Ryan White Care Act: First-Year Experiences under the Part D Administrative Expense Cap
Published: 2008-12-19T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The Ryan White Comprehensive AIDS Resources Emergency Act of 1990 (CARE Act) makes federal funds available to assist those infected and affected by HIV/AIDS. Through the CARE Act, the Health Resources and Services Administration (HRSA), part of the Department of Health and Human Services (HHS), awards grants (known as Part D grants) to provide services to women, infants, children, and youth with HIV/AIDS and their families. These grantees incur administrative expenses and indirect costs, such as rent and utilities. The Ryan White HIV/AIDS Treatment and Modernization Act of 2006 (RWTMA), which took effect in fiscal year 2007, capped at 10 percent the amount that Part D grantees could spend on administrative expenses. According to HRSA, there is no cap on indirect costs, but grantees must have an indirect cost rate to use funds for indirect costs. RWTMA directed GAO to examine Part D spending. In this report GAO describes (1) the services that Part D grantees provide and what effect, if any, the administrative expense cap has had on those services and on grantee programs; (2) how Part D grantees report on administrative expenses, indirect costs, and compliance with the cap; and (3) how HRSA implemented the cap and grantees' views on that implementation. GAO surveyed all Part D grantees, interviewed selected grantees, reviewed Part D grant applications and guidance, and interviewed HRSA officials.
section_title: What GAO Found
paragraphs: Part D grantees reported in our survey that they provide a range of services to clients, and the majority of these grantees reported that they have not made changes to services in response to the administrative expense cap implemented in fiscal year 2007. These services included both medical services, such as outpatient health services, as well as support services, such as child care. The majority of the 83 grantees that responded to our survey reported that the cap has not affected the services they provide. However, 4 grantees reported increasing services and 3 grantees reported reducing client services in response to the cap. In addition, the majority of grantees also reported that the cap has had a negative effect on their Part D programs, even if it has not changed client services, because it has, for example, made it necessary for clinical staff to perform administrative tasks. In addition, about half of the grantees reported that not all of their Part D administrative expenses were covered by the 10 percent allowance. Part D grantees report planned administrative expenses and indirect costs to HRSA and, starting in fiscal year 2009, HRSA will require additional reporting. In their grant applications, Part D grantees provide HRSA with budgets that include administrative expenses and indirect costs. Grantees must then update HRSA on any changes to that information, and some provide the results of independent financial audits. Starting in fiscal year 2009, HRSA will require all Part D grantees to report more detailed budget information at both the beginning and end of each year. In fiscal year 2007, the first year of the administrative expense cap, grantees reported to HRSA that they were in compliance with the cap. Grantees with approved indirect cost rates could include expenses such as rent and utilities in their indirect costs rather than in their administrative expenses and so were able to spend more than 10 percent of their Part D grants on such expenses. Beginning in fiscal year 2007, HRSA took multiple steps to implement the administrative expense cap but, while some grantees reported that HRSA's guidance on how to implement the cap was helpful, others reported difficulties in implementing the cap due to unclear guidance from HRSA. HRSA reported revising its grant application guidance and developing training for both its staff and grantees in response to the cap. HRSA also included additional revisions related to the administrative expense cap in the fiscal year 2008 grant application guidance and plans to provide grantees with further guidance in the fiscal year 2009 application. While some grantees reported that HRSA's guidance was helpful, others reported receiving conflicting information. In the first year of the cap, some grantees also indicated a need for additional guidance on the administrative expense cap and reported that they sought such guidance from sources other than HRSA. HHS provided technical comments on a draft of the report, which GAO incorporated as appropriate.

section_title: Letter
paragraphs: Since the first cases of what would become known as acquired  immunodeficiency syndrome (AIDS) were reported in the United States in  June 1981, over 1 million people in the United States have been infected  with human immunodeficiency virus (HIV) as of 2006, including almost  550,000 who have already died. The HIV/AIDS population has changed  over time, with women and youth representing a growing number of  cases. More than one quarter of all new HIV/AIDS diagnoses are in women,  according to the Centers for Disease Control and Prevention (CDC).  Additionally, CDC estimated that almost 5,000 youth received a diagnosis  of HIV or AIDS in 2004, representing about 13 percent of the persons  diagnosed during that year.
Through the Ryan White Comprehensive AIDS Resources Emergency Act  of 1990 (CARE Act), federal funds are made available to metropolitan  areas, states, and others to assist with the cost of medical and support  services for individuals and families infected and affected by HIV/AIDS.
Each year, CARE Act programs provide assistance to over 530,000 mostly  low-income, underinsured, or uninsured individuals living with HIV/AIDS.  The programs are administered by the Department of Health and Human  Services’ (HHS) Health Resources and Services Administration (HRSA).  Under the CARE Act, HRSA also awards grants to organizations to provide  family-centered medical and support services for women, infants, children,  and youth with HIV/AIDS and their families—including infected and  affected family members (known as Part D grants). These Part D grantee  organizations include government entities, community-based  organizations (CBO)—which may or may not be specifically focused on  HIV/AIDS—hospitals and medical centers, university/college hospitals and  medical centers, and universities/colleges.
