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unobligated as of the end of a grant year for an
award:
‘‘(i) The unobligated funds are avail-
able for expenditure by the eligible area in-
volved for the one-year period beginning
upon the expiration of the grant year (re-
ferred to in this subsection as the ‘carryover
year’).
‘‘(ii) If the funds are not expended by
the end of the carryover year, the Secretary
shall cancel that unexpended balance of the
award, and shall require the eligible area to
return any amounts from such balance that
have been disbursed to the area.
‘‘(C) USE
OF
CANCELLED
BALANCES.—In
the case of any balance of a grant award that is
cancelled under subparagraph (A) or (B)(ii), the
grant funds involved shall be made available by
the Secretary as additional amounts for grants
pursuant to subsection (b) for the first fiscal year
beginning after the fiscal year in which the Sec-
retary obtains the information necessary for de-
termining that the balance is required under
such subparagraph to be canceled, except that the
availability of the funds for such grants is sub-
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ject to subsection (a)(4) and section 2610(d)(2)
as applied for such year.
‘‘(D) CORRESPONDING REDUCTION IN FU-
TURE GRANT.—
‘‘(i) IN GENERAL.—In the case of an
eligible area for which a balance from a
grant award under subsection (a) is unobli-
gated as of the end of the grant year for the
award—
‘‘(I) the Secretary shall reduce, by
the same amount as such unobligated
balance, the amount of the grant under
such subsection for the first fiscal year
beginning after the fiscal year in which
the Secretary obtains the information
necessary for determining that such
balance was unobligated as of the end
of the grant year (which requirement
for a reduction applies without regard
to whether a waiver under subpara-
graph (A) has been approved with re-
spect to such balance); and
‘‘(II) the grant funds involved in
such reduction shall be made available
by the Secretary as additional funds
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for grants pursuant to subsection (b)
for such first fiscal year, subject to sub-
section (a)(4) and section 2610(d)(2);
except that this clause does not apply to the
eligible area if the amount of the unobli-
gated balance was 2 percent or less.
‘‘(ii) RELATION
TO
INCREASES
IN
GRANT.—A reduction under clause (i) for
an eligible area for a fiscal year may not
be taken into account in applying sub-
section (a)(4) with respect to the area for
the subsequent fiscal year.’’; and
(3) by adding at the end the following:
‘‘(e) REPORT ON THE AWARDING OF SUPPLEMENTAL
FUNDS.—Not later than 45 days after the awarding of sup-
plemental funds under this section, the Secretary shall sub-
mit to Congress a report concerning such funds. Such report
shall include information detailing—
‘‘(1) the total amount of supplemental funds
available under this section for the year involved;
‘‘(2) the amount of supplemental funds used in
accordance with the hold harmless provisions of sub-
section (a)(4);
‘‘(3) the amount of supplemental funds disbursed
pursuant to subsection (b)(2)(C);
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‘‘(4) the disbursement of the remainder of the
supplemental funds after taking into account the uses
described in paragraphs (2) and (3); and
‘‘(5) the rationale used for the amount of funds
disbursed as described under paragraphs (2), (3), and
(4).’’.
SEC. 105. USE OF AMOUNTS.
Section 2604 of the Public Health Service Act (42
U.S.C. 300ff–14) is amended to read as follows:
‘‘SEC. 2604. USE OF AMOUNTS.
‘‘(a) REQUIREMENTS.—The Secretary may not make
a grant under section 2601(a) to the chief elected official
of an eligible area unless such political subdivision agrees
that—
‘‘(1) subject to paragraph (2), the allocation of
funds and services within the eligible area will be
made in accordance with the priorities established,
pursuant to section 2602(b)(4)(C), by the HIV health
services planning council that serves such eligible
area;
‘‘(2) funds provided under section 2601 will be
expended only for—
‘‘(A) core medical services described in sub-
section (c);
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‘‘(B) support services described in sub-
section (d); and
‘‘(C) administrative expenses described in
subsection (h); and
‘‘(3) the use of such funds will comply with the
requirements of this section.
