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Grants Oversight

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Office of Financial Advisory Services (OFAS) is responsible for conducting financial and compliance oversight activities for SAMHSA’s programs.

OFAS’ primary mission areas and functions include:

OFAS Mission Areas

  • Performing financial and compliance reviews (onsite and virtual) of SAMHSA’s discretionary and non-discretionary grants;
  • Resolving federal and non-federal audits of SAMHSA’s grantees and programs. Federal audits can be conducted by either DHHS’ Office of Inspector General (OIG) or the General Accountability Office (GAO). Non-federal audits can be conducted by state auditors or by independent accounting firms;
  • Performing risk assessments of current and/or prospective SAMHSA grantees to ensure their financial management systems are adequate to administer federal awards;
  • Leading and coordinating the agency’s own internal audit as required by Office of Management and Budget (OMB) Circular A-123, Management’s Responsibility for Enterprise Risk Management and Internal Control.
  • Preparing/coordinating required departmental reports, such as the agency’s quarterly and year-end financial statements, management assurances, etc.; and
  • Receiving/coordinating the processing of whistleblower complaints.

OFAS Resources – OFAS will be updating its website regularly with additional resources as they become available. See below for recently developed Frequently Asked Questions (FAQ) in response to recurring instances of noncompliance found during both OFAS’ own financial and compliance reviews as well as during OIG audits.

Block Grants (SABG & MHBG) FAQs

Questions About Financial Management System Requirements:

The financial management system requirements applicable to SAMHSA’s block grants are referenced in the Notice of Award (NoA). These requirements are found at 45 CFR Part 96.30, Fiscal and administrative requirements. Section 96.30(a) Fiscal control and accounting procedures, requires a State to obligate and expend block grant funds in accordance with the laws and procedures applicable to the obligation and expenditure of its own funds. Fiscal control and accounting procedures must be sufficient to: (a) permit preparation of reports required by the statute authorizing the block grant and (b) permit the tracing of funds to a level of expenditure adequate to establish that such funds have not been used in violation of the restrictions and prohibitions of the statute authorizing the block grant.

Yes. The requirements located at 45 CFR 96.30 must flow down to individual subrecipient providers and be incorporated into the written agreement between the State and each subrecipient provider.

No. Advance payments are not expenditures. Therefore, a State may not treat them as expenditures on required financial reports. 45 CFR 96.30(a) requires that States maintain fiscal controls sufficient to permit the tracing of funds to a level of expenditure adequate to establish that such funds have not been used in violation of the block grant’s restrictions. Therefore, States must reconcile advances with actual expenditures and report actual expenditures on required financial reports.

For example: My State adopted a “Fee for Service” model for use with our provider network. Providers submit invoices based on a pre-established fee schedule that identifies the billable fee applicable to each type of treatment or procedure. Providers’ invoices specify the type and number of treatment services delivered to arrive at the invoice amount.

Yes and no. From the perspective of a prime award recipient, a State can accept a provider’s “fee for service” invoice to document the State’s expenditure. However, from the perspective of a subrecipient provider, the same “fee for service” invoice represents their “revenue” and not an “expense”. Therefore, subrecipient providers’ accounting systems must document the underlying expenses related to “fee for service” billings in order to comply with 45 CFR 96.30(a)’s requirements. 45 CFR 96.30(a) requires the tracing of funds to a level of expenditure adequate to establish that such funds have not been used in violation of the restrictions and prohibitions of the statute authorizing the block grant as required by 45 CFR 96.30(a).

Additionally, as the prime recipient, the State is ultimately responsible to ensure that “fee for service” billings are traceable back to the underlying expenditures in subrecipient providers’ accounting systems.

For example, what types of controls does SAMHSA consider necessary to permit the tracing of funds to a level of expenditure adequate to establish that such funds have not been used in violation of the restrictions and prohibitions of the statute authorizing the block grant?

Ultimately, it is the State’s responsibility to implement fiscal controls and accounting procedures to permit the tracing of funds to a level of expenditure adequate to establish that such funds have not been used in violation of the restrictions and prohibitions of the statute authorizing the block grant as required by 45 CFR 96.30(a).

However, States can increase compliance and reduce potential audit liability by avoiding commingled and unsupported costs. Specifically, States should consider that every business activity constitutes a cost center. Examples of cost centers include: a Federal grant, a state grant, a private grant, a self-funded project, fundraising activities, membership activities, lines of business, unallowable costs, indirect costs, etc. To avoid commingling, States must establish a unique General Ledger (G/L) account(s) in the accounting system to capture and accumulate expenditures for each cost center, apart from other cost centers.

Additionally, each individual block grant represents a unique cost center and a unique award as to time, purpose, and amount. Therefore, States must not commingle block grants awarded in different years by treating them as a single, fungible source of funding. Instead, States must create a unique G/L account to capture/accumulate the costs of each annual block grant. This same expectation also applies to subrecipient providers. Each subrecipient provider is also required to establish a unique G/L account to capture/accumulate the costs of each block grant subaward or pass-through award.

Finally, States’ accounting systems should also capture/accumulate any unique requirements associated with each block grant. For example, unique account/object codes should be created to capture/accumulate required spending earmarks, set-asides, maintenance of effort, etc.

