HHS Guidance Addresses Expiring Exception for IT Costs

One of my favorite radio announcers, when coming to his final discussion about a certain topic, would say that he’s “wrapping it up with a nice little bow.” That’s essentially the first thing that came to my mind when I saw a recent question-and-answer guidance from the Department of Health and Human Services (HHS) about the upcoming elimination of an exception to former Office of Management and Budget (OMB) Circular A-87, Cost Principles for State, Local and Tribal Governments, and §200.405, allocable costs, of the OMB uniform guidance.

The exception relates to information technology (IT). Circular A-87, and similarly addressed in §200.405, required costs associated with building shared state-based IT systems that support multiple health and human service programs be allocated across all benefitting programs in proportion to their use of the system. The exception revised this approach by allowing human service programs, such as the Supplemental Nutrition Assistance Program and Temporary Assistance for Needy Families program, to use a range of IT components at no additional cost except for interfaces or other uniquely required services specific to those programs. The exception applied only to design, development and implementation, while maintenance and operations work continued to be allocated in accordance with OMB requirements under the circular and uniform guidance.

In July 2015, the exception was extended for three years, but is now scheduled to end on Dec. 31. The HHS Q&A guidance explains that states using this exception will need to incur costs for goods and services furnished no later than Dec. 31. If work is completed by that date, it can still be funded under the exception, and such states should follow typical invoicing and claiming processes. Conversely, if an amount was obligated by Dec. 31, but the good or service is not furnished by that date, then such expenditure must be cost allocated by program in proportion to its use of the system.

The Q&A guidance clarified how states should account for the exception in their advance planning documents (APD). For federal fiscal year (FY) 2019 annual APDs and budget tables, they must be completed as follows:

• For first quarter FY 2019, states can allocate costs in accordance with the exception.
• For second through fourth quarter FY 2019, and for all APDs going forward, states should allocate costs according to the circular/uniform guidance.

The guidance also notes that states working to develop their new methodologies should send operational cost allocation plans to HHS Cost Allocation Services and the regional office fiscal staff for all benefiting programs.

And with that, we’ll wrap up the discussion about this exception with a nice little bow.