HRSA 330 Budget & Financial Management

Section 330 Budget Structure

The Section 330 budget follows the standard federal grant budget format using the SF-424A (Budget Information — Non-Construction Programs). The budget is organized into object class categories that align with how costs are tracked in your general ledger. Understanding this structure is essential because the approved budget becomes the financial control document against which all expenditures are measured.

The Section 330 budget reflects only the federal portion of health center operations. However, HRSA expects the budget to be presented in the context of the total organizational budget, demonstrating that the federal funds supplement (not supplant) other revenue sources and that the health center has a sustainable financial model beyond the grant itself.

SF-424A Object Class Categories

Each line on the SF-424A must be supported by a budget narrative that explains what is being purchased, why it is necessary, and how the amount was calculated. The categories are:

Allowable vs. Unallowable Costs

Cost allowability for Section 330 is governed by 2 CFR 200 Subpart E (Cost Principles) and any additional restrictions in the NOFO and Notice of Award. To be allowable, a cost must meet four tests simultaneously:

• •Necessary and reasonable for the performance of the grant
• •Allocable to the grant (the cost benefits the grant activity, or can be distributed proportionally across benefiting programs)
• •Consistently treated under your organization's accounting policies (you cannot charge something as a direct cost on one grant and an indirect cost on another if the nature of the cost is the same)
• •Not specifically prohibited by 2 CFR 200 or the terms of the award

Common Allowable Costs

• •Staff salaries and fringe benefits for personnel working on grant-funded activities (proportional to % effort)
• •Medical, dental, and pharmaceutical supplies used in direct patient care
• •Clinical equipment necessary for approved services
• •Contracted clinical services within the approved scope of project
• •Facility costs (rent, utilities, maintenance) proportional to grant use
• •EHR and practice management system costs
• •Professional development and continuing education for grant-funded staff
• •Patient enabling services (transportation, interpretation, outreach) within approved scope

Specifically Unallowable Costs

2 CFR 200.421–200.475 identifies costs that are always unallowable under federal grants. Key prohibitions for health centers include:

• •Alcoholic beverages (200.423)
• •Bad debts (200.426) — uncollectible patient receivables cannot be charged to the grant
• •Entertainment (200.438) — costs of amusement, social activities, and related items
• •Fines and penalties (200.441)
• •Fundraising (200.442) — costs of organized fundraising activities including grant writing for other funding sources
• •Lobbying (200.450) — costs associated with influencing legislation or regulatory actions
• •Major construction — Section 330 operational funds cannot be used for construction; minor A&R may require prior approval
• •Pre-award costs — unless specifically authorized in the Notice of Award (typically limited to 90 days pre-award)

Budget Period vs. Project Period

Understanding the distinction between budget period and project period is fundamental to Section 330 financial management:

• •Project period: The total duration of the award, typically 3–5 years for SAC or NAP awards. This is the full timeframe over which you are authorized to conduct grant activities.
• •Budget period: A single year within the project period, usually 12 months. Each budget period has its own approved budget, and you submit an NCC application to receive funding for each subsequent budget period.

Funds are awarded for the budget period, not the project period. You cannot spend next year's allocation this year. Unspent funds at the end of a budget period are subject to carryover rules (see below). Financial reports (SF-425) track expenditures against the current budget period allocation.

Carryover and Prior Approval Requirements

Unobligated Balance Carryover

If you do not spend all of your Section 330 allocation within a budget period, the unobligated balance may be carried forward to the next budget period. HRSA's carryover policies are defined in the Notice of Award, and the requirements have evolved over time:

• •Carryover up to a certain threshold (often 25% of the budget period award) may be automatic, requiring no prior approval but requiring documentation in the NCC application.
• •Carryover above the threshold requires prior written approval from HRSA. Submit a carryover request through EHBs with a detailed plan for how the carried funds will be used.
• •HRSA may reduce future budget period awards if an organization consistently carries over large balances, as this suggests the grant is over-funded relative to the organization's operational needs.

Prior Approval Requirements

Certain budget actions require prior written approval from HRSA before implementation. Under 2 CFR 200.407 and the Health Center Program conditions of award, prior approval is generally required for:

Implementing a budget action that requires prior approval without obtaining that approval in advance can result in disallowed costs. If HRSA determines that costs were incurred without required approval, those costs may need to be returned. Always check the Notice of Award conditions before making significant budget changes.

