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State Letter #02-21

Use of Surplus Prior Year Funds for Current Year Formula Programs

Published: June 19, 2002
Types:
State Letter
Tags:
surplus funds

TO: State Refugee Coordinators

FROM: Nguyen Van Hanh, Ph.D.
Director
Office of Refugee Resettlement

SUBJECT: Use of Surplus Prior Year Funds for Current Year Formula Programs

This State letter explains the use of surplus prior-year funds for FY 2002 CMA (Cash/Medical/Administrative) and social services allocations.

Each quarter ORR allocates funds to its State partners for the CMA program. The amount of the allocation is based on ORR’s estimate of the needs of each State, taking into account both the State’s initial estimate of its need (on the ORR-1), and the subsequent number of arrivals. ORR generally attempts to provide sufficient funds so that no State incurs a deficit throughout the year. States must file a final report with ORR one year after the end of the fiscal year in which the funds were awarded. In the case of FY 2001, for example, all expenditures must be reported to ORR by September 30, 2002  (see 45 CFR 400.210(a)(2).

ORR has now completed its processing of FY 2000 expenditures. As in previous years, actual State CMA expenditures in FY 2000 fell short of the amounts awarded during the year. Forty-seven States recorded CMA surpluses for FY 2000. Ordinarily, unobligated funds lapse to the Treasury Department, but Congress has allowed ORR to use these surplus funds through September 30, 2002.

As in previous years, ORR has used surplus prior year funds for CMA and social service formula allocations. The third quarter (02-Q3) CMA award letters reflected use of these funds:

Twenty-five States (AZ, CA-W, DC, FL, GA, IL, IA, KS, LA, MD, MI, MN, MO, NH, NJ, NY, OR, RI, SC, SD, TN, TX, UT, WA, WV, WI) received award letters authorizing funds only from normal FY 2002 appropriations. The current account number (CAN) for these award letters is 2002-G99-8001.

Eleven States (HI, ID, IN, ME, NE, NM, NC, ND, OK, VT, VA) received award letters which authorized them to draw their funds entirely out of FY 2000 funds. In the example below, the State’s CMA 02-Q3 award of $54,000 was paid entirely from FY 2000 CMA funds. The $87,000 from FY 2002 appropriations represents CMA awards from previous quarters.

Appropriation        CAN             This Grant     Reauthorized           Cumulative Fiscal
Number                                        Award        Prior Year Funds     Year Amount
75-0/2-1503    2000 G99 3001 $ 54,000.00
75-2/4-1503    2002 G99 8001   $  0.00         $ 87,000.00
$141,000.00

Five States (CA-H, CT, MS, OH, PA) received 02-Q3 CMA award letters that authorized use of both FY 2000 surplus funds and FY 2002 funds. In the example below, the CMA 02-Q3 award of $1,154,000 was paid in part with authorization to use prior year FY 2000 CMA funds ($588,000) and in part with FY 2002 CMA funds ($566,000).

Appropriation       CAN             This Grant     Reauthorized           Cumulative Fiscal
Number                                        Award       Prior Year Funds     Year Amount
75-0/2-1503    2000 G99 3001 588,000                  
75-2/4-1503    2002 G99 8001    566,000                                      2,877,000
$3,465,000                     

The upcoming 02-Q4 social services award letters will exhibit the same pattern: Some States will receive awards entirely from FY 2002 funds, some from FY 2000 surplus funds, and some from both.

After ORR has distributed most of its surplus funds in its 02-Q3 CMA and 02-Q4 social service awards, ORR will then de-obligate any remaining surpluses to augment discretionary grant programs. Each State with a remaining surplus will receive a de-obligation notice in the form of a CMA “award” letter for the fourth quarter of FY 2000. This “award” will be a negative number, which will reduce the previous cumulative award to the CMA amount actually spent, as shown on the State’s final financial report.

