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State Letter #03-24

Use of Surplus Prior Year Funds for Current Year Formula Programs

Published: December 26, 2003
State Letter

TO: State Refugee Coordinators

FROM: Nguyen Van Hanh, Ph.D.
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 (FY 2001) funds for the FY 2003 CMA (Cash/Medical/Administrative) 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 2002, for example, all CMA expenditures must be reported to ORR by September 30, 2003  (see 45 CFR 400.210(a)(2)).

During the past several months, ORR completed the processing of both the FY 2001 and FY 2002 CMA surpluses.

For FY 2001, 39 States recorded surpluses. Ordinarily, these funds would lapse to the Treasury, but Congress allowed ORR to use these surplus funds through September 30, 2003. As a consequence, five States (AZ, FL, MO, NY, NC) received 03-Q4 CMA award letters that re-authorized use of FY 20001 surplus CMA funds for FY 2003 expenditures. For the remaining States, ORR de-obligated the surplus funds for use in non-CMA programs.

Thirty-seven States recorded CMA surpluses for FY 2002. These 37 (AZ, AR, CA, CO, CT, FL, GA, HI, ID, IL, IN, IA, KS, LA, MD, MA, MI, MN, MS, MO, MT, NH, NJ, NM, NY, ND, OR, PA, RI, SC, SD, TN, UT, VT, VA, WA, WI, ) received 04-Q1 award letters that re-authorized use of FY 2002 surplus funds for FY 2004 expenditures. We expect to de-obligate the remaining surplus funds from States shortly.

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, 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—$173,000 in FY 2004 funds and $27,000 in unexpended prior year (FY 2002) funds. The State then incurs $140,000 in expenditures during FY 2004. The State should charge the first $27,000 in expenses against the FY 2002 funds, and the remaining $113,000 against FY 2004 funds, leaving only a surplus of $60,000 in FY 2004 funds. However, suppose the State neglects to do so, applying all expenditures to current year (FY 2004) funds. This leaves a surplus of only $33,000 in FY 2004 funds along with the untapped $27,000 in FY 2002 funds.

    A year from now, after the posting of all expenditures and the closing of all accounts, ORR will send the State a letter de-obligating the $60,000 in surplus FY 2004 funds. The State’s balance, however, will be only $33,000. The State cannot tap the surplus FY 2002 funds—these funds will have long since lapsed to the Federal treasury. As a consequence, the State will need to make up the difference ($33,000). Please discuss these points with the staff of your State Comptroller office.
  • 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 their estimate would exactly equal subsequent expenditures. For example, suppose ORR awards a State $200,000 in CMA for FY 2002. At the end of the accounting year (09/30/03), the State reports expenditures of exactly $200,000. One possible answer is that the State’s FY 2002 expenditures exceeded its FY 2002 award, and the State began to charge off the remainder of its FY 2002 expenditures against the FY 2003 award. This is, of course, impermissible. The correct procedure is to provide ORR with a final Form FSR-269 for FY 2002 CMA marked “final” showing the appropriate deficit. ORR will then provide supplemental 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 2002 expenditures against the FY 2003 CMA grant until the FY 2002 funds were depleted. This is also impermissible. The correct procedure is to provide ORR with a Form FSR-269 indicating a surplus for FY 2002 and charge FY 2003 expenditures against the subsequent FY 2003 award. ORR will then either de-obligate the FY 2002 surplus or reauthorize funds for other uses.
  • We wish also to emphasize the importance of filing a final financial report (SF-269) 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 Ella Hayes, ORR Data Unit, ORR—Sixth Floor, 370 L’Enfant Promenade, S.W., Washington, D.C. 20447  [Fax: (202) 401-5487].

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.