Questions About the Availability of Funds:

Each block grant award is available for obligation and expenditure for a period of two years after the award date. For example, a block grant awarded in Federal Fiscal Year (FFY) 2019 has a twenty-four (24) month performance period of October 1, 2018 through September 30, 2020.

Block grant funds that remain unobligated and unexpended in Letter of Credit (LOC) accounts at the end of the performance period are expired and no longer available to the State. Similarly, States must return to SAMHSA any block grant funds withdrawn from LOC accounts but which remain unobligated and unexpended at the end of the performance period. Even though the State has possession, these funds are also expired and no longer available to the State and must be returned.

The SABG funds are expired and no longer available to the State. States receiving block grant awards must comply with all of the awards’ terms and conditions as stated in the Notice of Award. Therefore, States must liquidate all obligations incurred within the award’s obligation and expenditure period (i.e., performance period) not later than 90 days after the end of the award’s performance period, which also coincides with the due date for submission of the FINAL Federal Financial Report (SF-425). After 90 days, Letter of Credit accounts are locked. SAMHSA does not approve extensions to the performance period or 90-day post-award reconciliation/liquidation period. Therefore, States must complete all work and reporting within the approved performance period and the aforementioned 90-day post-award reconciliation/liquidation period. State’s (late) withdrawal requests occurring after the aforementioned periods are denied.

Questions About the Allowability of Funds:

To be allowable, expenditures under SABG and MHBG awards must comply with the authorizing legislation and applicable regulations identified in the Notice of Award. Additionally, 45 CFR 96.30 further requires States to obligate and expend MHBG and SABG funds in accordance with the laws and procedures applicable to the State’s own funds.

During the Period of Performance. Unallowable expenditures identified during the performance period should be removed from the award or subaward via an adjusting journal entry. The full amount of the State’s block grant award, or subrecipient provider’s pass through award, remains available for obligation and expenditure during the performance period.

After the Period of Performance. Unallowable expenditures identified after the performance period should be removed from the award or subaward via an adjusting journal entry. The State must also submit a revised FINAL SF-425, Federal Financial Report that reflects actual, allowable expenditures. The State should provide an explanation in Box 12 of the revised FINAL SF-425 report. The State must also return funds used for the unallowable expenditures to SAMHSA if the State withdrew and used block grants funds to reimburse the unallowable expenditures incurred by the State, or subrecipient provider.

If returning funds during the obligation and expenditure period (i.e., performance period), States should return funds to the applicable Letter of Credit (LOC) account by following the Program Support Center’s procedures for electronic return of funds.

If returning funds after the obligation and expenditure period (i.e., performance period), but during the 90-day post-award reconciliation/liquidation period, States should return funds to the applicable Letter of Credit (LOC) account by following the Program Support Center’s procedures for electronic return of funds.

If returning funds after the 90-day post-award reconciliation/liquidation period, States should submit a hard copy check made payable to the U.S. Department of Health and Human Services. Submit the check to the following address:

Substance Abuse and Mental Health Services Administration
Office of Financial Resources
Office of Financial Advisory Services
5600 Fishers Lane, 17E36M
Rockville, MD 20857 (USPS) or 20852 (FedEx, UPS, etc.)
Attn: RETURNED FUNDS

Also, submit a copy of the FINAL SF-425, Federal Financial Report, to facilitate identification of the associated SAMHSA block grant award number.

Questions About Reporting Requirements:

States are required to submit a FINAL SF-425, Federal Financial Report.

The FINAL SF-425, Federal Financial Report for the most recently completed MHBG and SABG award is due not later than 90 days after the end of the award’s obligation and expenditure period (i.e., performance period).

SAMHSA reconciles the total authorized block grant awarded to the State’s withdrawals and expenditures. SAMHSA determines if it can close the block grant, or if additional follow-up with the State is necessary. For example, if SAMHSA’s review determines that funds withdrawn exceed expenditures, SAMHSA will request a return of funds. However, it is ultimately the State’s responsibility to review its records and ensure that withdrawals do not exceed expenditures and excess funds are not retained. Excess funds paid to a non-federal entity is a debt that must be returned to the federal government.

Submit a revised FINAL SF-425, Federal Financial Report that reflects the block grant’s actual, allowable, and final expenditures. Use Box 12 to explain the reason for the revision. The State must also return to SAMHSA the unused funds and funds related to unallowable expenditures. 

Time extensions to submit a FINAL SF-425, Federal Financial Report, should be directed to the Grants Management Specialist (GMS) identified in the Notice of Award. The GMS will communicate SAMHSA’s approval/disapproval. However, be aware that an extension to submit a FINAL SF-425 is not an extension to the performance period or 90-day liquidation period. States must liquidate all obligations incurred within the award’s obligation and expenditure period (i.e., performance period) not later than 90 days after the end of the performance period. SAMHSA does not approve extensions to the performance period or 90-day post-award reconciliation/liquidation period. Therefore, States must complete all work and reporting within the approved performance period and the aforementioned 90-day post-award reconciliation/liquidation period. State’s (late) withdrawal requests occurring after the aforementioned periods are denied.

Last Updated
Last Updated: 05/16/2024
Last Updated