This is the accessible text file for GAO report number GAO-09-1027T 
entitled 'Ryan White CARE Act: Program Changes Affecting Minority AIDS 
Initiative and Part D Grantees' which was released on September 9, 
2009. 

This text file was formatted by the U.S. Government Accountability 
Office (GAO) to be accessible to users with visual impairments, as part 
of a longer term project to improve GAO products' accessibility. Every 
attempt has been made to maintain the structural and data integrity of 
the original printed product. Accessibility features, such as text 
descriptions of tables, consecutively numbered footnotes placed at the 
end of the file, and the text of agency comment letters, are provided 
but may not exactly duplicate the presentation or format of the printed 
version. The portable document format (PDF) file is an exact electronic 
replica of the printed version. We welcome your feedback. Please E-mail 
your comments regarding the contents or accessibility features of this 
document to Webmaster@gao.gov. 

This is a work of the U.S. government and is not subject to copyright 
protection in the United States. It may be reproduced and distributed 
in its entirety without further permission from GAO. Because this work 
may contain copyrighted images or other material, permission from the 
copyright holder may be necessary if you wish to reproduce this 
material separately. 

Testimony: 

Before the Subcommittee on Health, Committee on Energy and Commerce, 
House of Representatives: 

United States Government Accountability Office: 
GAO: 

For Release on Delivery: 
Expected at 11:00 a.m. EDT:
Wednesday, September 9, 2009: 

Ryan White Care Act: 

Program Changes Affecting Minority AIDS Initiative and Part D Grantees: 

Statement of Marcia Crosse:
Director, Health Care: 

GAO-09-1027T: 

GAO Highlights: 

Highlights of GAO-09-1027T, a testimony before the Subcommittee on 
Health, Committee on Energy and Commerce, House of Representatives. 

Why GAO Did This Study: 

Under the Ryan White Comprehensive AIDS Resources Emergency Act of 1990 
(CARE Act) federal funds are made available to assist those affected by 
human immunodeficiency virus/acquired immunodeficiency syndrome 
(HIV/AIDS). The Health Resources and Services Administration (HRSA) 
awards CARE Act grants to states, territories, metropolitan areas, and 
others. The Ryan White HIV/AIDS Treatment Modernization Act of 2006 
(RWTMA) reauthorized CARE Act programs for fiscal years 2007 through 
2009. The CARE Act’s Minority AIDS Initiative (MAI) provides for grants 
through five parts (A, B, C, D, and F) with the goal of reducing HIV-
related health disparities among minorities. RWTMA changed how HRSA 
awards MAI grants under Part A and Part B from a formula based on the 
demographics of the grantee to a competitive process. Part D provides 
for grants for services to women, infants, children, and youth with 
HIV/AIDS and their families. RWTMA capped Part D administrative 
expenses at 10 percent. GAO was asked to testify about CARE Act changes 
resulting from RWTMA. This testimony discusses (1) the implementation 
of the MAI provisions and (2) grantees’ experiences under the Part D 
administrative expense cap. This testimony is based on two GAO reports, 
Ryan White Care Act: Implementation of the New Minority AIDS Initiative 
Provisions, [hyperlink, http://www.gao.gov/products/GAO-09-315], and 
Ryan White Care Act: First-Year Experiences under the Part D 
Administrative Expense Cap, [hyperlink, http://www.gao.gov/products/GAO-
09-140]. 

What GAO Found: 

