Chapter 4
Maintenance of Effort TOP

Introduction

The CARE Act requires Title I eligible metropolitan areas (EMA’s) to maintain, as a Condition of Award, EMA political subdivision 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 I grant. In order to receive a Title I award, EMAs must comply with maintenance of level 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, EMAs 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 EMA spending but instead expand and enrich HIV-related activities. These requirements implement 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 EMAs 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

Sections 2605(a) of the CARE Act states:

(1)(A)  “that funds received under a grant awarded under this part will be utilized to supplement not supplant State funds made available in the year for which the grant is awarded to provide HIV-related services as described in section 2604(b)(1);  

(B) “that the political subdivisions within the eligible area will maintain the level of expenditures by such political subdivisions for HIV-related services as described in section 2604(b)(1) at a level that is equal to the level of such expenditures by such political subdivisions for the preceding fiscal year; and

(C) “that political subdivisions within the eligible area will not use funds received under a grant awarded under this part in maintaining the level of expenditures for HIV-related services as required in subparagraph (B)….”

HAB/DSS Expectations  TOP

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

Definitions  TOP

The following OMB resources establish principles and standards for determining costs applicable to grants, contracts, and other agreements entered into by the types of organizations specified:

Go HERE for a page-reader-friendly or linearized version of definitions.

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 the cities and/or counties of the EMA. The fiscal year for reporting is the same as that of the political subdivision.

The Public Health Service (PHS) Grants Policy Statement dated April 1, 1994 states in Section 6-2 that when determining level of grantee 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 the maintenance of effort calculations. An example of a nonrecurring expenditure is a one-time infusion of funds into a political subdivision program on an emergency basis, where the appropriations or other authorizing language clearly identifies it as a one-time-only commitment.

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 and Local Governments).  Such costs are subject to audit for purposes of establishing compliance with the maintenance of effort requirement.

Title I Grantee Documentation Requirements  TOP

The Secretary of Health and Human Services may not make a grant under Title I unless the EMA demonstrates compliance with maintenance of effort requirements. In every grant application, EMAs must document that the maintenance of effort requirement has been met. This documentation consists of a signed assurance in the Title I grant application. In addition, EMAs must report on and have in place a system to track and document HIV-related local government expenditures. This means the grantee for the EMA must obtain written information from the political subdivisions. For example, the grantee must provide maintenance of effort information (amount and methodologies) in the Title I grant application from the city or county governments and government agencies represented in the EMA. If the political subdivisions contacted refuse to comply with the request for expenditure information, the grantee should inform them of the negative consequences for Title I funding and contact HAB/DSS for further guidance.

Compliance with the maintenance of effort requirements means that EMAs must develop and maintain a written, auditable system that is, adequate to document compliance. For documentation purposes, all communication between the EMAs and their political subdivisions regarding maintenance of effort must be in writing.

When working with their local political subdivisions, Title I grantees may start by defining HIV-related services/activities as those for which a categorical HIV budget line item, and subsequent expenditure line item, exists. EMAs should be able to understand the written explanations of methodologies used by each entity. For consistency, each EMA is expected to calculate and report expenditures for the same items from year to year. If a change is made, the entity must explain the change in writing to the grantee. In its documentation, grantees 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 is elimination of State funding for a category of service (e.g., hospice care) and the initiation of local funding or significant enhancement of such funding for another category (e.g., laboratory tests or pharmaceuticals).

Consistency does not mean that each EMA or city government agency must use the same methodology, but rather that an overall calculation for an EMA must be arrived at in a consistent manner over time. There is wide latitude in the types of methodologies that may be used, and still greater latitude in the locally defined element of the maintenance base. There is no HAB/DSS expectation or requirement that complicated mathematical exercises be undertaken, for example, to quantify the portion of a public hospital’s non-specific inpatient expenses. To ensure year-to-year comparability, it is important that the EMA should work with the information it has, develop a written procedure for internal use in preparing an annual expenditure report, and maintain records of the numbers reported.

Requirements are that:

• Each political subdivision or city government agency explains its methodologies to the grantee
• A clear, written paper trail documents the methodologies and definitions, and
• A reasonable attempt to determine HIV-related expenditures by the political subdivisions or city government agencies is demonstrated by the EMA.

EMA Documentation Guidance to Political Subdivisions  TOP

The EMA should provide written guidance to their Title I political subdivisions and city government agencies that: 

• Expenditures, not budgeted or appropriated amounts, should be reported

• The political subdivisions or city government agencies should defi ne what services constitute HIV-related services for reporting purposes, and

• Expenditure data and the explanation of the methodology used must be reported in writing.

A timeline for reporting expenditures should be provided that accommodates both the entities’ accounting systems and the EMA’s schedule for submission of reports to HAB/DSS.

EMAs should review and attempt to clarify any questionable data or omission of data submitted by political subdivisions or city government agencies before that information is reported to HAB/DSS.

In their grant applications, Title I EMAs are required to:

• Describe the methodology used for compiling HIV-related data from local accounting systems.

• Report their HIV-related expenditures funded locally using a consistent data set

• Explain any changes in the data set derived from changes in the purposes of HIV-related expenditures, and

• Document that the overall level of HIV-related expenditures has been maintained year to year for the previous two complete fiscal years.

EMA commitments to HIV/AIDS services may cover a wide range of services and also vary considerably. The purposes to which EMAs allocate resources may also change over time because of changes in the epidemic and the clinical management and service needs of those who are infected. Therefore, significant changes in the components of expenditures must be explained with documentation that the overall level of such expenditures has been maintained year to year.

Monitoring and Compliance  TOP

HAB/DSS will work with EMAs so that proper documentation of maintenance of effort is submitted. If an EMA cannot comply with the maintenance of effort requirements, the Title I grant must be withheld until documentation that the requirement is met is received by the Grants Management Officer.

Attachments  TOP

This attachment includes examples of two Maintenance of Effort Reports. The first limits the maintenance of effort base to HIV-specific line items only. The second includes HIV-specific line items as well as expenditures which are based on reasonable estimates that can be calculated consistently on a year-to-year basis.

Attachment 1: Examples: Title I Maintenance of Effort Report with Worksheets

Attachment 2: Example of Completed Standard Form 424A: Budget Information — Non-Construction Programs