In providing medical and support services to women, infants, children, and  youth with HIV/AIDS and their families, Part D grantees often incur  administrative expenses and indirect costs. The Ryan White HIV/AIDS  Treatment and Modernization Act of 2006 (RWTMA), which reauthorized  CARE Act programs and defined the term “administrative expenses” for  Part D grants, included a 10 percent cap on the amount of the Part D grant  awards that grantees could spend on administrative expenses beginning  with fiscal year 2007. The purpose of this cap is to maximize the amount  of federal funds spent on services for Part D clients. Prior to this, there  was no cap on administrative expenses for Part D grantees. Both  administrative expenses and indirect costs can include expenses such as  those related to rent, utilities, and photocopying; however, if a grantee  does not have a federally negotiated indirect cost rate, it must charge  (account for) such expenses as administrative expense.
RWTMA directed us to determine how funds are used in CARE Act Part D  programs. In this report, we describe (1) the services that Part D grantees  provide and what effect, if any, the administrative expense cap has had on  those services and on grantee programs; (2) how Part D grantees report on  administrative expenses, indirect costs, and compliance with the  administrative expense cap; and (3) how HRSA implemented the Part D  administrative expense cap and grantees’ views on that implementation.
To determine what services Part D grantees provide and what effect the  administrative expense cap has had on those services and on grantee  programs, we surveyed all 90 Part D grantees. The survey response rate  was 92 percent based on 83 responses received. The survey covered fiscal  year 2007. We conducted the survey from May 14, 2008, through July 10,  2008, collecting information and opinions about the administrative  expense cap for fiscal year 2007, the first year the administrative cap was  in effect. Fiscal year 2007 was the only full year of information we were  able to obtain from grantees. Information for fiscal year 2008 was not  available at the time of our review. We also interviewed selected grantees  and officials from AIDS Alliance for Children, Youth & Families, the Part D  grantee member organization, as well as HRSA officials responsible for  overseeing the Part D program, including 8 of the approximately 30 project  officers responsible for overseeing at least one Part D grant. We selected  the 8 project officers based on unbiased selection criteria by project  officers’ service areas, excluding those hired in 2008.
To determine how Part D grantees report on administrative expenses,  indirect costs, and compliance with the administrative expense cap, we  reviewed grantees’ fiscal year 2007 grant applications, which contain their  proposed budgets for their fiscal year 2007 spending. From these grant  applications we identified the administrative expenses and indirect costs  that grantees reported to HRSA in their fiscal year 2007 applications. We  also collected grantees’ indirect cost rates in the survey of Part D grantees  described above. Finally, we interviewed HRSA officials and reviewed  relevant agency documents.
To determine how HRSA implemented the Part D administrative expense  cap and grantees’ views on that implementation, we interviewed  representatives of 8 Part D grantees and 1 subgrantee selected as a  nongeneralizable sample based on their size, location, and organizational  structure. We also conducted two group interviews with representatives of  18 grantees. These grantees volunteered to participate in the group  interviews conducted during an AIDS Alliance for Children, Youth &  Families conference in May 2008. We also interviewed HRSA officials and  reviewed relevant documents, including HRSA’s technical assistance tools  and training provided to grantees and project officers, as well as fiscal  year 2007 and 2008 grant application guidance. See appendix I for a more  detailed description of our methodology.
We conducted this performance audit from January 2008 through  November 2008 in accordance with generally accepted government  auditing standards. Those standards require that we plan and perform the  audit to obtain sufficient, appropriate evidence to provide a reasonable  basis for our findings and conclusions based on our audit objectives. We  believe that the evidence obtained provides a reasonable basis for our  findings and conclusions based on our audit objectives.
subsections: section_title: Background
paragraphs: RWTMA reauthorized CARE Act programs for fiscal years 2007 through  2009. Part D grants—one of the types of grants under the act—are for  entities that provide HIV/AIDS services to women, infants, children, and  youth. In fiscal year 2007, HRSA provided $68,500,000 in Part D grants to  90 grantees, ranging from about $230,000 to over $2 million per grant. This  represented about 3 percent of all CARE Act funding.
CARE Act Part D Grantees  Part D grantees compete for grant funding to provide a range of services— both medical and support—to women, infants, children, and youth in a  variety of settings. Medical services are those outpatient and ambulatory  care services that are part of essential medical care. They can include, for  example, primary medical care and HIV/AIDS drug assistance. Support  services are nonmedical services necessary to use the medical services.  They can include, for example, client transportation to medical  appointments, child care, or food assistance services.
