cases for purposes of this subparagraph 
and to detect instances of inaccurate re-
porting, including fraudulent reporting.’’. 
(c) CODE-BASED AREAS; LIMITATION ON INCREASE 
IN GRANT.—Section 2603(a)(3) of the Public Health 
Service Act (42 U.S.C. 300ff-13(a)), as amended by sub-
section (b)(2) of this section, is amended by adding at the 
end the following subparagraph: 
‘‘(D) CODE-BASED AREAS; LIMITATION ON 
INCREASE IN GRANT .—
‘‘(i) IN GENERAL.—For each of the 
fiscal years 2007 through 2010, if code-
based reporting (within the meaning of 
subparagraph (C)(vi)) applies in an eligible 
area or any portion thereof as of the begin-
ning of the fiscal year involved, then not-
withstanding any other provision of this 
paragraph, the amount of the grant pursu-
ant to this paragraph for such area for 
such fiscal year may not—
‘‘(I) for fiscal year 2007, exceed 
by more than 5 percent the amount of 
the grant for the area that would have 
been made pursuant to this paragraph 
and paragraph (4) for fiscal year
2006 (as such paragraphs were in ef-
fect for such fiscal year) if paragraph 
(2) (as so in effect) had been applied 
by substituting ‘662⁄3 percent’ for ‘50 
percent’; and 
‘‘(II) for each of the fiscal years 
2008 and 2009, exceed by more than 
5 percent the amount of the grant 
pursuant to this paragraph and para-
graph (4) for the area for the pre-
ceding fiscal year. 
‘‘(ii) USE OF AMOUNTS INVOLVED.—
For each of the fiscal years 2007 through 
2010, amounts available as a result of the 
limitation under clause (i) shall be made 
available by the Secretary as additional 
amounts for grants pursuant to subsection 
(b) for the fiscal year involved, subject to 
paragraph (4) and section 2610(d)(2).’’. 
(d) HOLD HARMLESS.—Section 2603(a) of the Pub-
lic Health Service Act (42 U.S.C. 300ff-13(a)) is amend-
ed—
(1) in paragraph (3)(A)—
(A) in clause (ii), by striking the period at 
the end and inserting a semicolon; and
(B) by inserting after and below clause (ii) 
the following: 
‘‘which product shall then, as applicable, be in-
creased under paragraph (4).’’. 
(2) by amending paragraph (4) to read as fol-
lows: 
‘‘(4) INCREASES IN GRANT.—
‘‘(A) IN GENERAL.—For each eligible area 
that received a grant pursuant to this sub-
section for fiscal year 2006, the Secretary shall, 
for each of the fiscal years 2007 through 2009, 
increase the amount of the grant made pursu-
ant to paragraph (3) for the area to ensure that 
the amount of the grant for the fiscal year in-
volved is not less than the following amount, as 
applicable to such fiscal year: 
‘‘(i) For fiscal year 2007, an amount 
equal to 95 percent of the amount of the 
grant that would have been made pursuant 
to paragraph (3) and this paragraph for 
fiscal year 2006 (as such paragraphs were 
in effect for such fiscal year) if paragraph 
(2) (as so in effect) had been applied by 
substituting ‘662⁄3 percent’ for ‘50 per-
cent’.
‘‘(ii) For each of the fiscal years 2008 
and 2009, an amount equal to 95 percent 
of the amount of the grant made pursuant 
to paragraph (3) and this paragraph for 
the preceding fiscal year. 
‘‘(B) SOURCE OF FUNDS FOR INCREASE.—
‘‘(i) 
IN
GENERAL.—From 
the 
amounts available for carrying out the sin-
gle 
program 
referred 
to 
in 
section 
2609(d)(2)(C) for a fiscal year (relating to 
supplemental grants), the Secretary shall 
make available such amounts as may be 
necessary to comply with subparagraph 
(A), subject to section 2610(d)(2). 
‘‘(ii) PRO RATA REDUCTION.—If the 
amounts referred to in clause (i) for a fis-
cal year are insufficient to fully comply 
with subparagraph (A) for the year, the 
Secretary, in order to provide the addi-
tional funds necessary for such compliance, 
shall reduce on a pro rata basis the 
amount of each grant pursuant to this sub-
section for the fiscal year, other than 
grants for eligible areas for which in-
creases under subparagraph (A) apply. A
reduction under the preceding sentence 
may not be made in an amount that would 
result in the eligible area involved becom-
ing eligible for such an increase. 
‘‘(C) LIMITATION.—This paragraph may 
not be construed as having any applicability 
after fiscal year 2009.’’. 
SEC. 103. TYPE AND DISTRIBUTION OF GRANTS; SUPPLE-
MENTAL GRANTS. 
