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Transcript of Fund Accounting Clinic. 2 Who Are We? Presented by Training and Development Associates, Inc....
Fund Accounting Clinic
2
Who Are We?
Presented by Training and Development Associates, Inc. – Edward Hammond– Rocky Wade
Sponsored by U.S. Department of Housing and Urban Development
3
Who Are You?
What type of organization do you represent?– Lead agency– Sponsor– Service provider
What is your role at the organization?– Executive Director– Financial staff– Case Manager– Another position
4
What Do You Expect?
What are your expectations?– Why are you here?– What do you expect to gain from today’s
training session?– What will be the outcome of your
participation in this training session?
5
Why Are We Here?
Participants should be able:– To understand what fund accounting is
and how it applies to SNAPS grants;– To prepare a budget that uses fund
accounting; and– To prepare an employee time and
activity report that reflects fund accounting.
6
Why Are We Here?
To strengthen the capacity of SNAPS grantees to:– Make sure that funded activities are
eligible– Make sure eligible costs are charged to
the appropriate grant– Prepare accurate reports to be used as
management tools– Avoid recapture of SNAPS funds by HUD
7
Workshop Goals
Participants will leave with tools and techniques to incorporate fund accounting into the grantee’s procedures for:– Budgets– Time and activity reports– Reporting
8
Logistics
Resource materials– Manual– Presentation– Handouts
Activities Questions (the “Bin”) Restrooms and telephones
– Please silence or turn off cell phones
What is Fund Accounting?
10
What is Fund Accounting?
Simply stated:– Fund accounting is a method of
recording financial information that groups resources into funds based on the sources and the uses of those resources
11
What is Fund Accounting?
Not-for-profit accounting systems should operate on a fund basis– Fiscal and accounting entity
• With self-balancing accounts • Matches revenues with expenses
– Funds are segregated for the purpose of carrying out specific activities• Such as eligible activities cited in a grant
agreement
12
Benefits of Fund Accounting
Fund accounting tracks sources and uses of funds for each funding source– Without fund accounting, one cannot
truly analyze the revenues and expenses of a specific funding source
HUD revenues = HUD expensesHHS revenues = HHS expenses
13
Benefits of Fund Accounting
Allows one to evaluate each project and/or activity individually
Results in proper information for the drawdown of funds in LOCCS
14
Common Misconceptions of Fund Accounting
Taking a straight percentage of costs and applying it against a grant– Fund accounting creates a link between
eligible expenditures and the actual grant funds drawn for those expenditures
15
Common Misconceptions of Fund Accounting
Drawing budgeted amounts regardless of actual costs (including salary)– Time must be actual and documented
Drawing funds against multiple SHP sites instead of the specific site in an approved grant award
16
Common Misconceptions of Fund Accounting
Thinking that one SNAPS grant is the same as another SNAPS grant– Each grant has a separate approved
budget
17
Common Misconceptions of Fund Accounting
Thinking that one can spend on anything as long as it is SNAPS related– Expenses must be allocable to a specific
grant, not just eligible within the SNAPS program
18
Common Misconceptions of Fund Accounting
Drawing funds from a prior SNAPS grant to pay for a present grants’ expenditure– Each grant has a specific funding period– Excess funds are subject to recapture by
HUD
19
Start with a Chart of Accounts
Fund accounting starts from a basic building block—chart of accounts– Outlines all revenue sources– Outlines all expenditures by eligible
activities
20
Model Chart of Accounts
Start with chart of revenues– Broken down by specific funding sources
Expenditures for each possible activity and sub-activity
Specific expenditure charts for each individual project
Chart of accounts grows with each new project undertaken
21
Developing a Sources and Uses Statement
Develop chart of accounts for grant, then– Develop sources and uses statement
outlined in general ledger– Customized to particular SHP activity
We will use the “chart of accounts” as a basic building block through the rest of the presentation.