‘‘(b) DIRECT FINANCIAL ASSISTANCE TO APPROPRIATE
ENTITIES.—
‘‘(1) IN GENERAL.—The chief elected official of
an eligible area shall use amounts from a grant under
section 2601 to provide direct financial assistance to
entities described in paragraph (2) for the purpose of
providing core medical services and support services.
‘‘(2) APPROPRIATE ENTITIES.—Direct financial
assistance may be provided under paragraph (1) to
public or nonprofit private entities, or private for-
profit entities if such entities are the only available
provider of quality HIV care in the area.
‘‘(c) REQUIRED FUNDING FOR CORE MEDICAL SERV-
ICES.—
‘‘(1) IN
GENERAL.—With respect to a grant
under section 2601 for an eligible area for a grant
year, the chief elected official of the area shall, of the
portion of the grant remaining after reserving
amounts for purposes of paragraphs (1) and (5)(B)(i)
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of subsection (h), use not less than 75 percent to pro-
vide core medical services that are needed in the eligi-
ble area for individuals with HIV/AIDS who are
identified and eligible under this title (including serv-
ices regarding the co-occurring conditions of the indi-
viduals).
‘‘(2) WAIVER.—
‘‘(A) IN
GENERAL.—The Secretary shall
waive the application of paragraph (1) with re-
spect to a chief elected official for a grant year
if the Secretary determines that, within the eligi-
ble area involved—
‘‘(i) there are no waiting lists for
AIDS Drug Assistance Program services
under section 2616; and
‘‘(ii) core medical services are available
to all individuals with HIV/AIDS identi-
fied and eligible under this title.
‘‘(B) NOTIFICATION OF WAIVER STATUS.—
When informing the chief elected official of an el-
igible area that a grant under section 2601 is
being made for the area for a grant year, the
Secretary shall inform the official whether a
waiver under subparagraph (A) is in effect for
such year.
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‘‘(3) CORE MEDICAL SERVICES.—For purposes of
this subsection, the term ‘core medical services’, with
respect to an individual with HIV/AIDS (including
the co-occurring conditions of the individual), means
the following services:
‘‘(A) Outpatient and ambulatory health
services.
‘‘(B) AIDS Drug Assistance Program treat-
ments in accordance with section 2616.
‘‘(C) AIDS pharmaceutical assistance.
‘‘(D) Oral health care.
‘‘(E) Early intervention services described
in subsection (e).
‘‘(F) Health insurance premium and cost
sharing assistance for low-income individuals in
accordance with section 2615.
‘‘(G) Home health care.
‘‘(H) Medical nutrition therapy.
‘‘(I) Hospice services.
‘‘(J) Home and community-based health
services as defined under section 2614(c).
‘‘(K) Mental health services.
‘‘(L) Substance abuse outpatient care.
‘‘(M) Medical case management, including
treatment adherence services.
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‘‘(d) SUPPORT SERVICES.—
‘‘(1) IN GENERAL.—For purposes of this section,
the term ‘support services’ means services, subject to
the approval of the Secretary, that are needed for in-
dividuals with HIV/AIDS to achieve their medical
outcomes (such as respite care for persons caring for
individuals with HIV/AIDS, outreach services, med-
ical transportation, linguistic services, and referrals
for health care and support services).
‘‘(2) MEDICAL OUTCOMES.—In this subsection,
the term ‘medical outcomes’ means those outcomes af-
fecting the HIV-related clinical status of an indi-
vidual with HIV/AIDS.
