DEPARTMENT OF HEALTH AND HUMAN SERVICES

CFDA 93.044 SPECIAL PROGRAMS FOR THE AGING--TITLE III, PART B--GRANTS FOR SUPPORTIVE SERVICES AND SENIOR CENTERS

CFDA 93.045 SPECIAL PROGRAMS FOR THE AGING--TITLE III, PART C--NUTRITION SERVICES

I. PROGRAM OBJECTIVES

Grants for Supportive Services and Senior Centers

The objective of this grant program is to assist States develop and implement, through a network of public and private agencies and service providers, comprehensive and coordinated community-based service delivery systems for older Americans, which will assist them in leading independent, meaningful and dignified lives in their own homes and communities as long as possible. The target population for these supportive services, which include in-home services for frail elderly as well as those provided in multi-purpose senior centers, is individuals aged 60 and older with emphasis on those with the greatest social and economic need, particularly low-income minorities; however, proof of age is not required as a condition of receiving services.

As the program itself matures, program funding is increasingly being targeted to serve those elderly who, because of their income or age, may not be eligible for Medicaid or Medicare, and recipients are coordinating with other Federal and State programs in ensuring the availability of the broadest range of services for the elderly. As a result, many of the organizations funded under this program and the nutrition program (see below) also receive funds from other Federal sources as well as from non-Federal sources.

Supportive services may include a full range of economic and social services, including access services (transportation, outreach, information and referral, and language translation services), legal assistance and other counseling services, case management services, health screening services, services designed to ensure safe and appropriate housing, pre-retirement planning and assessment of post-retirement needs, ombudsman services, and services to families of elderly victims of Alzheimer's disease and related disorders with neurological and organic brain dysfunction. Nutrition services are provided under a separate authorization as described below.

Grants for Nutrition Services

The objective of this grant program is to provide individuals aged 60 or older with nutrition services, including meals and nutrition education, either in the home or in a congregate setting. This program is clustered with the grants for supportive services and senior centers for purposes of this Compliance Supplement (Supplement) since these services, although separately earmarked, fall under the overall State planning process and process for allocation of funds.

II. PROGRAM PROCEDURES

Source of Governing Requirements

These programs are authorized under Parts B and C, respectively, of Title III of the Older Americans Act, as amended, which is codified at 42 USC 3021-3030. These programs may also be referred to as Part B (supportive services and senior centers) and Part C1(congregate nutrition services) and C2 (home-delivered nutrition services). Grants to Indian tribes for similar purposes are authorized under another title of the Older Americans Act and are not included in this Supplement. Implementing regulations are published at 45 CFR part 1321.

Administration and Services

The Administration on Aging (AoA), a component of the Department of Health and Human Services, administers the supportive services and senior centers program and the nutrition program in cooperation with States, sub-State agencies, and other service providers. The States receive a formula grant from AoA, which is used by the State Unit on Aging (SUA or, hereafter, State Agency) both for its planning, administration, and evaluation of these programs as well as to pass through to other entities.

Planning and Service Areas (PSAs) are designated by the State Agency in accordance with AoA guidelines after considering the geographical distribution of the service populations, location of available services, available resources, other service area boundaries, location of units of general purpose local government, and other factors. An Area Agency on Aging (AAA or, hereafter, Area Agency) is then designated by the State for each PSA after considering the views of affected local governments (States that had a single State-wide planning and service area in place prior to FY 1981 had the option to continue that method of operation; there are currently eight States in this category). A single Area Agency may serve more than one PSA. The Area Agencies, which may be public or private non-profit agencies or organizations, develop and administer counterpart area aging plans, as approved by the State Agency, and, in turn, provide subgrants to or contract with public or private service providers for the provision of services.

In general, the State Agency and the Area Agencies are precluded from the direct provision of services, other than ombudsman services, unless providing the services is necessary to ensure an adequate supply of services, the services are related to the agency's administrative functions, or where services of comparable quality can be provided more economically by the agency. Federal funds may pay for only a portion of the costs of administration and services with the State and subrecipients required to provide a matching share from other sources.

Service providers may include profit-making organizations (42 USC 3020(c)).

State Plan and Area Plans

A State plan, approved by AoA, is a prerequisite to funding of the supportive services and nutrition programs; however, the State Plan covers the totality of AoA programs for which the State is the recipient under the Older Americans Act. The State Plan is developed on the basis of input from the Area Agencies as well as input from the affected populations as a result of public hearings. The State plan addresses how the State intends to comply with the various requirements of the Older Americans Act and, specifically for Title III, its program objectives, designation of Planning and Service Areas (PSAs), and specification of the intrastate allocation formula for distribution of funds to each PSA. The State plan also contains assurances required by the Act and implementing regulations.

Unless a State is not in compliance with Title III requirements, the State Plan may be submitted on a two-, three-, or four-year cycle, at the option of the State, with annual amendments, as appropriate; however, AoA funding is provided annually. States found to be in noncompliance may be required to submit their State plans annually until they are determined to be in compliance. Area plans are prepared and submitted to the State for approval for either two, three, or four years, with annual adjustments, as necessary.

III. COMPLIANCE REQUIREMENTS

In developing the audit procedures to test compliance with the requirements for a Federal program, the auditor should first look to Part 2, Matrix of Compliance Requirements, to identify which of the 14 types of compliance requirements described in Part 3 are applicable and then look to Parts 3 and 4 for the details of the requirements.

A. Activities Allowed or Unallowed

1. State Agency

a. State Agencies may use any amount of Title III-B (supportive services) funding necessary to conduct an effective ombudsman program (42 USC 3024 (d)(1)(B)).

b. Grant funds may be used for paying the costs of providing for a State volunteer services coordinator (42 USC 3024 (e)).

c. Grant funds may be used for State plan administration, including State plan preparation, evaluation of activities carried out under the plan, the collection of data and the conduct of analyses related to the need for services, dissemination of information, short-term training, and demonstration projects (42 USC 3028 (a)).

d. No supportive services, nutrition services, or in-home services may be provided directly by the State Agency unless the State Agency determines that direct provision of services is necessary to ensure an adequate supply of services, where such services are related to the agency's administrative functions, or where such services of comparable quality can be provided more economically by the State Agency (42 USC 3027 (a)(10)).

2. Area Agency

a. Funds may be used for plan administration, operation of an advisory council, activities related to advocacy, planning, information sharing, and other activities leading to development or enhancement within the designated service area(s) of comprehensive and coordinated community-based systems of service delivery to older persons (45 CFR section 1321.53).

b. Funds may be used for paying the costs of providing for an area volunteer services coordinator (42 USC 3024(e) and 3026(a)(12)).

c. If approved by the State Agency, an Area Agency may use service funds for program development and coordination activities (42 USC 3024 (d)(1)(D) and 45 CFR section 1321.17(f)(14)(i)).

d. No supportive services, nutrition services, or in-home services may be provided directly by an Area Agency except if, in the judgment of the State Agency, direct provision of services is necessary to ensure an adequate supply of services, where such services are related to the agency's administrative functions, or where such services of comparable quality can be provided more economically by the agency (42 USC 3027 (a)(10)).

3. Service Providers

a. Funds may be used to assist in the operation of multi-purpose senior centers and to meet all or part of the costs of compensating professional and technical personnel required for center operation (42 USC 3030d (b)(2)).

b. Funds may be used for nutrition services and supportive services consistent with the terms of the agreement between the Area Agency and the service provider (42 USC 3026 (a)(1), 42 USC 3030d(a), and 42 USC 3030e).

c. Funds may be used for services associated with access to supportive services for in-home services, and for legal assistance (42 USC 3026 (a)(2)).

d. Nutrition services may be provided to older individuals' spouses, who may not be eligible for these services in their own right, on the same basis as they are provided to older individuals, and may be made available to handicapped or disabled individuals who are less than 60 years old but who reside in housing facilities occupied primarily by older individuals at which congregate nutrition services are provided (42 USC 3027 (a)(13)(A)).

e. In accordance with procedures established by the Area Agencies, nutrition project administrators may offer meals to individuals providing volunteer services during the meal hours and to individuals with disabilities who reside at home with and accompany eligible individuals (42 USC 3027 (a)(13)(I)).

f. Funds may be used for provision of home-delivered meals to older individuals (42 USC 3027 (a)(13)(B)).

g. Funds may be used to acquire (in fee simple or by lease for 10 years or more), alter, or renovate existing facilities or to construct new facilities to serve as multi-purpose senior centers for not less than 10 years after acquisition, or 20 years after completion of construction, unless waived by the Assistant Secretary for Aging (42 USC 3027 (a)(15)).

G. Matching, Level of Effort, Earmarking

1. Matching

a. State

(1) States must contribute from State or local sources at least 25 percent of the cost of State plan administration as their matching share. This may include cash or in-kind contributions by the State or third parties (42 USC 3028 (a)(1), 42 USC 3029 (b), and 45 CFR section 1321.47).

(2) Using fiscal year (FY) 1980 as the baseline, the difference, if any, between the amount representing the match for services (of at least 15 percent State-wide) in FY 1980 and the amount required in any subsequent FY shall be met from State sources only (42 USC 3029 (b)).

(3) All services, whether provided by the State Agency, an Area Agency or other service provider (including any ombudsman services provided under the authority of 42 USC 3024 (d)(1)(D)) must be funded with a non-Federal match of at least 15 percent. Funds for ombudsman services provided under the authority of 42 USC 3024 (d)(1)(B) are not required to be matched. This percentage must be met on a State-wide basis (42 USC 3042 (d)(1)(D) and 45 CFR section 1321.47).

b. State and Area Agencies

Area Agencies, in the aggregate, must contribute at least 25 percent of the costs of administration of area plans (42 USC 3024 (d)(1)(A) and 45 CFR section 1321.47).

(1) State - Since this match is computed based on the aggregate of all Area Agencies in the State, the auditor's testing of the amount of this match is performed at the State Agency.

(2) Area Agencies - The auditor's testing of the allowability of the matching (e.g., from an allowable source and in compliance with the administrative requirements and allowable costs/cost principles requirements) should be performed at the Area Agencies.

2.1 Level of Effort - Maintenance of Effort - State

The State Agency must spend for both services and administration at least the average amount of State funds it spent under the State plan for these activities for the three previous fiscal years. This amount is exclusive of any amounts spent by the State to meet its required matching share (42 USC 3029 (c) and 45 CFR section 1321.49). See L.1. for reporting requirement regarding maintenance of effort.

2.2 Level of Effort - Supplement Not Supplant - Not Applicable

3. Earmarking

a. State

(1) Expenditures for administration of the State plan are limited to the greater of five percent (or $300,000 or $500,000 depending on the aggregate amount appropriated or a lesser amount for the U.S. territories) of the overall allotment to a State under Title III unless a waiver is granted by the Assistant Secretary on Aging (42 USC 3028 (a)(1) and (b)(1), (2) and (3)).