Section 2603(b) of the Public Health Service Act (42 
U.S.C. 300ff-13(b)) is amended—
(1) in paragraph (1)—
(A) in the matter preceding subparagraph 
(A), by striking ‘‘Not later than’’ and all that 
follows through ‘‘the Secretary shall’’ and in-
serting the following: ‘‘Subject to subsection 
(a)(4)(B)(i) and section 2610(d), the Secretary 
shall’’; 
(B) in subparagraph (B), by striking 
‘‘demonstrates the severe need in such area’’ 
and inserting ‘‘demonstrates the need in such 
area, on an objective and quantified basis,’’; 
(C) by striking subparagraph (F) and in-
serting the following:
‘‘(F) demonstrates the inclusiveness of af-
fected communities and individuals with HIV/
AIDS;’’; 
(D) in subparagraph (G), by striking the 
period and inserting ‘‘; and’’; and 
(E) by adding at the end the following: 
‘‘(H) demonstrates the ability of the appli-
cant to expend funds efficiently by not having 
had, for the most recent grant year under sub-
section (a) for which data is available, more 
than 2 percent of grant funds under such sub-
section canceled or covered by any waivers 
under subsection (c)(3).’’; and 
(2) in paragraph (2)—
(A) in subparagraph (A), by striking ‘‘se-
vere need’’ and inserting ‘‘demonstrated need’’; 
(B) by striking subparagraph (B) and in-
serting the following: 
‘‘(B) DEMONSTRATED NEED.—The factors 
considered by the Secretary in determining 
whether an eligible area has a demonstrated 
need for purposes of paragraph (1)(B) may in-
clude any or all of the following: 
‘‘(i) The unmet need for such services, 
as determined under section 2602(b)(4) or
other community input process as defined 
under section 2609(d)(1)(A). 
‘‘(ii) An increasing need for HIV/
AIDS-related services, including relative 
rates of increase in the number of cases of 
HIV/AIDS. 
‘‘(iii) The relative rates of increase in 
the number of cases of HIV/AIDS within 
new or emerging subpopulations. 
‘‘(iv) The current prevalence of HIV/
AIDS. 
‘‘(v) Relevant factors related to the 
cost and complexity of delivering health 
care to individuals with HIV/AIDS in the 
eligible area. 
‘‘(vi) The impact of co-morbid factors, 
including co-occurring conditions, deter-
mined relevant by the Secretary. 
‘‘(vii) The prevalence of homelessness. 
‘‘(viii) The prevalence of individuals 
described under section 2602(b)(2)(M). 
‘‘(ix) The relevant factors that limit 
access to health care, including geographic 
variation, adequacy of health insurance 
coverage, and language barriers.
‘‘(x) The impact of a decline in the 
amount received pursuant to subsection (a) 
on services available to all individuals with 
HIV/AIDS identified and eligible under 
this title.’’; and 
(C) by striking subparagraphs (C) and (D) 
and inserting the following: 
‘‘(C) PRIORITY IN MAKING GRANTS.—The 
Secretary shall provide funds under this sub-
section to an eligible area to address the decline 
in services related to the decline in the amounts 
received pursuant to subsection (a) consistent 
with the grant award for the eligible area for 
fiscal year 2006, to the extent that the factor 
under subparagraph (B)(x) (relating to a de-
cline in funding) applies to the eligible area.’’. 
SEC. 104. TIMEFRAME FOR OBLIGATION AND EXPENDI-
TURE OF GRANT FUNDS. 
Section 2603 of the Public Health Service Act (42 
U.S.C. 300ff–13) is amended—
(1) by redesignating subsection (c) as sub-
section (d); and 
(2) by inserting after subsection (b) the fol-
lowing:
‘‘(c) TIMEFRAME FOR OBLIGATION AND EXPENDI-
TURE OF GRANT FUNDS.—
‘‘(1) OBLIGATION BY END OF GRANT YEAR.—
Effective for fiscal year 2007 and subsequent fiscal 
years, funds from a grant award made pursuant to 
subsection (a) or (b) for a fiscal year are available 
for obligation by the eligible area involved through 
the end of the one-year period beginning on the date 
in such fiscal year on which funds from the award 
first become available to the area (referred to in this 
subsection as the ‘grant year for the award’), except 
as provided in paragraph (3)(A). 
‘‘(2) SUPPLEMENTAL GRANTS; CANCELLATION 
OF UNOBLIGATED BALANCE OF GRANT AWARD.—Ef-
fective for fiscal year 2007 and subsequent fiscal 
years, if a grant award made pursuant to subsection 
(b) for an eligible area for a fiscal year has an unob-
ligated balance as of the end of the grant year for 
the award—
‘‘(A) the Secretary shall cancel that unobli-
gated balance of the award, and shall require 
the eligible area to return any amounts from 
such balance that have been disbursed to the 
area; and
‘‘(B) the 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 fis-
cal year in which the Secretary obtains the in-
formation necessary for determining that the 
balance is required under subparagraph (A) to 
be canceled, except that the availability of the 
funds for such grants is subject to subsection 
(a)(4) and section 2610(d)(2) as applied for 
such year. 
‘‘(3) FORMULA GRANTS; CANCELLATION OF UN-
OBLIGATED
BALANCE
OF
GRANT
AWARD; WAIVER 
PERMITTING CARRYOVER.—
‘‘(A) IN
GENERAL.—Effective for fiscal 
year 2007 and subsequent fiscal years, if a 
grant award made pursuant to subsection (a) 
for an eligible area for a fiscal year has an un-
obligated balance as of the end of the grant 
year for the award, the Secretary shall cancel 
that unobligated balance of the award, and 
shall require the eligible area to return any 
amounts from such balance that have been dis-
bursed to the area, unless—
‘‘(i) before the end of the grant year, 
the chief elected official of the area sub-
mits to the Secretary a written application 
for a waiver of the cancellation, which ap-
plication includes a description of the pur-
poses for which the area intends to expend 
the funds involved; and 
‘‘(ii) the Secretary approves the waiv-
er. 
‘‘(B) EXPENDITURE BY END OF CARRY-
OVER YEAR.—With respect to a waiver under 
subparagraph (A) that is approved for a bal-
ance that is 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 ‘carry-
over year’). 
‘‘(ii) If the funds are not expended by 
the end of the carryover year, the Sec-
retary shall cancel that unexpended bal-
ance of the award, and shall require the el-
igible area to return any amounts from