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CARE Act Title II Manual - 2003 Version

II. Grants Administration

2. Maintenance of Effort

Introduction

1. Legislative Background
2. Definitions
3. HAB/DSS Expectations
4. Determining the Elements that Constitute Maintenance of Effort
5. Title II Grantee Documentation Requirements
6. Securing Maintenance of Effort Data from Grantee Government Agencies
7. Monitoring and Compliance
8. Instructions and Examples for Documenting Maintenance of Effort
9. Attachment 1 - Description of the Maintenance of Effort Monitoring Process
10. Attachment 2 - Maintenance of Effort Reports with Worksheets

Chapter 2
Maintenance of Effort

Introduction TOP

The CARE Act requires Title II grantees to maintain State expenditures for HIV-related activities at a level equal to the 1-year period preceding the fiscal year (FY) for which the grantee is applying to receive a Title II grant. In order to receive a Title II award, States must comply with maintenance of effort requirements, which include: a signed assurance that maintenance of effort has been maintained, a description of a consistent data set of local government expenditures for two previous years, and methodologies for calculating maintenance of effort expenditures.

To demonstrate compliance with this provision, States must maintain adequate systems for consistently tracking and reporting on HIV-related expenditure data from year-to-year. Grantees are accountable to ensure that Federal funds do not supplant State spending but instead expand and enrich HIV-related activities. These requirements resulted from an audit conducted by the Office of the Inspector General (OIG), Department of Health and Human Services (HHS), which recommended that the Health Resources and Services Administration (HRSA) require a more detailed written accounting of how CARE Act grantees meet the maintenance of effort requirement.

This chapter describes the responsibilities of States regarding maintenance of effort:

• What data must be consistently reported year to year
• What consistency means
• What methodologies may be used, and
• How maintenance of effort will be monitored by HRSA's HIV/AIDS Bureau (HAB), Division of Service Systems (DSS) and HRSA/HAB's Grants Management Branch (GMB).

Legislative Background TOP

Section 2617(b(6)(E) of the CARE Act defines the Title II maintenance of effort requirement as follows: "the State will maintain HIV-related activities at a level that is equal to not less than the level of such expenditures by the State for the 1-year period preceding the fiscal year for which the State is applying to receive a grant...."

Definitions TOP

HAB/DSS Expectations TOP

Title II funds are not intended to be the sole source of support for HIV care and treatment services for States. The maintenance of effort requirement is important in ensuring that CARE Act funds are used to supplement existing State expenditures for HIV-related care and treatment services and to prevent Title II funds from being used to offset specific HIV-related budget reductions at the State level.

Following are issues relating to implementation of the maintenance of effort requirement and concerns expressed by the OIG regarding grantee compliance with the maintenance of effort requirement.

Determining the Elements That Constitute Maintenance of Effort TOP

The elements, or items, that grantees use to document maintenance of effort compliance are defined in the legislation as HIV-related activities. Grantees may choose which elements to include but are directed to include, at a minimum, HIV-related activities for which a line item can be identified in the budgets and subsequent expenditure reports of State agencies. Examples of such identifiable line items would include State appropriations to AIDS Drug Assistance Programs (ADAP), State-funded HIV care and/or prevention programs, and State-funded surveillance efforts.

Section 6-2 of the Public Health Service Grants Policy Statement indicates that when determining level of expenditures to be maintained, "[t]he level of effort does not include volunteer services or donations nor should it include expenditures of a nonrecurring nature." Grantees may determine which expenditures are of a nonrecurring nature and are therefore excluded from maintenance of effort calculations. An example of a nonrecurring expenditure is a one-time infusion of funds into a State HIV program on an emergency basis, where the appropriations or other authorizing language clearly identifies it as a one-time-only commitment by the State.

HIV-related activities to be counted, including cash and in-kind, must be allowable under the applicable cost principles (OMB Circular A-87, Cost Principles for State, Local, and Indian Tribal Governments). Such costs are subject to audit for purposes of establishing compliance with the maintenance of effort requirement.