(2) After determination of the amount to be applied to State plan administration under 42 USC 3028 (b), the State may make up to (and including) 10 percent of that amount available for the cost of administration of Area plans. The State may either calculate the 10 percent based on the total allotment from AoA or on the amount remaining after deducting the amount to be applied to State plan administration. This is an aggregate amount and need not be applied on an Area Agency-by-Area Agency basis (42 USC 3024 (d)(1)(A)).

(3) Any amounts available to the State for State plan administration which the State determines are not needed for that purpose may be used by the State to supplement the amount available for administration of Area plans (42 USC 3028 (a)(2)).

(4) Any State which has been designated as a single planning and service area may elect to be subject to the State plan administration limit (five percent) or the Area plan administration (10 percent) limit (42 USC 3028 (a)(3)).

(5) A State may transfer:

(a) Up to 30 percent of a State's separate allotments for congregate and home-delivered nutrition services between those two allotments without AoA approval (42 USC 3028 (b)(4)(a) and 45 CFR section 1321.45 (a)).

(b) Not more than 20 percent between programs under Part B and Part C (Parts C1 and/or C2) for use as the State considers appropriate (42 USC 3028 (b)(5)(A)).

A State Agency may not delegate to an Area Agency or any other entity the authority to make such transfers 42 USC 3028 (b) (6)).

Additional amounts may be transferred with AoA approval (42 USC 3028 (b)(4)(B) and 42 USC 3028 (b)(5) (B)).

(6) If a State allotted 10 percent of its allotment for administration of area plans, the State may allow any Area Agency, upon request and with justification, to use an amount (that an Area Agency would otherwise make available for direct services) for program development and coordination activities by that Area Agency (42 USC 3024 (d)(1)(D) and 45 CFR section 1321.17(f)(14)(i)).

b. Area Agency

As provided in agreements with the State Agency, Area Agencies earmark portions of their allotment. The typical earmarks are:

(1) A maximum amount or percentage for Program development and coordination activities by that agency (42 USC 3024 (d)(1)(D) and 45 CFR section 1321.17(f)(14)(i)).

(2) A minimum amount or percentage for Services related to access, in-home services, and legal assistance (42 USC 3026 (a)(2) and 3026 (b)).

H. Period of Availability of Federal Funds

Funds are made available to the State annually and must be obligated by the State by the end of the Federal fiscal year in which they were awarded. The State has two years to liquidate all obligations for its administration of the State plan and for awards to the Area Agencies consistent with their intrastate allocation formula. Therefore, in any given year, multiple years of funding are being used to provide services State-wide.

. Whenever the Assistant Secretary on Aging determines that any amount allotted to a State under Parts B or C for a fiscal year will not be used to carry out the purpose for which the allotment was made, the funds may be reallotted to one or more other States. Any amount made available to a State as the result of a reallotment shall be regarded as part of the State's allotment for the same fiscal year in which the funds were appropriated, but shall remain available for obligation by the State until the end of the succeeding fiscal year (42 USC 3024 (b)).

J. Program Income

Service providers are required to provide an opportunity to individuals being served under the nutrition services program to make voluntary contributions for meals. These voluntary contributions are to be added to the amounts made available by the State or Area Agency and must be used to increase the number of meals served, facilitate access to meals, and provide other supportive services directly related to nutrition services (42 USC 3027(a)(13)(C)(i)and (ii)).

L. Reporting

1. Financial Reporting

a. SF-269, Financial Status Report, and AoA Supplemental Form (OMB No. 0985-0004) - Applicable (Required semi-annually)

b. SF-270, Request for Advance or Reimbursement - Not Applicable

c. SF-271, Outlay Report and Request for Reimbursement for Construction Program - Not Applicable

d. SF-272, Federal Cash Transactions Report - Payments under this program are made by the Department of Health and Human Services, Payment Management System. Reporting equivalent to the SF-272 is accomplished through the Payment Management System and is evidenced by the PMS 272 series of reports.

2. Performance Reporting - Not Applicable

3. Special Reporting - Not Applicable

M. Subrecipient Monitoring

1. State Agency

The State Agency is required to develop policies governing all aspects of programs operated under the State plan and to monitor their implementation, including assessing performance for quality and effectiveness and specifying data system requirements to collect necessary and appropriate data (45 CFR sections 1321.11 and 1321.17 (f)(9)).

2. Area Agencies

Area Agencies are required to oversee the activities of service providers with respect to provision of services, reporting, voluntary contributions, and coordination of services (45 CFR section 1321.65).

DEPARTMENT OF HEALTH AND HUMAN SERVICES

CFDA 93.558 TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF)

I. PROGRAM OBJECTIVES

The objectives of this program are to provide time-limited assistance to needy families with children so that the children can be cared for in their own homes or in the homes of relatives; end dependence of needy parents on government benefits by promoting job preparation, work, and marriage; prevent and reduce out-of-wedlock pregnancies, including establishing prevention and reduction goals; and encourage the formation and maintenance of two-parent families. This program replaces the Aid to Families with Dependent Children (AFDC), Job Opportunities and Basic Skills Training (JOBS), and Emergency Assistance (EA) programs.

II. PROGRAM PROCEDURES

Source of Governing Requirements

This program is authorized under Title IV-A of the Social Security Act, as amended by the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA) (Pub. L. 104-193), and subsequent amendments thereto, and codified at 42 USC 601-619. Other sections of the Social Security Act that were not amended by PRWORA continue to apply to TANF and may be referenced in this Supplement. PRWORA was signed into law on August 22, 1996, and required State implementation no later than July 1, 1997. The statute also afforded the States (other than eligible territories) the opportunity for earlier implementation. Proposed implementing program regulations have been published as a Notice of Proposed Rulemaking (Federal Register, Volume 62, No. 224, November 20, 1997, pp.62124 et seq). The HHS Administration for Children and Families (ACF) has issued several Policy Announcements and Program Instructions for State use, primary among them, TANF-ACF-PA-97-1, January 31, 1997.

TANF is subject to the A-102 Common Rule and OMB Circular A-87. This is in contrast to AFDC which, as described in Appendix I, was excluded from the A-102 Common Rule.

Administration and Services

ACF, a component of HHS, administers the TANF program on behalf of the Federal Government. To be eligible for the TANF block grant, a State (including the District of Columbia, the Commonwealth of Puerto Rico, the United States Virgin Islands, Guam, and American Samoa) must submit a State plan containing specified information and assurances within the 27-month period prior to the Federal fiscal year in which the funds are to be provided.

Indian Tribal governments are also eligible entities for TANF but under another set of requirements that ACF will implement separately. Until this Supplement is updated for these requirements, audits of Indian Tribal governments should follow Part 7 rather than Part 4 of this Supplement.

Following ACF review of the State plan and determination that it is complete, ACF awards the basic "State family assistance grant" (SFAG) to the State using a formula allocation derived from funding levels under the superseded programs. The SFAG is a fixed amount to the State subject to reductions based on any penalties assessed. In addition, amounts may be adjusted on the basis of separate Federal funding of counterpart Indian tribal programs within the State. States meeting the qualifying criteria may also receive supplemental grants, bonuses, loans, and payments from a contingency fund. As long as the minimum requirements are met, a State has significant flexibility in designing programs and determining eligibility requirements and may use grant funds to provide cash or non-cash assistance, including direct services, and for administrative activities. Along with the discretion provided to the States, there are also a number of provisions to ensure accountability for results, in the form of monetary penalties, and requirements to provide a variety of data to ACF about expenditures and individuals receiving benefits under the program. In addition to the penalties for failure to meet programmatic or administrative requirements, a State may be rewarded for its performance in program-related areas, such as reducing out-of-wedlock births.

Transition Considerations

A majority of States (including the District of Columbia) opted to implement the program prior to the required implementation date of July 1, 1997, with varying starting dates. Therefore, for the period between the statute's enactment and July 1, 1997, some States continued to operate their programs in their entirety under the prior legislation, while others converted to the TANF provisions at some point during that time. As of July 1, 1997, all States, including the eligible territories, had to implement the TANF requirements.

In addition, waivers, granted under the authority of section 1115 of the Social Security Act, that allow a State to operate a program that does not follow specific requirements of the prior law, remain in effect in some States. In some cases, these waivers are inconsistent with the statutory requirements of the TANF program, but are being allowed under 42 USC 615 to continue until their expiration, despite the inconsistency. To the extent that a State operated a TANF program in FY 1997, penalties may apply.

III. COMPLIANCE REQUIREMENTS

In developing the audit procedures to test compliance with the requirements for a Federal program, the auditor should look to Part 2, Matrix of Compliance Requirements, to identify which of the 14 types of compliance requirements described in Part 3 are applicable and then look to Parts 3 and 4 for the details of the requirements.

A. Activities Allowed or Unallowed

1. Funds may be used in any manner reasonably calculated to achieve the purposes of the program (as specified in 42 USC 601), including providing low-income households with assistance in meeting home heating and cooling costs, or any uses authorized for State expenditure under prior Parts A and F, Title IV-A, of the Social Security Act as in effect on September 30, 1995 or August 21, 1996, at the State's option (42 USC 604(a)(1) and (2)).

2. A State may use funds for programs to prevent and reduce the number of out-of-wedlock pregnancies, including programs targeted to law enforcement officials, the educational system and counseling services, that provide education and training of women and men on the problem of statutory rape ( 42 USC 602(a)(1)(A)(v) and (vi)).

3. Funds may be used to make payments or provide job placement vouchers to State-approved public and private job placement agencies providing employment placement services to individuals receiving assistance under TANF (42 USC 604(f)).

4. Funds may be used to implement an electronic benefits transfer system (42 USC 604(g)).

5. Funds may be used to carry out a program to fund individual development accounts (as described in 42 USC 604(h)(2)) established by individuals eligible to receive assistance under TANF (42 USC 604(h)).

6. Funds may not be used for juvenile justice activities except for those States having approved AFDC State plans under Title IV-A which included Emergency Assistance juvenile justice activities as of September 30, 1995 or August 21, 1996, at the State's option (42 USC 604(a)(2)).

7. Grant funds may not be used to provide medical services other than pre-pregnancy family planning services (42 USC 608(a)(6)).

8. Funds may not be used for sectarian worship, instruction, or proselytization (42 USC 604a(j)).

9. A State may contract with charitable, religious and private organizations to provide administrative and programmatic services and may provide beneficiaries of assistance with certificates, vouchers, or other forms of disbursement which are redeemable with such organization (42 USC 604a(b)).