Applicants generally submit applications to HRSA for 5-year project  periods. Grantees receive funding for the first year and then submit annual  noncompeting applications to HRSA to receive the remaining funding and  to update HRSA on their projects’ spending and services. Although the  grant applications and federal funds are released by fiscal year, HRSA  refers to grantee spending in each of the 5 years constituting a project  period as budget years. Within Part D, there are two types of grants, each  of which has a slightly different budget year. For example, in 2007, one  Part D budget year ran from August 1, 2007, until July 31, 2008, and  another budget year ran from September 1, 2007, until August 31, 2008.  Because the Part D grants discussed in this report are from fiscal year  2007 funds and the grant applications and accompanying guidances use  the term fiscal year, we use the term throughout this report.
Part D grantees include state and local government entities, CBOs—which  may or may not be specifically focused on HIV/AIDS—hospitals and  medical centers, university/college hospitals and medical centers, and  universities/colleges. (See app. I for additional information.) Part D  grantees can (1) operate a network of Part D subgrantees that provide  services, (2) directly provide the services, or, as most do, (3) both operate  a network of subgrantee service providers as well as directly provide  services.
subsections: section_title: Administrative Expenses and Indirect Costs
paragraphs: In addition to spending Part D funds on medical and support services for  clients, Part D grantees may also use their Part D grant funds to pay for  certain administrative expenses and indirect costs. Indirect costs differ  from administrative expenses in that indirect cost rates for specific  activities are typically negotiated with the federal agency from which the  grantee receives the greatest amount of federal awards and that rate then  applies to all relevant federal award programs that permit indirect costs,  unless it conflicts with a legislative indirect cost cap. The Office of  Management and Budget (OMB) cost principles provide guidance as to the  expenses that can be included in indirect costs to the cognizant agencies  and grantees according to entity type. Within HHS, the Division of Cost  Allocation performs this role. HRSA, following OMB cost principles,  defines indirect costs as costs “incurred for common or joint objectives,  which cannot be readily identified but are necessary to the operations of  the organization.” HRSA defines administrative expenses as “funds that are  to be used by grantees for grant management and monitoring activities,  including costs related to any staff or activity unrelated to services or  indirect costs.”
Some expenses can be considered to be either administrative or indirect.  For example, rent and utilities could be considered either administrative  expenses or indirect costs. However, for a grantee to claim any expenses  as indirect costs, it must have an approved indirect cost rate. Smaller  organizations or ones that receive only one federal grant may not have  approved indirect cost rates, but organizations that receive multiple  federal grants would need to have approved rates. For example, a  university that receives multiple federal grants would have an indirect cost  rate to cover different grants’ shares of costs such as rent, utilities, as well  as library expenses. However, a small organization that receives only one  federal grant might not have an indirect cost rate since it may be able to  account for all of those expenses for the single federal grant it receives. If  a grantee does not have an approved indirect cost rate agreement, the  grantee must charge (account for) expenses such as rent and utilities as  administrative expenses in order to pay for those expenses with grant  funds. This means that grantees with approved indirect cost rates have  greater latitude than those without such rates to pay for expenses that  might otherwise be considered administrative expenses as they can spend  more than 10 percent of their Part D grant on expenses such as rent and  utilities.
The CARE Act now caps at 10 percent the amount of the Part D grant  awards that grantees can spend on administrative expenses. HRSA reports  that the purpose of this cap is to maximize the amount of federal funds  spent on services for Part D clients. HRSA reports that the cap only applies  to grantees’ administrative expenses; there is no cap on indirect costs.  Prior to RWTMA, there was no cap on administrative expenses for Part D  grantees.
section_title: Oversight of CARE Act Part D Grantees
paragraphs: HRSA project officers are responsible for overseeing the Part D program  by reviewing grant applications; writing and revising grant application  guidance; responding to grantees’ questions; providing technical  assistance and training to grantees; monitoring grantees’ performance and  compliance with grant guidance, program expectations, and legislative  requirements; and recommending approval on program budget  submissions. Project officers are Part D grantees’ primary contact with  HRSA, and they are expected to contact their assigned grantees at least  once every 3 months.
