ACTIVITY/MECHANISM BUDGET SUMMARY

Department of Health and Human Services

Indian Health Services -- 75-0390-0-1-551

####### CONTRACT SUPPORT COSTS

# 

# [Program Authorization]{.underline}: P. L. 93-638, Indian Self-Determination Act, as amended and P.L. 100-472, Section 106(a) (2) A & B.

+-------------+-------------+-------------+-------------+-------------+
|             | 2002        | 2003        | 2004        | Increase    |
|             |             |             |             |             |
|             | Actual      | President's | Estimate    | or Decrease |
|             |             |             |             |             |
|             |             | Budget      |             |             |
+-------------+-------------+-------------+-------------+-------------+
| BA          | \$          | \$          | \$          | \$0         |
|             | 268,234,000 | 270,734,000 | 270,734,000 |             |
+-------------+-------------+-------------+-------------+-------------+
| FTE         | 0           | 0           | 0           | 0           |
+-------------+-------------+-------------+-------------+-------------+

######## PURPOSE AND METHOD OF OPERATION

Section 106(a) (2) of P.L. 93-638, the Indian Self-Determination Act, as
amended, authorizes the Secretary to fund those costs that a tribal
contractor incurs in addition to what the Secretary would have otherwise
provided for the direct operation of the program. These costs are
referred to as contract support costs.

The IHS uses contract support cost funds made available under the ISD
fund to support the initial transfer of programs from Federal operations
to tribal operation. The ISD money also funds tribal requests that
include Start-Up and Pre-Award costs, Direct and Indirect types of
Contract Support Costs.

Amounts needed for Indirect CSC are determined in independent
negotiations with the cognizant Agency's Inspector General (which is the
Department of the Interior for virtually all contracts). The types of
costs included in these indirect cost pools include the reasonable costs
of tribal governing bodies, management and planning, financial
management, property management, procurement management, data
processing, office support, building rent, utilities, program specific
insurance, legal services, and single-agency audits.

**[ACCOMPLISHMENT]{.underline}**

Contract support costs (CSC) is a supplement to the direct program
funding provided in order to maintain an equitable opportunity for
tribes who choose to operate programs under this legislative authority.

In 1997, the Congress directed the IHS to "work with Tribes, the Bureau
of Indian Affairs and the Inspector General at the Department of the
Interior to contain the escalation in contract support costs." In
response to this directive, the IHS developed a "Report to Congress on
Contract Support Cost Funding in Indian Self-Determination Contracts and
Compacts". The findings of the report, based on analysis of tribal
indirect cost rates, indicated that rates have remained relatively
stable and have not unreasonably escalated. The report further indicated
that the continued increase in contract support cost need is due
primarily to the increased assumption by tribes of new programs,
services, functions and activities from the IHS. The Office of the
Inspector General within the Department of Interior reached a similar
conclusion as a result of an analysis it conducted of a sample of tribes
over an 8-year period.

In FY 2001 and 2002, the IHS received significant increases in CSC
funding. The same allocation methodology used in FY 1999 and FY 2000 was
used in FY 2001 and FY 2002 to allocate these increases. The majority of
the increased funding was allocated to Tribes to support new and
expanded programs being contracted and compacted for the first time. In
FY 2002 the Navajo Nation and the Eastern Band of Cherokee Indians
assumed major IHS programs resulting in the outsourcing of over \$72
million in programs and 1,052 FTEs.

In each year a portion of the funding was also used to address the level
of CSC need being funded under existing awards.

Following are the funding levels for the last 5 years:

  -------------------- ----------------------- ----------------------------------------------
  [Year]{.underline}   [Funding]{.underline}   [Increase Over Previous Year]{.underline}

  1999                 \$203,781,000           \$35,079,000

  2000                 \$228,781,000           \$25,000,000

  2001                 \$248,234,000           \$19,453,000

  2002                 \$268,234,000           \$20,000,000

  2003                 \$270,734,000           \$ 2,500,000
  -------------------- ----------------------- ----------------------------------------------

**[RATIONALE FOR BUDGET REQUEST]{.underline}**

[Total Request]{.underline} \-- The request of \$270,734,000 is the same
as the FY 2003 President's Budget of \$270,734,000.