10. A State may transfer up to 30 percent combined total of the State family assistance grant, supplemental grant for population increases, and bonus funds for high performance and illegitimacy reduction, if any, for a given fiscal year to carry out programs under the Social Services Block Grant (Title XX) (CFDA 93.667) and/or the Child Care and Development Block Grant (CFDA 93.575). However, no more than 10 percent may be transferred to Title XX and such amounts may be used only for programs or services to children or their families whose income is less than 200 percent of the poverty level. Contingency funds under 42 USC 603(b) cannot be transferred under this authority (42 USC 604(d)).

C. Cash Management

Under the TANF program's State maintenance of effort (MOE) requirement, the drawdown of Federal cash should not exceed the federally funded portion of TANF expenditures taking into account the State MOE accounts. For example, if a State has an MOE level that is calculated to be 40 percent of the total funds for a fiscal year, Federal draws should not exceed 60 percent of the amount needed to cover disbursements in any time period (Department of the Treasury, Financial Management Service CMIA Policy Statement Number 19).

E. Eligibility

1. Eligibility for Individuals

The State Plan provides the specifics on how eligibility is determined in each State. The State Plan and eligibility requirements must comply with the following Federal requirements:

a. To be eligible for assistance under this program, a family must include a minor child, i.e., an individual less than 18 years old, or, if a full-time student in a secondary school (or the equivalent level of vocational or technical training), less than 19 years old, who resides with the family (consistent with 42 USC 608(a)(10)); or a pregnant individual. A family must also meet the State's eligibility requirements as provided in the State plan (42 USC 602, 608(a)(1) and 619(2)).

b. Any family including an adult who has received assistance under any State program funded by Federal TANF funds for 60 months (whether or not consecutive) from the date of the initiation of the State program is ineligible for additional federally funded TANF services unless an exemption is granted by the State on the basis of hardship or a family member having been battered or subjected to extreme cruelty. In determining the number of months for which an adult has received assistance, the State must not count any month during which the adult received the assistance while living in Indian country or in an Alaskan Native Village and the most reliable data available with respect to that month (or a period including that month) indicate at least 50 percent unemployment among adults living in Indian country or in the village (42 USC 608(a)(7)).

(See III.G.3., Earmarking, for testing the limits related to the number of exemptions.)

c. A State may not use Federal TANF funds to provide assistance to an individual who is under age 18, is unmarried, has a minor child at least 12 weeks old, and has not successfully completed high school or its equivalent unless the individual either participates in education activities directed toward attainment of a high school diploma or its equivalent, or participates in an alternative education or training program approved by the State (42 USC 608(a)(4)).

d. A State may not use Federal TANF funds to provide assistance to an unmarried individual under 18 caring for a child, if the minor parent and child are not residing with a parent, legal guardian, or other adult relative, unless one of the statutory exceptions applies (42 USC 608(a)(5)).

e. A State may not use any part of the grant to provide assistance for a minor child who has been or is expected to be absent from the home for a period of 45 consecutive days or, at the option of the State, such period of not less than 30 and not more than 180 consecutive days unless the State grants a good cause exception, as provided in its State plan (42 USC 608(a)(10)).

f. A State may not use any part of the grant to provide assistance for an individual who is a parent (or other caretaker relative) of a minor child who fails to notify the State agency of the absence of the minor child from the home, as in paragraph e. immediately above, within five days of the date that it becomes clear to that individual that the child will be absent for the specified period of time (42 USC 608(a)(10)(C)).

g. A State shall require, as a condition of providing assistance, that a member of the family assign to the State the rights the family member may have for support from any other person. This assignment does not exceed the amount of assistance provided (42 USC 608(a)(3)).

h. A State may not use any part of the grant to provide cash assistance to an individual during the 10-year period that begins on the date the individual is convicted in Federal or State court of having made a fraudulent statement or representation with respect to place of residence in order to simultaneously receive assistance from two or more States under TANF, Title XIX, or the Food Stamp Act of 1977, or benefits in two or more States under the Supplemental Security Income program under Title XVI of the Social Security Act. If the President of the United States grants a pardon with respect to the conduct which was the subject of the conviction, this prohibition will not apply for any month beginning after the date of the pardon (42 USC 608(a)(8)) .

i. A State may not use any part of the grant to provide assistance to any individual who is fleeing to avoid prosecution, or custody or confinement after conviction, for a felony or attempt to commit a felony (or in the State of New Jersey, a high misdemeanor), or who is violating a condition of probation or parole imposed under Federal or State law (42 USC 608(a)(9)(A)).

j. Qualified aliens, as defined at 8 USC 1641b, entering the United States on or after August 22, 1996, are not eligible for Federal TANF benefits for a period of five years beginning on the date of the alien's entry into the United States, unless they meet an exception at 8 USC 1612(b)(2) or 1613. A State may, at its option, provide Federal TANF assistance to qualified aliens who entered the United States before August 22, 1996, and, for aliens entering the United States on or after August 22, 1996, after the expiration of the five-year time bar. Non-qualified aliens may not receive Federal TANF assistance unless one of the exceptions at 8 USC 1612(b)(2) applies (8 USC 1612 and 1613).

k. An individual convicted under Federal or State law of any offense which is classified as a felony and which involves the possession, use, or distribution of a controlled substance (as defined the Controlled Substances Act (21 USC 802(6)) is ineligible for assistance under TANF if the conviction was based on conduct occurring after August 22, 1996. A State shall require each individual applying for assistance under TANF to state in writing whether the individual or any member of their household has been convicted of such a felony involving a controlled substance. However, a State may by law exempt individuals or limit the time period of this prohibition (21 USC 862a).

l. If an individual refuses to engage in required work, a State must reduce TANF assistance to the family, at least pro rata, with respect to any period during the month in which the individual so refuses, or may terminate assistance. Any reduction or termination is subject to good cause or other exceptions as the State may establish (42 USC 607(e)(1)). However a State may not reduce or terminate TANF assistance based on a refusal to work if the individual is a single custodial parent caring for a child who is less than 6 years of age if the individual can demonstrate the inability (as determined by the State) to obtain child care for one or more of the following reasons: (1) the unavailability of appropriate care within a reasonable distance of the individual's work or home; (2) unavailability or unsuitability of informal child care; or (3) unavailability of appropriate and affordable formal child care (42 USC 607(e)(2)).

2. Eligibility for Groups of Individuals or Area of Service Delivery - Not Applicable

3. Eligibility of Subrecipients - Not Applicable

G. Matching, Level of Effort, Earmarking

1. Matching - Not Applicable

2.1 Level of Effort - Maintenance of Effort

a. TANF MOE - A State is required to maintain in each succeeding year an amount of "qualified State expenditures" (as defined in 42 USC 609(a)(7)(B)) at least at the applicable percentage of historic State expenditures for eligible families for the immediately preceding fiscal year. The applicable percentage for fiscal years 1997 through 2002 is 80 percent of the amount of non-Federal funds the State spent in fiscal year (FY) 1994 on AFDC or 75 percent if the State meets the Act's work participation rate requirements (42 USC 607(a)) for the fiscal year. This is termed "TANF MOE" and the requirement is based on the Federal fiscal year. This amount was prorated for FY 1997 based on a State's entry into the program. (42 USC 609(a)(7)(A)).

If application of a penalty results in a reduction of Federal TANF funding, a State is required in the immediately succeeding fiscal year to spend from State funds an amount equal to the total amount of the reduction, in addition to the otherwise required TANF MOE (42 USC 609(a)(12)).

Expenditures to support TANF MOE are shown on the TANF ACF 196 Financial Report under the columns headed "State TANF Expenditures(MOE)" and "Separate State Programs (MOE)."

b. Contingency Fund MOE - A State must exceed its annual reconciliation maintenance of effort level, which is 100 percent of historic State expenditures in FY 1994, to qualify for contingency funding. This is termed "Contingency Fund MOE." A State may retain its contingency funds in an amount calculated under 42 USC 603(b) only if State and contingency fund expenditures exceed the specified maintenance of effort level and the State has countable expenditures above the required maintenance of effort. This amount was not prorated for FY 1997 but the State may count expenditures used to meet the State's matching requirement under the predecessor AFDC, EA and JOBS programs (42 USC 603(b) and 609(a)(10)).

2.2 Level of Effort - Supplement not Supplant - Not Applicable

3. Earmarking

a. A State may not spend more than 15 percent for administrative purposes, excluding expenditures for information technology and computerization needed for required tracking and monitoring, of the total combined amounts available under the State family assistance grant, supplemental grant for population increases, bonus funds for high performance and illegitimacy reduction, and contingency funds (42 USC 604(b)(1) and (2)).

b. The number of exemptions granted by a State for any family, including an adult, who has received assistance under any State program funded by Federal TANF funds for 60 months (whether or not consecutive) may not exceed 20 percent of the average monthly number of families to which the State provided assistance during the fiscal year or the immediately preceding fiscal year (but not both), as the State may elect (42 USC 608(a)(7)).

(See III.E.1, Eligibility for Individuals, for related eligibility testing.)

H. Period of Availability of Federal Funds

Funds, other than contingency funds, are available to the State until expended; contingency funds may be used for qualified expenditures only in the fiscal year for which the funding is provided (42 USC 60 (b) and 604(e)).

L. Reporting

1. Financial Reporting

a. SF-269, Financial Status Report - Not Applicable

b. SF-270, Request for Advance or Reimbursement - Not Applicable

c. SF-271, Outlay Report and Request from Reimbursement for Construction Program - Not Applicable

d. SF-272, Federal Cash Transactions Report - Payments under this program are made by the Department of Health and Human Services, Payment Management System. Reporting equivalent to the SF-272 is accomplished through the Payment Management System and is evidenced by the PMS 272 series of reports.

e. Temporary Assistance for Needy Families (TANF) ACF-196 Financial Report (OMB No. 0970-0165) is due quarterly in lieu of the SF-269, Financial Status Report. With the fourth quarter report, the State must also file definitions and descriptive information on the TANF program and expenditure-related information on the State's separate program(s) used to meet the TANF maintenance of effort requirement. Each fiscal year's expenditure reporting must be separate; therefore, multiple reports may be required if the State spent funds from more than one fiscal year in a given quarter.

2. Performance Reporting - Not Applicable

3. Special Reporting

Emergency TANF Data Report, ACF-198, (OMB No.0970-0164) Quarterly on the basis of information collected monthly, including both disaggregated and aggregated data (42 USC 611(a)). States should select disaggregated data in accordance with the Generic Sampling Specifications provided with the form or the report should indicate the sampling plan followed. Those States implementing TANF by March 31, 1997, were required to submit their initial reports to cover the period from six months after the date of their implementation of the program or July 1, 1997, whichever is later, through September 30, 1997.