The new competitive process for awarding MAI grants altered funding for 
grantees, increased administrative requirements for grantees, and 
resulted in continued funding for existing initiatives. The new 
competitive application process for Part A grantees—metropolitan areas—
and Part B grantees—states and territories and associated jurisdictions—
altered MAI grants from what they would have been under the old formula-
based process. In determining the award amounts under the new process, 
HRSA considered the number of minorities with HIV/AIDS living in the 
grantee jurisdiction, along with the MAI applications grantees were 
required to file. The new competitive grant applications sometimes 
resulted in considerable differences in grantees’ share of MAI funds 
from what they would have received under the old process. For example, 
in fiscal year 2007, Phoenix received $127,578 (39.8 percent) less than 
it would have received under the old formula, while Houston received 
$154,018 (10.9 percent) more. In addition, Part A and B grantees that 
received MAI funding told GAO that the administrative requirements 
increased significantly because of the new process. These included a 
new MAI grant application and reporting requirements. All Part A and B 
grantees that applied for MAI funding received it, but some Part B 
grantees decided that the administrative requirements, including a 
separate application for MAI funds, were not worth the amount of funds 
that they expected to receive and therefore chose not to apply. 
Moreover, grantees said that they generally funded the same service 
providers and initiatives to reduce minority health disparities as they 
had in prior years. MAI grantees continued to fund a range of core 
medical services, which include essential medical care services, and 
support services, which are services needed for individuals with 
HIV/AIDS to achieve their medical outcomes. 

In a survey of Part D grantees, GAO found that grantees 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 GAO’s survey reported that the cap 
has not affected the services they provide. However, four grantees 
reported increasing services and three 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. 

View [hyperlink, http://www.gao.gov/products/GAO-09-1027T or key 
components. For more information, contact Marcia Crosse at (202) 512-
7114 or crossem@gao.gov. 

[End of section] 

Mr. Chairman and Members of the Subcommittee: 

I am pleased to be here today as you discuss reauthorization of Ryan 
White Comprehensive AIDS Resources Emergency Act of 1990 (CARE Act) 
programs and consider the results of some of the changes that were 
instituted by the 2006 reauthorization of CARE Act programs. The CARE 
Act, administered by the Department of Health and Human Services' (HHS) 
Health Resources and Services Administration (HRSA), was enacted to 
address the needs of jurisdictions, health care providers, and people 
with human immunodeficiency virus/acquired immunodeficiency syndrome 
(HIV/AIDS) and their family members.[Footnote 1] In December 2006 the 
Ryan White HIV/AIDS Treatment Modernization Act of 2006 (RWTMA) 
reauthorized CARE Act programs for fiscal years 2007 through 2009. 
[Footnote 2] Each year CARE Act programs provide assistance to over 
530,000 mostly low income, underinsured, or uninsured individuals 
living with HIV/AIDS. Under the CARE Act, approximately $2.2 billion in 
grants were made to states, metropolitan areas, and others in fiscal 
year 2009. 

There are five primary sections of the CARE Act under which HRSA awards 
grants--Parts A, B, C, D, and F. Part A provides for grants to selected 
metropolitan areas--known as eligible metropolitan areas (EMA) and 
transitional grant areas (TGA)--that have been disproportionately 
affected by the HIV/AIDS epidemic.[Footnote 3] Part B provides for 
grants to states and territories and associated jurisdictions to 
improve the quality, availability, and organization of HIV/AIDS 
services. Part C provides for grants to public and private nonprofit 
entities to provide early intervention services, such as HIV testing 
and ambulatory care. Part D provides for grants to organizations for 
family-centered medical and support services for women, infants, 
children, and youth with HIV/AIDS and their families--including 
infected and affected family members. Part F provides for grants for 
demonstration and evaluation of innovative models of HIV/AIDS care 
delivery for hard-to-reach populations and training of health care 
providers.[Footnote 4] 

Most CARE Act funding is distributed to grantees either as base or 
supplemental grants. Base grants are distributed by formula, and HRSA 
uses a grantee's share of living HIV/AIDS cases to determine the amount 
of base grants. Supplemental grants are generally awarded through a 
competitive process based on the demonstration of severe need and other 
criteria. In addition, Minority AIDS Initiative (MAI) grants are 
supplemental grants awarded on a competitive basis to address 
disparities in access, treatment, care, and health outcomes. 

RWTMA included provisions that changed how certain funding is awarded 
to grantees. For example, RWTMA changed the process by which HRSA 
awards MAI grants under Part A and Part B from a formula based solely 
on demographics of the grantee jurisdiction to a competitive process. 
The RWTMA also capped at 10 percent the amount that Part D grantees 
could spend on administrative expenses.[Footnote 5] 

In 2008 and 2009, we issued two reports on MAI and related issues and 
how funds are used in Part D programs and what effect the 
administrative expense cap has had on those services and on grantee 
programs. Today my remarks are based on our issued reports.[Footnote 6] 
Specifically, I will discuss (1) the implementation of the MAI 
provisions in RWTMA and (2) grantees' experiences under the Part D 
administrative expense cap. 

