Presentation on theme: "Welcome to “Numbers don’t lie, they hide”"— Presentation transcript:
1Welcome to “Numbers don’t lie, they hide” Training and Development Associates, Inc.
2Numbers Don’t Lie, They Hide Financial Management for Homeless Grantees
3Who Are We? Presented by Sponsored by Training & Development Associates, Inc.As a subcontractor of the Corporation for Supportive HousingSponsored byU.S. Department of Housing and Urban DevelopmentLos Angeles Field OfficeTraining and Development Associates, Inc.
4Logistics Manual and handouts Exercises Teams Questions (the “Bin”) Restrooms and telephonesTraining and Development Associates, Inc.
5Who Are You? Type of organization Your role Lead agency Sponsor Service providerYour roleExecutive directorFinancial staffCase managerAnother positionTraining and Development Associates, Inc.
6Why Are We Here? Different funding requirements and reports confusing Grantees have questions about HUD’s requirementsFinance roles for staff and subgrantees can be confusingMonitoring scrutiny plus new funding considerationsReliance on outside “experts” leaves some in the darkPrograms rely on software they can’t interpretStaff does not know the language or tools of financial managementTraining and Development Associates, Inc.
7Workshop Goals Participants in this session will Understand the “nuts and bolts” of financial management and analysisKnow how to use “internal controls” to guarantee compliance with HUD and other funder requirementsUnderstand the “order of authority” and, therefore, what is required by HUD regulations, OMB Circulars and Generally Accepted Accounting PrinciplesLeave with tools and techniques to address financial management and know when to seek external assistanceTraining and Development Associates, Inc.
8Performance Benchmark Each participant willLeave with at least 3 new ideas, techniques or tools to address financial managementMeet at least 2 new participants who can be their resource person, mentor or support network after the workshopTraining and Development Associates, Inc.
9Table Talk: Real vs. Ideal Discuss the difference between the ideal-world and the real-world as it applies to financial management of your HUD homeless grantIdentify 3 items and provide the followingIn an ideal world _____But in the real world _____ is what happensWhy the real world differs from the ideal worldWays the real world can be more like the ideal worldTraining and Development Associates, Inc.
10HUD’s Top Issues Funds spent on eligible costs Documentation of homeless statusIf the client is not eligible, the costs are not eligibleProper calculation of rentsCommitment of match dollarsDocumentation of expendituresYou are assumed guilty until proven innocentInformation to report results to CongressTimeliness of drawdownsTraining and Development Associates, Inc.
11New Emphasis on Performance HUD comprehensive monitoring handbook issuedCovers all CPD programs, including SHP [ REV-5]Exhibit 13-8: Guide for Review of SHP Financial ManagementExhibit 13-9: Guide for Review of SHP Cost AllowabilityExhibit 13-10: Guide for Review of SHP ProcurementExhibit 13-11: Guide for Review of SHP EquipmentExhibit 13-12: Guide for Review of SHP Other Federal RequirementsTraining and Development Associates, Inc.
14The Order of Authority GAAP Congress OMB/GAO HUD HUD Grantee Training and Development Associates, Inc.
15Relationship of Federal Regulations *Federal Acquisition RequirementsTraining and Development Associates, Inc.
16Fiscal Management System Cash ManagementAccountingRegulationsHomelessProgramFinancial ReportsProceduresInternal ControlsDocumentationBudgetingPoliciesAuditingMonitoringFinancial ManagementTraining and Development Associates, Inc.
17Setting the Stage Financial Management Financial Analysis Constant process of safeguarding financial assets of organization, whether for-profit or nonprofitBy instituting policies and practices that maintain and increase the value of assets for overall benefit of the organizationFinancial AnalysisSystematic technique for evaluating financial health of organizationBy quantifying information and comparing that information to similar organizations in the fieldTraining and Development Associates, Inc.
18The Importance of Financial Management “Fitting in” with other fundersBetter planningGaining alliesRaising your “match”Sustaining future growthTraining and Development Associates, Inc.
19Fitting in With Other Funders and Better Planning Funders (private and public) look at financial management to make investment decisionsSolid information helps grantees toRealistically project the futureSeek funding for that futurePlan more accuratelyFinancial management is part of a multi-year planning processOperating like a business helps organizations toIncrease program servicesNot always be obsessed with raising more fundsTraining and Development Associates, Inc.
20Fund AccountingYour grant may be one of many funding sources that your agency hasMultiple funders leads to “fund accounting”Your financial system must account for the requirements of all of funding streamsWhile many of the requirements have a higher authority than HUDHUD is the funding stream that we focus onTraining and Development Associates, Inc.
21Example of Fund Accounting HUD SHPHHSUnited WayFounda-tionDonorTotalRevenueGrantsCashDonationsTotal RevenueExpensesLaborOverheadAdministrationTotal ExpensesExcess RevenueTraining and Development Associates, Inc.
22Gaining AlliesWho is financially responsible for the viability of your organization?Your board of governance begins to own the program as they understand their liability and responsibilityExternal funders gain confidence in your organization as you comply with the norms of the business worldTraining and Development Associates, Inc.
23100% Equals 100%To serve 100% of the HUD-eligible clients projected in your technical submission and approved budget…With 100% of the projected HUD-eligible activities…You must raise 100% of the total project costs (HUD grant and match)…Otherwise, you are either not serving 100% of the clients or not providing 100% of the activitiesTraining and Development Associates, Inc.
