42 U.S.C. § 300ff–31a — Timeframe for obligation and expenditure of grant funds

(a) Obligation by end of grant year — Starting in fiscal year 2007, a State has one year from when its grant money — under section 300ff–28(a)(1), 300ff–28(a)(2)(F), 300ff–29a, or 300ff–30 — first becomes available to commit ("obligate") that money. This one-year window is called the "grant year." Formula grants have a special carryover option, covered in (c). (b) Supplemental grants; cancellation of unobligated balance of grant award — For supplemental ADAP grants under section 300ff–28(a)(2)(F)(ii), and for grants under section 300ff–29a or 300ff–30, if money is still unobligated at the end of the grant year, the Secretary must cancel it and make the State return any of it already paid out. That canceled money then becomes extra funding for the next fiscal year's supplemental grants under section 300ff–29a, subject to the hold-harmless rule in section 300ff–28(a)(2)(H). (c) Formula grants; cancellation of unobligated balance of grant award; waiver permitting carryover — For formula grants under section 300ff–28(a)(1) or 300ff–28(a)(2)(F)(i), the same cancel-and-return rule applies, unless the State submitted a written waiver application before the grant year ended, describing what it plans to spend the money on, and the Secretary approved it. If approved, the State gets one more year — the "carryover year" — to spend the money; anything still unspent at the end of that year is canceled and must be returned. Canceled balances become extra funding for the following fiscal year's section 300ff–29a supplemental grants, subject to the hold-harmless rule. Separately, if a State has unobligated formula-grant money at the end of a grant year, the Secretary must also reduce that State's next formula grant by the same amount, minus any part covered by an approved waiver — this reduction applies whether or not a waiver was granted — and the reduced amount likewise becomes extra section 300ff–29a funding, subject to the hold-harmless rule. This reduction does not apply if the unobligated balance was 5 percent or less of the grant, and it is not counted when the Secretary later calculates the State's hold-harmless guarantee for the following year. (d) Treatment of drug rebates — Money from ADAP drug rebates (section 300ff–26(g)) does not count as part of a grant award for purposes of this section. If spending rebate money would trigger a penalty, or a bigger penalty, under this section, a State may ask the Secretary to instead treat its unobligated balance as reduced by the rebate amount in the planned spending. Any unobligated ADAP supplemental funds returned to the Secretary must be used either for the ADAP supplemental program, if the Secretary decides that is appropriate, or as extra funding for section 300ff–29a supplemental grants. (e) Authority regarding administration of provisions — Instead of canceling a State's unobligated balance under (b) or (c), the Secretary may choose to simply reduce that State's future grants under section 300ff–28, 300ff–29a, or 300ff–30 by the same amount, and may let the State keep and use the unobligated balance toward that future grant. Any amount reduced this way becomes extra section 300ff–29a funding, subject to the hold-harmless rule. This does not limit the Secretary's other powers under (b) and (c), including granting waivers, and it applies even though (c)(4) separately requires a penalty for unobligated funds.