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From Health Law Daily, July 10, 2013

Guidance from HRSA provided with regard to FQHC and Look-Alikes budgets

By Kelly J. Rooney, JD

The Health Resources and Services Administration (HRSA) has released a policy information notice (PIN) entitled “Health Center Budgeting and Accounting Requirements” to clarify requirements for federally qualified health centers (FQHCs) and Look-Alikes (LALs) (Notice, 78 FR 41412, July 10, 2013). FQHCs receive grants to support the delivery of preventive and primary care services to medically underserved communities and vulnerable populations, and LALs, while they do not receive federal funding, do receive LAL designation and benefits if they meet the requirements for FQHC programs provided under sec. 330 of the Public Health Service Act (PHSA). One of the requirements that both types of facilities must meet is to establish a budget that shows the cost of operations, expenses, and revenues needed to accomplish the service delivery plan. This PIN is aimed at clarifying requirements for sec. 330 grant funds as opposed to non-grant funds and to help ensure transparency and accountability in budgeting and accounting. The policies described in the PIN are effective immediately and will be incorporated into health center grant applications starting in 2014.

Background. Such health centers must maintain accounting and internal controls that are appropriate to their size and complexity that reflect Generally Accepted Accounting Principles (GAAP) and function to safeguard assets and maintain financial stability. Each year, the centers must develop and submit an operational budget to HRSA which includes projections for all revenue sources to support the scope of the project (which is the difference between the projected cost of operations and the projected non-grant revenue sources). Previously, the same standards applied whether the funds were sec. 330 grant funds or non-grant funds, but in 1996, sec. 330(e)(5)(D) was enacted which affected how non-grant funds were treated. This PIN, which applies to all FQHCs authorized under sec. 330 and LALs, clarifies the treatment of grant versus non-grant funds and describes how non-grant funds can be used “for such other purposes as are not specifically prohibited under this section if such use furthers the objectives of the project.”

Details. Per the PIN, both sec. 330 grant and non-grant funding sources support the health center scope of project, and a center’s total budget includes both sec. 330 grant funds and non-grant funds and the projections from all anticipated revenue sources from program income must be included in the budget. Centers must still prepare and submit applications for HRSA approval containing the operating budget for the scope of project for the year. Grantees must track spending to ensure that expenditures are in line with the approved budgets and obtain HRSA approval where needed.

New policy. Because this is a new policy, public comments are requested regarding sec. 330(e)(5)(D) and the requirements to spend non-grant funds according to sound business practices, policies and procedures, and other rules. HRSA notes that with such funds, program income and non-grant funds should be used for allowable costs even though non-grant funds can be used in alternative ways, but the center must be able to document that the use is in furtherance of the project objectives. Non-grant funds must be used in ways that are consistent with the statutory purposes of sec. 330 and with the scope of project. The PIN lists specific in-scope non-grant expenditures that are seen as permissible, and notes that any others that do not conform to the list should be submitted to HRSA for review and approval. HRSA will look to see whether the proposed expenditures lead to (1) increased services to patients; (2) services provided to more health center patients; or (3) better quality of services.

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