25Who is Involved in Managing Your System? Board of DirectorsLocal community development staffElected officialsHUDGovernment staffOther investorsAccountantsTraining and Development Associates, Inc.
26Staff Responsibilities Fiduciary trustPayment of taxesGovernment filingsCash flowFund accounting and reports to funders, including HUDService deliveryInternal financial controlsReports to committeesLegal contracts“The books”Construction…if?Future planning and financial projectionsTraining and Development Associates, Inc.
27Board Responsibilities Building the agency’s financial capacityRaising the funds to maintain the organization long-termBudgeting funds productivelyManaging funds wiselyReporting on funds raisedSupplementing budgetsEvaluating agency’s financial performanceTraining and Development Associates, Inc.
28When Do You Need An Accountant? Benefits justify the costs“Too many hoops”Adjunct staff and business partnerFund accounting requiredFunders’ requirementTraining and Development Associates, Inc.
29What Services Should An Accountant Provide? Advice on tax matters, unrelated business income, tax questionsPreparation of tax formsQuarterly IRS Form 941Quarterly federal, state and local government tax filingsAnnual income tax returns and/or 1099’sAnalysis of management activities and adviceTraining and Development Associates, Inc.
30What Services Should An Accountant Provide? Assistance in establishing financial management systemsCollecting grants, outstanding revenues and “fees for service”Control of inventory, asset purchases and cashRecommendations to cut expenses, increase cash flow and price servicesAssistance in preparing the organization for long-term growthWhen can the agency afford new staff?Training and Development Associates, Inc.
32Why a Financial Management System? Required by HUD and OMBSystems required to meet certain standardsControl and account for funds, property and other assetsIdentify source and application of fundsAllow accurate, timely and complete reportingMinimize time in transfer of funds between partiesAddressed through policies, procedures, practices and personnel—the “4-P’s”Training and Development Associates, Inc.
33Financial Management System Ineffective results inMajor audit findingsNegative publicityFunding withheldEffective results inSound management decisionsDocumentation supporting program activities and expendituresKnowledge of regulations, policies and proceduresStrong accounting systemGood internal controlsTraining and Development Associates, Inc.
34Components of Financial Management Systems Uniform administrative requirementsCost principlesAudit proceduresProcurement standardsTraining and Development Associates, Inc.
35In The Final Analysis…Like it or not, financial management is a requirement of your grantWe need to learn to appreciate it, rather than fight it!Use source documents for guidanceRegulations24 CFR Part 85—Governments24 CFR Part 84—NonprofitsHUD’s desk guidesOMB CircularsHUD’s Monitoring ChecklistExhibit 13 – 8, Items 1-12Training and Development Associates, Inc.
36Frequently Asked Questions Who? What? How? Under SHP
37Supportive Housing Program One component of the continuum of care strategy for homelessnessOutreach and assessmentImmediate (emergency) shelterTransitional housing (with support services)Permanent housing (with support services)Enacted in the McKinney-Vento ActTraining and Development Associates, Inc.
39National Objectives 3 goals of HUD’s homeless programs Help participants obtain and remain in permanent housingHelp participants increase skills and/or incomeHelp participants achieve greater self-determinationTraining and Development Associates, Inc.
40HUD Objectives National Targets Create new PH beds for chronically homeless persons.Increase percentage of homeless persons staying in PH over 6 months to 71%.Increase percentage of homeless persons moving from transitional housing into permanent housing to 61%.Increase percentage of homeless persons becoming employed by 11%.At least 390 CoC’s will have functioning HMIS.Training and Development Associates, Inc.
41Program Components 6 types of projects Transitional Housing Permanent Housing for people with disabilitiesSupportive Services OnlySafe HavensInnovative Supportive HousingHomeless Management Information SystemsTraining and Development Associates, Inc.
42Eligible Activities 8 ways to spend SHP funds Acquisition RehabilitationNew constructionLeasingSupportive servicesOperating expensesAdministrationHomeless Management Information SystemTraining and Development Associates, Inc.
43Acquisition and Rehabilitation Purchase and/or rehabilitate all or part of buildingUsed for housing and/or servicesPay off a current mortgage (lump sum)If not previously used for HUDFunding limited to between $200,000 and $400,000Higher amounts applicable to high cost area50% cash match obligation20-year use restrictionTraining and Development Associates, Inc.
44New Construction Newly construct building for housing (not services) Funding limited to $400,000Covers both land and buildingFunds cannot be used for demolitionMust demonstrate costs are less than for rehabilitation50% cash match obligation20-year use restrictionTraining and Development Associates, Inc.
45Leasing Leasing building for supportive housing or supportive services Portion of building, entire building or multiple buildingsNot building already ownedNo mortgage payments or building operationsPay rent for individual unitsPaid directly to landlordUnits must meet housing standardsRents must be reasonableNo match requirement for leasingTraining and Development Associates, Inc.
46Supportive ServicesFor new grantees, cost of new or increased servicesFor renewals, cost of continuing servicesSalaries to providers and other direct costs (actual direct staff time)Services aimed at moving homeless to independenceOffered while part of projectFor transitional housing, services may continue for 6 months after graduating20% cash match obligationTraining and Development Associates, Inc.
47Operating Expenses Costs of operating facilities Only for new project or expanded portion of existing projectSupports function and operation of projectOften referred to as indirect costsStandards in OMB Circulars A-87 and A-122Pro rate costs to individual funding sourcesEligible for all components except supportive services only25% match obligationTraining and Development Associates, Inc.
