The file below has been archived for historical reference purposes only. The content and links are no longer maintained and may be outdated. See the OER Public Archive Home Page for more details about archived files.

6. NON-FEDERAL SOURCES OF FUNDS (PHS GPS 9505)


A number of PHS grant programs require non-Federal participation in the costs of grant-supported activities; the extent of that participation is specified by PHS or is negotiable. The non-Federal participation may be in the form of allowable costs incurred by the grantee, subgrantee, or a contractor under the grant or subgrant or the value of third-party in-kind contributions (see section 7) and must meet the requirements for allowability and documentation set forth in 45 CFR Part 74, Subpart G, and 45 CFR Part 92.24. The following information, which supplements 45 CFR Parts 74 and 92, explains the non-Federal share requirements and how they are administered by PHS and specifies where PHS will exercise the options provided in 45 CFR Parts 74 and 92.

MATCHING

PHS no longer has a general legislative requirement that recipients of research grants must cost share on their projects. However, specific program legislation may require grantees to share in the cost of the project, the PHS awarding office may administratively apply a matching requirement, or the grantee may voluntarily share in the cost of a grant-funded research project. A matching requirement may specify either a minimum fixed percentage of non-Federal funds or a level of non-Federal participation that has been negotiated between the applicant and the PHS awarding office.

The costs that the grantee incurs in fulfilling its matching requirement are subject to the individual cost or activity prior approval requirements and other rules for allowability described by 45 CFR Part 74, Subpart Q; 45 CFR Part 92.22; and this document.

In determining the allowability of costs for matching purposes, the qualifications and exceptions listed in 45 CFR Parts 74.53 and 92.24 apply. Also, the classification of a contributed cost as either direct or indirect must be consistent with the classification of other costs incurred for the same purpose in like circumstances. For example, if the costs of facilities (such as depreciation or use allowance and operation and maintenance expenses) are treated as indirect costs for the organization's other activities, similar costs may not be counted as a direct cost contribution for purposes of matching. If the recipient has established special or multiple indirect cost rates, the requirement for consistent classification of costs applies separately to the activities covered by each rate.

PHS will exercise the options contained in 45 CFR Part 74.56(b), 45 Part CFR 74.57, and 45 CFR Part 92.24(f) and (h) in the following way. Where a grantee, subgrantee, or contractor under a grant proposes to provide allowable matching in the form of an in-kind contribution of equipment, a building, and/or land that has been donated by another party who has transferred title to the grantee, subgrantee, or contractor under a grant, PHS awarding office prior approval is required in order to apply the market value at the time of the donation of the equipment or building and/or the fair rental rate of the land as matching. See 45 CFR Part 74.56(b)(2) and 45 CFR Part 92.24(e) and (f) for the required accounting treatment in the absence of such approval.

The PHS awarding office may require that the market value or fair rental rate be established by a certified real property appraiser (or by a representative of the U.S. General Services Administration, if available) and that the value or rate be certified by a responsible official of the party to which the property or its use is donated.

The source and amount of costs and/or the value of third-party in-kind contributions proposed by the applicant to meet a matching requirement must be identified in the application. The amount of Federal funds awarded, including authorized carryovers, combined with the amount of the non-Federal share reflected on the Notice of Grant Award (NGA), constitute the total approved budget. The activities supported by that budget as well as any expenditures against that budget must conform to the requirements of this document.

Unless otherwise restricted by legislation or regulation, costs used to satisfy the grantee's matching requirements may be financed from the following:

When a grantee is unable to meet the specified level of matching, the appropriate action stated below shall be taken by PHS:

When a grantee institution wishes to provide matching in the indirect cost category, it should merely reduce its charge to the grant account for the indirect costs to which it would otherwise be entitled. The amount of the reduction will count as matching. Where such reductions of indirect costs might appear to be inadvertent in financial reports submitted under the grant, the grantee should include an explanation in the "Remarks" section of the report, showing that the claim for less than full allowable indirect cost is intentional.

THIRD-PARTY REIMBURSEMENT AND OTHER
SOURCES OF HEALTH SERVICES FUNDING

Those projects supported under health services delivery programs are expected to develop, to the extent possible, independence from PHS grant support. Therefore, these projects are encouraged and assisted in the development and use of alternate funding sources to supplement or supplant PHS support where possible. Each project is expected to establish a plan to recover, to the maximum extent feasible, third-party revenues to which it is entitled for services provided; garner all other available Federal, State, local, and private funds; and charge beneficiaries according to their ability to pay for services without creating a barrier to those services.

Where third-party payors, including Government agencies, are authorized or are under legal obligation to pay all or a portion of charges for health care services, all such sources must be billed for covered services, and every effort must be made to obtain payment. Each service provider receiving Federal funds, either directly or indirectly, must have a procedure to identify all persons served who are eligible for third-party reimbursement.

Where a significant percentage of the cost of care and services provided by the project is to be reimbursed by a third-party payor, there must be a written agreement with the third party.

MAINTENANCE OF EFFORT AND
NONSUPPLANTATION OF FUNDS

Some PHS grant programs require an assurance that grant funds will be used to supplement and not supplant the non-Federal funds that would otherwise be made available for that activity or purpose. This is a "nonsupplantation" requirement.

Some PHS grant programs also have a "maintenance of effort" requirement where a specified level of non-Federal effort is to be maintained. The level of effort does not include volunteer services or donations nor should it include expenditures of a nonrecurring nature. The base period for determining the level of grantee expenditures to be maintained and the sanctions for noncompliance vary among the programs containing this requirement.



prev next