We illustrate this through an example. A State’s total CMA allocation in FY 2000 was $5,624,000. Its subsequent final financial report for FY 2000 recorded total CMA expenses of $4,246,000, for a surplus of $1,377,000. This year, the State was authorized to use $1,115,000 in FY 2000 surplus funds for part of its FY 2002 CMA award, leaving a remaining balance of $262,000 in unused FY 2000 CMA funds. The State will shortly receive an award (i.e. de-obligation) letter which will de-obligate the final portion of the surplus FY 2000 CMA funds for use in ORR discretionary programs. The final award, dated as the fourth quarter of FY 2000, will read as following:

Appropriation       CAN              This Grant    Reauthorized           Cumulative Fiscal
Number                                        Award       Prior Year Funds     Year Amount
75-0-1503       2000 G99 3001   (262,000)                                     5,361,000

We emphasize three points:

Each State must spend all of its prior year funds before it spends any of its current year funds. This is extremely important—prior year funds authorized, but not used in FY 2002, will lapse to the U.S. Treasury.

We illustrate the importance of this in the following example. Suppose that this year ORR obligates to a State CMA funds of $200,000—$150,000 in FY 2002 funds and $50,000 in unexpended prior year (FY 2000) funds. The State then incurs $125,000 in expenditures during FY 2002. The State should charge the first $50,000 in expenses against the FY 2000 funds, and the remaining $75,000 against FY 2002 funds, leaving only a surplus of $75,000 in FY 2002 funds. However, suppose the State neglects to do so, applying all expenses to current year (FY 2002) funds. This leaves a surplus of only $25,000 in FY 2002 funds along with the untapped $50,000 in FY 2000 funds.

Two years later, ORR again obligates $200,000 for CMA—$125,000 in current year (FY 2004) funds and $75,000 in prior year (FY 2002) funds. The State, however, cannot locate the full surplus in FY 2002, since only a surplus of $50,000 in FY 2002 funds remains. Nor can it tap the surplus FY 2000 funds—these funds will have long since lapsed to the Federal treasury. As a consequence, the State will need to make up the difference ($25,000) with State funds.

States must use funds only for benefits and services in the year of award. Each year some States report final expenditures that evenly match their awards from ORR. Since those awards were based on projections, it is implausible that an award would exactly equal subsequent expenditures. For example, suppose ORR awards a State $200,000 in CMA for FY 2000. At the end of the accounting year (09/30/01), the State reports expenditures of exactly $200,000. One possible answer is that the State’s FY 2000 expenditures exceeded its FY 2000 award, and the State began to charge off the remainder of its FY 2000 expenditures against the FY 2001 award. This is, of course, impermissible. The correct procedure is to provide ORR with a final Form-269 for FY 2000 CMA marked “final” showing the appropriate deficit. ORR will then provide funds to expunge that deficit.

The other possibility is that the State’s expenditures fell short of the award. In this case, the State may have continued to charge FY 2001 expenditures against the FY 2000 CMA grant until the FY 2000 funds were depleted. This is also impermissible. The correct procedure is to provide ORR with a Form-269 indicating a surplus for FY 2000 and charge FY 2001 expenditures against the subsequent FY 2001 award. ORR will then either de-obligate the FY 2000 surplus or reauthorize funds for other uses.

We wish also to emphasize the importance of filing a final financial report (on SF269) in a timely manner. Reports are due 30 days after the end of the quarter. ORR uses these forms to plan the ORR budget and track expenditures throughout the year. Please send one copy to Mike Bratt, Office of mandatory Grants, Fourth Floor, 370 L’Enfant Promenade S.W., Washington, D.C.  20447 and one copy to your State liaison, ORR—Sixth Floor, 370 L’Enfant Promenade, S.W., Washington, D.C. 20447  [Fax: (202) 401-5487 pr (202) 401-0981].

A final report is due in the ORR office by September 30th of the year following the end of the fiscal year in which the funds were awarded. There is no grace period. As in past years, ORR attempted to contact every State Coordinator and every State financial officer, but, this year, as in past years, several States filed their final reports after the deadline. Unfortunately, we cannot accept tardy reports unless they are favorable to the Federal government.

We hope that these examples help to explain more fully the authorization of prior year CMA surplus funds. Please share this letter with other State financial staff. If you have any questions, please contact Loren Bussert by phone at (202) 401-4732 or by E-mail at lbussert@acf.hhs.gov. Please note that the E-mail addresses is new.