48Administrative CostsYou may request up to 5% of grant to cover administrative costsCosts associated with carrying out the grantMay be split between lead agency and sponsorsCosts associated with carrying out components ineligibleNo match requirement for administrative costsTraining and Development Associates, Inc.
49Homeless Management Information System Computerized data collection toolDesigned to capture client level system-wide informationCosts to implement and/or operate a computerized data collection toolCharacteristics and service needs of the homelessFunds cannot be used for planning or developing new system20% cash match obligationTraining and Development Associates, Inc.
50HUD Eligible Activities For Shelter Plus Care, remember:Housing Assistance is for the term of the grantService Match is $1:$1 during the term of the grantService match must be for HUD-eligible activitiesAdministration is 8% of the grant ( after the housing assistance)Training and Development Associates, Inc.
51Eligible Clients 8 eligible categories of homelessness Not all homeless people are HUD-homeless eligibleNot all clients with disabilities are eligible for permanent housingIf a client is not eligible, all costs associated with that client (including administration and match) are not eligibleTraining and Development Associates, Inc.
54Procurement RulesGrantees and subgrantees must adhere to federal procurement rules when purchasingServicesSupplies and materialsEquipmentApplicabilityGovernmental entities: 24 CFR Part 85Nonprofits: 24 CFR Part 84Also refer toSHP Monitoring Checklist Exhibit , ItemsTraining and Development Associates, Inc.
55Procurement Overview Procurement policies must be in place Must follow written procedures and document complianceFour procurement methods availableSmall purchase (less than $100,000)Sealed bid (construction)Request for proposals (RFP)Non-competitiveTraining and Development Associates, Inc.
56Small Purchase Method Also known as “streamlined” method May be used for purchases below $100,000Requirements includeGetting 3 to 5 competitive quotesSelecting the most reasonable offerUsing purchase orders or petty cash to purchaseTraining and Development Associates, Inc.
57Sealed BidUse for construction contracts and to purchase equipment and/or suppliesProcess involvesDeveloping an invitation for bidsPublicly soliciting bidsOpening bids and announcing pricesReviewing bids in detailAwarding contract to winning bidderTraining and Development Associates, Inc.
58Request for Proposal (RFP) Used when sealed bid not appropriate (for example, consulting services)Process involvesAnnouncing and issuing RFPOpening, reviewing and comparing proposalsIf necessary, negotiating with offerorsRequesting and reviewing “best and final” offersAwarding contractTraining and Development Associates, Inc.
59Non-Competitive Award Permitted when award is infeasible under other methods and one of following appliesItem is available from only one sourceEmergency situation will not permit delayHUD authorizes non-competitive proposalsPrice or cost analysis and written justification must be in filesTraining and Development Associates, Inc.
60Contracts Two basic types permitted Firm fixed priceAgreed upon price, regardless of actual costCost reimbursementEstimated cost, usually with a ceilingWhen using sealed bid method, firm fixed-price contract requiredOther methods, use either typeTraining and Development Associates, Inc.
61Bonding and InsuranceFor contracts of $100,000 or more, completion assurance required through:Performance and payment bondsDeposit of cash escrowLetters of creditTraining and Development Associates, Inc.
62Bonding and Insurance Insurance requirements include Worker’s compensation and employee liabilityAuto insurance for injuries on job siteComprehensive public liabilityProperty damageTraining and Development Associates, Inc.
63Other Contracting Requirements Minority- and women-owned businessesMBE and WBE outreach requirementsMust take affirmative steps to use businesses owned by minorities and womenSection 3applies to construction contractsGoals for training and hiring low-income residents of areaGoals for hiring contractors located in areaTraining and Development Associates, Inc.
64Ethics in Contracting Conflict of interest requirements apply 24 CFR (e)SHP Monitoring Checklist Exhibit , Item 4Gratuities and kickbacks not allowedConfidential information may not be used for personal gainInfluence peddling not allowedTraining and Development Associates, Inc.
65Numbers Don’t Lie, They Hide Financial Management for Homeless GranteesDAY TWO
66Pop Quiz on Day One 3__________________ 6__________________ 8__________________4__________________14__________________100% must equal _____ or ___________________24 CFR, Part ______ is for governments24 CFR, Part ______ is for not-for-profitsOMB Circular A-ll0 governs ____________OMB Circular A-122 outlines ____________OMB Circular A-133 governs ____________Extra Credit Question?Training and Development Associates, Inc.
68SHP Match Requirements AcquisitionRehabilitationNew ConstructionSupportive ServicesLeasingOperationsAdministrationHMIS50/5080/20None75/25Training and Development Associates, Inc.
69SHP Match Sources Match must be CASH! Must document match as part of the management of your financial systemMust show that match is not being counted as match for another federal programMust keep source documentation on file for review when neededTraining and Development Associates, Inc.
70SHP Match SourcesRent collected from clients may be counted towards your match requirementIf the rent is calculated properly and used for HUD eligible activitiesSelf-Monitoring Checklists, pp. 31 to 35HUD Notice 96-3: Certain Tenant Rent CalculationsMatch can be from another federal sourceESG’s transitional housing programHOME ProgramMatch is leverage but not all leverage is matchTraining and Development Associates, Inc.
71Safe House Match Requirements Team ExerciseSafe House Match Requirements
72HUD Eligible Activities For Shelter Plus Care, remember:Housing Assistance is for the term of the grantService Match is $1:$1 during the term of the grantService match must be for HUD-eligible activitiesAdministration is 8% of the grant ( after the housing assistance)Training and Development Associates, Inc.