Required audits assist HRSA in providing financial oversight of some   Part D grantees’ spending. Organizations that receive Part D grants are  generally subject to the requirements of the Single Audit Act, as amended,  and the implementing OMB guidance. These provisions require grantees  that expend $500,000 or more in federal awards in a year to have either  single or program-specific audits for that year conducted by an  independent auditor. Single audits are organizationwide audits, not  intended to focus specifically on an individual grant awarded by a  particular agency. They include a review of the grantee’s financial  statements, schedule of federal expenditures, internal controls, and  compliance with laws and regulations pertaining to major programs that  affect all federal funding, including grants—defined with reference to  dollar thresholds—for which the grantee expends federal funds. Generally,  grantees that expend federal funds under only one federal program may  choose to have a program-specific audit. Among other things, such an  audit includes a review of compliance with laws and regulations that affect  that program.
section_title: Part D Grantees Reported Providing a Range of Services, and Most Reported That the Administrative Expense Cap Did Not Change These but Had a Negative Effect on Programs
paragraphs: Grantees reported providing a range of medical and support services to  women, infants, children, and youth infected with HIV/AIDS, as well as  support services for affected family members. The majority of survey  respondents reported that they have not made any changes to the services  they provide to their clients in response to the cap, which, according to  HRSA, was meant to maximize the amount of federal funds spent on  services for Part D clients. However, four grantees reported increasing  services and three grantees reported reducing client services. While most  grantees reported not making changes to client services, the majority  reported that the administrative expense cap, by reducing administrative  services, has had a negative effect on their programs. Some grantees,  however, reported experiencing positive effects on their programs as a  result of the cap.
subsections: section_title: Part D Grantees Reported Providing Both Support and Medical Services to Women, Infants, Children, and Youth with HIV/AIDS and Their Families
paragraphs: Grantees reported providing a range of medical and support services to  women, infants, children, and youth infected with HIV/AIDS, as well as  their families (see table 1). Survey respondents reported providing medical  services such as outpatient and ambulatory health services, medical case  management—including treatment adherence services—mental health  services, and HIV counseling and testing. They also reported providing  support services such as referrals to health care and supportive services,  outreach services, transportation, family advocacy, case management  services, and child care.
Grantees reported in our survey that they spent an average of 53 percent  of their fiscal year 2007 Part D grants on medical services for clients,  ranging from 0 percent to 95 percent. They also reported spending an  average of about 33 percent of their fiscal year 2007 Part D grants on  support services for their clients, ranging from 1 percent to 90 percent.  Grant money not spent on medical and support services was used to pay  for administrative expenses, indirect costs, and other services not directly  related to clients.
Grantees reported serving a range of clients with their Part D funds,  including affected family members of HIV-infected individuals. Grantees  reported serving varying numbers of clients ranging from 75 to over 10,000  clients. Of those clients, grantees reported serving an average of 37 infants  less than 24 months of age; an average of 59 children from 2 to 12 years  old; an average of 194 youths from 13 to 24 years old; and an average of  443 adults over 25 years of age. The number of clients served varied by  type of grantee, with CBOs and universities/colleges serving fewer clients  on average (667 and 554, respectively) and government entities,  hospital/medical centers, and university/college hospital/medical centers  serving more clients on average (1,047, 1,471, and 1,125, respectively). In  addition, grantees varied in the types of clients they served. For example,  several grantees had no infant or child clients, while one grantee served  over 300 infants and another served over 1,100 children.
Representatives of Part D grantees, including the AIDS Alliance for  Children, Youth & Families, stated that providing both HIV-infected  individuals and their uninfected family members with medical and support  services makes grantees of the Part D program unique compared to other  CARE Act programs. Some grantees stated that this family-centered care  can include educating the family members of HIV-infected individuals and  providing prevention information, medical care, and HIV counseling and  testing to family members. These grantees told us that by providing  medical and support services to uninfected family members, Part D  programs help to keep the infected family member’s support system intact  and help to eliminate barriers to the infected family member receiving  care.
section_title: Grantees Generally Reported That the Administrative Expense Cap Has Not Changed the Services They Provide but Has Created a Negative Effect on Their Programs
paragraphs: The majority of survey respondents (63 of the 83) reported that they have  not altered the amount or type of services that they provide to their clients  in response to the administrative expense cap. In addition, all eight of the  HRSA project officers we interviewed reported that they were aware of  only minor or no changes to the services that their Part D grantees  provided in response to the administrative expense cap. Of the 19 grantees  that said they made changes to their services in response to the cap   (1 grantee did not respond to this question), 4 described spending more on  client services, such as oral health care. However, 3 described reducing  client services. For example, 1 grantee reported that, because of the cap,  the grantee has been unable to upgrade older computers, causing delays in  services, and reducing staff time spent on client services.
Grantees also reported effects that the administrative expense cap had on  their programs other than changes to services. In our survey, 57 of the   83 respondents reported that the administrative expense cap has had a  negative effect on their programs that did not involve reducing client  services. Fifty-two of the 57 provided specific examples of how the cap  has had a negative effect at a time when some commented they are seeing  more clients. For example, one grantee commented that the cap has  reduced its ability to fund necessary administrative services, such as data  tracking and program management, and another commented that clinical  staff must now perform administrative duties. However, 19 grantees  reported that the administrative expense cap has had positive effects on  their programs, while not necessarily changing their services. These  survey respondents reported that the administrative expense cap has led  them to review how they spend their Part D funds or take steps to save  money or change staff roles.