Key items from Section 1 (disaggregated data) are:

Item 8 Type of Family for Work Participation

Item 13 B. Cash and Cash Equivalent - Number of Months

Item 14 B. Work Subsidies-Number of Months

Item 15 B. Child Care--Number of Months

Item 20 Date of Birth (Age)

Item 24 Relationship to Head of Household

Item 30 Work Participation Status

Items 31-44 Adult Work Participation Activities

Key items from Section 3 (aggregated data) are:

Item 4 Total Number of Families

Item 5 Total Number of Two-Parent Families

Note 1: Section 1, items 30 and 31-44 and Section 3, items 4 and 5 are used by HHS to determine whether a State meets the two-parent participation rate and the overall rate which are achieved by having adults participate in specified work activities for specified minimum hours per week. The proper classification of work participation and caseload reduction are critical to this calculation. HHS may penalize a State for up to 21 percent of the SFAG for failure to meet the participation rates (42 USC 607 and 42 USC 609(a)(3)).

Note 2: During the transition from AFDC to TANF, States may not have had time to modify their automated systems to collect the data required for TANF reporting. Also, some of the data required by TANF will be maintained at the local government level rather than the State level. Regardless of any data collection difficulties, the State is required to accurately collect and report the data included in the TANF reports.

N. Special Tests and Provisions

1. Child Support Non-Cooperation

Compliance Requirement - If the State agency responsible for administering the State plan approved under Title IV-D of the Social Security Act determines that an individual is not cooperating with the State in establishing paternity, or in establishing, modifying or enforcing a support order with respect to a child of the individual, and reports that information to the State agency responsible for TANF, the State TANF agency must (1) deduct an amount equal to not less than 25 percent from the TANF assistance that would otherwise be provided to the family of the individual, and (2) may deny the family any TANF assistance. HHS may penalize a State for up to five percent of the SFAG for failure to substantially comply with this required State child support program (42 USC 608(a)(2) and 42 USC 609(a)(8)).

Audit Objective - To determine whether, after notification by the State IV-D agency, the TANF agency has taken necessary action to reduce or deny TANF assistance.

Suggested Audit Procedures:

a. Review the State's TANF policies and operating procedures concerning this requirement.

b. Test a sample of cases referred by the IV-D agency to the TANF agency to ascertain if benefits were reduced or denied as required.

2. Income Eligibility and Verification System (IEVS)

Compliance Requirement - Each State shall participate in the Income Eligibility and Verification System (IEVS) required by section 1137 of the Social Security Act as amended. HHS may penalize a State for up to two percent of the SFAG for failure to participate in IEVS (42 USC 609(a)(4), 42 USC 1320b-7, and 45 CFR sections 205.51 - 205.60).

Audit Objective - To determine whether the State has established and implemented the required IEVS system for data matching and verification.

Suggested Audit Procedures:

a. Gain an understanding of the State's implementation of the IEVS system.

b. Test a sample of TANF cases subject to IEVS to ascertain if the State:

(1) Used the IEVS to determine eligibility in accordance with the State plan.

(2) Requested and obtained the data from the Internal Revenue Service, the Statewide Information Collection Agency, the Social Security Administration, and the Immigration and Naturalization Service, as appropriate, and performed the required data matching.

(3) Properly considered the information obtained from the data matching in determining the amount of TANF benefits.

3. Adult Custodial Parent of Child under Six When Child Care Not Available

Compliance Requirement - If an individual is an adult single custodial parent caring for a child under the age of six, the State may not reduce or terminate assistance for the individual's refusal to engage in required work if the individual demonstrates to the State an inability to obtain needed child care based upon the following reasons: (a) unavailability of appropriate child care within a reasonable distance from the individual's home or work site; (b) unavailability or unsuitability of informal child care by a relative or under other arrangements; and (c) unavailability of appropriate and affordable formal child care arrangements. The determination of inability to find child care is made by the State. HHS may penalize a State for up to five percent of the SFAG for violation of this provision (42 USC 607(e)(2) and 42 USC 609(a)(11)).

Audit Objective - Determine whether the State has improperly reduced or terminated assistance to adult single custodial parents who refused to work because of inability to obtain child care for a child under the age of six.

Suggested Audit Procedures:

a. Gain an understanding of the criteria established by the State to determine benefits for an adult single custodial parent who refused to work because of inability to obtain child care for a child who is under the age of six.

b. Select a sample of adult single custodial parents caring for a child who is under six years of age whose benefits have been reduced or terminated.

c. Ascertain if the benefits were improperly reduced or terminated because of inability to obtain child care.

IV. OTHER INFORMATION

As discussed in III.A, Activities Allowed or Unallowed, funds may be transferred out of TANF to Social Services Block Grant (Title XX) (CFDA 93.667) and the Child Care and Development Block Grant (CFDA 93.575). These transfers are reflected on the quarterly Temporary Assistance for Needy Families (TANF) ACF-196 Financial Report. The amounts transferred out of TANF are subject to the requirements of the program into which they are transferred and should not be included in the audit universe and total expenditures of TANF when determining Type A programs. On the Schedule of Expenditures of Federal Awards, the amount transferred out should not be shown as TANF expenditures but should be shown as expenditures for the program into which they are transferred.

DEPARTMENT OF HEALTH AND HUMAN SERVICES

CFDA 93.575 CHILD CARE AND DEVELOPMENT BLOCK GRANT

IV. OTHER INFORMATION

This program is not included in this Compliance Supplement; however, the following information is included to alert the auditor to transfers from Temporary Assistance for Needy Families (TANF) (CFDA 93.558), a program which is included in this Supplement.

A State may transfer up to 30 percent of the combined total of the State family assistance grant, supplemental grant for population increases, and bonus funds for high performance and illegitimacy reduction, if any, (all part of TANF) for a given fiscal year to carry out programs under the Social Services Block Grant (Title XX) (CFDA 93.667) and/or the Child Care and Development Block Grant. The amount of the transfers is reflected on the quarterly Temporary Assistance for Needy Families (TANF) ACF-196 Financial Report. The amounts transferred into this program are subject to the requirements of this program and should be included in the audit universe and total expenditures of this program when determining Type A programs. On the Schedule of Expenditures of Federal Awards, the amounts transferred in should be shown as expenditures of this program when such amounts are expended.

DEPARTMENT OF HEALTH AND HUMAN SERVICES

CFDA 93.667 SOCIAL SERVICES BLOCK GRANT (Title XX)

IV. OTHER INFORMATION

This program is not included in this Compliance Supplement; however, the following information is included to alert the auditor to transfers from Temporary Assistance for Needy Families (TANF) (CFDA 93.558), a program which is included in this Supplement.

A State may transfer up to 30 percent of the combined total of the State family assistance grant, supplemental grant for population increases, and bonus funds for high performance and illegitimacy reduction, if any, (all part of TANF) for a given fiscal year to carry out programs under the Social Services Block Grant (Title XX) and/or the Child Care and Development Block Grant program (CFDA 93.575). The amount of the transfers is reflected on the quarterly Temporary Assistance for Needy Families (TANF) ACF-196 Financial Report. The amounts transferred into this program are subject to the requirements of this program when expended and should be included in the audit universe and total expenditures of this program when determining Type A programs. On the Schedule of Expenditures of Federal Awards, the amounts transferred in should be shown as expenditures of this program when such amounts are expended.

DEPARTMENT OF HEALTH AND HUMAN SERVICES

CFDA 93.778 MEDICAL ASSISTANCE PROGRAM (Medicaid; TITLE XIX)

CFDA 93.775 STATE MEDICAID FRAUD CONTROL UNITS

CFDA 93.777 STATE SURVEY AND CERTIFICATION OF HEALTH CARE PROVIDERS AND SUPPLIERS

Note: In accordance with OMB Circular A-133, §___.525(c)(2), when the auditor is using the risk-based approach for determining major programs, the auditor should consider that HHS has identified the Medicaid Assistance Program as a program of higher risk. While not precluding an auditor from determining that the Medicaid Cluster qualifies as a low-risk program (e.g., because prior audits have shown strong internal controls and compliance with Medicaid requirements), this identification by HHS should be considered as part of the risk assessment process.

I. PROGRAM OBJECTIVES

Medical Assistance Program

The objective of the Medical Assistance Program (Medicaid or Title XIX of the Social Security Act, as amended, (42 USC 1396, et seq.)) is to provide payments for medical assistance to low-income persons who are age 65 or over, blind, disabled, or members of families with dependent children or qualified pregnant women or children.

State Medicaid Fraud Control Units

The objective of the State Medicaid Fraud Control Units is to control provider fraud in the Medicaid program. The State Medicaid Fraud Control Unit's grant application contains the organization, administration, agreements, and procedures for the unit. Federal requirements are contained in 42 CFR part 1007. This unit is separate and distinct from the State Medicaid agency.

State Survey and Certification of Health Care Providers and Suppliers

The objective of the State Survey and Certification of Health Care Providers and Suppliers program is to determine whether the providers and suppliers of health care services under the Medicaid program are in compliance with regulatory health and safety standards and conditions of participation. This program is administered in a manner similar to Medicaid and includes an approved State plan which addresses Federal requirements.

Even though the State Medicaid Fraud Control Units and State Survey and Certification of Health Care Providers and Suppliers have substantially less Federal expenditures than the Medicaid Assistance Program, they are clustered with Medicaid because these programs provide significant controls over the expenditures of Medicaid funds. It is unlikely that the expenditures for these two programs would be material to the Medicaid cluster; however, noncompliance with the requirements to administer these controls may be material.

II. PROGRAM PROCEDURES

The following paragraphs are intended to provide a high-level, overall description of how Medicaid generally operates. It is not practical to provide a complete description of program procedures because Medicaid operates under both Federal and State laws and regulations and States are afforded flexibility in program administration. Accordingly, the following paragraphs are not intended to be used in lieu of or as a substitute for the Federal and State laws and regulations applicable to this program.

Authoritative Sources

The auditor is expected to use the applicable laws and regulations (including the applicable State approved plan) when auditing this program. The Federal law that authorizes these programs is Title XIX of the Social Security Act (Title XIX), enacted in 1965 and subsequently amended (42 USC 1396, et seq.). The Federal regulations applicable to the Medicaid program are found in 42 CFR parts 430 through 456, 1002, and 1007.

Administration

The U.S. Department of Health and Human Services' (HHS) Health Care Financing Administration (HCFA) administers the Medicaid program in cooperation with State governments. The Medicaid program is jointly financed by the Federal and State governments and administered by the States. For purposes of this program, the term "State" includes the 50 States, the District of Columbia, and five U.S. territories: Puerto Rico, the Virgin Islands, Guam, American Samoa, and the Northern Mariana Islands. Medicaid operates as a vendor payment program, with States paying providers of medical services directly. Participating providers must accept the Medicaid reimbursement level as payment in full. Within broad Federal rules, each State decides eligible groups, types and range of services, payment levels for services, and administrative and operating procedures.