22
Examples of Fund Accounting
Budget models– Housing operations with supportive
services– Leasing with supportive services– Development with supportive services– Supportive services only– HMIS only– Development only– Grantee with sponsors
23
One Model
Housing operations with supportive services– Accounts for all revenues
• From HUD and others
– Accounts for all expenses • HUD-eligible and not eligible
– HUD-eligible costs classified • Direct• Allocated
24
Who Uses Fund Accounting
Board of Directors – Financially responsible for viability of
organization– Owns program as they understand their
liability and responsibility External funders (including HUD)
– Gain confidence in organization as it complies with business norms
Staff and management– Tracks operations and reporting
25
Exercise
Family Services, Inc.– Review the case description– Complete the worksheet– Answer the related questions
How Does Financial Management Relate to Fund Accounting?
27
Financial Management
OMB establishes guidelines for financial management– Addresses many areas of financial
systems including requirement for fund accounting
– Applies to all awards of federal assistance
– May apply differently to specific grants based on role of recipient
28
Relationship of Federal Regulations
Area of Financial Management
State and Local Governments
Not-for-Profits
Cost Principles OMB Circular A-87 OMB Circular A-122
AuditsOMB Circular A-133
OMB Circular A-133
Uniform Administrative Requirements
24 CFR Part 85 24 CFR Part 84
29
OMB Accounting Standards
Fund Accounting helps an organization comply with OMB’s federal standards– Control and account for funds, property
and other assets– Identify source and use of all federal funds– Allow accurate, timely and complete
financial reporting– Minimize time in transfer of funds between
federal government and grantee
30
Accounting Records
Tracks the sources and uses of funds Ensures that program costs are
– Incurred for the proper period– Actually paid– Expended on eligible items– Expended from the appropriate grant– Approved by appropriate officials
31
Sources and Uses of Funds
Up-to-date information on sources and uses of funds– Amount of federal funds received and
authorization of funds– Obligations of funds and un-obligated
balances– Assets and liabilities– Program income– Expenses by grant year and program
32
Determining Costs
Costs are only eligible if they– Are associated with an eligible client– Pay for eligible activities– Are delineated in your application
(budget)– Have adequate source documentation– Meet OMB standards for being
reasonable, allowable and allocable
33
Cost Reasonableness
Costs charged to federal award must be necessary, reasonable and directly related to the grant
Look at the following– Whether cost is ordinary and necessary– Market prices for comparable goods and
services– Benefit to the individuals involved
34
Cost Allowability
In general, cost must be– Necessary and reasonable– Allocable to the program– Authorized or not prohibited– Conform to and be consistent with rules
and requirements– Not charged to any other program
Refer to list of allowed costs in OMB Circular
35
Cost Allocation
A cost is allocable to a HUD program if it is– Treated consistently with other similar
costs– Incurred specifically for the program– Benefits program or can be distributed
based on a reasonable proportion– Necessary to operations
36
Determining Eligibility
If properly procured, cost is reasonable If on approved budget, cost is
allowable If directly linked to grant, cost is
allocable
Therefore, if costs are reasonable, allowable and allocable…
They are eligible for federal reimbursement!
37
Grant Agreement
Establishes compliance standards for federal requirements– SuperNOFA– Application– Technical Submission– OMB Circulars
38
Importance of Fund Accounting toFinancial Management HUD grant may be of many funding
sources– Multiple grants lead to fund accounting– Multiple HUD grants lead to fund
accounting– Financial management system must
account for requirements • All funding streams • Each project and/or activity
39
Developing Budgets
Budgets are projections of expenses drawn from actual experience– Defines goals for a given period– Provides ability to monitor progress– Identifies significant variances between
financial goals and how resources are actually used
Budgets should never be submitted to decision-makers and funding sources without including assumptions
40
Budget Requirements
OMB requires organizations put budget controls into place– Starting with the application– Confirmed in the technical submission– Established with an approved budget– Analyzed throughout agency operations– Reconciled in any required reports
41
Budget Requirements
OMB requires organizations to compare and control expenditures– Keep records on budgeted amounts– Compare obligations and expenditures
to planned budgets and accomplishments
– Report deviations from budgets and plan– Be prepared to request grant
amendments when the budget deviations trigger such actions
42
Developing a SNAPS Budget
Study SNAPS budget requirements– Ask questions of the lead agency and/or
HUD before developing the SNAPS budget
Budget should include– Description of particular SNAPS project – All HUD-eligible activities to be funded
by the SHP grant
43
Developing a SNAPS Budget
If necessary, include previous financial statements and budgets– Justifies historical assumptions used in
your budget Contrast any budget changes from
recent history – Such as increases in utilities
44
Developing a SNAPS Budget
Include all budget assumptions– Especially those which might require
greater explanation– Such as substantial difference in cost
from historical assumptions
45
Developing a SNAPS Budget
Include allocation of all positions funded by the SNAPS grant– Include assumptions about projected
hours to be budgeted for each position by various funding sources
Include for all funded positions– Descriptions – “Fully loaded” rates (wages and fringe
benefits)– Breakdown of costs funded by SHP grant
46
Developing a SNAPS Budget
Include all sources of funds– Match allocated to a specific SNAPS
eligible activity – Budget must fully account for all costs
associated with grant
47
Developing a SNAPS Budget
Funding non-HUD eligible activities – Identify source of funds– Comprehensive budget for the agency
that accounts for all HUD, cash match, and non-HUD funded activities
Analyzing the budget– One other staff member – One Board member – Analyze and ask questions
How Does Fund Accounting Impact Running A Program?