Some grantees reported that they were unable to pay for all of their Part D  programs’ administrative expenses with their Part D grants because of the  administrative expense cap. Almost all grantees charged administrative  expenses to their Part D grants (82 of the 83 survey respondents).  However, about half (41 of the 83) of the grantees that responded to the  survey reported that not all of their administrative expenses for the Part D  program were covered by the 10 percent allowance. Grantees that needed  additional funding to cover their Part D administrative expenses reported  using money from their organizations’ general operating budgets (26 of the  41 grantees), funds from other government grants (17 of the 41), and in- kind donations (14 of the 41). HRSA officials told us that Part D funding is  not intended to cover all of a program’s expenses and that the agency  encourages Part D grantees to seek other sources of funding to pay for any  administrative expenses that are not covered by the 10 percent allowance.
section_title: Part D Grantees Report Planned Administrative Expenses and Indirect Costs
paragraphs: Part D grantees report their planned administrative expenses and indirect  costs in their grant applications, budget revisions, and other documents  they submit to HRSA. HRSA officials review that information to ensure  that grantees adhere to their spending plans. Starting in fiscal year 2009,  Part D grantees will complete standardized budget forms that will provide  information to HRSA on the grantees’ final spending on administrative  expenses and indirect costs. Documents submitted to HRSA by grantees  indicated that grantees complied with the administrative expense cap.  However, responses to our survey indicate that the amount grantees spent  on the types of items that would generally be covered by the  administrative expense cap if a grantee did not have an approved indirect  cost rate was up to 36 percent of their grants in fiscal year 2007, with  grantees with approved indirect cost rates spending more on those  expenses.
subsections: section_title: Part D Grantees Report Planned Administrative Expenses and Indirect Costs to HRSA but Will Provide Additional Information in Fiscal Year 2009
paragraphs: Part D grantees report planned administrative expenses and indirect costs  to HRSA in their grant applications, which the agency uses to oversee  grantees’ compliance with the Part D program. Part D grantees submit  grant applications to HRSA that include planned expenses in line-item  budgets and budget justifications. Grantees are required to include in the  grant applications explanations of how they plan to spend their Part D  grant funds. They do this using line-item budgets, in which each expense is  shown on one line. They also provide budget justifications, which are  narratives of how the grantee plans to spend its grant money. These  budgets and justifications show a range of expenses, such as the grantee’s  estimated expenses for medical services and support services, as well as  the grantee’s estimated indirect costs and—starting in fiscal year 2007, the  first year of the administrative expense cap—administrative expenses for  the year.
HRSA uses the budget information grantees submit to oversee their  spending. Grantees must report to HRSA any changes to the budgets they  submitted in their grant applications and HRSA must review and approve  those changes before a grantee can change how it spends its Part D grant  funds. HRSA also receives the annual audits of Part D grantees conducted  under the Single Audit Act. Among other things, these audits examine  grantees’ Part D spending, which may include whether the grantees  comply with the administrative expense cap. HRSA officials reported that  the project officers and other HRSA staff review all of the grantees’ budget  information to ensure that the grantees are meeting the obligations of the  Part D program.
Starting in fiscal year 2009, HRSA will require Part D grantees to report  more detailed information, including administrative expenses, at the  beginning and end of each fiscal year. HRSA officials stated that, starting  in fiscal year 2009, Part D grantees will be required to complete forms at  both the beginning (planned allocation report) and end (final expenditure  report) of the fiscal year. In the planned allocation reports, grantees will  be required to report their expected administrative expenses and indirect  costs at the beginning of the fiscal year. In the final expenditure reports,  grantees will be required to report the actual administrative expenses and  indirect costs they incurred by the end of the fiscal year. Both reports note  that administrative expenses cannot exceed 10 percent of the Part D grant  award. The reports will also require grantees to provide detailed  information about the services they provide with their Part D funding. The  reports include a list of possible Part D medical and support services— such as outpatient services, mental health services, case management, and  child care—and the grantees will be required to note what amount, if any,  they spent on each of those. The reports also state that HRSA will use the  information from the allocation and expenditure reports to prepare an  annual report to Congress on the use of Part D funds.