State Plans

States administer the Medicaid program under a State plan approved by HCFA. The Medicaid State plan is a comprehensive written statement submitted by the State Medicaid agency describing the nature and scope of its Medicaid program. A State plan for Medicaid consists of preprinted material that covers the basic requirements, and individualized content that reflects the characteristics of each particular State's program. The State plan is referenced to the applicable Federal regulation for each requirement and will also contain references to applicable State regulations.

The State plan contains all information necessary for HCFA to determine whether the State plan can be approved to serve as a basis for determining the level of Federal financial participation in the State program. The State plan must specify a single State agency (hereinafter referred to as the "State Medicaid agency") established or designated to administer or supervise the administration of the State plan. The State plan must also include a certification by the State Attorney General which cites the legal authority for the State Medicaid agency to determine eligibility.

The State plan also specifies the criteria for determining the validity of payments disbursed under the Medicaid program. This encompasses the system the State will use to ensure that payments are disbursed only to eligible providers for appropriately-priced services that are covered by the Medicaid program and provided to eligible beneficiaries. Payments must also be based on claims that are adequately supported by medical records, and payments must not be duplicated.

A State plan or plan amendment will be considered approved unless HCFA sends the State written notice of disapproval or a request for additional information within 90 days after receipt of the State plan or plan amendment. Copies of the State plan are available from the State Medicaid agency.

Waivers

The State Medicaid agency may apply for a waiver of Federal requirements. Waivers are intended to provide the flexibility needed to enable States to try new or different approaches to the efficient and cost-effective delivery of health care services, or to adapt their programs to the special needs of particular areas or groups of beneficiaries. Waivers allow exceptions to State plan requirements and permit a State to implement innovative programs or activities on a time-limited basis, and are subject to specific safeguards for the protection of beneficiaries and the program.

Actions that States may take if waivers are obtained include: (1) implement a primary care case-management system or a specialty physician system; (2) designate an entity to act as a central broker in assisting Medicaid beneficiaries to choose among competing health care plans; (3) share with beneficiaries (through the provision of additional services) cost-savings made possible through the beneficiaries' use of more cost effective medical care; (4) limit beneficiaries' choice of providers to providers that fully meet reimbursement, quality, and utilization standards, which are established under the State plan and are consistent with access, quality, and efficient and economical furnishing of care; (5) include as "medical assistance," under its State plan, home and community-based services furnished to beneficiaries who would otherwise need inpatient care that is furnished in a hospital, skilled nursing facility (SNF), or intermediate care facility (ICF), and is reimbursable under the State plan; and, (6) impose a deduction, cost-sharing or similar charge of up to twice the "nominal charge" established under the State plan for outpatient services for certain nonemergency services. A State may also obtain a waiver of statutory requirements to provide an array of home and community-based services which may permit an individual to avoid institutionalization (42 CFR part 441 subpart G). Depending on the type of requirement being waived, a waiver may be effective for initial periods ranging from two to three years, with varying renewal periods. Copies of waivers are available from the State Medicaid agency.

Payments to States

Once HCFA has approved a State plan and waivers, it makes quarterly grant awards to the State to cover the Federal share of Medicaid expenditures for services, training, and administration. The amount of the quarterly grant is determined on the basis of information submitted by the State Medicaid agency (in quarterly estimate and quarterly expenditure reporting). The grant award authorizes the State to draw Federal funds as needed to pay the Federal financial participation portion of qualified Medicaid expenditures. The HHS Payment Management System Division of Payment Management (PMS-DPM) in Rockville, Maryland, disburses Federal funds to States including funding under Medicaid. Currently, all States use a system developed by HHS called SMARTLINK to request funds on an as needed basis. States may use one of two payment mechanisms which are linked to SMARTLINK: (1) wire transfers through the Automated Clearinghouse in conjunction with the Federal Reserve Bank, which is settled the day after the request date, or (2) FEDWIRE transfers through the U.S. Department of the Treasury, which is a same day payment mechanism. The payment method is selected by the State and approved by the U.S. Department of the Treasury and HHS before payments are made through either mechanism. States report cash activity to PMS-DPM with a quarterly Cash Transactions Report (PMS-272).

State Expenditure Reporting

Thirty days after the end of the quarter, States electronically submit form HCFA-64 , "Quarterly Statement of Expenditures for the Medical Assistance Program." The HCFA-64 presents expenditures and recoveries and other items that reduce expenditures for the quarter and prior period expenditures. The amounts reported on the HCFA-64 and its attachments must be actual expenditures for which all supporting documentation, in readily reviewable form, has been compiled and is available immediately at the time the claim is filed. States use the Medicaid Budget and Expenditure System to electronically submit the HCFA-64 directly to HCFA.

Eligibility

Eligibility for Medicaid is based primarily on income and resources. The States must provide services to mandatory categorically needy and other required special groups (e.g., individuals receiving Aid to Families With Dependent Children (AFDC), Temporary Assistance for Needy Families (TANF), or Supplemental Security Income (SSI)). States may provide coverage to members of optional groups who do not receive cash assistance (e.g., individuals who would be eligible for but are not receiving AFDC) and medically needy individuals (individuals who are eligible for Medicaid after deducting large medical expenditures from their income). Eligibility criteria will be specified in the individual State plan.

Under the Personal Responsibility and Work Opportunity Reconciliation Act of 1996, the cash welfare program known as AFDC was repealed and replaced with block grants to States known as TANF. Under the old AFDC law, children and parents who received cash welfare were automatically enrolled in the Medicaid program. While the new law eliminates the entitlement to welfare, access to Medicaid for children and parents who would have met the State's old AFDC income and asset standards in place on July 16, 1996, has been preserved--whether or not these individuals are eligible for the new TANF system (P.L. 104-193).

States must provide limited Medicaid coverage for "qualified Medicare beneficiaries." These are aged and disabled persons who are receiving Medicare, whose income is below 100 percent of the Federal poverty level, and whose resources do not exceed twice the allowable amount under SSI (42 CFR section 407.40).

The State plan will specify if determinations of eligibility are made by agencies other than the State Medicaid agency and will define the relationships and respective responsibilities of the State Medicaid agency and the other agencies. The application process includes completing and filing an application form, being interviewed, and having information verified. The State plan must also provide that the State Medicaid agency will maintain individual records on each applicant and Medicaid beneficiary including date of application, date and basis for disposition, facts essential to determination of initial and continuing eligibility, provision of medical assistance, and basis for discontinuing assistance.

Services

Medicaid expenditures include medical assistance payments for eligible recipients for such services as hospitalization, prescription drugs, nursing home stays, outpatient hospital care, and physicians' services, and expenditures for administration and training. In order for a medical assistance payment to be considered valid, it must comply with the requirements of Title XIX, as amended, (42 USC 1396, et seq.) and implementing Federal regulations. Determinations of payment validity are made by individual States in accordance with approved State plans under broad Federal guidelines.

Some States have managed care arrangements under which the State enters into a contract with an entity, such as an insurance company, to arrange for medical services to be available for beneficiaries. The State pays a fixed rate per person (capitation rate) without regard to the actual medical services utilized by each beneficiary.

Also, Medicaid expenditures include administration and training, the State Survey and Certification Program, and State Medicaid Fraud Control Units.

Control Systems

Utilization Control and Program Integrity

The State plan must provide methods and procedures to safeguard against unnecessary utilization of care and services, including those provided by long term care institutions. In addition, the State must have: (1) methods of criteria for identifying suspected fraud cases; (2) methods for investigating these cases; and, (3) procedures, developed in cooperation with legal authorities, for referring suspected fraud cases to law enforcement officials.

These requirements may be met by the State Medicaid agency assuming direct responsibility for assuring the requirements or met by contracting with a peer review organization (PRO) to perform such reviews. The reviewer must establish and use written criteria for evaluating the appropriateness and quality of Medicaid services.

The State Medicaid agency must have procedures for the ongoing post-payment review, on a sample basis, for the necessity, quality, and timeliness of Medicaid services. The State Medicaid agency may conduct this review directly or may contract with a PRO.

Suspected fraud identified by utilization control and program integrity should be referred to the State Medicaid Fraud Control Units.

Inpatient Hospital and Long-Term Care Facility Audits

States are required to establish as part of the State plan standards and methodology for reimbursing inpatient hospital and long-term care facilities based on payment rates that represent the cost to efficiently and economically operate such facilities and provide Medicaid services. The State Medicaid agency must provide for the filing of uniform cost reports by each participating provider. These cost reports are used by the State Medicaid agency to aid in the establishment of payment rates. The State Medicaid agency must provide for periodic audits of the financial and statistical records of the participating providers. Such audits could include desk audits of cost reports in addition to field audits. These audits are an important control for the State Medicaid agency in ensuring that established payment rates are proper.

ADP Risk Analyses and System Security Reviews

The Medicaid program is highly dependent on extensive and complex computer systems that include controls for ensuring the proper payment of Medicaid benefits. States are required to establish a security plan for ADP systems that include policies and procedures to address: (1) physical security of ADP resources; (2) equipment security to protect equipment from theft and unauthorized use; (3) software and data security; (4) telecommunications security; (5) personnel security; (6) contingency plans to meet critical processing needs in the event of short- or long-term interruption of service; (7) emergency preparedness; and, (8) designation of an agency ADP security manager.

State agencies must establish and maintain a program for conducting periodic risk analyses to ensure appropriate, cost effective safeguards are incorporated into new and existing systems. State agencies must perform risk analyses whenever significant system changes occur. On a biennial basis State agencies shall review the ADP system security of installations involved in the administration of HHS programs. At a minimum, the reviews shall include an evaluation of physical and data security operating procedures, and personnel practices.

Medicaid Management Information System (MMIS)

The MMIS is the mechanized Medicaid benefit claims processing and information retrieval system that States are required to have, unless this requirement is waived by the Secretary of HHS. HHS provides general systems guidelines (42 CFR sections 433.110 through 433.131) but it does not provide detailed system requirements or specifications for States to use in the development of MMIS systems. As a result, MMIS systems will vary from State to State. The system may be maintained and operated by the State or a contractor.

The MMIS is normally used to process payments for most medical assistance services and normally includes edits and controls which identify unusual items for follow up by the utilization control and program integrity unit. However, the State may use systems other than MMIS to process medical assistance payments. In many cases the operation of the MMIS is contracted out to a private contractor. The State plan will describe the administration of each State's claims processing system.

Generally, the MMIS does not process claims from State agencies (e.g., State operated intermediate care facility for the mentally retarded (ICF/MR)) and certain selected types of claims. The claims payments which are not processed through MMIS may be material to the Medicaid program.