‘‘(e) EARLY INTERVENTION SERVICES.—
‘‘(1) IN GENERAL.—For purposes of this section,
the term ‘early intervention services’ means HIV/
AIDS early intervention services described in section
2651(e), with follow-up referral provided for the pur-
pose of facilitating the access of individuals receiving
the services to HIV-related health services. The enti-
ties through which such services may be provided
under the grant include public health departments,
emergency rooms, substance abuse and mental health
treatment programs, detoxification centers, detention
facilities, clinics regarding sexually transmitted dis-
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eases, homeless shelters, HIV/AIDS counseling and
testing sites, health care points of entry specified by
eligible areas, federally qualified health centers, and
entities described in section 2652(a) that constitute a
point of access to services by maintaining referral re-
lationships.
‘‘(2) CONDITIONS.—With respect to an entity
that proposes to provide early intervention services
under paragraph (1), such paragraph shall apply
only if the entity demonstrates to the satisfaction of
the chief elected official for the eligible area involved
that—
‘‘(A) Federal, State, or local funds are oth-
erwise inadequate for the early intervention serv-
ices the entity proposes to provide; and
‘‘(B) the entity will expend funds pursuant
to such paragraph to supplement and not sup-
plant other funds available to the entity for the
provision of early intervention services for the
fiscal year involved.
‘‘(f) PRIORITY FOR WOMEN, INFANTS, CHILDREN, AND
YOUTH.—
‘‘(1) IN GENERAL.—For the purpose of providing
health and support services to infants, children,
youth, and women with HIV/AIDS, including treat-
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ment measures to prevent the perinatal transmission
of HIV, the chief elected official of an eligible area,
in accordance with the established priorities of the
planning council, shall for each of such populations
in the eligible area use, from the grants made for the
area under section 2601(a) for a fiscal year, not less
than the percentage constituted by the ratio of the
population involved (infants, children, youth, or
women in such area) with HIV/AIDS to the general
population in such area of individuals with HIV/
AIDS.
‘‘(2) WAIVER.—With respect to the population
involved, the Secretary may provide to the chief elect-
ed official of an eligible area a waiver of the require-
ment of paragraph (1) if such official demonstrates to
the satisfaction of the Secretary that the population
is receiving HIV-related health services through the
State medicaid program under title XIX of the Social
Security Act, the State children’s health insurance
program under title XXI of such Act, or other Federal
or State programs.
‘‘(g) REQUIREMENT OF STATUS AS MEDICAID PRO-
VIDER.—
‘‘(1) PROVISION OF SERVICE.—Subject to para-
graph (2), the Secretary may not make a grant under
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section 2601(a) for the provision of services under this
section in a State unless, in the case of any such serv-
ice that is available pursuant to the State plan ap-
proved under title XIX of the Social Security Act for
the State—
‘‘(A) the political subdivision involved will
provide the service directly, and the political
subdivision has entered into a participation
agreement under the State plan and is qualified
to receive payments under such plan; or
‘‘(B) the political subdivision will enter into
an agreement with a public or nonprofit private
entity under which the entity will provide the
service, and the entity has entered into such a
participation agreement and is qualified to re-
ceive such payments.
‘‘(2) WAIVER.—
‘‘(A) IN GENERAL.—In the case of an entity
making an agreement pursuant to paragraph
(1)(B) regarding the provision of services, the re-
quirement established in such paragraph shall be
waived by the HIV health services planning
council for the eligible area if the entity does not,
in providing health care services, impose a
charge or accept reimbursement available from
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any third-party payor, including reimbursement
under any insurance policy or under any Fed-
eral or State health benefits program.
‘‘(B) DETERMINATION.—A determination
by the HIV health services planning council of
whether an entity referred to in subparagraph
(A) meets the criteria for a waiver under such
subparagraph shall be made without regard to
whether the entity accepts voluntary donations
for the purpose of providing services to the pub-
lic.
‘‘(h) ADMINISTRATION.—
‘‘(1) LIMITATION.—The chief elected official of
an eligible area shall not use in excess of 10 percent
of amounts received under a grant under this part for
administrative expenses.
