required to match the HIV CARE Act grants received according to a specified schedule. These HIV CARE grants include ADAP Earmark dollars.

The Secretary may not make grants to a State with more than one percent of the reported AIDS cases for the two most recent fiscal years unless the State agrees to make available non-Federal contributions and match the HIV CARE grants received. The matching amount includes non-Federal contributions such as cash or in-kind contributions provided directly by the State or through donation from public or private entities. In making a determination of the amount of non-Federal contributions made by a State, the Secretary shall include any non-Federal contributions provided by the State for HIV-related services without regard to whether the contributions are made specifically for CARE Act programs. If a State provides matching funds/assets, but the rate of matching is not at the level prescribed in the Act, the HIV CARE grant is reduced to achieve the required matching ratio. Please note that non-Federal contributions could include contributions from pharmaceutical manufacturers to State ADAPs. It may not include rebates, or in the grant domain, funds where the original source of any non-State appropriated dollars are Federal.

The required rate of matching is based on a schedule outlined in paragraph one of the subsection. This schedule is based on the number of years of payment under the grant. The schedule is as follows:

(A) for the first fiscal year of payments under the grant, not less than 16 2/3 percent of such costs ($1 for each $5 of Federal funds provided in the grant);

(B) for any second fiscal year of such payments, not less than 20 percent of such costs ($1 for each $4 of Federal funds provided under the grant);

(C) for any third fiscal year of such payments, not less than 25 percent of such costs ($1 for each $3 of Federal funds provided under the grant);

(D) for any fourth fiscal year of such payments, not less than 33 1/3 percent of such costs ($1 for each $2 of Federal funds provided under the grant); and

(E) for any subsequent fiscal year of such payments, not less than 33 1/3 percent of such costs ($1 for each $2 of Federal funds provided under the grant).

Please note that with respect to the first bullet in this section, HIV CARE grants include ADAP Earmark dollars.

 Program Principles and Definitions TOP

CARE Act funds are intended to supplement resources provided by metropolitan areas and States in providing services to individuals with HIV and their families. For States, Title II funding was never intended to be the sole source of support for community-based HIV care services, and the matching requirement, along with other legislative requirements like maintenance of effort, assure a concomitant level of State support. This paper focuses on issues relating to implementation of this legislative requirement. Such guidance is especially important given the recent concerns expressed by the Office of the Inspector General regarding compliance with, and oversight of, the matching requirement.

The following definitions may be helpful in reading and understanding this Issue Paper:

In-Kind Contributions: Non-cash contributions that a State may provide to support HIV-related services. These non-cash contributions must be fairly valued and may include plant equipment or services.

Required Rate of State Matching: The minimum level of cash and/or in-kind contributions a State must provide according to a schedule established in 2617(d) of the CARE Act.

State: A State is defined to include each of the 50 States, the District of Columbia, the Commonwealth of Puerto Rico and the Territories of the Virgin Islands, Guam, American Samoa, the Commonwealth of the Northern Mariana Islands, Palau, the Federated States of Micronesia, and the Republic of the Marshall Islands. However, Puerto Rico is specifically exempted from the State match requirement.

State Matching: The non-Federal cash or in-kind contributions provided by the State to supplement the Federal funds received. State contributions claimed as match for other Federal programs (such as Medicaid) may not be used to meet the match requirement for the Title II grant. Amounts provided by the Federal Government, and any portion of any service subsidized by the Federal Government, may not be included in calculating the amount of the State matching contribution.

 DSS Expectations TOP

1. Determining the Rate of the State Match

Section 2617(d)(1) establishes the rate of State matching based on the number of fiscal years the State has received CARE Act funding, beginning with the fiscal year in which the State exceeded the one percent threshold of reported AIDS cases for the two most recent fiscal years.

Program experience shows that a small number of States have been above and then fallen below the one percent threshold over different fiscal years. A State that meets the one percent threshold in a particular fiscal year and then falls below that threshold in a subsequent fiscal year is not required to meet the matching fund requirement in the year in which it is below the threshold. If, however, the State subsequently meets the threshold again, only the years in which that State meets the one percent threshold are counted in determining the required rate of match. As an example, if a State exceeded the one percent threshold in FY 1994, fell below the one percent threshold in FYs 1995 and 1996, and then again exceeded the one percent threshold in FY 1997, the State would be required to match at the rate of $1 for each $4 (i.e., the rate of match for year 2) in FY 1997.

2. Defining Elements that Constitute the State Match

The items or elements that a State may count toward its match requirement are defined in general terms in the legislation. DSS and GMB, in agreement with the Office of General Counsel, have more specifically interpreted HIV-related services to include:

a spectrum of HIV activities such as care and treatment (including State contributions to CARE Act-funded programs), prevention, surveillance, and research.

To be accepted, all matching contributions, including cash and in-kind, shall be allowable under the applicable cost principles (OMB Circular A-87, "Cost Principles for State and Local Governments"). Such costs are subject to audit for purposes of establishing compliance with the State match requirement.

3. Title II Grantee Documentation Requirements

Since the Secretary may not make a grant under Title II unless the State agrees to make available the required match, the State must provide documentation with its Title II application that such match requirements will be met. For FY 1997, this documentation includes signed assurances, which include the agreement to meet the required State match and specific information submitted as per instructions found on Page 16, FY 1997 Application Guidance for States. Such guidance instructs Title II grantees to show matching funds in Column (f) of Section A and in Column (4) of Section B of the Standard Form (SF) 424A, and to complete Section C if the State provides such matching funds. Beginning in FY 1998, Application Guidance for States will also include instructions and requirements related to the submission of a categorical budget that identifies the source and proposed use of all matching funds, along with a budget narrative/justification that details the activities, personnel, and other object class categories supported with such funds.

Title II grantees are also required, 90 days after the end of each budget period, to submit a final Financial Status Report (FSR). Items 10b (Recipient Share of Outlays) and 10e (Recipient Share of Unliquidated Obligations) of this report document that the required State match for the grant has been met (i.e., the requirement is met when the sum of 10b and 10e equals the required State match amount). In addition, starting with the FY 1997 final progress report due 30 days after the end of the budget period, States must describe the activities, personnel, and other object class categories actually supported through use of matching funds.

Please note that the matching requirement is in proportion to the amount of grant funds actually expended. Thus, in cases where the Title II grant has not been fully expended, the State match amount will be less than that amount cited in the original Notice of Grant Award. Any carry-over amount approved for use in future grant budget periods will automatically increase the amount of State match required for that fiscal year, even if in the previous year the State match was at a level higher than that required by the level of expenditure.

4. Monitoring and Compliance

For those States supplying sufficient pre-award information, in the form of signed assurances, a complete SF 424A showing the required State match and future requirements as outlined in the previous section, a total award will be made. If a State identifies on the SF 424A a level of matching funds not at the level prescribed in the Act, DSS will work with those States so that revised SF 424As can be submitted and reviewed for proper documentation, thus allowing a full grant award. If the required level of State match cannot be documented, the HIV CARE grant award will be reduced to meet the required matching ratio. Any amounts by which grants are reduced will be re-allocated to other States with follow-up to ensure the necessary budget revisions are completed.

For those States submitting a FSR and final progress report indicating the required State match has been met and how, as outlined in the previous section, future awards will remain unaffected. If a State submits a FSR indicating a level of recipient outlays and unliquidated obligations below the required State match, subsequent grant awards will be offset by the appropriate proportional amount. The amount by which the grant is offset will be reallocated to other Title II grantees.