74Rent can be match Rent can be used for match if : Properly calculated Properly documentedProperly usedTraining and Development Associates, Inc.
75Calculating Resident Rents Grantees may charge participants rent under specific guidelinesMaximum rent (housing expense) is higher of30% of monthly adjusted income10% of monthly gross incomeTANF rentUtility expenses deductedTraining and Development Associates, Inc.
76Calculating Rents, cont’d Annual income from all sourcesIncome exclusions subtractedAdjustments to annual incomeDependent allowanceChildcare allowanceDisabled assistance allowanceMedical expenses allowanceElderly/disabled family allowanceTraining and Development Associates, Inc.
77Calculating Rents, cont’d General GuidelinesReview & document income annually or when changes occurDistinguish between employment & trainingEmployment = incomeTraining = stipends or reimbursementsFees for food & services acceptable if reasonable & not paid for by HUD or match alreadyTraining and Development Associates, Inc.
78Tenant Rent Calculations Team ExerciseTenant Rent Calculations
80Line Of Credit Control System LOCCS Access AuthorizationHUD Form 27054Banking informationDirect Deposit Form 1199LOCCS Voucher for Grant PaymentHUD Form 50080Training and Development Associates, Inc.
81LOCCS Access Authorize a staff person for draw downs Maintain security of passwordIf a LOCCS password is shared, one can be banned from using LOCCS foreverAccess LOCCS to maintain an active passwordApproving official – certificationTraining and Development Associates, Inc.
82Direct Deposit Banking information Form 1199 Use Your existing bank account or establish a new accountSubmit Form 1199 to HUD OfficialsWashington, DC OR Field OfficeEnsure that all banking information is accurateTraining and Development Associates, Inc.
83LOCCS PaymentMinimize the time elapsing between transfer of funds to recipients from the U.S. TreasuryAdvance methodExpend in 3 daysReimbursement methodNo timeframe for reimbursing the general fund accountTraining and Development Associates, Inc.
84Tracking LOCCS Draw Downs Cash control registerTrack each draw requestTrack SNAP funds by grant number and voucher numberMaintain a cumulative balance of SNAP fundsTraining and Development Associates, Inc.
86Internal ControlsCombination of polices, procedures, job responsibilities, personnel and records that create accountability in financial systemEnsures funds are used and managed properlyRemember, a small investment early will reap great benefits laterTraining and Development Associates, Inc.
87Internal Control System Basic elementsOrganizational chartWritten delineation of job dutiesAccounting policy and proceduresSeparation of dutiesHiring policiesControl over assets and documentsReconciliation of recordsTraining and Development Associates, Inc.
88Internal Controls Hiring competently trained financial personnel Board authorizing bank accounts and checksRecording all cashMaintaining pre-numbered receiptsBoard signing checksNo invoice, no checkReconciling bank statements monthlyHaving timesheets to justify payroll expensesRecording petty cashMaintaining fireproof storageMaintaining detailed inventory recordsObtaining fidelity InsuranceTraining and Development Associates, Inc.
89Organization Chart Supervision of employees Lines of authority CommunicationDelineates responsibility, functions and dutiesAuditors want it!Training and Development Associates, Inc.
90Segregation of DutiesNot having one person in control from inception to final recordingHaving independent cross-checkingSHP Monitoring Checklist, Exhibit 13-8, Item 14SeparatingOperational work from record-keeping of assetsAsset custody from asset recordsAuthorization of asset purchases from custody and record-keepingPurchasing from receivingTraining and Development Associates, Inc.
91Documenting TimeFor employees that work in a single indirect cost activity, document time with a timesheetFor employees that work in a single federal award category, document time with a timesheet and periodic certificationsFor employees that work on more than one activity (direct or indirect), document time with timesheets supported by activity recordsSHP Monitoring Checklist, Exhibit 13-8, Items and 15-17Training and Development Associates, Inc.
92Time and Activity Records Accordingly to OMB Circular and Parts 84 and 85:After-the-fact determination of actual activitySigned by individual employee, certified by supervisorPrepared at least monthlyApplies to direct HUD grantees and subgranteesTraining and Development Associates, Inc.
93Sample TimesheetTraining and Development Associates, Inc.
94Sample TimesheetTraining and Development Associates, Inc.
95Types of Activity Sheets Clients’ case notesCalendars, logs and sign-in sheetsPalm pilotsDaily, weekly and quarterly reportsProducts and deliverablesWhat do you use now?Training and Development Associates, Inc.
96Basic Cash Controls Making disbursements with checks, not cash Pre-listing and recording cash receipts by someone other than depositorHaving subsidiary and control accountsUsing pre-numbered checksReconciling bank statements monthly (backed by checks)Having supporting documentation for checksHaving payroll expenses backed up by timesheets/separate bank accountTraining and Development Associates, Inc.
97Physical Control of Assets Keeping canceled checks in a safe, fireproof placePeriodically inventorying physical assetsUsing a check protector machine vs. individually drafted checksUsing fireproof safes and locked file cabinetsKeeping duplicate records in a safe, secure off-site locationDepositing cash receipts on a daily basisTraining and Development Associates, Inc.
99Team Exercise: We Need a Budget Your team has won the lottery!While you have only won $100, you decide to celebrate as a groupPrepare a celebration budget that includesBudget assumptionsCost estimatesProposed expendituresTraining and Development Associates, Inc.
100Budget Controls Compare and control expenditures Keep records on budgeted amountsCompare obligations and expenditures to planned budgets and accomplishmentsReport deviations from budgets and planTraining and Development Associates, Inc.