‘‘(2) ALLOCATIONS
BY
CHIEF
ELECTED
OFFI-
CIAL.—In the case of entities and subcontractors to
which the chief elected official of an eligible area allo-
cates amounts received by the official under a grant
under this part, the official shall ensure that, of the
aggregate amount so allocated, the total of the expend-
itures by such entities for administrative expenses
does not exceed 10 percent (without regard to whether
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particular entities expend more than 10 percent for
such expenses).
‘‘(3) ADMINISTRATIVE
ACTIVITIES.—For pur-
poses of paragraph (1), amounts may be used for ad-
ministrative activities that include—
‘‘(A) routine grant administration and
monitoring activities, including the development
of applications for part A funds, the receipt and
disbursal of program funds, the development and
establishment of reimbursement and accounting
systems, the development of a clinical quality
management program as described in paragraph
(5), the preparation of routine programmatic
and financial reports, and compliance with
grant conditions and audit requirements; and
‘‘(B) all activities associated with the grant-
ee’s contract award procedures, including the ac-
tivities carried out by the HIV health services
planning council as established under section
2602(b), the development of requests for pro-
posals, contract proposal review activities, nego-
tiation and awarding of contracts, monitoring of
contracts through telephone consultation, written
documentation or onsite visits, reporting on con-
tracts, and funding reallocation activities.
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‘‘(4) SUBCONTRACTOR ADMINISTRATIVE ACTIVI-
TIES.—For the purposes of this subsection, subcon-
tractor administrative activities include—
‘‘(A) usual and recognized overhead activi-
ties, including established indirect rates for agen-
cies;
‘‘(B) management oversight of specific pro-
grams funded under this title; and
‘‘(C) other types of program support such as
quality assurance, quality control, and related
activities.
‘‘(5) CLINICAL QUALITY MANAGEMENT.—
‘‘(A) REQUIREMENT.—The chief elected offi-
cial of an eligible area that receives a grant
under this part shall provide for the establish-
ment of a clinical quality management program
to assess the extent to which HIV health services
provided to patients under the grant are con-
sistent with the most recent Public Health Serv-
ice guidelines for the treatment of HIV/AIDS
and related opportunistic infection, and as ap-
plicable, to develop strategies for ensuring that
such services are consistent with the guidelines
for improvement in the access to and quality of
HIV health services.
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‘‘(B) USE OF FUNDS.—
‘‘(i) IN GENERAL.—From amounts re-
ceived under a grant awarded under this
subpart for a fiscal year, the chief elected of-
ficial of an eligible area may use for activi-
ties associated with the clinical quality
management program required in subpara-
graph (A) not to exceed the lesser of—
‘‘(I) 5 percent of amounts received
under the grant; or
‘‘(II) $3,000,000.
‘‘(ii) RELATION TO LIMITATION ON AD-
MINISTRATIVE
EXPENSES.—The costs of a
clinical 
quality 
management 
program
under subparagraph (A) may not be consid-
ered administrative expenses for purposes of
the limitation established in paragraph (1).
‘‘(i) CONSTRUCTION.—A chief elected official may not
use amounts received under a grant awarded under this
part to purchase or improve land, or to purchase, construct,
or permanently improve (other than minor remodeling) any
building or other facility, or to make cash payments to in-
tended recipients of services.’’.
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SEC. 106. ADDITIONAL AMENDMENTS TO PART A.
(a) REPORTING OF CASES.—Section 2601(a) of the
Public Health Service Act (42 U.S.C. 300ff–11(a)) is
amended by striking ‘‘for the most recent period’’ and in-
serting ‘‘during the most recent period’’.
(b) PLANNING COUNCIL REPRESENTATION.—Section
2602(b)(2)(G) of the Public Health Service Act (42 U.S.C.
300ff–12(b)(2)(G)) is amended by inserting ‘‘, members of
a Federally recognized Indian tribe as represented in the
population, individuals co-infected with hepatitis B or C’’
after ‘‘disease’’.
