Ryan White HIV/AIDS Program Part A Manual

Administrative costs relate to oversight and management of Ryan White HIV/AIDS Program funds and include such items as contracting, accounting, data reporting, planning council support, and program support (such as capacity development and technical assistance).

There are several requirements regarding the use of Part A funds to carry out administrative activities. Some of these requirements apply to grantees, while others apply to the entities that receive Ryan White funds from grantees.

The Ryan White legislation includes the following references to administrative costs:

Administrative Costs

Section 2604(h) states that "the [CEO] of an eligible area shall not use in excess of 10 percent of amounts received under a grant awarded under this subpart for administrative expenses" and "[I]In the case of entities and subcontractors to which the [CEO] of an eligible area allocates amounts received by the official under a grant under this subpart, the official shall ensure that, of the aggregate amount so allocated, the total of the expenditures by such entities for administrative expenses does not exceed 10 percent (without regard to whether particular entities spend more than 10 percent for such expenses)."

Section 2604(h)(3) defines allowable administrative activities for Part A to include:

1. Routine grant administration and monitoring activities, including the development of applications for Part A funds, the receipt and disbursal of program funds, the development and establishment of reimbursement and accounting systems, the development of a clinical quality management program as described in paragraph (5), the preparation of routine programmatic and financial reports, and compliance with grant conditions and audit requirements; and
   

2. All activities associated with the grantee's contract award procedures, including the activities carried out by the HIV health services planning council as established under section 2602(b), the development of requests for proposals, contract proposal review activities, negotiation and awarding of contracts, monitoring of contracts through telephone consultation, written documentation or onsite visits, reporting on contracts, and funding reallocation activities."

Clinical Quality Management Program Costs

Section 2604(h)(5) states that "from amounts received under a grant awarded under this subpart for a fiscal year, the chief elected official of an eligible area may [in addition to amounts for grantee administration] use for activities associated with the clinical quality management program required in subparagraph (A) not to exceed the lesser of 5 percent of amounts received under the grant or $3,000,000."

Subcontractor Administrative Costs

Section 2604(h)(4) defines allowable "subcontractor administrative activities to include:

• Usual and recognized overhead, including established indirect rates for agencies;
• Management and oversight of specific programs funded under this title; and
• Other types of program support such as quality assurance, quality control, and related activities."

Typical examples of administrative costs for first-line entities include general administration and general expenses. Examples include: salaries and expenses of executive officers, personnel administration, accounting, the costs of operating and maintaining facilities, and depreciation or use allowances on buildings and equipment. Included under management and oversight activities for first-line entities are costs associated with:

• Development of funding applications and proposals
• Receipt and disbursal of program funds
• Development and establishment of reimbursement and accounting systems
• Preparation of routine programmatic and financial reports, including the minimum requirements of completing the Ryan White HIV/AIDS Program Data Report
• Compliance with contract conditions and audit requirements, and
• Monitoring of and reporting on any subcontracts through telephone consultation, written documentation, or on-site visits.

Calculating Administrative Cost Caps

The grantee should determine the aggregate amount of funds available for first-line entities to use for administrative costs. To determine this amount, the grantee should:

• Subtract the grantee's administrative costs (up to 10 percent) and the grantee's clinical quality management costs (up to 5 percent or $3 million, whichever is less) from the total grant award, and
• Multiply the remaining amount by 10 percent

For example, suppose that a grantee receives $5 million in Part A funds. The maximum this grantee may spend on grantee administrative costs is ten (10) percent of $5 million or $500,000. The maximum the grantee may spend on clinical quality management is another five (5) percent of the total grant award, or $250,000. The funds remaining for other uses total $5 million minus $500,000 for grantee administrative costs and $250,000 for the clinical quality management program, or $4.25 million. The maximum amount available for first-line entities to use on administrative costs is 10 percent of the $4.25 million, or $425,000. That is, regardless of how much an individual "first-line" entity spends on administrative costs, the total amount of Part A grant funds that can be used for administrative costs, when added across all such entities, cannot exceed $425,000.