Medicaid Eligibility Quality Control System (MEQC)

Each State is required to operate a MEQC system in accordance with requirements specified by HCFA. This HCFA-approved system redetermines eligibility for individual sampled cases and provides national and State measures of the accuracy of eligibility and benefit amount determinations (commonly referred to as "payment accuracy"), including both underpayments and overpayments, and of the correctness of decisions to deny benefits. The MEQC system reviews the determinations of beneficiary eligibility made by a State agency, or its designee, and uses statistical sampling methods to select claims for review and project the number and dollar impact of payments to ineligible beneficiaries (42 CFR sections 431.800 through 431.865).

Federal Oversight and Compliance Mechanisms

HCFA oversees State operations through its organization consisting of a headquarters and 10 regional offices.

HCFA program oversight includes budget review, reviews of financial and program reports, and on-site reviews which are normally targeted to cover a specific area of concern. HCFA conveys areas of national and local concerns to the States through the regions. Technical assistance is used extensively to promote improvements in State operation of the program but enforcement mechanisms are available. HCFA considers the single audit as an important internal control in its monitoring of States.

Federal program oversight, because of its targeted nature, should not be used as a substitute for audit evidence gained through transaction testing.

HHS Office of Inspector General (OIG) Fraud Alerts

The HHS OIG issues fraud alerts, some of which relate to the Medicaid program. These alerts are available on the Internet from the HHS OIG Home Page, Special Fraud Alerts section

(http:// www.dhhs.gov/progorg/oig/frdalrt/frdalrt.html).

III. COMPLIANCE REQUIREMENTS

In developing the audit procedures to test compliance with the requirements for a Federal program, the auditor should first look to Part 2, Matrix of Compliance Requirements, to identify which of the 14 types of compliance requirements described in Part 3 are applicable and then look to Parts 3 and 4 for the details of the requirements.

General Audit Approach for Medicaid Payments

To be allowable, Medicaid costs for medical services must be: (1) covered by the State plan and waivers; (2) for an allowable service rendered (including supported by medical records or other evidence indicating that the service was actually provided and consistent with the medical diagnosis); (3) properly coded; and, (4) paid at the rate allowed by the State plan. Additionally, Medicaid costs must be net of applicable credits (e.g., insurance, recoveries from other third parties who are responsible for covering the Medicaid costs, and drug rebates), paid to eligible providers, and only provided on behalf of eligible individuals.

Due to the complexity of Medicaid program operations, it is unlikely the auditor will be able to support an opinion that Medicaid expenditures are in compliance with applicable laws and regulations (e.g., are allowable under the State plan) without relying upon the systems and internal controls. Examples of complexities include:

- Dependence upon large and complex ADP systems to process the large volume of Medicaid transactions.

- Medical services are provided directly to an eligible beneficiary, normally without prior approval by the State.

- Medical service providers normally determine the scope and medical necessity of the services.

- Notice to the State that service is rendered is after-the-fact when a bill is sent.

- Payments systems do not include a review of original detailed documentation supporting the claim prior to payment.

- Complex billing charge structures and payment rates for medical services, including significance of proper coding of services (e.g., billing by diagnosis related groups (DRG)).

- Different types of Medicaid payments (e.g., inpatient hospital, physicians, prescription drugs and drug rebates).

Medicaid has required control systems that should aid the auditor in obtaining sufficient audit evidence for Medicaid expenditures. These control systems are discussed in the preceding Program Procedures under Control Systems and are: (1) utilization control and program integrity; (2) inpatient hospital and long term care facility audits; (3) ADP risk analyses and system security reviews (e.g, of the MMIS); and (4) the MMIS normally includes edits and controls that identify unusual items for follow up by the utilization control and program integrity function. The first three are generally performed by specialists retained by the State Medicaid agency. The following table indicates the major types of Medicaid payments to which these controls will likely relate:

Each of the above Medicaid payment types are tested for compliance with applicable laws and regulations under either "A. Activities Allowed or Unallowed;" "B. Allowable Costs/Cost Principles;" or "E. Eligibility." Based upon the assessed level of control risk, the auditor should design appropriate tests of the allowability of Medicaid payments. Testing likely will include tests of medical records, in which case the auditor should consider the need for assistance of specialists. The auditor may consider using the same specialists used by the State.

The auditor should consider the following in planning and performing tests of controls and compliance:

1. Section "N. Special Tests and Provisions," includes required internal control, which are compliance requirements (i.e., controls (1), (2), and (3) above), and audit objectives and procedures for each. The audit procedures will entail tests of work performed by the State Medicaid agency.

2. Tests of compliance with laws and regulations relating to Sections A, B, and E below, and the compliance requirements enumerated in Section N should be coordinated.

A. Activities Allowed or Unallowed

1. Funds can only be used for Medicaid benefit payments (as specified in the State plan, Federal regulations, or an approved waiver), expenditures for administration and training, expenditures for the State Survey and Certification Program, and expenditures for State Medicaid Fraud Control Units (42 CFR sections 435.10, 440.210, 440.220, and 440.180).

2. Case Management Services - The State plan may provide for case management services as an optional medical assistance service. The term case management services means services which will assist individuals eligible under the plan in gaining access to needed medical, social, educational, and other services.

Medicaid case management services are divided into two separate categories:

Administrative case management - Services must be identifiable with Title-XIX benefit (e.g., outreach services provided by public school districts to Medicaid recipients).

Medical/Targeted case management - Services must be provided to an eligible Medicaid recipient. Services do not have to be specifically medical in nature and can include securing shelter, personal needs, etc. (e.g., services provided by community mental health boards, county offices of aging).

Case management services is an area of risk because of the high growth of expenditures, the relative newness of the provision that allows these expenditures to be claimed, and prior experience which indicates problems with the documentation of case management expenditures.

With the exception of case management services provided through capitation (a process in which payment is made on a per beneficiary basis) or prepaid health plans, Federal regulations typically require the following documentation for case management services: date of service; name of recipient; name of provider agency and person providing the service; nature, extent, or units of service; and, place of service (P.L. 99-272, Section 9508; 42 CFR part 434).

3. Managed Care - A State may obtain a waiver of statutory requirements in order to develop a system that more effectively addresses the health care needs of its population. For example, a waiver may involve the use of a program of managed care for selected elements of the client population or allow the use of program funds to serve specified populations that would be otherwise ineligible (Sections 1115 and 1915 of the Social Security Act). Managed care providers must be eligible to participate in the program at the time services are rendered, payments to managed care plans should only be for eligible clients for the proper period, and the capitation payment should be properly calculated. Medicaid medical services payments (e.g., hospital and doctors charges) should not be made for services that are covered by managed care. States should ensure that capitated payments to providers are discontinued when a beneficiary is no longer enrolled for services. Requirements related to beneficiaries' access to managed care services are covered under N.6., Special Tests and Provisions, Managed Care.

4. Medicaid Health Insurance Premiums - A State may enroll certain Medicare-eligible recipients under Medicare Part B and pay the premium, deductibles, cost sharing, and other charges (42 CFR section 431.625).

5. Disproportionate Share Hospital - Federal financial participation is available for aggregate payments to hospitals that serve a disproportionate number of low income patients with special needs. The State plan must specifically define a disproportionate share hospital and the method of calculating the rate for these hospitals. Specific limits for the total disproportionate share hospital payments for the State and the individual hospitals are contained in the legislation (Section 1923 of the Social Security Act and 42 USC 1396(r)).

6. Home Health Care - A State may obtain a waiver of statutory requirements to provide an array of home and community-based services which may permit an individual to avoid institutionalization (42 CFR part 441 subpart G). The HHS OIG has issued a special fraud alert concerning home health care. Problems noted include cost report frauds, billing for excessive services or services not rendered, and use of unlicensed staff. The full alert was published in the Federal Register on August 10, 1995, (page 40847) and is available on the Internet from the HHS OIG Home Page, Special Fraud Alerts section (http://www.dhhs.gov/progorg/oig/frdalrt/frdalrt.html).

B. Allowable Costs/Cost Principles

Recoveries, Refunds, and Rebates (Costs must be the net of all applicable credits)

1. States must have a system to identify medical services that are the legal obligation of third parties, such as private health or accident insurers. Such third party resources should be exhausted prior to paying claims with program funds. Where a third party liability is established after the claim is paid, reimbursement from the third party should be sought (42 CFR sections 433.135 through 433.154).

2. The State is required to credit the Medicaid program for (1) State warrants that are canceled and uncashed checks beyond 180 days of issuance (escheated warrants) and (2) overpayments made to providers of medical services within specified time frames. In most cases, the State must refund provider overpayments to the Federal Government within 60 days of identification of the overpayment, regardless of whether the overpayment was collected from the provider (42 CFR sections 433.300 through 433.320 and 433.40).

3. Section 1903 (w)(1) of the Social Security Act (as amended by P.L. 102-234) provides that, effective January 1, 1992, before calculating the amount of Federal financial participation, certain revenues received by a State will be deducted from the State's medical assistance expenditures. The revenues to be deducted are (1) donations made by health providers and entities related to providers (except for bona fide donations and, subject to a limitation, donations made by providers for the direct costs of out stationed eligibility workers); and (2) impermissible health care-related taxes that exceed a specified limit ( 42 USC 1396(b)(w) and 42 CFR section 433.57).

"Provider related donations" are any donations or other voluntary payments (in-cash or in-kind) made directly or indirectly to a State or unit of local government by (1) a health care provider, (2) an entity related to a health care provider, or (3) an entity providing goods or services under the State plan and paid as administrative expenses. "Bona fide provider-related donations" are donations that have no direct or indirect relationship to payments made under Title XIX (42 USC 1396, et seq.) to (1) that provider, (2) providers furnishing the same class of items and services as that provider, or (3) any related entity (42 CFR sections 433.58(d) and 433.66(b)).

Permissible health care-related taxes are those taxes which are broad-based taxes, uniformly applied to a class of health care items, services, or providers, and which do not hold a taxpayer harmless for the costs of the tax, or a tax program for which HCFA has granted a waiver. Health care-related taxes that do not meet these requirements are impermissible health care-related taxes (42 CFR section 433.68(b)).

The provisions of P.L. 102-234 apply to all 50 States and the District of Columbia, except those States whose entire Medicaid program is operated under a waiver granted under section 1115 of the Social Security Act (42 CFR part 433; Federal Register published August 13, 1993, 58 FR 43156-43183).

4. Section 1927 of the Social Security Act allows States to receive rebates for drug purchases the same as other payers receive. Drug manufacturers are required to provide a listing to HCFA of all covered outpatient drugs and, on a quarterly basis, are required to provide their average manufacturer's price and their best prices for each covered outpatient drug. Based upon these data, HCFA calculates a unit rebate amount for each drug which it then provides to States. No later than 60 days after the end of the quarter, the State Medicaid agency must provide to manufacturers drug utilization data. Within 30 days of receipt of the utilization data from the State, the manufacturers are required to pay the rebate or provide the State with written notice of disputed items not paid because of discrepancies found.