101Developing BudgetsBudget is projection of expenses based on actual experienceDefines goals for a given period of timeProvides ability to monitor progressIdentifies significant variances between financial goals and how resources are actually usedBudgets should never be submitted to decision-makers and funding sources without including assumptionsTraining and Development Associates, Inc.
102Drawing Down Budgeted Funds Drawdown for actual expenses by line itemHomeless programs allowMoving up to 10% between line items (notify HUD)More than 10% (request HUD approval to amend budget)Implication of budget amendmentsInitially funded for a specific purposeRevising budgets too much may trigger funding reconsideration, amendments and additional HUD scrutinyTraining and Development Associates, Inc.
104Accounting Records Accounting system should include Chart of accounts Cash receipts journalCash disbursements journalPayroll journalGeneral ledgerTraining and Development Associates, Inc.
105Accounting Records Source documentation required SHP Monitoring Checklist Exhibit 13-8, Items 1- 4Also, ensure that program costs wereIncurred for the proper periodActually paidExpended on eligible itemsApproved by appropriate officialsTraining and Development Associates, Inc.
106Sources and Uses of Funds Up-to-date information on sources and uses of fundsAmount of federal funds received and authorization of fundsObligations of funds and un-obligated balancesAssets and liabilitiesProgram incomeExpenses by grant year and programTraining and Development Associates, Inc.
108Cash ManagementProcedures to minimize the time between receipt and disbursement of funds requiredThree methods allowedReimbursementAlmost all SHP lead agencies use reimbursementCash advanceWorking capitalTraining and Development Associates, Inc.
109Property Management Definitions SHP Monitoring Checklist 13 -11 Real property is land and improvementsPersonal property is other types of property (supplies and equipment)SHP Monitoring ChecklistComplies with 24 CFR and 24 CFR 84.34Training and Development Associates, Inc.
110Property Management General requirements Specific requirements Property can only be acquired for a specific purposeSpecific requirementsUse must continue for a certain period of timeRemember the SHP 20 year use restrictionAccurate records must be keptSHP Monitoring Checklist Exhibit , Items 1-3Use should reflect intended purposeProperty can be disposed of only if rules are followedThere are specific requirements for SHP propertySHP Monitoring Checklist Exhibit , Item 4Training and Development Associates, Inc.
112Cost Principles Three components to cost principles Applicability Cost reasonablenessCost allowabilityCost allocationApplicabilityGovernmental entities: OMB Circular A-87Nonprofits: OMB Circular A-122Also refer toSHP Monitoring Checklist, Exhibit 13-9Training and Development Associates, Inc.
113Determining CostsCosts are only eligible if they can be associated with an eligible clientCosts are only eligible if they areEligible activity under funding programDelineated in your application submissions and budgetsSource documentedReasonable, allowable and allocableTraining and Development Associates, Inc.
114Cost ReasonablenessCosts charged to federal award must be necessary, reasonable and directly related to the grantLook at the followingWhether cost is ordinary and necessaryMarket prices for comparable goods and servicesBenefit to individuals involvedTraining and Development Associates, Inc.
115Cost Allowability In general, cost must be Necessary and reasonableAllocable to the programAuthorized or not prohibitedConform to and be consistent with rules and requirementsNot charged to any other programRefer to list of costs in OMB Circular A-122Training and Development Associates, Inc.
116Table Talk: Cost Allowability Which of the following costs are allowable?AlcoholPre-award costsWriting a Continuum of Care grant application (fundraising)Client graduation ceremony (entertainment)Training and Development Associates, Inc.
117Cost Allocation A cost is allocable to a HUD program if it is Treated consistently with other similar costsIncurred specifically for the programBenefits program or can be distributed based on a reasonable proportion ORNecessary to operationsTraining and Development Associates, Inc.
118Allowable vs. Allocable The real issue with timesheets is not whether the activity is allowable or not… …BUT whether the time is allocable to the specific grant.Training and Development Associates, Inc.
119Table Talk: Allowable vs. Allocable Under what circumstances could furniture, which is allocable, not be allowable?Under what circumstances would a computer printer, which is allowable, not be allocable?Under what circumstance would the case managers’ time, which is reasonable, not be allowable? Not be allocable?Training and Development Associates, Inc.
120Determining Eligibility If properly procured, cost is reasonableIf on approved budget, cost is allowableIf directly linked to grant, cost is allocableTherefore, if costs are… Reasonable… Allowable… Allocable… They are eligible for federal reimbursementTraining and Development Associates, Inc.
121Direct and Indirect Costs Direct costs can be identified with specific program or activityIndirect costs are incurred for common/joint purpose benefiting more than one program or activityAdministrative salariesAccounting expensesFacility maintenanceTraining and Development Associates, Inc.
122Table Talk: Direct vs. Indirect Assign the following costs as direct or indirectStaff salariesUtility costsFoodDepreciationInsuranceTraining and Development Associates, Inc.
123What kind of cost is it?Training and Development Associates, Inc.
124Pro-Rating CostsRequired by HUD where full cost is not the actual cost for HUD’s pieceMust always have source documentationTraining and Development Associates, Inc.
125Pro-Rating Costs Supportive service costs Operating expenses Salaries pro-rated based on percentage timeDocument with time and activity records reflecting funding sourceOperating expensesPro-rate based on percentage of space or time usedDocument with logs, plans, etc.Training and Development Associates, Inc.