Title II Grantee Documentation Requirements TOP

The Secretary of Health and Human Services may not make a grant under Title II unless the grantee demonstrates compliance with the maintenance of effort requirement. Compliance means that the grantee must develop and maintain a written, auditable system adequate to document compliance. In every Title II grant application, the State must document that the maintenance of effort requirement has been met.

In Title II grant applications, grantees are required to:

• Sign an assurance that they are complying with the maintenance of effort requirement
• Describe the methodology developed and implemented for compiling HIV-related expenditure data from State agency(ies) accounting systems, and
• Report year-to-year HIV-related expenditures by the State from a data set that is used consistently over time, explain any changes in the data set resulting from changes in the purposes of HIV-related expenditures (see note, next paragraph), and document that the overall level of HIV-related expenditures has been maintained year-to-year for the previous two complete fiscal years.

NOTE: Grantee commitments to HIV/AIDS activities may cover a wide range of services, and the purposes to which grantees allocate resources may change over time (e.g., because of changes in the clinical management and service needs of those who are infected, funding for end-stage hospice care might be reduced or eliminated while funding was begun for "return to work" programs). If there are significant changes in expenditure elements, or line items, documentation must explain the reason(s) for changes and demonstrate that the overall level of expenditures has been maintained year-to-year.

Securing Maintenance of Effort Data from Grantee Government Agencies TOP

Following is guidance for working with grantee government agencies to compile information for the maintenance of effort requirement:

• The fiscal year for reporting data should be that of the grantee.
• For documentation purposes, all communication between the grantee and grantee government agencies regarding maintenance of effort must be in writing or electronically documented. It is not acceptable to compile information by telephone without a documentary record.
• Grantees should provide written guidance to their agencies that includes the following: a time line for reporting expenditures that accommodates both the various agencies' accounting systems and the grantee's schedule for submission of reports to HAB/DSS; a statement that expenditures, not budgeted or appropriated amounts, should be reported; a statement that the grantee will define what services constitute HIV-related activities for reporting purposes, along with a listing of the defined HIV-related activities; an explanation of the concept of consistency as described in this document; a statement that the methodology used by the individual State government agencies in calculating their HIV/AIDS expenditures must be clearly reported to the grantee; and a statement that State government agency methodology and expenditure data must be reported to the grantee in writing or electronically.
• When working with State government agencies, Title II grantees may start by defining HIV-related activities as those for which a categorical HIV budget line item, and subsequent expenditure line item, exists. There is no expectation or requirement by HAB/DSS that grantees will undertake complex efforts to determine expenditure amounts where HIV line items do not exist (e.g., complicated mathematical exercises to quantify the portion of a public hospital's non-specific inpatient expenses).
• Grantees should review and attempt to clarify any questionable data or omission of data submitted by State government agencies before that information is reported to HAB/DSS.
• If State agencies refuse to comply with the request for expenditure information related to the maintenance of effort requirement, the grantee should inform them of the potential negative consequences for Title II funding and invoke the assurance signed by the Governor/Governor's designee on this topic.
• Consistency (i.e., use of a consistent data set) does not mean that all grantee government agencies must use the same methodology but rather that an overall calculation for a State must be arrived at in a consistent manner over time. Grantees have wide latitude in the type of methodologies that may be used and still greater latitude in determining the elements that will be consistently included in the maintenance of effort base year and in subsequent years.
• Even though the financial management systems of State agencies may vary, for consistency, each is expected to calculate and report expenditures for the same items from year-to-year. If a change is made, the State government agency must explain the change in writing to the grantee, and the grantee, in its documentation, must explain to HAB/DSS why a change occurred. An example of the kind of fundamental change in HIV/AIDS funding that should be accommodated might involve elimination of State funding for a category of service (e.g., hospice care) and the initiation of State funding or significant enhancement of such funding for another category (e.g., laboratory tests or pharmaceuticals).

Monitoring and Compliance TOP

Grantees are required to assure that maintenance of effort has been fulfilled. As described above, in addition to a signed assurance, grantees are required to provide a description of methodologies used for calculating maintenance of effort expenditures and a description of a data set of State expenditures that is used consistently, with data provided for the two previous years. An example is attached. HAB/DSS will work with grantees to ensure that proper documentation is submitted so that a Title II grant award can be made. If a grantee cannot comply with the maintenance of effort requirement, HAB/DSS must withhold the Title II grant until documentation is received by the Grants Management Officer that the requirement is met.

