The U.S. Department of Health and Human Services (HHS) plays a vital role in managing public health, medical research, and social services. One financial mechanism used to support large, one-time investments within the department is the HHS Nonrecurring Expenses Fund (NEF). This fund is designed to provide flexible, strategic financing for infrastructure, information technology, and other capital-related projects that enhance the department’s long-term efficiency and effectiveness. Understanding the purpose, structure, and impact of the Nonrecurring Expenses Fund helps clarify how HHS allocates resources for mission-critical improvements that do not fit into routine operating budgets.
What Is the HHS Nonrecurring Expenses Fund?
Definition and Purpose
The Nonrecurring Expenses Fund, or NEF, is a special financial mechanism authorized by Congress that allows HHS to retain and reinvest unobligated balances from prior-year appropriations. These funds are used exclusively for capital-related projects, such as facilities modernization, advanced IT systems, and equipment upgrades. Unlike regular appropriations, which must often be spent within a single fiscal year, NEF funds allow HHS to take a long-term view and invest in infrastructure that supports its public health mission.
The goal is to maximize the value of unspent funds and avoid waste by redirecting them to projects that enhance productivity, safety, and cost-effectiveness across the department’s many operating divisions.
How It Works
When HHS programs return unobligated funds at the end of a fiscal year, those funds may be deposited into the NEF instead of being returned to the U.S. Treasury. These carryover balances are then reviewed and allocated through an internal prioritization process. Projects seeking NEF support undergo rigorous vetting to ensure they align with strategic goals and deliver measurable benefits.
Eligible Projects and Use Cases
Capital Investments
The NEF is strictly limited to nonrecurring expenses, which typically means capital investments. These include:
- Facility construction and renovation: Upgrading labs, hospitals, data centers, and other physical infrastructure.
- Information technology modernization: Replacing outdated software, building secure cloud systems, or improving cybersecurity defenses.
- High-value equipment purchases: Acquiring advanced research tools or diagnostic devices for NIH, CDC, and other HHS agencies.
Routine operational costs, personnel salaries, and program grants are excluded from NEF eligibility. The emphasis is on one-time expenditures with long-term utility.
Examples of Past Projects
Over the years, NEF funds have supported critical upgrades across HHS agencies. Examples include:
- Modernization of the Centers for Disease Control and Prevention (CDC) laboratory facilities.
- IT infrastructure improvements at the Food and Drug Administration (FDA) to enhance drug approval tracking.
- Construction of new research buildings at the National Institutes of Health (NIH).
- Cybersecurity enhancements across HHS networks following assessments of system vulnerabilities.
These projects demonstrate how NEF funds are leveraged to increase operational resilience and support the health care and research systems that millions of Americans rely on.
Funding Source and Legislative Authority
How the Fund Is Capitalized
The NEF does not receive new appropriations from Congress each year. Instead, it is funded through unobligated balances money that was appropriated in past years but not spent or committed to contracts by the end of the fiscal period. Congress authorized HHS to redirect these funds through Section 223 of the Consolidated Appropriations Act, 2008, and subsequent statutes have continued and clarified this authority.
This system allows HHS to make use of funds that would otherwise lapse, turning potential waste into forward-looking investments.
Congressional Oversight
Although HHS has flexibility in using NEF resources, all spending is subject to congressional notification and reporting. HHS must submit detailed justifications for each NEF-funded project, including cost estimates, timelines, and expected benefits. Lawmakers and oversight bodies such as the Government Accountability Office (GAO) review these plans to ensure funds are used appropriately.
Governance and Selection Process
Internal Review and Prioritization
Within HHS, the Office of the Assistant Secretary for Financial Resources (ASFR) manages the NEF process. Project proposals are submitted by HHS agencies, such as the Administration for Children and Families or the Health Resources and Services Administration. These proposals undergo a multi-phase evaluation that considers:
- Urgency of need
- Alignment with strategic goals
- Potential return on investment
- Feasibility within the given fiscal year
- Risk and mitigation planning
Approved projects are added to the NEF implementation plan, and funds are allocated accordingly. The process is designed to be competitive and merit-based, ensuring that only high-impact projects receive support.
Performance Monitoring
Once projects are funded, HHS agencies must track progress and report on performance. Metrics may include milestones achieved, budget adherence, operational improvements, and long-term outcomes. These assessments help determine whether NEF investments are achieving their intended goals and inform future funding decisions.
Benefits of the Nonrecurring Expenses Fund
Efficient Use of Federal Resources
The NEF allows HHS to recycle unspent funds into mission-critical projects, reducing the need for new appropriations. This encourages fiscal discipline and ensures that taxpayer dollars support high-priority needs rather than remaining idle or lapsing unused.
Support for Long-Term Planning
Because NEF projects focus on one-time investments, agencies can plan for major upgrades without affecting their annual operating budgets. This allows for better long-term strategy, especially in infrastructure and technology modernization.
Improved Public Services
Many NEF projects directly improve service delivery to the public. For instance, better IT systems at HHS mean faster processing of Medicare claims, more efficient disease tracking, and improved access to health care data for researchers and providers.
Challenges and Limitations
Availability of Funds
The size of the NEF varies each year depending on the amount of unobligated balances available. In years when agency budgets are tightly managed, fewer unspent funds may be returned, limiting NEF capacity.
Project Readiness
To be eligible for NEF support, projects must be shovel-ready and capable of being completed within a limited timeframe. Some worthwhile initiatives may be excluded simply because they require longer planning or design phases.
Complexity of Oversight
While oversight is essential for transparency, it can also slow down implementation. Balancing speed and accountability is a constant challenge for NEF administrators and participating agencies.
The HHS Nonrecurring Expenses Fund is a powerful tool for reinvesting federal resources into meaningful infrastructure and technology projects. By utilizing unobligated balances from prior appropriations, the fund helps the Department of Health and Human Services enhance its capabilities without placing additional strain on taxpayers or annual budgets. From lab upgrades and cybersecurity improvements to new data centers and medical equipment, NEF investments support the long-term goals of public health, safety, and service efficiency. As the health care landscape continues to evolve, the NEF remains a strategic instrument for ensuring HHS agencies are equipped to meet future challenges with modern and effective systems.
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