(c) APPLICATION FOR GRANT.—
(1) 
PAYER
OF
LAST
RESORT.—Section
2605(a)(6)(A) of the Public Health Service Act (42
U.S.C. 300ff–15(a)(6)(A)) is amended by inserting
‘‘(except for a program administered by or providing
the services of the Indian Health Service)’’ before the
semicolon.
(2) AUDITS.—Section 2605(a) of the Public
Health Service Act (42 U.S.C. 300ff–15(a)) is
amended—
(A) in paragraph (8), by striking ‘‘and’’ at
the end;
(B) in paragraph (9), by striking the period
and inserting ‘‘; and’’; and
(C) by adding at the end the following:
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‘‘(10) that the chief elected official will submit to
the lead State agency under section 2617(b)(4), au-
dits, consistent with Office of Management and Budg-
et circular A133, regarding funds expended in accord-
ance with this part every 2 years and shall include
necessary client-based data to compile unmet need
calculations and Statewide coordinated statements of
need process.’’.
(3) COORDINATION.—Section 2605(b) of the Pub-
lic Health Service Act (42 U.S.C. 300ff–15(b)) is
amended—
(A) in paragraph (3), by striking ‘‘and’’ at
the end;
(B) in paragraph (4), by striking the period
and inserting a semicolon; and
(C) by adding at the end the following:
‘‘(5) the manner in which the expected expendi-
tures are related to the planning process for States
that receive funding under part B (including the
planning process described in section 2617(b)); and
‘‘(6) the expected expenditures and how those ex-
penditures will improve overall client outcomes, as de-
scribed under the State plan under section 2617(b),
and through additional outcomes measures as identi-
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fied by the HIV health services planning council
under section 2602(b).’’.
SEC. 107. NEW PROGRAM IN PART A; TRANSITIONAL
GRANTS FOR CERTAIN AREAS INELIGIBLE
UNDER SECTION 2601.
(a) IN GENERAL.—Part A of title XXVI of the Public
Health Service Act (42 U.S.C. 300ff–11) is amended—
(1) by inserting after the part heading the fol-
lowing:
‘‘Subpart I—General Grant Provisions’’; and
(2) by adding at the end the following:
‘‘Subpart II—Transitional Grants
‘‘SEC. 2609. ESTABLISHMENT OF PROGRAM.
‘‘(a) IN GENERAL.—The Secretary, acting through the
Administrator of the Health Resources and Services Admin-
istration, shall make grants for the purpose of providing
services described in section 2604 in transitional areas, sub-
ject to the same provisions regarding the allocation of grant
funds as apply under subsection (c) of such section.
‘‘(b) TRANSITIONAL AREAS.—For purposes of this sec-
tion, the term ‘transitional area’ means, subject to sub-
section (c), a metropolitan area for which there has been
reported to and confirmed by the Director of the Centers
for Disease Control and Prevention a cumulative total of
at least 1,000, but fewer than 2,000, cases of AIDS during
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the most recent period of 5 calendar years for which such
data are available.
‘‘(c) CERTAIN ELIGIBILITY RULES.—
‘‘(1) FISCAL YEAR 2007.—With respect to grants
under subsection (a) for fiscal year 2007, a metropoli-
tan area that received funding under subpart I for
fiscal year 2006 but does not for fiscal year 2007
qualify under such subpart as an eligible area and
does not qualify under subsection (b) as a transitional
area shall, notwithstanding subsection (b), be consid-
ered a transitional area.
‘‘(2) CONTINUED
STATUS
AS
TRANSITIONAL
AREA.—
‘‘(A) IN
GENERAL.—Notwithstanding sub-
section (b), a metropolitan area that is a transi-
tional area for a fiscal year continues, except as
provided in subparagraph (B), to be a transi-
tional area until the metropolitan area fails, for
three consecutive fiscal years—
‘‘(i) to qualify under such subsection as
a transitional area; and
‘‘(ii) to have a cumulative total of
1,500 or more living cases of AIDS (re-
ported to and confirmed by the Director of
the Centers for Disease Control and Preven-