49
Impact on Program Operations
Documenting time and activities Pro-rating costs
– Personnel– Non-personnel
Tracking other funds
50
Documenting Time
Most employees work on more than one activity and/or project
OMB standards require that– Work be supported with employee time
and activity tracking system• Actual time was spent on an activity• What activity took place ( eligible client,
eligible activity)• Must be documented with activity records
51
Time and Activity Reports
OMB requirements– After-the-fact determination of actual
activity– Signed by individual employee, certified
by supervisor– Prepared at least monthly
52
Time and Activity Reports
Used to determine actual salary expenses– Ties activities back to budget – Applies to HUD grantees, sponsors and
service providers
53
Model Time and Activity Report
HUD-eligible and ineligible time allocations possible
Time accounted for within specific HUD grants
Signed by employee and certified by supervisor
Recorded after-the-fact
54
Allowable vs. Allocable
The real issue with time and activity reports is not whether the activity is allowable or not…
BUT whether the time is allocable to the specific SNAPS grant
55
Activity Records
Documentation that supports time and activity reports– Clients’ case notes– Calendars, logs and sign-in sheets– Daily, weekly and quarterly reports– Products and deliverables
56
Top 10 Timekeeping Mistakes
1. Charging straight 8 hours per day or straight percentage of time to a grant
2. Not using information from the time and activity report to charge the grant
3. Having discrepancies between payroll and budget
4. Not including sick time and vacation5. Not linking time to an eligible activity
57
Top 10 Timekeeping Mistakes
6. Not linking time to an eligible grant (or multiple grants)
7. Not identifying a project or client8. Not showing time spent on ineligible
activities9. Not having documentation (activity
records) to support the time and activity report
10.Not getting the time and activity report signed
58
Pro-Rating Costs
Required by HUD where full cost is not the actual cost for HUD’s piece
Must always have source documentation to substantiate
59
Pro-Rating Costs
Personnel costs for supportive services, operations and administration– Salaries pro-rated based on actual, not
budgeted time– Personnel costs should include benefits– Document with time and activity records
60
Important Eligibility Consideration
If the client is not eligible– All costs associated with that client are
ineligible for federal reimbursement– All match associated with that client is
ineligible
61
Pro-Rating Costs
Non-personnel costs for buildings and equipment – Pro-rate based on an established base
• Square footage of space• Time used • Actual mileage
– Document with logs, plans, etc.
62
Allocating Non-Personnel Costs
Space– Square footage– Usage (logs)
Motor pool– Miles driven– Days used (logs)
Computers– Separate by
function– System usage
Printing and reproduction– Number of copies– Separate by
function– Key/code access
Telephone– Number of
instruments– Separate by
function– Usage (logs)
63
Tracking Other Funds
Fees for services Rents collected from residents Mandatory savings accounts Also, application of receipts that
reduce expenses– Management fees– Rebates– Discounts
64
Exercise
Haven House– Review each scenario– Select one answer for each
How Does Fund Accounting Impact Match Requirements?