For our work reviewing the implementation of RWTMA's MAI provisions, we 
conducted a Web-based survey of fiscal year 2007 Part A and B grantees 
to learn how the grantees applied for funds, distributed funds to 
service providers, and provided oversight, and what services they 
provided prior to and after the enactment of RWTMA. We also analyzed 
the effect on funding amounts of the changes made by RWTMA to MAI 
grants. Additionally, we reviewed HRSA's policies and reporting 
requirements under MAI for Part A and B grantees. We interviewed staff 
from selected grantees for Parts A and B to determine how funds were 
distributed and how grantees provided oversight. We interviewed staff 
from national organizations with HIV/AIDS expertise. We also 
interviewed selected grantees under Part A, B, C, D, and F about 
services they provided under MAI prior to and after the enactment of 
RWTMA. We interviewed HRSA officials about implementation of MAI and 
reviewed Part A and B MAI competitive grant applications for fiscal 
year 2007. 

For our review of grantees' experiences under the Part D administrative 
expense cap, we surveyed all 90 Part D grantees, collecting information 
and opinions about the administrative expense cap for fiscal year 2007, 
the first year the administrative cap was in effect. 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 reviewed grantees' fiscal year 
2007 grant applications, which contained their proposed budgets for 
their fiscal year 2007 spending, and identified the administrative 
expenses and indirect costs that grantees reported to HRSA in these 
applications. We also reviewed HRSA's technical assistance tools and 
training provided to grantees and project officers, as well as fiscal 
year 2007 and 2008 grant application guidance. 

We conducted the work for this statement from January 2008 to February 
2009 in accordance with generally accepted government auditing 
standards. Those standards require that we plan and perform the audit 
to obtain sufficient and 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 objectives. 

Background: 

MAI grants were first distributed in conjunction with CARE Act funding 
in fiscal year 1999. The RWTMA added provisions on MAI funding to the 
CARE Act, authorizing specific amounts for the purpose of carrying out 
activities to evaluate and address the disproportionate impact of HIV/ 
AIDS on, and the disparities in access, treatment, care, and outcomes 
for, racial and ethnic minorities. The amount of CARE Act funds used 
for MAI grants has increased from $24 million in fiscal year 1999 to 
$131 million in fiscal year 2007. The MAI provides funding through five 
parts (A, B, C, D, and F) of the CARE Act. Prior to the enactment of 
RWTMA, HRSA awarded Part A and B MAI funds to Part A and B grantees 
according to a formula that was solely based on the demographic 
characteristics of the grantees' jurisdictions, out of funds otherwise 
available for Parts A and B; those that received other Part A and Part 
B funds received MAI funds without having to file separate 
applications. The CARE Act now requires HRSA to award MAI funds under 
Parts A and B according to a competitive process. Under this new 
process, HRSA evaluates grantee applications for MAI funds in addition 
to the demographic characteristics of the jurisdictions.[Footnote 7] 

Through the CARE Act, HRSA 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.[Footnote 8] The 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.[Footnote 9] 

Implementation of the MAI Provisions: 

The new competitive process for awarding MAI funds to grantees under 
Parts A and B, altered MAI funding amounts from what they would have 
been under the old formula-based process, increased administrative 
requirements for grantees, and resulted in continued funding for 
existing initiatives to reduce health disparities for minorities. In 
determining the award amounts under the new process, HRSA considered 
the number of minorities with HIV/AIDS living in the grantee 
metropolitan area, state, or territory or associated jurisdiction, 
along with the MAI applications grantees were required to file. The new 
competitive grant applications sometimes resulted in considerable 
differences in grantees' share of MAI funds from what they would have 
received under the old process. For example, in fiscal year 2007, 
Phoenix received $127,578 (39.8 percent) less than it would have 
received under the old formula, while Houston received $154,018 (10.9 
percent) more. Part A and B grantees that received MAI funding told us 
that the administrative requirements increased significantly because of 
the new process. These included a new MAI grant application and 
reporting requirements. All Part A and B grantees that applied for MAI 
funding received it, but some Part B grantees decided that the 
administrative requirements, including a separate application for MAI 
funds, were not worth the amount of funds that they expected to receive 
and therefore chose not to apply. 