126Table Talk: Pro-Rating Costs A case manager works with 30 clients under 3 different funding programs of which 8 clients are associated with this HUD grantHow would you pro-rate the case manager’s time?Divide the total cost equally among the 3 funding programsCharge 8/30ths of the cost to this grantCompare the number of hours spent with the 8 clients to that spent with all 30 clientsNone of the aboveTraining and Development Associates, Inc.
127Table Talk: Pro-Rating Costs Your HUD-funded program is located in the same facility as another program where there is only one utility meterHow would you pro-rate the utility costs?Divide the cost equally among the 2 programsUse the percentage of square footage used by clientsUse the percentage of square footage used by clients and staffNone of the aboveTraining and Development Associates, Inc.
128Cost Eligibility Summary Costs are eligible if they are reasonable, allowable and allocableA cost is only a “cost” if charged to the correct budget line itemIf the client is not eligible, all costs (including administration) associated with that client are ineligibleIf a cost is not specifically listed in OMB’s Circular, does that mean that the cost is allowable?Training and Development Associates, Inc.
130Why Do We Need An Audit? Universally accepted analytical tool Ratios, standards, disciplined way of viewing numbersDemonstrates accountabilityGAAP, GAGAS, OMB Circular, HUD requirementsDemonstrates proper stewardshipVerifies internal financial controlsDemonstrates board oversightIndependently audited and adequate reportingTraining and Development Associates, Inc.
131Audits Federal programs are subject to review or audit When spending $500,000 or more in federal awards per year, specific rules applyGrantees and subgrantees must adhere to OMB Circular A-133Training and Development Associates, Inc.
132Federal Awards Federal awards include But only counts if “expended” Grants, loans and loan guaranteesDirect assistance or appropriationsProperty insurance or interest subsidiesProperty, food commoditiesCooperative agreements or contractsOther assistanceBut only counts if “expended”Training and Development Associates, Inc.
133Type of Audit Program-specific audit Single audit OK if recipient or subgrantee gets federal funds from only one sourceInvolves only looking at that programSingle auditRequired if funds come from more than one sourceInvolves looking at all programs and financial statementsTraining and Development Associates, Inc.
134Auditing StandardsFederal audits performed using Generally Accepted Government Auditing StandardsFinancial information correctly presentedInternal controls exercised regarding cash management, payroll processing, fixed assets and reportingActivities in compliance with program requirementsAudit report must address each areaTraining and Development Associates, Inc.
135Compliance Requirements A federal audit must satisfy 14 compliance requirementsLaws (for example, Davis Bacon)Regulations covering match, eligibility, etc.Other grant provisions including subgrantee monitoringTraining and Development Associates, Inc.
136Audit Findings Audit may include findings and questioned costs Material weakness in internal controlNoncompliance with laws and/or regulationsQuestioned costs in excess of $10,000Fraud affecting federal awardMisrepresentation of prior audit findingTraining and Development Associates, Inc.
137Qualified Audits Auditor’s work based on the work of others Uncertainties exist affecting the potential effect of the auditSerious doubt about organization as an ongoing concern (bankrupt?)Supplementary information not presented or inadequateTraining and Development Associates, Inc.
138Qualified AuditsUnaudited information not consistent with audited dataDeviation from GAAP due to unusual circumstancesAuditor unable to perform all aspects of the engagementIn adequate records to support assertions in the financial statementsFinancial statements do not contain all disclosures needed for a fair presentationTraining and Development Associates, Inc.
139Review and ResolutionAudit report must be submitted to HUD within 9 months of audit period andSubmit an A-133 Audit to the Federal ClearinghouseGrantees and subgrantees must establish system to ensure timely and appropriate resolution to audit findingsTraining and Development Associates, Inc.
140What HUD Looks For Audits that are “clean” There are no findings, either financial or managementFund accounting applied to segregate HUD’s grants and costs associated with those grants from other funding sourcesCosts that are supported with source documentationTraining and Development Associates, Inc.
141Hiring An Auditor Many nonprofits need specialized auditor Multiple funding sources requires fund accountingSpecialized experience with federal programsToo much emphasis on cost vs. needsPerception of low-risk of liability for agenciesFailure to recognize the needs of all interested partiesTraining and Development Associates, Inc.
142Specialized Auditors Specialized auditors need to know AICPA’s industry audit and accounting guideGAO’s Government Auditing Standards manualApplicable OMB CircularsCatalogue of Federal Domestic AssistanceHUD’s program guidelinesOMB’s Compliance SupplementTraining and Development Associates, Inc.
143Selecting The Right Auditor Use a competitive process with at least 3 bidsIssue a request for qualifications (RFQ) that outlines what you wantSeparate the technical submission from the cost quoteIssue an engagement letterGAO secondary considerations includeFinancial education and audit experienceAn audit committee to handle selectionDetailed policies and proceduresTraining and Development Associates, Inc.
144Using An Audit Committee Nominate and terminate the firmNegotiate feesDetermine the type, scope and timing of the auditDiscuss internal control weaknessesReview financial and audit reportsMonitor and evaluate performanceOversee the accounting policiesFollow up on findings and corrective actionsTraining and Development Associates, Inc.
145On the Lighter Side! What is an auditor? Someone who arrives after the battle and bayonets the woundedWhat are the three types of accountants in the world?Those who can count and those who can’tWhat do accountants suffer from that ordinary people don’t?DepreciationTraining and Development Associates, Inc.
146The Audit Process Is Ongoing As one audit period ends, another audit period beginsTraining and Development Associates, Inc.