section_title: Grantees Reported Complying with the Administrative Expense Cap
paragraphs: Grantees reported to HRSA that they spent 10 percent or less of their   Part D grants on administrative expenses, but those with approved  indirect cost rates were able to spend more on the types of expenses that  could otherwise be considered administrative expenses. In the fiscal year  2007 grant applications, grantees reported administrative expense  estimates that ranged from 0 to the maximum allowed 10 percent.  However, 60 of the 83 grantees reported in our survey that they had  federally approved indirect cost rates and that, with these rates, they  charged to their Part D grants an average of 10 percent for indirect costs in  addition to the 10 percent allowed for administrative expenses. In our  survey, the highest rate grantees reported charging to the Part D grant was  26 percent, although the maximum approved indirect cost rate was   66 percent. Taking into account the maximum approved indirect cost rate  in our survey, as well as the 10 percent that all grantees are allowed for  administrative expenses, some grantees could use as much as 76 percent  of their Part D grants to pay for items that could qualify as indirect costs  or administrative expenses, such as rent, utilities, and photocopying. In  our survey, while most of the grantees reported using their full rate for the  Part D program (46 of the 60), the highest reported combined percentage  of a Part D grant spent on administrative expenses and indirect costs was  36 percent. The primary reason grantees reported for not charging their  full indirect cost rate was because they chose to use a greater portion of  their grant award to pay for medical and support services for clients,  rather than for indirect costs.
section_title: HRSA Took Multiple Steps to Implement the Administrative Expense Cap, but Grantees’ Experiences Implementing the Cap Varied
paragraphs: To implement the fiscal year 2007 administrative expense cap, HRSA  reported revising its grant application guidance, approving grants with the  condition that the grantee comply with the cap, and developing training  for both its staff and grantees to implement the administrative expense  cap. While 33 of the 83 grantees reported that the new guidance was  helpful, others suggested that their project officers could have been more  helpful in assisting them to meet the new administrative expense cap and  some grantees expressed interest in receiving additional guidance.
subsections: section_title: HRSA Took Multiple Steps to Implement the Administrative Expense Cap
paragraphs: To implement the administrative expense cap, HRSA revised and issued  new written grant application guidance, approved grants with the  condition that the grantee comply with the cap, and developed training for  both its staff and grantees.
subsections: section_title: HRSA Revised the Part D Grant Guidance to Reflect the Administrative Expense Cap
paragraphs: To implement the administrative expense cap, HRSA revised its Part D  grant application guidance. In 2007, the first year of the administrative  expense cap, HRSA issued grant guidance for Part D grantees that  included guidance on how to define and calculate administrative  expenses. Prior to RWTMA, there was no cap on Part D grantees’  administrative expenses so there was no guidance on administrative  expenses specific to Part D grantees. The fiscal year 2007 grant application  guidance stated that “a grantee may not use more than 10 percent of  amounts received under a grant award under Part D for administrative  expenses.” That guidance also defined administrative expenses as the  CARE Act does as “funds that are to be used by grantees for grant  management and monitoring activities, including costs related to any staff  or activity unrelated to services and indirect costs.”
HRSA included additional revisions related to the administrative expense  cap in the fiscal year 2008 grant application guidance and plans to provide  grantees with further guidance in the fiscal year 2009 application. In fiscal  year 2008, HRSA added the following sentences to its definition of  administrative expenses in its Part D grant application guidance:  “Administrative costs also include rent, utilities and telephone services, as  well as other costs not directly related to patient care. Administrative  expenses are separate from those of indirect costs.” HRSA officials  reported that the fiscal year 2009 grant guidance will be further revised to  include more detail about how grantees should categorize their expenses,  including administrative expenses. HRSA officials stated that the fiscal  year 2009 grant guidance will be available to grantees in January 2009.
In addition to the revised grant application guidance, HRSA issued a letter  to all Part D grantees in May 2008 clarifying the definition of  administrative expenses that appeared in the fiscal year 2008 guidance.  The letter stated that the following are administrative expenses that are  subject to the administrative expense cap: routine grant administration  and monitoring activities, contracts for services awarded as part of the  grant, and “costs which could qualify as either indirect or direct costs but  are charged as direct costs,” such as rent, utilities, and  telecommunications. The letter also described activities that are not  subject to the administrative expense cap, such as indirect costs.
section_title: HRSA Conditionally Approved Fiscal Year 2007 Part D Grants to Ensure Compliance with the Administrative Expense Cap
paragraphs: HRSA officials reported that they placed conditions on all fiscal year 2007  Part D grant awards to ensure that all grantees met certain new  requirements mandated in RWTMA, including the administrative expense  cap, in order to avoid having their grant funds restricted. Some grantees  reported that HRSA’s conditions required them to revise multiple  documents, such as their budgets and work plans, in order to comply with  the Part D program requirements. HRSA officials reported that, before  they awarded the fiscal year 2008 grants, they had removed the conditions  on all fiscal year 2007 Part D grant awards because the grantees had met  all of the necessary requirements for the Part D grant awards, including  the administrative expense cap. The amount of time grantees reported  having conditions on their awards varied. In their survey responses,  grantees reported that it took from over 2 weeks to almost 11 months to  have the conditions removed.
