The Rural Health Transformation Program (RHTP) gives states flexibility to invest in rural healthcare through initiatives that strengthen healthcare delivery and support improved health outcomes. Through this flexibility, there is a responsibility to follow federal cost principles, specific limitations, and other guardrails that shape how RHTP funds may be budgeted and used.
This article is the third in a series of four articles providing details on RHTP frequently asked questions (FAQs). This third article explores questions related to RHTP budgeting and financial management. The first two articles in this series cover questions about how RHTP funds can and cannot be used and subrecipient and contractor eligibility. The fourth and final article will delve into compliance and reporting.
1. What are the specific budget caps for the RHTP?
Budget caps include:1
- Administrative costs: No more than 10% of the total award
- Provider payments: No more than 15% of the total award per budget period
- Infrastructure/capital investments: No more than 20% of the total award
- Electronic medical record (EMR) replacement: No more than 5% of the total award per budget period
- Technology catalyst funding allocated through the state: No more than 10% of the total award or $20 million, whichever is less
2. What is the maximum indirect cost rate allowed?
According to the RHTP Notice of Funding Opportunity (NOFO), states may apply their approved negotiated indirect cost rate or de minimis rate. Subrecipients are then subject to the state’s relevant indirect cost rate.
However, Section 71401 of Public Law 119-21,2 establishes a 10% cap on administrative costs, which includes direct and indirect costs. This also applies to subrecipients.
3. How do you calculate indirect costs?
The method of calculating indirect costs will vary depending on what rate is being used (the cognizant agency-approved negotiated rate or the de minimis rate).
Approved Negotiated Indirect Cost Rate
A negotiated indirect cost rate is the rate that has been formally negotiated and approved by your cognizant agency for indirect costs. This rate is to be applied consistently across federal awards unless stated otherwise in the award terms. This rate may be based on different costs such as modified total direct cost (MTDC), salaries and wages, total direct costs, etc. An organization’s approved negotiated indirect cost agreement will specify which base for indirect costs is being used, and what the applicable rate is.
To calculate indirect costs using a negotiated rate, an entity will multiply their agreed-upon rate by the total of their base. See below for an example.
- Indirect Cost Base & Rate: Salaries & Wages at 25%
- Formula: Total Salaries & Wages × 25% = Indirect Costs
- Total Salaries & Wages: $200,000
- Calculation: $200,000 × 25% = $50,000
De Minimis Rate
According to 2 CFR 200.414,3 indirect costs can be calculated using a de minimis rate of up to 15% of MTDC. Using the de minimis rate, indirect costs can be calculated using this formula:
MTDC × de minimis rate = indirect cost
MTDCs are calculated by summing the costs included in the MTDC base under 2 CFR4 guidance, while excluding costs identified as ineligible.
See the table below for a list of what MTDCs include and exclude.
| MTDC – Included | MTDC – Excluded |
|---|---|
|
|
After the MTDCs have been calculated, the MTDC can be multiplied by the de minimis rate of 15% (or a lower percentage if chosen by your organization) to determine the indirect costs. See below for an example calculation using the 15% de minimis rate:
| Category | Calculation |
|---|---|
| Expenses | |
| Salaries & Wages: $500,000 | $500,000 × 100% = $500,000 |
| Supplies: $75,000 | $75,000 × 100% = $75,000 |
| Subaward 1: $250,000 | $50,000 × 100% = $50,000 (Only the first $50,000 eligible for MTDC) |
| Subaward 2: $45,000 | $45,000 × 100% = $45,000 |
| MTDC | $500,000 + $75,000 + $50,000 + $45,000 = $670,000 |
| Indirect Costs Total | $670,000 × 15% = $100,500 |
4. What is the expenditure deadline for the RHTP funds per budget period?
Funds from each budget period may be used through the end of the subsequent federal fiscal5 year (FFY). For example, for FFY 2026, the budget period is October 1, 2025 to September 30, 2026. Expenditures for that budget period must be completed no later than September 30, 2027.
Unspent funds do not carry forward to future budget periods unless CMS approves an exception. The approval by CMS to carry forward unused funds is an exception and not a routine flexibility.
5. What do we do if we need to revise our RHTP budgets?
States may request revisions6 to RHTP budgets as program needs evolve. However, significant changes require CMS review and written approval. RHTP budget revisions require prior CMS approval under the following circumstances:
- There is a shift of funds across major expenditure categories or initiatives.
- The change affects a capped cost category.
- The change reflects a substantive adjustment to the approved transformation plan.
To request a budget revision, states are to provide CMS with an updated budget narrative that clearly explains what is changing, why the change is being made, and confirm that the revised budget continues to comply with any spending caps. The revised budgets do not take effect until CMS approval is granted.
Subrecipients should refer to the terms and conditions of their award agreements with the state to determine what types of budget revisions require prior state approval.