E. Eligibility

1. Eligibility for Individuals

The State Medicaid agency or its designee is required to determine client eligibility in accordance with eligibility requirements defined in the approved State plan (42 CFR section 431.10). States have a high degree of flexibility in designating who will determine eligibility.

The State is required to operate a MEQC system in accordance with requirements specified by HCFA. The MEQC system reviews the determinations of beneficiary eligibility made by State Medicaid agencies, or their designee, and uses statistical sampling methods to select claims for review and project the number and dollar impact of incorrect payments to ineligible beneficiaries (42 CFR sections 431.800 through 431.865).

As discussed in the General Audit Approach for Medicaid Payments, the auditor will likely combine Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Eligibility testing. Therefore, compliance requirements related to amounts provided to or on behalf of eligibles were combined with Activities Allowed or Unallowed.

1. Eligibility of Group of Individuals or Area of Service Delivery - Not Applicable

2. Eligibility for Subrecipients - Not Applicable

G. Matching, Level of Effort, Earmarking

1. Matching

The State is required to pay part of the costs of providing health care to the poor and part of the costs of administering the program. Different State participation rates apply to medical assistance payments. There are also different Federal financial participation rates for the different types of costs incurred in administering the Medicaid program, such as administration, family planning, training, computer, and other costs (42 CFR sections 433.10 and 433.15). The auditor should refer to the State plan for the matching rates.

2. Level of Effort

A State waiver may contain a level of effort requirement.

3. Earmarking

A State waiver may contain an earmarking requirement.

L. Reporting

1. Financial Reporting

a. SF-269, Financial Status Report - Not Applicable

b. SF-270, Request for Advance or Reimbursement - Not Applicable

c. SF-271, Outlay Report and Request for Reimbursement for Construction Program - Not Applicable

d. SF-272, Federal Cash Transactions Report - Not Applicable

e. HCFA-64, Quarterly Statement of Expenditures for the Medical Assistance Program (OMB No. 0938-0067) - Required to be used in lieu of SF-269, Financial Status Report and is required to be prepared quarterly and submitted electronically to HCFA within 30 days after the end of the quarter.

f. PMS-272, Quarterly Cash Transactions Report (OMB No. 0937-0200) - Required in lieu of the Federal Cash Transaction Report (SF-272).

2. Performance Reporting - Not Applicable

3. Special Reporting - Not Applicable

N. Special Tests And Provisions

1. Utilization Control and Program Integrity

Compliance Requirements - The State plan must provide methods and procedures to safeguard against unnecessary utilization of care and services, including long-term care institutions. In addition, the State must have: (1) methods or criteria for identifying suspected fraud cases; (2) methods for investigating these cases; and, (3) procedures, developed in cooperation with legal authorities, for referring suspected fraud cases to law enforcement officials (42 CFR parts 455, 456, and 1002).

Suspected fraud should be referred to the State Medicaid Fraud Control Units (42 CFR part 1007).

The State Medicaid agency must establish and use written criteria for evaluating the appropriateness and quality of Medicaid services. The agency must have procedures for the ongoing post-payment review, on a sample basis, of the need for and the quality and timeliness of Medicaid services. The State Medicaid agency may conduct this review directly or may contract with a PRO.

Audit Objectives - To determine whether the State has established and implemented procedures to: (1) safeguard against unnecessary utilization of care and services, including long term care institutions; (2) identify suspected fraud cases; (3) investigate these cases; and, (4) refer those cases with sufficient evidence of suspected fraud cases to law enforcement officials.

Suggested Audit Procedures

a. Obtain and evaluate the adequacy of the procedures used by the State Medicaid agency to conduct utilization reviews and identifying suspected fraud.

(1) Consider the qualifications of the personnel conducting the reviews and identifying suspected fraud. Ascertain that the individuals possess the necessary skill or knowledge by considering the following: (1) professional certification, license, or specialized training; (2) the reputation and standing of licensed medical professionals in the view of peers; and, (3) experience in the type of tasks to be performed.

(2) Consider the personnel performing the utilization review and identifying suspected fraud are sufficiently organized outside the control of other Medicaid operations to objectively perform their function.

(3) Ascertain if the sampling plan implemented by the State Medicaid agency or the PRO was properly designed and executed.

b. Test a sample of the cases examined by State Medicaid agency or the PRO and ascertain if such examinations were in accordance with the agency's procedures.

c. Test a sample of the identified suspected cases of fraud and ascertain if the agency took appropriate steps to investigate and, if appropriate, make a referral.

d. Based on the above procedures, consider the degree of reliance that can be placed on the utilization review and identification of suspected fraud in performing tests under Sections A, B, and E.

2. Inpatient Hospital and Long-Term Care Facility Audits

Compliance Requirement - The State Medicaid agency pays for inpatient hospital services and long-term care facility services through the use of rates that are reasonable and adequate to meet the costs that must be incurred by efficiently and economically operated providers. The State Medicaid agency must provide for the filing of uniform cost reports for each participating provider. These cost reports are used to establish payment rates. The State Medicaid agency must provide for the periodic audits of financial and statistical records of participating providers. The specific audit requirements will be established by the State Plan (42 CFR section 447.253).

Audit Objectives - To determine whether the State Medicaid agency performed inpatient hospital and long-term care facility audits as required.

Suggested Audit Procedures

a. Review the State Plan and State Medicaid agency operating procedures and document the types of audits performed (e.g., desk audits, field audits), the methodology for determining when audits are conducted, and the objectives and procedures of the audits.

b. Through examination of documentation, ascertain that the sampling plan was carried out as planned.

c. Select a sample of audits and ascertain if the audits were in compliance with the State Medicaid agency's audit procedures.

d. Based on the above, consider the degree of reliance that can be placed on the inpatient hospital and long term care facility audits in performing tests under Sections A, B, and E.

3. ADP Risk Analysis and System Security Review

Compliance Requirement - State agencies must establish and maintain a program for conducting periodic risk analyses to ensure that appropriate, cost effective safeguards are incorporated into new and existing systems. State agencies must perform risk analyses whenever significant system changes occur. State agencies shall review the ADP system security installations involved in the administration of HHS programs on a biennial basis. At a minimum, the reviews shall include an evaluation of physical and data security operating procedures, and personnel practices. The State agency shall maintain reports on its biennial ADP system security reviews, together with pertinent supporting documentation, for HHS onsite reviews (45 CFR section 95.621).

Audit Objective - To determine whether the State Medicaid agency has performed the required ADP risk analyses and system security reviews.

Suggested Audit Procedures

a. Review the State Medicaid agency's policies and procedures and document the frequency, timing, and scope of ADP security reviews. This should include any reviews following Statement on Auditing Standards No. 70 (SAS 70) which may have been performed on outside processors.

b. Consider the appropriateness and extent of reliance on such reviews based on the qualifications of the personnel performing the risk analyses and security reviews and their organizational independence from the ADP systems.

c. Review the work performed during the most recent risk analysis and security review.

d. Based on the above, consider the degree of reliance that can be placed on the ADP Risk Analysis and System Security Reviews in performing tests under Sections A, B, and E.

4. Provider Eligibility

Compliance Requirement - In order to receive Medicaid payments, providers of medical services furnishing services must be licensed in accordance with Federal, State, and local laws and regulations to participate in the Medicaid program (42 CFR sections 431.107 and 447.10; and section 1902(a)(9) of the Social Security Act) and the providers must make certain disclosures to the State (42 CFR subpart B).

Audit Objective - To determine whether providers of medical services are licensed to participate in the Medicaid program in accordance with Federal, State, and local laws and regulations, and whether the providers have made the required disclosures to the State.

Suggested Audit Procedures

a. Obtain an understanding of the State plan's provisions for licensing and entering into agreements with providers.

b. Select a sample of providers receiving payments and ascertain if:

(1) The provider is licensed in accordance with the State Plan.

(2) The agreement with the provider complies with the requirements of the State Plan, including the disclosure requirements of 42 CFR 455 subpart B.

5. Provider Health and Safety Standards

Compliance Requirement - Providers must meet the prescribed health and safety standards for hospital, nursing facilities, and ICF/MR (42 CFR part 442). The standards may be modified in the State plan.

Audit Objective - To determine whether the State ensures that hospitals, nursing facilities, and ICF/MR that serve Medicaid patients meet the prescribed health and safety standards.

Suggested Audit Procedures

a. Obtain an understanding of the State Plan provisions which ensure that payments are made only to institutions which meet prescribed health and safety standards.

b. Select a sample of payments for each provider type (i.e., hospitals, nursing facilities, and ICF/MR) and ascertain if the State Medicaid agency has documentation that the provider has met the prescribed health and safety standards.

6. Managed Care

Compliance Requirement - A State may obtain a waiver of statutory requirements in order to develop a system that more effectively addresses the health care needs of its population. A waiver may involve the use of a program of managed care for selected elements of the client population or allow the use of program funds to serve specified populations that would be otherwise ineligible (Sections 1115 and 1915 of the Social Security Act).

Audit Objective - To determine whether the State is operating managed care in compliance with the approved State plan waiver.

Suggested Audit Procedures

a. Obtain an understanding of the State plan's managed care waiver.

b. Perform tests to ascertain if the State has a system to handle beneficiary complaints of not receiving necessary care and provider complaints of not receiving payments for services provided to Medicaid recipients.

c. Perform tests to ascertain if the State has a system to ensure beneficiaries have adequate access to health care from managed care organizations which are being paid premiums on the beneficiaries' behalf.

DEPARTMENT OF HEALTH AND HUMAN SERVICES

CFDA 93.914 HIV EMERGENCY RELIEF PROJECT GRANTS

CFDA 93.915 HIV EMERGENCY RELIEF FORMULA GRANTS

I. PROGRAM OBJECTIVES

The objective of this program is to improve access to a comprehensive continuum of high-quality community-based primary medical care and support services in metropolitan areas that are disproportionately affected by the incidence of Human Immunodeficiency Virus (HIV)/Acquired Immune Deficiency Syndrome (AIDS). The statute refers to both persons infected with HIV and those who have clinically defined AIDS. These terms are used interchangeably in this compliance supplement but refer to this total universe of eligible individuals.

Emergency financial assistance, in the form of formula-based funding and supplemental project-based funding, is provided to eligible metropolitan areas (EMAs) to develop, organize, and operate health and support services programs for infected individuals and their care givers. The supplemental grants are discretionary awards and are awarded, following competition, to EMAs that demonstrate severe need beyond that met through the formula award. They must also demonstrate the ability to use the supplemental amounts quickly and cost-effectively. Other criteria, contained in annual application guidance documents, may also apply. All EMAs currently receiving formula assistance are also receiving supplemental assistance.

Beginning in Fiscal Year 1998, these two programs will be combined in the CFDA as 93.914, HIV Emergency Relief Project and Formula Funding.

II. PROGRAM PROCEDURES

Source of Governing Requirements

These programs are authorized under Title I of the Ryan White Comprehensive AIDS Resources Emergency (CARE) Act of 1990, Pub. L. 101-381, as amended, which is codified at 42 USC 300ff-11 - 300ff-17. There are no program regulations specific to these programs.

Administration

The Health Resources and Services Administration (HRSA), a component of the Department of Health and Human Services, administers the HIV emergency relief programs. HRSA uses data reported to and confirmed by the Centers for Disease Control and Prevention (CDC) to determine eligibility (i.e., any metropolitan area for which there has been reported to CDC a cumulative total of more than 2,000 cases of AIDS for the most recent five calendar years for which data are available) and to establish the formula for allocation of funds. A metropolitan area is not eligible if it does not have an overall population of 500,000 or more unless it was eligible for FY 1995 or any prior fiscal year. Geographic boundaries are those that were in effect for FY 1994. A metropolitan area that was eligible in FY 1996 is an eligible area for FY 1997 and each subsequent fiscal year (42 USC 300ff-11(c) and (d)).

In FY 1997, there were 49 eligible metropolitan areas. At least fifty percent of the appropriated amount (and an amount for subsequent adjustment, if necessary, to ensure funding levels consistent with the baseline year, i.e., Fiscal Year 1995) is made available for the EMAs' formula allocation and the remainder is retained by HRSA for award as discretionary supplemental "project" assistance on the basis of "severe need" and other factors. Beginning in FY 1998, funding of the EMAs will be on the basis of a single application and a combined award will be made. This implements a statutory provision and the use of a single award will not result in changes to the programmatic and post-award administrative requirements.

Funds are made available to the chief elected official of the city or urban county that administers the public health agency that provides outpatient and ambulatory services to the greatest number of individuals with AIDS in the EMA in accordance with statutory requirements and program guidelines. Day-to-day responsibility for the grant is ordinarily delegated to the jurisdiction's public health department, and some administrative functions may be outsourced to a private entity. The chief elected official of the EMA is also required to establish or designate an AIDS health services planning council, which carries out a planning process, coordinating with other State, local and private planning and service organizations, and establishes the priorities for allocating funds.

Consistent with funding and service priorities established through the public planning process, the EMA uses the funds to provide direct assistance to public entities or private non-profit or for-profit entities to deliver or enhance HIV/AIDS-related outpatient and ambulatory health and support services, including case management, substance abuse treatment and mental health treatment; comprehensive treatment services, including treatment, education, and prophylactic treatment for opportunistic infections; inpatient case management services that prevent unnecessary hospitalization or that expedite discharge, as medically appropriate, from inpatient facilities; and, within established limits, for associated administrative activities. These administrative activities include EMA oversight of service provider performance and adherence to their subgrant or contractual obligations. Most of these service providers are non-profit organizations.

III. COMPLIANCE REQUIREMENTS

In developing the audit procedures to test compliance with the requirements for a Federal program, the auditor should first look to Part 2, Matrix of Compliance Requirements, to identify which of the 14 types of compliance requirements described in Part 3 are applicable and then look to Parts 3 and 4 for the details of the requirements.

A. Activities Allowed or Unallowed

1. Funds may be used to provide medical treatment and support services for individuals with HIV/AIDS (42 USC 300ff-78).

2. Consistent with planning council priorities, funds may be used to deliver or enhance HIV/AIDS-related (a) outpatient and ambulatory health and support services, including case management, substance abuse treatment and mental health treatment, (b) comprehensive treatment services, including treatment education, and prophylactic treatment for opportunistic infections, for individuals and families with HIV disease, and (c) inpatient case management services that prevent unnecessary hospitalization or expedite discharge, as medically appropriate, from inpatient facilities (42 USC 300ff-14 (b)(1)).

3. Funds may be used for the operation of an HIV health services planning council established by the grantee, including: staff support to the council; costs incurred by members of the council as a result of participation in meetings and other activities, including out-of pocket expenses (e.g., transportation and meals); costs associated with conducting needs assessment, plan development and publicizing council activities; and implementation of grievance procedures (42 USC 300ff-12(b)).

4. The EMA may use funds for routine grant administration and monitoring activities, including, but not limited to, the development of applications under this program, the receipt and disbursal of program funds, the establishment of accounting systems, the preparation of required programmatic and financial reports, and for all activities associated with the grantee's selection, award, and administration of contracts under the grant (42 USC 300ff-14 (e)(2)).

5. Funds may be used for service provider (also referred to as first-line entities, including first-tier contractors) administrative activities, including normal overhead, management and oversight of specific projects, and other program support, such as quality control and quality assurance (42 USC 300ff-14 (e)(3)).

6. The EMA may use funds to support program activities that are not service-oriented or administrative in nature, e.g., capacity building, technical assistance, program evaluation, and assessment of service delivery patterns, if they are established as priorities by the planning council and meet the requirements of 42 USC 300ff-12 (b)(4) (A) and (E).

7. Funds may be used for outreach programs that have as their principal purpose identifying people with HIV disease so they become aware of and may be enrolled in care and treatment services, and informing low-income individuals with HIV disease of the availability of services. Funds may not be used for programs whose primary purpose is to target the general public to increase broad public awareness about HIV services, or programs that exclusively promote HIV counseling and testing and/or prevention education 42 USC 300ff-15(a)(5)(C)).

8. Funds may not be used to make payment for any item or service if payment has already been made or can reasonably be expected to be made under any State compensation program, under an insurance policy or any Federal or State health benefits program, or by an entity that provides health services on a pre-paid basis (42 USC 300ff-15 (a)(4)).

9. Funds may not be used to purchase or improve land or to purchase, construct or make permanent improvement to any building. Minor remodeling is allowed (42 USC 300ff-14(f)).

10. Funds may not be used to make cash payments to recipients of services; however, vouchers which may be exchanged only for a specific commodity or service, such as food or transportation or similar programs, may be provided where direct provision of the service is not possible or effective (42 USC 300ff-14(f)).

11. Funds may not be used to provide individuals with hypodermic needles or syringes (42 USC 300ff-1).

12. Funds may not be used for programs or to develop materials designed to promote or encourage intravenous drug use or sexual activity. (42 USC 300ff-78).

E. Eligibility

1. Eligibility for Individuals

Eligible beneficiaries are individuals or families of individuals with HIV/AIDS. To the maximum extent practicable, services are to be provided to eligible individuals regardless of their ability to pay for the services and their current or past health condition. Services to non-infected individuals must have, at least, an indirect benefit to a person with HIV/AIDS (42 USC 300ff-14(b) and 300ff-15 (a) (5)(A)).

2. Eligibility for Groups of Individuals or Area of Service Delivery - Not Applicable

3. Eligibility of Subrecipients

The EMA may make funds available to public (including Department of Veterans Affairs' facilities) or private non-profit entities or private for-profit entities, if they are the only available providers of quality HIV care in the area. Eligible subrecipients include hospitals, community-based organizations, hospices, ambulatory care facilities, community health centers, migrant health centers, and homeless health centers (42 USC 300ff-14 (b)(2)).

G. Matching, Level of Effort, Earmarking

1. Matching - Not applicable

2.1 Level of Effort - Maintenance of Effort

Each political subdivision within the metropolitan area is required to maintain its level of expenditures for HIV-related services to individuals with HIV disease at a level equal to its level of such expenditures for the preceding fiscal year. Political subdivisions within the EMA may not use funds received under the HIV grants to maintain the required level of HIV/AIDS-related services (42 USC 300ff-15 (a)(1)(B)) and 42 USC 300ff-15(a) (1)(C)).

2.2 Level of Effort - Supplement Not Supplant - Not Applicable

3. Earmarking

a. An amount not less than the percentage represented by the ratio of infants, women, and children with AIDS in the population of the metropolitan area to the metropolitan area's overall population with AIDS is to be spent on services to these populations (42 USC 300ff-14 (b)(3)).

b. Not more than five percent of the amounts awarded to the EMA may be used for administration at that level. Program support and planning council support are not considered administration for purposes of this limitation. If the EMA contracts with a third party for the performance of any part of its administrative activities, the five percent limitation applies to the combined total of administrative expenditures by the EMA and the contractor(s) (42 USC 300ff 14(e)).

c. Not more than 10 percent, in the aggregate, of amounts allocated by the EMA to first-line entities may be used for administrative expenses (42 USC 300ff-14(e)).

H. Period of Availability of Federal Funds

Funds are available for one year unless carryover for services only is authorized by HRSA. Funds carried forward from prior years may not be used for administration. HRSA may reduce the following year's award by the amount of unobligated grant funds reported by the EMA in its Financial Status Report (42 USC 300ff-13(a)(3)(D)).

L. Reporting

1. Financial Reporting

a. SF-269, Financial Status Report - Applicable

b. SF-270, Request for Advance or Reimbursement - Not Applicable

c. SF-271, Outlay Report and Request for Reimbursement for Construction Program - Not Applicable

d. SF-272, Federal Cash Transactions Report - Payments under this program are made by the Department of Health and Human Services, Payment Management System. Reporting equivalent to the SF-272 is accomplished through the Payment Management System and is evidenced by the PMS 272-E, Major Program Statement.

2. Performance Reporting - Not Applicable

3. Special Reporting

Annual Administrative Report (AAR) (OMB No.0915-0166). Aggregate provider-level data required from each direct service provider. These reports are currently provided to the EMA electronically or in hard copy and may be submitted to HRSA in a similar manner (e.g., the subrecipient (service provider) submits the report to the pass-through entity (EMA) which in turn submits the reports to the Federal agency (HRSA)). The reporting entity has the option of completing the reports on the basis of "all clients receiving a service eligible for Title I (and Title II--HIV Care Formula Grants, 93.917) funding" or "only clients receiving service funded with Title I or II funding." If those "funded" is the reporting basis, the reporting entity would be expected to have a tracking system to develop this data.

Key items across an EMA's reporting entities are:

a. Part 4: Client Information:

(1) Number of clients (unduplicated)

(2) Number of new clients served

b. Part 5, Services Provided/Clients Served - Number of visits for each of the following types of office-based health care:

(1) Medical care

(2) Dental care

(3) Mental health services

(4) Substance abuse services

(5) Rehabilitation services

(6) Face-to-face case management encounters

c. Part 6, Fiscal Information - Total HIV services funding by source:

(1) Title I CARE

(2) Title II CARE

(3) Other CARE Act funding

(4) Other Federal funding (exclusive of Medicare and Medicaid)

M. Subrecipient Monitoring

EMAs are required to establish policies in the areas of verification and documentation of client eligibility, require that service providers follow those policies, and oversee the implementation by service providers (42 USC 300ff-14(b) and 42 USC 300ff-14(e)(2)(B).

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