section_title: HRSA Trained Project Officers and Grantees about the Administrative Expense Cap
paragraphs: Following the enactment of RWTMA, HRSA provided its project officers  and grantees with training on the changes resulting from the law. The  training for project officers included briefing slides, a handout highlighting  changes due to RWTMA, the creation of a model budget form, and  additional guidance for responding to grantee questions about the  administrative expense cap. The eight project officers we interviewed  reported receiving the training, consistently defining administrative  expenses as they are defined by HRSA, and rarely requiring their  supervisors to provide additional guidance to their grantees on  administrative expenses. In addition to training the project officers, HRSA  provided training for grantees. HRSA officials reported conducting  multiple telephone and Internet technical assistance training sessions with  grantees.
section_title: Grantees’ Experiences with the HRSA Guidance Implementing the Administrative Expense Cap Varied
paragraphs: In our survey, grantees reported both positive and negative reviews of the  guidance HRSA provided related to the administrative expense cap. In  addition, some grantees indicated the need for additional guidance from  HRSA on the administrative expense cap.
subsections: section_title: Grantees Reported Both Positive and Negative Reactions to HRSA’s Grant Guidance
paragraphs: Grantees reported receiving various types of guidance from HRSA on the  administrative expense cap. In addition to the grant application guidance  that is included in the grant application that all grantees must complete,  grantees that responded to our survey reported receiving verbal (63 of 83)  and written (43 of 83) guidance from their project officers on the  administrative expense cap. Fewer reported receiving technical assistance  (6 of 83) and verbal (13 of 83) and written (19 of 83) guidance from other  HRSA officials.
Some grantees reported that HRSA’s guidance was helpful when  implementing the administrative expense cap. Specifically, 33 of 83  grantees reported that the guidance on administrative expenses was very  or somewhat helpful. In written comments on the survey, grantees that  reported that HRSA’s guidance was helpful commented that the guidance  made clear how to categorize expenses, their project officers could  answer any questions, and what was required of the grantees to comply  with the cap was clear. We also heard similar comments during our  interviews. For example, one grantee reported that its project officer  provided specific advice and was very helpful and explicit, speaking with  the grantee daily when necessary. Another grantee stated that its project  officer was “knowledgeable and helpful.”
Some grantees, however, reported that HRSA’s guidance was not helpful  when implementing the administrative expense cap. Thirty of the 83  survey respondents reported that they found the guidance not at all helpful  or somewhat unhelpful. In written comments on the survey, grantees that  reported that HRSA’s guidance was unhelpful commented that the  guidance did not provide clear definitions of allowable expenses and that  the guidance was unclear or poorly written. Twelve of the 30 commented  that they had received conflicting guidance from HRSA. Five of the  grantees commented that the project officers could not answer questions  or provide explanations regarding the grant application guidance or that  the project officers provided different information to different grantees. A  poll of the group interview participants showed that none thought that  either the formal guidance or the informal guidance, such as guidance  from project officers, was adequate.
section_title: Some Grantees Indicated a Need for Additional Guidance on the Administrative Expense Cap, and HRSA Officials Reported Revising the Guidance in Response to Feedback
paragraphs: Some grantees reported seeking more detailed guidance about what  should be considered an administrative expense. For example, during the  group interviews, an official from one grantee stated that she would like to  receive a list of approved administrative expenses from HRSA. In an  interview with an official of a grantee, the official reported that there are  “several gray areas” between what is considered an administrative  expense and an indirect cost and HRSA had provided few definitions of  those expenses. In addition, 16 of the 83 survey respondents sought  guidance from sources other than HRSA on administrative expenses and  the cap, such as from the AIDS Alliance for Children, Youth & Families.
HRSA officials reported that the agency has received feedback from  grantees about the grant application guidance and has worked to improve  the guidance each year. These officials explained that the agency’s latitude  is somewhat limited when revising the grant guidance. One official  explained that the agency does not have complete control over the Part D  guidance because all HRSA grant applications and guidance must follow a  standard template. Moreover, one official stated that grantees often do not  carefully read the guidance. Officials stated that in response to questions  about the grant application guidance, project officers will often refer  grantees back to the grant application guidance and might not provide  additional clarification to ensure fairness in the application process by not  providing existing grantees with information unavailable to new  applicants.
section_title: Agency Comments
paragraphs: HHS provided technical comments on a draft of the report, which we  incorporated as appropriate.
We are sending copies of this report to the Secretary of Health and Human  Services and the Administrator of HRSA. This report also is available at no  charge on GAO’s Web site at http://www.gao.gov.
If you or your staff have any questions about this report, please contact me  on (202) 512-7114 or crossem@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs can be found on the last page  of this report. GAO staff who made major contributions to this report are  listed in appendix II.
section_title: Appendix I: Scope and Methodology
paragraphs: We examined the administrative expense cap, which took effect in fiscal  year 2007, placed on grants for family-centered medical and support  services for women, infants, children, and youth with HIV/AIDS and their  families (Part D grants) under the Ryan White Comprehensive AIDS  Resources Emergency Act of 1990 (CARE Act). Specifically, we examined  (1) the services that Part D grantees provide and what effect, if any, the  administrative expense cap has had on those services and on grantee  programs; (2) how Part D grantees report on administrative expenses,  indirect costs, and compliance with the administrative expense cap; and  (3) how the Department of Health and Human Services’ Health Resources  and Services Administration (HRSA) implemented the Part D  administrative expense cap and grantees’ views on that implementation.