Indirect Cost Rate Considerations

Health centers can recover indirect costs (overhead) charged to the Section 330 grant through one of two mechanisms:

Negotiated Indirect Cost Rate Agreement (NICRA)

A NICRA is negotiated between the health center and its cognizant federal agency (the agency that provides the most direct federal funding, which for most health centers is HRSA/HHS). The NICRA establishes a rate based on the organization's actual indirect costs relative to a direct cost base. Common rate types include:

• •Provisional rate: Used during the year based on estimated costs, then trued-up to the actual rate after the fiscal year closes.
• •Predetermined rate: Fixed for a specified period, not subject to adjustment.
• •Fixed rate with carryforward: Fixed for the period, with any variance between applied and actual costs carried forward to future periods.

Negotiating a NICRA requires submitting an indirect cost rate proposal to HHS Division of Cost Allocation (DCA). The process can take 6–12 months for initial proposals. Health centers with complex cost structures often benefit from consulting with a cost allocation specialist.

10% De Minimis Rate

Organizations that have never had a NICRA may elect a 10% de minimis indirect cost rate under 2 CFR 200.414(f). The 10% rate is applied to modified total direct costs (MTDC), which excludes equipment, capital expenditures, subawards exceeding $25,000, patient care charges, and rental costs. The de minimis rate is simpler to administer but may significantly understate actual indirect costs for large health centers with substantial overhead.

Once elected, the de minimis rate must be used consistently until the organization negotiates a NICRA. You cannot switch between the de minimis rate and a negotiated rate without going through the formal NICRA process.

Change in Scope vs. Budget Modification

One of the most consequential distinctions in Section 330 financial management is the difference between a Change in Scope (CIS) and a routine budget modification. Misclassifying a scope change as a budget modification — and implementing it without CIS approval — is a compliance violation that can result in disallowed costs and conditions of award.

What Triggers a Change in Scope

A CIS is required when the proposed change alters the approved scope of project as documented on Forms 5A, 5B, and 5C. Common CIS triggers include:

• •Adding or removing a service delivery site — including temporary sites, mobile units, or school-based health centers
• •Adding or removing a service type — for example, adding dental services, pharmacy, or behavioral health that were not on the approved Form 5B
• •Adding or deleting a target population — such as adding homeless services under 330(h)
• •Significant change in service area — expanding or contracting the geographic area served
• •Relocation of a service site — moving a site to a new address

What Is a Budget Modification (Not a CIS)

Budget modifications that do not alter the approved scope of project are handled through routine budget revision processes. Examples include:

• •Reallocating funds between budget categories within the 25% threshold
• •Adjusting staffing levels within the same approved services (e.g., replacing a departing physician with a nurse practitioner providing the same services)
• •Changing vendors or contractors while maintaining the same service scope
• •Minor adjustments to operating hours at existing sites

Cost Allocation for Multi-Funded Health Centers

Most health centers receive funding from multiple sources simultaneously — Section 330, other HRSA programs, SAMHSA, CDC, Ryan White, state grants, and Medicaid/Medicare revenue. This multi-funding environment requires a rigorous cost allocation methodology to ensure that each funding source is charged only for costs that benefit its activities.

Health centers must maintain a written cost allocation plan that describes:

• •How direct costs are assigned to specific funding sources
• •How shared costs are distributed across funding sources (e.g., by patient volume, FTE allocation, or square footage)
• •How indirect costs are allocated using the negotiated rate or de minimis rate
• •How the methodology ensures no funding source is charged more than its fair share

The cost allocation plan is reviewed during the Single Audit and during OSVs. Auditors will test transactions to verify that the allocation methodology is applied consistently and accurately. Weak cost allocation is one of the most common financial management mistakes in health center operations.

Non-Supplanting Requirement

Section 330 funds may not be used to supplant (replace) funds from other sources that would otherwise be available for the same purposes. This means you cannot reduce state funding, Medicaid revenue, or private fundraising and replace the lost revenue with Section 330 dollars. The non-supplanting requirement applies to the total budget, not just individual line items.

HRSA monitors for supplanting by reviewing total revenue trends in UDS data, examining the relationship between Section 330 funding and other revenue sources, and reviewing budget narratives that suggest replacement of previously available funding. If revenue from other sources decreases, be prepared to document that the decrease was not caused by the availability of Section 330 funds.

Financial Reporting Alignment

Section 330 financial management requires alignment across multiple reporting systems. The following reports must be internally consistent:

• •SF-425 quarterly reports must reconcile with general ledger expenditures and PMS drawdowns
• •UDS Table 8A/9D/9E must reconcile with audited financial statements for the same period
• •Single Audit schedule of expenditures must reconcile with SF-425 reports
• •NCC budget must reflect actual operational patterns and reasonable projections

For details on each of these reporting obligations, see the reporting requirements guide.