147Family Services Audit Consideration Team ExerciseFamily Services Audit Consideration
149Purpose of APR Tracks project progress Tool for HUD…and YOU! Help participants obtain and remain in permanent housingHelp participants increase skills and/or incomeHelp participants achieve greater self-determinationTool for HUD…and YOU!Helps to keep your program on trackGives you information about how the project is doing and what it is accomplishingUsed to document success for other fundersUsed for completing continuum gaps analysisTraining and Development Associates, Inc.
150Submission Requirements Each grantee must submit an APRIf grantee does not run the projectSponsor completesGives to grantee for submission to HUDA separate APR submitted for each HUD grant receivedEach program component = a project = a separate APRTraining and Development Associates, Inc.
151Due Date – Reporting Period Failure to submit an APR may lead to a delay in receiving future grant fundingDue 90 days after the end of each operating year of your programWhat is the operating year?Trigger date for start and end of grant termStarts the clock for submission of APRTrigger varies depending on program and project activitiesTraining and Development Associates, Inc.
152Operating YearProjects with acquisition, rehabilitation or new constructionOperating year begins afterObtaining a certificate of occupancyAccepting first clientOther projectsLOCCS draw of leasing, supportive services or operating fundsRenewal projectsSpecified in grant agreement letterTraining and Development Associates, Inc.
153Components of APR Basic information about project and goals Information about participants in projectInformation about participants leaving projectFinancial information and matchTraining and Development Associates, Inc.
154APR Part I: Project Progress No. 1: Projected level of serviceAt a given point in time showNumber of singles not in familiesNumber of adults in familiesNumber of children in familiesNumber of familiesTraining and Development Associates, Inc.
155APR Part I: Project Progress No. 2: Persons servedEnrolled on first day of operating yearEnrolled any time after the first dayWho left during the operating yearStill enrolled in the program on the last day of the operating yearNo. 3: Project capacityNo. 4: Non-homeless housed (Section 8 SRO only)Training and Development Associates, Inc.
156APR Part I: Project Progress Nos. 5 – 14: Demographic DataParticipant information by individual, families and chronically homelessAgeGenderRace/ethnicityPrimary disabilityPrior living situationIncome changeIncome sourceLength of stayReasons for leavingPost-project destinationTraining and Development Associates, Inc.
157APR Part I: Project Progress No. 15: Supportive ServicesNumber of participants receiving discrete categories of serviceIdentify those participants receiving services that are chronically homelessTraining and Development Associates, Inc.
158APR Part I: Project Progress No. 16: Goals and objectivesShows goals and objectivesCurrent year’s goals and progressNext year’s goalsMeasurable goal for each year as it relates to the overall HUD program goalsObtain and remain in permanent housingIncrease skills and incomeAchieve greater self-determinationTraining and Development Associates, Inc.
159APR Part I: Project Progress No. 17: Number of bedsSHP (not completed for SSO projects)Number of beds – Current LevelNumber of beds – New EffortNew Effort beds in place at the end of operating yearShelter Plus CareNumber of bedsNumber of dwelling unitsSection 8 SROTraining and Development Associates, Inc.
160APR Part II: Financial Information No. 18: Supportive ServiceSHP funded servicesAmount of SHP funds spent during operating yearFor discrete services outlined in application and technical submissionS+C projectsAmount of funding from other sourcesSpent on services by discrete categoriesSRO projectsEstimates percentage of clients who use discrete service categoriesFunded outside of SRO programTraining and Development Associates, Inc.
161APR Part II: Financial Information For S+C service match14 categories of eligible servicesMatch is overallNot year-by-yearEach client need not receive the same amount of services as rental assistance.Examples of match [ ]Volunteer time at $10 per hourActual salaries paid to staff that provide servicesValue of lease on service facilityTraining and Development Associates, Inc.
162APR Part II: Financial Information No. 19: SHP leasing, supportive services, operating costs, HMIS, and administrationTracks SHP expendituresSHP funds drawn down during the yearCash match (by activity)Total expendituresTracks sources of cash matchCash only! (no in-kind contributions, etc.)Required match varies by activityKeep documentation on fileSHP expenditures and cash matchNo regulatory guidance outside of OMB CircularsTraining and Development Associates, Inc.
163APR Part II: Financial Information No. 20: SHP acquisition, rehabilitation, and new constructionTracks SHP expendituresFill out in year-1 onlySHP funds drawn down during the yearCash match (by activity)Total expendituresTracks sources of cash matchMatch is $1 for $1Keep documentation on fileTraining and Development Associates, Inc.
164APR Part II: Financial Information No. 21: SHP HMIS activitiesShows how SHP funds for HMIS activities were spent during yearEquipmentSoftwareServicesPersonnelSpace and operationsTraining and Development Associates, Inc.
165APR Part II: Problems, Changes, and Technical Assistance Request Open-ended questionsDescribe problems or changesSolicit information onNeed for technical assistanceWays HUD could improve serviceSelf-reflection on project improvementChance to give important feedback!Establish HUD relationshipTraining and Development Associates, Inc.
166Emphases in the Revised APR Renumeration of services to the chronically homelessReporting of HMIS activitiesRacial and ethnicity reportingCertification of continuing SHP servicesPersons-served worksheet (new tool)Exiting programParticipant leaves project, stops receiving rental assistance, and/or servicesNot expected to returnReturn after 90 days, new participantReturn within 90 days, not counted as exiting programTraining and Development Associates, Inc.