Grantees said that they generally funded the same service providers and 
initiatives to reduce minority health disparities after RWTMA as they 
had in prior years. MAI grantees continued to fund a range of core 
medical services, which include essential medical care services, and 
support services, which are services needed for individuals with HIV/ 
AIDS to achieve their medical outcomes. Consistent with HRSA guidance, 
the types of services funded under MAI generally did not differ from 
services provided with other CARE Act funds. 

Implementation of the Part D Administrative Expense Cap: 

Part D grantees report planned administrative expenses and indirect 
costs to HRSA in their grant applications. In these applications, Part 
D grantees provide HRSA with budget documents, such as line-item 
budgets and budget justifications. HRSA officials review this 
information and any revisions to it to ensure that grantees adhere to 
their spending plans. For the 2009 fiscal year, HRSA required Part D 
grantees to report more detailed budget information, including their 
administrative expenses, at both the beginning and end of each fiscal 
year. We found that grantees reported to HRSA that they were in 
compliance with the administrative expense cap--having spent 10 percent 
or less on administrative expenses, such as rent and utilities, in 
fiscal year 2007. However, grantees with approved indirect cost rates 
could spend more of their Part D grants on expenses that would 
otherwise be covered by the administrative expense cap. These grantees 
reported spending up to 26 percent of their Part D grants on such 
expenses, in addition to the 10 percent allowed under the cap. 

In a survey of Part D grantees, we found that grantees 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. 

Mr. Chairman, this completes my prepared remarks. I would be happy to 
respond to any questions you or other members of the subcommittee may 
have at this time. 

GAO Contacts and Staff Acknowledgments: 

For more information regarding this testimony, please contact Marcia 
Crosse, (202) 512-7114 or crossem@gao.gov. Contact points for our 
Offices of Congressional Relations and Public Affairs may be found on 
the last page of this statement. In addition, Thomas Conahan, Assistant 
Director; Robert Copeland, Assistant Director; Helen Desaulniers; Drew 
Long; Eden Savino; and Jennifer Whitworth made key contributions to 
this testimony. 

[End of section] 

Footnotes: 

[1] Pub. L. No. 101-381, 104 Stat. 576 (codified as amended at 42 
U.S.C. §§ 300ff through 300ff-121). The 1990 CARE Act added Title XXVI 
to the Public Health Service Act. Unless otherwise indicated, 
references to the CARE Act are to the current Title XXVI. 

[2] Pub. L. No. 109-415, 120 Stat. 2767. The CARE Act programs had 
previously been reauthorized by the Ryan White CARE Act Amendments of 
1996 (Pub. L. No. 104-146, 110 Stat. 1346) and the Ryan White CARE Act 
Amendments of 2000 (Pub. L. No. 106-345, 114 Stat. 1319). 

[3] An EMA is a metropolitan area with a population of 50,000 or more 
that had more than 2,000 AIDS cases reported in the most recent 5-year 
period. The 2,000 AIDS cases criterion does not include cases of HIV 
that have not progressed to AIDS. RWTMA created a new program for TGAs. 
A TGA is a metropolitan area with a population of 50,000 or more, which 
had 1,000 to 1,999 AIDS cases reported in the most recent 5-year 
period. In fiscal year 2007, there were 22 EMAs and 34 TGAs according 
to HRSA. 

[4] Part E does not provide for funding for HIV/AIDS services but 
rather includes provisions to address various administrative functions. 