6. Can RHTP funds be used to cover startup or one-time costs versus ongoing operational expenses?
Yes. RHTP funds may be used for both startup (one‑time) costs and ongoing operational expenses, provided that all costs are:
- Allowable under the RHTP NOFO and applicable federal cost principles
- Included in an approved budget and budget narrative
- Reasonable, necessary, and allocable to approved RHTP activities
| Allowable Startup Costs | Allowable Ongoing Operational Costs |
|---|---|
|
|
Important clarification: Construction, major renovations, building expansion, or costs that materially increase the value or useful life of facilities are generally unallowable under RHTP. Pre-award costs are not permitted.
CMS encourages recipients to plan for sustainability and to clearly distinguish between:
- Implementation‑phase investments, e.g., startup, system build‑out, initial training
- Long‑term operational expenses needed to maintain and scale successful RHTP initiatives
This distinction is important because CMS will reassess state performance and funding allocations annually over the five‑year program period.
In summary, all costs, whether one‑time or recurring, must directly support RHTP objectives. They should also be adequately documented and reflect sound fiscal stewardship. Recipients should also confirm that:
- Costs are not duplicated or used to supplant other federal, state, local, or private funding sources.
- One‑time costs are clearly identified and explained in the budget narrative.
- Multiyear or recurring expenses align with the approved budget periods and annual continuation requirements.
7. What are the top three financial management practices to keep in mind?
While CMS guidance and 2 CFR Part 200 outline the full financial management requirements for the RHTP, the practices below highlight three key areas to keep top of mind when managing RHTP funds.
- Maintain strong internal controls supported by clear documentation.
- Check that written policies and procedures, any applicable approvals, and supporting documentation for activities performed under the award are available to provide evidence of compliance with applicable requirements.
- Monitor spending against approved budgets and caps.
- Regularly track expenditures to the CMS- or state-approved budget to help maintain compliance with RHTP spending limits and expenditure progress.
- Scrutinize administrative and indirect costs closely.
- Apply indirect cost rates consistently, with an emphasis on keeping total administrative costs at or below the 10% spending cap.
8. What financial documentation should be retained to support audits and CMS reviews?
Per CFR 200.3347 and the NOFO, recipients and subrecipients must retain all financial, performance, and programmatic records supporting the RHTP award, including:
- General ledgers and expenditure reports
- Invoices, receipts, and payroll documentation
- Contracts, subaward agreements, and procurement files
- Cost allocation plans and indirect cost agreements
- Documentation supporting program income, if applicable
- Progress reports
- Federal Financial Report (FFR)
- Federal Funding Accountability and Transparency Act of 2006 (FFATA)
- SAM.gov responsibility/qualification records
- Payment management system (PMS)
- Audit reporting (Federal Audit Clearinghouse)
- Work plan updates
- Debarment, suspension, ineligibility, and voluntary exclusion certification
Note: This content reflects our interpretation of CMS, HHS, and applicable federal guidance (including 2 CFR 200 and 2 CFR 300). Additional state‑specific or organization‑specific guidance and requirements may also apply.
How Forvis Mazars Can Help
Turning RHTP funding into measurable impact requires strong financial infrastructure, clear internal controls, consistent cost treatment, and routine budget-to-actual monitoring. Our Healthcare Consulting team at Forvis Mazars can work with organizations to help translate statutory and CMS expectations into workable financial management processes that support compliance efforts and effective decision making. In addition, we offer end‑to‑end grants management support, including the development of compliant budgets and indirect cost methodologies, proactive monitoring of spending and caps, enhanced documentation practices, and detailed preparation for reporting and closeout activities. If you’re looking to strengthen oversight while keeping implementation moving, our team can help you prepare for what’s next.
If you have questions or would like to discuss the rural health transformation plan and how it could apply to your organization, please reach out to a professional at Forvis Mazars.
Learn more about how healthcare organizations can navigate RHTP opportunities:
- Rural Health Transformation Program: Implications & Opportunities
- Rural Health Transformation Program: Compliance & Oversight
The information set forth contains the analysis and conclusions of the author(s) based upon his/her/their research and analysis of industry information and legal authorities. Such analysis and conclusions should not be deemed opinions or conclusions by Forvis Mazars or the author(s) as to any individual situation as situations are fact-specific. The reader should perform their own analysis and form their own conclusions regarding any specific situation. Further, the author(s)’ conclusions may be revised without notice with or without changes in industry information and legal authorities.
- 1“CMS-RHT-26-001: Rural Health Transformation Program – Notice of Funding Opportunity,” grants.gov, January 2026.
- 2“Public Law 119–21,” congress.gov, July 4, 2025.
- 3“Code of Federal Regulations: 2 CFR 200.414,” ecfr.gov, January 29, 2026.
- 4“Code of Federal Regulations: 2 CFR 200,” ecfr.gov, January 29, 2026.
- 5“RHT FAQs,” cms.gov, October 2025.
- 6“CMS Notice of Award,” health.wyo.gov, December 29, 2025.
- 7“Code of Federal Regulations: 2 CFR 200.334,” ecfr.gov, January 29, 2026.