Health Center Regulatory Issues

New Service Area Competition Application Incorporates Key Changes

Recently, HRSA issued the new Service Area Competition (SAC) (i.e., project renewal) application for FY 2014.  Similar to other years, the new SAC includes some “technical” modifications, updating both clinical performance measures and the Need for Assistance Worksheet (Form 9) and adding a 120-day implementation plan for new applicants and existing grantees applying for new service area.  More importantly, the new SAC incorporates key changes to service area definition, the budgeting process, and the length and determination of project periods.  These changes could significantly impact many grantees’ projects, as well as increase the administrative burden on all grantees.


  • Placing Stricter Limits on Service Area Coverage:  The new SAC modifies the eligibility requirements to require applicants to propose on Form 5B (Service Sites) zip codes from which at least 75% of current patients reside. Presumably, this change should decrease or limit service area competition issues.  On a practical note, it may result in decreasing certain existing grantees’ current service area coverage.


  • Requiring an Increased Level of Detail in the Budgeting Process:  Consistent with the recently issued Policy Information Notice (PIN) #2013-001, the new SAC requires grantees to budget separately for their federal funds (i.e., Section 330 grants) versus their non-federal funds (i.e., program income), increasing both accountability for the grant funds and the administrative burden associated with the budgeting process.  Specific changes include:
    • Revision to the Staffing Plan form (Form 2) to report staff expenses charged to the Section 330 grant versus to the total budget.
    • Addition of a new “Federal Object Class Category” form that collect details about the Section 330 funding request and the total non-federal (non-section 330) funding for the first year of the proposed project period. According to HRSA, this information will enable it to “review the proposed use of federal grant dollars to ensure that all applicable requirements described in 45 CFR 74 or 45 CFR 92 are met.”  The categories are the same as the budget categories on the standard SF-424: personnel; fringe benefits; travel; equipment; supplies; contractual; construction; other; indirect costs.
    • Modification to the budget justification requiring detail of the costs for each line item within each budgeting category from the “Federal Object Class Categories” form.  While a 3-year budget justification broken down into federal and non-federal resources is required, an itemization of revenues and expenses is necessary for the first year of the budget justification only.


  • Shortening the General Project Period Length and Increasing Situations under Which Non-Compliance with Health Center Program Requirements Result in 1-Year Project Periods:  The new SAC incorporates the 3-year project period length that was announced during the last BPHC grantee teleconference and clarifies the factors used to determine whether a grantee qualifies for a 3-year project period or a 1-year project period.  On a practical note, the stricter determination factors could result in an increase in 1-year project periods and ultimately the de-funding of existing grantees.
    • 3-year project period will be awarded if: (1) a new applicant would have 0 to 4 grant conditions related to the Health Center Program Requirements based on the information presented in the SAC application; or (2) a current grantee would have 0 to 4 grants conditions related to the Health Center Program Requirements based on a combination of unresolved grant conditions carried over into the new project period and any new grant conditions based on the information presented in the SAC application.
    • 1-year project period will be awarded if: (1) a new applicant or a current grantee would have 5 or more grant conditions related to the Health Center Program Requirements based on the process described above; (2) the most recent audit called into question whether the organization is able to continue as a “going concern;” or (3) a current grantee has an unresolved grant condition in the 30-day phase of the progressive action process that is carried over into the new project period.  NOTE:  every Notice of Award for a 1-year project period will include a restricted drawdown term.
    • If a grantee has had 1-year project periods in FY 2012 and FY 2013 and would be awarded a 1-year project period for FY 2014 based on the aforementioned criteria, the SAC will not be awarded to the grantee.  Effectively, the grantee will be de-funded.

Given these significant changes, it is crucial that all health center grantees review the SAC carefully and start preparing your organization for these modifications now – NACHC urges that you do not wait until right before your submission deadline (or risk being too late to resolve issues).  In the meantime, NACHC will be contacting BPHC to discuss these modifications and their potential adverse impact on health centers.

If you need additional information, please contact Roger Schwartz or Susan Sumrell.

1 Comment

  1. Unfortunately, increasing the administrative burden will produce the results HRSA is looking for – the defunding of certain grantees. It’s no longer about the patients, it’s about the money and its appropriate versus inappropriate uses. We all pay the price, large or small, for the poor performers and thieves among us. Factoring in the ACA over the next few years could easily spell the end of Section 330 funding as we know it for many of us.

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