[5] Among other things, RWTMA also changed hold-harmless provisions 
that protected formula funding for certain metropolitan areas. 
Subsequent to RWTMA, appropriations acts also limited the decreases in 
total funding (formula and non-formula) for metropolitan areas. See 
GAO, Ryan White Care Act: Impact of Legislative Funding Proposal on 
Urban Areas, [hyperlink, http://www.gao.gov/products/GAO-08-137R] 
(Washington, D.C.: October 5, 2007); GAO, Ryan White CARE Act: 
Estimated Effect of Proposed Stop-Loss Provision on Urban Areas, 
[hyperlink, http://www.gao.gov/products/GAO-09-472R] (Washington, D.C.: 
March 6, 2009); GAO, Ryan White CARE Act: Estimated Effect of Proposed 
Stop-Loss Provision in H.R. 3293 on Urban Areas, [hyperlink, 
http://www.gao.gov/products/GAO-09-947R] (Washington, D.C.: August 3, 
2009). 

[6] GAO, Ryan White Care Act: Implementation of the New Minority AIDS 
Initiative Provisions, [hyperlink, 
http://www.gao.gov/products/GAO-09-315] (Washington, D.C.: Mar. 27, 
2009); and GAO, Ryan White Care Act: First-Year Experiences under the 
Part D Administrative Expense Cap, [hyperlink, 
http://www.gao.gov/products/GAO-09-140] (Washington D.C.: Dec. 19, 
2008). 

[7] The way HRSA awards MAI funds under Parts C, D, and F remains 
unchanged. The Part C, D, and F MAI funds are awarded through a 
competitive process as a component of the competitive grant award for 
the base parts C, D, and F. 

[8] RWTMA defines administrative expenses for Part D grantees as grant 
management and monitoring activities, including costs related to any 
staff or activity unrelated to services or indirect costs, and indirect 
costs as costs included in a federally negotiated indirect rate. 42 
U.S.C. § 300 ff-71(h)(1-2). HRSA interprets administrative costs as 
excluding indirect costs. The legislative history indicates that in 
defining administrative expenses, Congress departed from the standard 
definition of the term. H.R. Rep. No. 109-695, at 11 (2006), reprinted 
in 2006 U.S. C. C.A.N. 1650, 1660. 

[9] 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." 

[End of section] 

GAO's Mission: 

The Government Accountability Office, the audit, evaluation and 
investigative arm of Congress, exists to support Congress in meeting 
its constitutional responsibilities and to help improve the performance 
and accountability of the federal government for the American people. 
GAO examines the use of public funds; evaluates federal programs and 
policies; and provides analyses, recommendations, and other assistance 
to help Congress make informed oversight, policy, and funding 
decisions. GAO's commitment to good government is reflected in its core 
values of accountability, integrity, and reliability. 

Obtaining Copies of GAO Reports and Testimony: 

The fastest and easiest way to obtain copies of GAO documents at no 
cost is through GAO's Web site [hyperlink, http://www.gao.gov]. Each 
weekday, GAO posts newly released reports, testimony, and 
correspondence on its Web site. To have GAO e-mail you a list of newly 
posted products every afternoon, go to [hyperlink, http://www.gao.gov] 
and select "E-mail Updates." 

Order by Phone: 

The price of each GAO publication reflects GAO’s actual cost of
production and distribution and depends on the number of pages in the
publication and whether the publication is printed in color or black and
white. Pricing and ordering information is posted on GAO’s Web site, 
[hyperlink, http://www.gao.gov/ordering.htm]. 

Place orders by calling (202) 512-6000, toll free (866) 801-7077, or
TDD (202) 512-2537. 

Orders may be paid for using American Express, Discover Card,
MasterCard, Visa, check, or money order. Call for additional 
information. 

To Report Fraud, Waste, and Abuse in Federal Programs: 

Contact: 

Web site: [hyperlink, http://www.gao.gov/fraudnet/fraudnet.htm]: 
E-mail: fraudnet@gao.gov: 
Automated answering system: (800) 424-5454 or (202) 512-7470: 

Congressional Relations: 

Ralph Dawn, Managing Director, dawnr@gao.gov: 
(202) 512-4400: 
U.S. Government Accountability Office: 
441 G Street NW, Room 7125: 
Washington, D.C. 20548: 

Public Affairs: 

Chuck Young, Managing Director, youngc1@gao.gov: 
(202) 512-4800: 
U.S. Government Accountability Office: 
441 G Street NW, Room 7149: 
Washington, D.C. 20548: