Financial and Grants Management Institute - March 18-20, 20081 Developing and Managing Your Budget.

Financial and Grants Management Institute - March 18-20, 2008 1

Developing and Managing Your Budget


Session Objectives

1. Identify costs attributable to your grant

2. Provide participants with tools and resources to create an effective grant budget

3. Provide guidance for managing grant budget effectively once it is created


Cost Principles• Used to determine the allowable costs

incurred by organizations under grants or contracts.

• Principles are designed so that federal awards bear their fair share of the cost.

• Information about factors that affect allowability and information about reasonable, necessary, and allocable costs.

• There is a list of selected costs that are specifically addressed.


Cost Principles

• Provide guidance about reimbursement requirements

• Provide uniform standards of allowability and allocation

• Encourage consistent treatment of costs

• Define reasonable costs


Reasonable Costs• A cost is reasonable if it does not exceed

that which would be incurred by a “prudent person” under the circumstances prevailing at the time the decision was made to incur the costs. The question of the reasonableness of specific costs must be scrutinized with particular care in connection with organizations or divisions which receive the preponderance of their support from awards made by Federal agencies.


Cost PrinciplesExamples of costs described in Circular:• Advertising and public relations costs • Compensation for personal services• Memberships, subscriptions, and

professional activity costs• Recruiting costs• Rental costs• Training and education costs• Travel costs


Factors Affecting Allowability of Costs

To be allowable under an award, costs must meet the following general criteria:

• Be reasonable, ordinary, necessary and allocable under OMB principles.

• Conform to any limitations set forth in OMB principles and in the award as to types or amount of cost items.

• Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the organization.

• Be accorded consistent treatment. • Be determined in accordance with Generally Accepted

Accounting Principles (GAAP). • Not be included as a cost or used to meet cost sharing or

matching requirements of any other Federally-financed program.

• Be adequately documented.


Key Elements of Costs• Allowable

– Conform to any limitation or exclusion set forth in the OMB Cost Principle Circulars/Code of Federal Regulations or in the award as to types or amount of cost items.

– Be determined in accordance with Generally Accepted Accounting Principles (GAAP)

• Allocable– A cost is allocable to a particular cost

objective, such as a grant, contract, project, service, or other activity, in accordance with the relative benefits received.

– A cost is allocable to a Federal award if it is treated consistently with other costs incurred for the same purpose in like circumstances


Key Elements of Costs

• Reasonable– A cost is reasonable if, in its nature or amount,

it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the costs

• Necessary– The cost is of a type generally recognized as

ordinary and necessary for the operation of the organization or the performance of the award


Revised Grant Guidelines

Federal Grant Guidelines

UniversitiesStates, Local, Indian Tribal Governments

Non-Profits Hospitals

Administrative Requirements

§ 45 CFR 2543§ 2 CFR 215

(formerly A-110)

§ 45 CFR 2541 OMB A-102

§ 45 CFR 2543§ 2 CFR 215 (formerly A-110)

§ 45 CFR 2543§ 2 CFR 215

(formerly A-110)

Cost Principles § 2 CFR 220 (formerly A-21)

§ 2 CFR 225 (formerly A-87)

§ 2 CFR 230 (formerly A-122)

§ 45 CFR 74 (HHS regulations)

Audit Requirements *

OMB A-133 OMB A-133 OMB A-133 OMB A-133

Notes:CFR = Code of Federal Regulations* = Organization is subject to A-133 if it expends more than $500,000 in Federal funds in its fiscal year

Effective May 11, 2004 and August 31, 2005


Budgeting – The BIG Picture


Managing The Budget Process

• What is a Budget?– A financial blueprint projecting expenditures

for the grant award period, e.g. six months; one year; three years; etc. Uses:

– Management oversight– Fundraising– Accountability– Forecasting


Summary: How Budgets Fit into the Big Picture

• Budgets impact every stage of the grant lifecycleBudgets can not be an afterthought

• Budget formulation is a known challenge to applicants

Knowing how to form a quality budgetis a critical skill


Budget Design Has Impactat Every Stage of the Grant Lifecycle

• To plan what is necessary for success• To establish realistic scope• To ensure you’ve covered the details• To compete for funds• To keep your partners compliant• To reflect on how you’ve complied with rules• To guide your staff as they execute the program• To define what’s expected and approved• To reflect upon your performance

Tip: Involve budget and finance staff in project planning from the beginning and thereafter

Tip: Involve budget and finance staff in project planning from the beginning and thereafter


Good budget planning makes things happening the way they are supposed

to happen…

Negotiation

APPLICANT

CORPORATION

Award

Application

Continuation Applications

Closeout Reports

Continuation Awards

Clarification Questions

How much do we need?

How much do we need?


What are some of the impacts of a poorly planned budget?

FLIP CHART LIST

Delayed award…

Post-award amendments

…

…


As an applicant/grantee, what is on your mind when you are

faced with submitting a grant budget?

How much can I ask for? …

How much information do they need?...…

How much can I ask for? …

How much information do they need?...…

FLIP CHART LIST


What are some typical budget development problems you have

run into?

Unclear directions/instructions…

Limited space for answers…

…

Unclear directions/instructions…

Limited space for answers…

…

FLIP CHART LIST


AmeriCorps Budgeting – What Do I Need to Know?


Grant Specific Functions of an

AmeriCorps Budget• Becomes part of the grantee’s contractual

obligation• Serves as a blueprint for the activities

supported under the grant • Helps ensure conformance to provisions and

regulatory restrictions• Used to monitor and measure progress

towards meeting matching requirements• Used to monitor and compare to budget to

actual expenses


Costs Types• Why know the difference between the

two kinds of costs?– Cost characteristics to properly classify expenses

• Cost Types:– Direct costs that correlate with the program and

its objectives, such as:– Member support– Training

– Indirect costs, also known as administrative costs, are costs to operate the organization, not directly or easily attributable to the program/project


Direct CostsCosts that are directly attributable to

meeting the goals and objectives of the programs.

They include:• Allowable, direct charges for members• Costs for staff who train, recruit or supervise

members• Member gear• Costs for independent program evaluations• Costs for travel


Administrative Costs

Administrative costs are general or centralized expenses of overall administration of an organization that receives assistance from CNCS.

Include items such as:• Accounting, auditing, general legal service• Costs for internal evaluation• General liability insurance• Salaries & benefits related to general

organizational management and support


CNCS Budgets

Overall Budget Checks • Are matching requirements being met• Graduated matching requirement based on

number of years program has operated• Cost per member service year• Consistent numbers of members, slots


Match Requirements

• As part of the Corporation’s 2008 appropriations, Congress changed the requirements for matching AmeriCorps grants.

• In general, the new requirements will apply to the grants that were submitted in January of 2008. In most cases, programs funded in 2007 or earlier (and which do not receive 2008 funding) must continue to meet the 15%

and 33% match requirements.

AmeriCorps Funding Year 1, 2, 3 4 5 6 7 8 9 10+ Grantee Share Requirements 24% 26% 30% 34% 38% 42% 46% 50%


Essence of an AmeriCorps Budget

• Budget is broken down by three sections– Section I: Program Operating Costs– Section II: Member Costs– Section III: Administrative Costs

• Multiple funding sources: Federal funds (CNCS) and matching funds (state, local and private) (subgrantees)


AmeriCorps Budget Structure

Section I: Program Operating Costs• Personnel• Personnel Fringe Benefits• Staff Travel• Member Travel• Equipment• Supplies• Member Training• Evaluation• Other

Federal Share (CNCS) for

Section I cannot exceed 67%


AmeriCorps Budget Structure

Section II: Member Costs• Living Allowance• Member Support Costs

– FICA– Worker’s Compensation– Health Care

• Subgrantee’s matching contributions for member costs, excluding health care, must be in non-federal monies, unless otherwise authorized


AmeriCorps Budget StructureSection III: Indirect or Administrative

Costs• Two methods to recover administrative

costs:– Organization has an approved federally

negotiated indirect cost rate Requires approval from Federal Government

– Grantee share is limited to 5% of Corporation’s share of actual expenses and the difference is allowable as match

• Organization uses fixed five percent rule– Requires approval by Corporation– Grantee match for administrative funds may

not exceed 10% of all direct expenditures


Budget Monitoring


What Are Budget Controls

• Reviews of budget to actual expenses regularly to avoid cost overruns

• Identification of expenditures that many not be budgeted to ensure they can be claimed

• Identification of expenditures that may need approval before being claimed


Key Budgetary Controls

Budgetary controls include:• Regular monitoring of budgets to actual year-to-date

and current period expenditures or outlays

• Explaining any budget variations that are unexpected or unusual and determining necessary adjustments

• Ensuring compliance with laws, regulations, and CNCS provisions, particularly matching percentage requirements

• Requesting prior approvals for modification, if necessary

• Assure budget changes are properly approved


AmeriCorps programs must obtain prior approval for:• Changes to increase or reallocate funds for the member

support category• Purchase of equipment over $5,000 that was not included

in the original budget • Cumulative reallocation exceeding 10% of total budget

Substantial changes in level of participant supervision• Sub-grants or contracts not included in original budget

Budget Management


Exercise


Taking it Home!

1. Have a clear understanding of the budget process and allowability of costs to include in the budget.

2. Create a process to monitor the budget to ensure compliance.

3. Be sure your budget supports your program design.

Financial and Grants Management Institute - March 18-20, 20081 Developing and Managing Your Budget.

Documents

Transcript of Financial and Grants Management Institute - March 18-20, 20081 Developing and Managing Your Budget.