Instructions and Examples for Documenting Maintenance of Effort TOP

This section briefly describes HAB/DSS expectations around documentation of the process used to consistently assess maintenance of effort from year-to-year and provides examples of State HIV-related expenditures that are to be reported in Title II applications.

As outlined above, States have considerable latitude in deciding what to include in the maintenance of effort base beyond HIV-specific line items in agency or department budgets. States may not omit HIV/AIDS line items from their base unless they are identified at the point of appropriation or authorization as non-recurring expenditures.

In deciding whether or not to include in the base expenditures elements that may not have an HIV-specific line item, grantees should consider several factors. While it is simpler to report only expenditures with an HIV-specific line item, these line items may be subject to reduction if State revenues decline or other pressures come to bear on the appropriations process. The somewhat more detailed process of devising a reasonable method for consistently estimating the percent of State Medicaid expenditures linked to HIV (minus the Federal share of Medicaid expenses), prison inmate HIV health expenditures, etc., may provide a somewhat larger and more stable base for year-to-year State HIV spending.

Attachment 1 below is an example of a description of a monitoring process that is consistent with what is expected in a State's Title II grant application. The example illustrates reporting scenarios as described above. In addition to completing and submitting a Maintenance of Effort Table, grantees are expected to complete and attach to the form a Maintenance of Effort Worksheet according to the format which follows in Attachment 2 (which includes examples of two maintenance of effort reports). The first limits the maintenance of effort base to HIV-specific line items only, and the second includes HIV-specific line items as well as expenditures that are based on reasonable estimates that can be calculated consistently on a year-to-year basis.

ATTACHMENT 1  TOP

Example: Description of the Maintenance of Effort Monitoring Process

The State of ____________________ monitors maintenance of effort using the following process. Once adopted, personnel in the Department of Health review the State operating budget to identify agencies and departments with line items for HIV-specific activities. The Health Department sends letters to the comptrollers/fiscal officers of each identified entity introducing the maintenance of effort provision and attaching a copy of the Assurance signed by the Governor (or the Commissioner of Health, if so designated). The letter requests the naming of a liaison in the comptroller's office and a written report of actual expenditures for the HIV line item(s) at the earliest possible date after the close of the State fiscal year. Health Department personnel follow-up with each agency/department by phone to confirm receipt of the letter and ascertain the name, phone number, etc. for the liaison as well as the anticipated time (month and week of the following year) when expenditure data will be available. A matrix of agencies/departments, line items, liaisons, and due dates is created and guides Health Department work throughout the year to assure that expenditure data essential to documenting compliance with the maintenance of effort provision are received and verified in a timely manner. Information received is recorded and aggregated using the worksheets and forms developed by the Division of Service Systems at HRSA and submitted with the annual Title II grant application.

The State has also optionally elected to include in the maintenance of effort base two additional expenditure classes. We report estimated Medicaid expenditures for individuals with HIV disease, and expenditures on health care for inmates of the State prison system who are known to have HIV disease. The State Medicaid agency estimates that 4.9 percent of enrollees have HIV disease; total State-only Medicaid expenditures are multiplied by that factor to achieve an estimate of HIV-related expenditures for Medicaid. Due to the time lag in closing the books on Medicaid, please note that estimates are reported for YEAR and YEAR, rather than YEAR and YEAR. Similarly, the total health care expenditures of the State prison system were multiplied by the 11.6 percent of the inmate population known to have HIV disease. The resulting figure was then increased by "x" percent to approximate the higher level of health care usage these inmates would have vs. non-infected inmates.

 ATTACHMENT 2  TOP

Examples: Maintenance of Effort Report with Worksheets

Example 1: Maintenance of Effort Base Limited to HIV-Specific Line Items

Table 3: Maintenance of Effort

EXAMPLE 2

 MAINTENANCE OF EFFORT BASE
INCLUDING NON-HIV-SPECIFIC EXPENSES

Maintenance of Effort Summary Report