Applying Administrative Cost Caps

1.  Grantees

The legislation requires that the grantee's administrative activities charged to the Part A grant not exceed ten (10) percent of the grant award. If a grantee makes Part A funds available to one or more administrative or fiscal agents that perform grantee administrative functions, then the costs of these activities are counted against the grantee's administrative cost cap. For example, a Part A grantee's city health department might make funds available to the health department of an outlying county to fund service providers in that county. The costs for the county to disburse those program funds, develop reimbursement and accounting systems, develop requests for proposals, monitor contracts, etc., count against the city health department's ten (10) percent administrative cost cap.

If the administrative or fiscal agent is also delivering a Ryan White-funded service, the costs of that service and any administrative activities associated with providing it are not counted against the grantee's 10 percent cap. The administrative activities associated with the service are, however, counted against the 10 percent aggregate cap imposed on first-line entities receiving Ryan White HIV/AIDS Program funds (see discussion below).

2.  First-Line Entities

The 10 percent aggregate administrative cost cap applies only to first-line entities. However, given the clear Congressional intent to limit administrative costs, HRSA/HAB expects grantees, through their contracts with first-line entities, to impose a separate 10 percent administrative cost cap on any "second- or third-line" entities that receive Ryan White funds from a first-line entity. That is, of the amount awarded to an individual second- or third-line entity, a maximum of 10 percent can be spent on administrative costs.

If a Part A grantee makes Part A funds available to an administrative or fiscal agent that performs grantee administrative functions, then the entities to which that contracted agent makes funds available are considered first-line entities and are therefore subject to the 10 percent aggregate administrative cap. For example, a grantee's city health department might make funds available to the health department of an outlying county to fund service providers in that county. Organizations that receive funding from that county health department are considered first-line entities.

During the contracting process, grantees must work with their first-line entities to negotiate a final budget that appropriately classifies funded activities, personnel, supplies, material, etc., as administrative costs or service costs. Administrative costs count against the 10 percent aggregate cost cap; service costs do not. For those situations in which a unit cost system is used to pay a contractor, the unit cost must be broken down so that administrative and service costs can be distinguished.

Because of the diverse characteristics and accounting practices of governmental units and nonprofit organizations, it is not possible to specify all the types of costs that may be classified as administrative or service-related in all situations. A case management organization, for example, may include some telephone expenses as a service cost, since such calls are directly related to service delivery. A food distribution program may assign some or all rental expenses as a service cost because storing the food is directly related to delivering the service.

In general, grantees should establish and use their own guidelines in making these classifications. Guidelines used to assign particular costs to Ryan White should be consistent with guidelines used to assign particular costs to local funds or to other, non-Ryan White, Federal funds. However, requirements specific to Ryan White, as defined earlier in this chapter, must be followed.

Enforcement and Monitoring of Administrative Cost Requirements

1.      Grantees

Part A grantees are required to submit categorical budgets and narrative justifications to the HRSA/HAB DSS Project Officer for approval. Budgets must be submitted for administration, planning council support, services, and clinical quality management programs. Project officers review the grantee budgets and determine whether the grantee's administrative costs fall within the statutory limits. Attachment I is a sample of the completed budget form that breaks down each budget category (i.e., administration, planning council support, services, and clinical quality management) by object class categories (e.g., personnel, travel, equipment, supplies). 

2.      First-Line Entities

The chief elected officials (CEOs) of Part A grantees (or their designees) are required to sign program assurances with their application to HRSA/HAB's Division of Service Systems (DSS) for funding. Included among them is an assurance that the 10 percent aggregate administrative cost cap requirement will be met. As with all other program assurances and legal requirements, compliance is subject to audit by the Office of the Inspector General at the Department of Health and Human Services, the General Accounting Office, and others.

HAB/DSS strongly encourages grantees to require from contractors and provide to HAB/DSS a budget format that clearly identifies the costs for administration and the costs for services. This clarity can be achieved by using a format similar to that shown in Attachment I. Instead of four budget categories, however, contractors would show two budget categories (administration and services) for each entity and then break down each of those budget categories by object class categories (e.g., personnel, travel, equipment, supplies).

Along with their budget and narrative justifications, Part A grantees are required to submit, to the DSS Project Officer a page that identifies the amount of funds, in the aggregate, available for "first-line" entities to spend on administrative costs. The page also requires an estimate of the total amount of administrative costs those entities will incur over the budget year. At the end of the budget year, as part of the final progress report submitted to the Grants Management Branch, the grantee is expected to update the page to reflect actual dollars spent. The financial officer in charge of the Ryan White grant must sign both the initial and final documentation of these figures.