To determine what services Part D grantees provide and what effect the  administrative expense cap has had on those services; how Part D  grantees report on administrative expenses, indirect costs, and compliance  with the administrative expense cap; and how HRSA has implemented the  Part D administrative expense cap, we analyzed data from our Web-based  survey sent to all 90 Part D grantees. We obtained the e-mail addresses and  the names of grantee contacts from HRSA. The survey contained questions  on grantees’ services and clients, administrative expenses and indirect  costs, and HRSA’s implementation of the administrative expense cap. The  questions focused on changes that occurred in fiscal year 2007, the first  year the administrative expense cap was in effect. Fiscal year 2007 was the  only full year of information we were able to obtain from grantees.  Because the Part D grants are generally awarded in August of each year— the beginning of what HRSA officials refer to as the budget year—a full  year of information was not available for fiscal year 2008. Of the 90 Part D  grantees, 83 completed the survey for a 92 percent response rate (see   table 2).
During the development of our survey, we pretested it with three Part D  grantees from New York, Washington, D.C., and Maryland. We opened the  survey on May 14, 2008. During the course of the survey, we sent two  follow-up e-mails to each nonrespondent and then made telephone follow- up calls to remaining nonrespondents to address any problems they had  and to encourage them to complete the survey. We closed the survey on  July 10, 2008. Because this survey was conducted with all of the Part D  grantees, it is not subject to sampling error. However, the practical  difficulties of conducting any survey may introduce other errors. For  example, difficulties in interpreting a particular question or sources of  information available to respondents can introduce unwanted variability  or bias into the survey results. We took steps to minimize such  nonsampling errors in developing the questionnaire and collecting and  analyzing the data. While the response rate of 92 percent is high, if those  not responding differed materially from those responding on any  particular question we analyzed, our analysis may not accurately represent  the group surveyed. Our results therefore best represent only those  responding to our survey. However, given our analysis of the  nonresponders, we determined that we could generalize our findings to all  Part D grantees.
To obtain information on grantees’ fiscal year 2007 spending, including  administrative expenses and indirect costs, we reviewed the grantees’ 2007  Part D grant applications that contain their proposed budgets. Because the  Part D grant applications did not contain standardized spending  information that met our reporting objectives, we also included questions  in the survey on grantees’ fiscal year 2007 Part D spending.
To gain further information on Part D grantees and the administrative  expense cap, we visited two Part D grantees and one Part D subgrantee in  the Washington, D.C., metropolitan area and conducted telephone  interviews with officials from six Part D grantees. We selected the  grantees for visits and interviews through a nongeneralizable sample  based on their size, location, and organizational structure. We also  conducted two group interviews held at the AIDS Alliance for Children,  Youth & Families conference in May 2008. The 18 grantees that  participated were self-selected volunteers representing universities,  hospitals, community-based organizations, and government entities.
To determine how HRSA has implemented the Part D administrative  expense cap, we interviewed HRSA officials and reviewed relevant  documents. We interviewed HRSA officials responsible for overseeing the  Part D program. We also conducted one-on-one interviews with 8 of the  approximately 30 project officers who oversee at least one Part D grant.  These project officers write program guidance that defines the grant  program objectives, monitor grantees’ performance, and evaluate grantee  achievements. We selected the 8 project officers based on unbiased  selection criteria by project officers’ service areas. We excluded project  officers who were hired in 2008 because those officers did not oversee  grantees during the entire first year of the administrative expense cap.  Finally, we reviewed HRSA’s technical assistance tools and training  provided to grantee staff and project officers, including fiscal years 2007  and 2008 grant application guidance, and reviewed Part D fiscal year 2007  grant applications. We did not consider how HRSA’s treatment of  administrative expenses differed from other programs.
We conducted this performance audit from January 2008 through  November 2008 in accordance with generally accepted government  auditing standards. Those standards require that we plan and perform the  audit to obtain sufficient, appropriate evidence to provide a reasonable  basis for our findings and conclusions based on our audit objectives. We  believe that the evidence obtained provides a reasonable basis for our  findings and conclusions based on our audit objectives.
section_title: Appendix II: GAO Contact and Staff Acknowledgments
subsections: section_title: Acknowledgments
paragraphs: In addition to the contact named above, Tom Conahan, Assistant Director;  Stefanie A. Bzdusek; Shaunessye Curry; Kelly L. DeMots; Cathy Hamann;  Christopher Howard; Martha Kelly; and Eden Savino made key  contributions to this report.