66
100% Equals 100%
To serve 100% of the clients With 100% of the activities You must raise 100% of the total
project costs – HUD grant plus match
If not, you are either – Not serving 100% of the clients – Not providing 100% of the activities
67
Meeting Match Obligation
Calculating match– Expenditures– Less SNAPS reimbursement– Equals Cash Match
For example, an agency has incurred $100,000 of eligible operations costs
$100,000 Total expenditures–$75,000 SHP reimbursement
=$25,000 Cash match
68
SHP Match Requirements
Acquisition Rehabilitation New Construction Supportive
Services Leasing Operations Administration HMIS
50/50 50/50 50/50 80/20 None 75/25 None 80/20
69
SHP Match Sources
Match must be CASH! Must document match as part of the
management of your financial system
Must show that match is not being counted as match for another federal program
Must keep source documentation on file for review when needed
70
SHP Match Sources
Rent collected from clients may be counted towards your match requirement– If the rent is calculated properly and
used for HUD eligible activities
Remember, rent is rent, fees are feesand savings are savings!
71
SNAPS Match Sources
Match can be from another HUD source– CDBG Program– HOME Program
• for acquisition, rehabilitation or new construction
– Make sure match is eligible and authorized by the federal funding source
72
What Is Not Match?
Rent is not always match Fees are not match
– Fees are charged for a specific non -SNAPS use
Savings are not match– Savings belong to the client, not the
agency Non-cash donations are not match Cash pledged to another grant is not
match
How Does Fund Accounting Affect Grant Reporting?
74
Reporting Your Finances
APR shows how grantee has performed financially during an operating year
Financial statements show financial condition of organization at a point in time
Audit verifies all financial accounts over a specific period of time, usually a fiscal year
75
Function of Each Report
Annual Progress Report
Matches SHP draws and cash match to eligible SHP activities for HUD compliance
Financial Statements
Shows all sources of funds and uses of funds at a point in time to help operate the organization
Audits
Verifies all revenues and expenses for a specific period and shows whether financially sound
76
Annual Progress Report
APR used to track project progress – Information on clients and services– Information on expenditures and match
Each grantee must submit an APR– Supported with source documentation
on file Separate APRs submitted for each
grant received– Budget→Systems→Match→APR
77
Components of APR
Part I includes information on clients and activities
Part II provides financial information– Expenditures and match for leasing,
supportive services, operations, HMIS, administration, acquisition, rehabilitation and new construction
78
Completing the APR
Ensure you are using the most recent APR
Have program and finance staff complete APR together – Parts I and II must be consistent
79
Financial Statements
Shows financial information at a point in time– Balance sheet (assets and liabilities)– Revenue and expenses
Shows a positive or negative fund balance over time
Shows whether revenues are greater than expenses
80
Audit Requirement
Federal programs subject to audit– Spending $500,000 or more in federal
awards per year– OMB Circular A-133 standards apply
In addition to OMB’s requirement, audits– Are a universally accepted analytical tool– Demonstrates accountability of the Board– Demonstrates proper stewardship of funds
81
OMB Standards
A-133 single audit– Funds come from more than one source– Involves looking at all programs
individually and organization as a whole Select auditor who knows requirements
– More than a “clean bill of health”– Auditor must understand program
compliance• Not all auditors check for compliance with
federal regulations, including fund accounting
82
Auditing Standards
Audits look at– Correct presentation of financial information– Financial management systems– Activities generally in compliance with program
requirements
Audit report must address each area Audit does not assure there will be no
monitoring findings– Narrower scope of work than monitoring– Auditors may not determine compliance with
all HUD requirements
Wrap-up
84
What Have You Learned?
Post-assessment Complete each true or
false question
85
Fund Accounting Action Plan
1. Read NOFA, application, desk guide, technical submission, budget and OMB circulars
2. Create a chart of accounts3. Create budgets based on specific
SHP grant activities4. Develop financial management
system including policies and procedures
5. Develop a time and activity reporting system
86
Fund Accounting Action Plan
6. Develop allocation system for non-personnel costs
7. Train staff on financial management8. Use both program and finance staff
to complete APR9. Hire an auditor who knows A-133
requirements10.Implement checks and balances
87
Wrap Up
Cleaning out “the BIN” Evaluations Who you gonna’ call?
– Lead Agency– HUD– TDA
Have a safe journey!
88
For Future Reference
Training & Development Associates, Inc.131 Atkinson Street, Suite B
Laurinburg, NC 28352
910/277-1275 (O)910/277-2816 (F)
www.tdainc.org