168Technical Submission Technical submission is your contract If an activity is not specified in the technical submission, it is not eligibleStrengthening the technical submissionSite control (within 1 year of award letter)Restrictive covenants for 20 year useMatch raised (evidence of first year in hand)Training and Development Associates, Inc.
169Spending Down the Grant Timeliness!Training and Development Associates, Inc.
170Grant Amendments Program changes during grant term Scope of changes SignificantMinorHUD involvement and approvalInformed (minor)Review and approval (significant)Training and Development Associates, Inc.
171Scope of Changes Significant changes Minor changes Departure from applicationAnd substantially affects implementationHUD approval required and amended grant agreementMinor changesDepartures from applicationBut does not substantially affect implementationNo HUD approval or amended grant agreementMust document changeTraining and Development Associates, Inc.
172Examples of Significant Changes Substantial amendment needed whenNew grantee or name changeChange in project siteChange in project activitiesShift over 10% of funds from one activity to another (cumulative)Change in population or number of participants servedTraining and Development Associates, Inc.
173HUD Approval Written request to field office with revised application LetterRevised application exhibit(s)If applicable, new ConPlan certificationField office approval and amendment of grant agreementsApplication must remain competitiveReduced rating requires HQ’s approvalTraining and Development Associates, Inc.
174Reduced Rating Examples “Lower quality”Housing and/or services lower quality than originally fundedLess experienced providerInnovative features eliminatedCost effectiveness reducedSite moved to area of less needTraining and Development Associates, Inc.
175Recapture of Funds Whole grants or portion of grants Used to fund additional projects next yearReasonsLack of site controlSlow expenditure of fundsNoncompliance with grant agreementUnspent or surplus fundsTraining and Development Associates, Inc.
176Recapture of Funds Lack of site control Slow expenditure of funds Must obtain within 1 year of award notificationStatutory (cannot be waived)Exception where site control lost (rare)Slow expenditure of fundsAcquisition, rehabilitation or new construction must begin within 3 months OR residents must begin occupancy within 9 months of agreementLeasing, operating or supportive services must begin within 3 months of availabilityTraining and Development Associates, Inc.
177Recapture of Funds Noncompliance with grant agreement Unspent funds Any instance of defaultFactors beyond grantee’s control consideredUnspent fundsDuring grant termCosts are less than anticipatedFunds may be shifted to other activities or carried forwardTraining and Development Associates, Inc.
178Recapture of Funds Surplus funds Upon expiration of grant Unspent fundsUnless term extension received or final draw-down is pendingTraining and Development Associates, Inc.
179Merging SHP Grants Under certain conditions, grants may be merged Applies to grantees with 2 or more grants that meet criteriaGrants must be the same componentGrants must have same period (expiration)Instructions included in SHP operating instructionsShelter Plus Care grants may also be mergedTraining and Development Associates, Inc.
181What is Financial Analysis? Tool to analyze financial information in a systematic mannerQuantify one’s financial questions“An art, not a science”Using standard ratios and measuresLanguage of lenders and investorsTraining and Development Associates, Inc.
182The Process of Financial Analysis “Spreading the numbers”Reviewing basic credit questionsIs the organization liquid?Is the organization profitable?Is there adequate cash flow to operate?Preparing follow-up questionsCalculating and analyzing ratiosCompare this organization to othersTrend analysisThe key is getting betterTraining and Development Associates, Inc.
183Documents to Review Three years of financial statements Why 3 years? Revenue and ExpensesBalance SheetsCash Flow StatementsCorporate tax returnsBank statementsWhy 3 years?Projected financial statements for the next 3 to 5 yearsInterim financial statementsDepending on the timing of the yearly statementsTraining and Development Associates, Inc.
184Fund AccountingFund accounting matches sources and uses of funds for each funding sourcesWithout fund accounting, you cannot truly analyze the revenues and expenses of a specific funding sourceApplies the principles of financial analysis to each funding sourceTraining and Development Associates, Inc.
186Financial Statements Balance sheet Income statement What an organization owns (assets)What an organization owes (liabilities)Income statementRevenueExpensesRevenue in excess of expenses (profit)Training and Development Associates, Inc.
187Notes to Financial Statements Provides extra detail about the information in the financial statementsTerms and conditions of financing, leases, etc.Loans to staff and officersCollection and payment termsInter-fund transfersValuation of assetsOutstanding receivables (grants)Pending litigation or contingent liabilitiesTraining and Development Associates, Inc.
188Forms of Financial Statements In-house financial statementsPrepared internally by organizationUsed for day-to-day operationsCompiled financial statementsAuditor takes information from organization and compiles it into proper formatOnly as good as information provided by organizationAuditor does not test informationLeast expensive independently preparedTraining and Development Associates, Inc.
189Forms of Financial Statements Reviewed financial statementsAuditor reviews information provided by organizationProvides limited verificationKey tests completed to validate informationAudited financial statementsAuditor evaluates all aspects of organization’s financesVerifies assets, debt, other obligations and liabilitiesMost thorough and expensiveTraining and Development Associates, Inc.
191Operating Cycles Collecting Receivables Paying Others Purchasing InventoryTraining and Development Associates, Inc.
192Grantee’s Operating Cycle Even not-for-profits have an operating cycle and a need for working capital“Seasonality” – timing is everythingInvesting in fixed vs. variable expensesFixed expenses drive up the need to raise revenues on a regular basisDon’t buy stuff until you need itLease now, buy laterCollect now, pay on timeGrants are not cash until collectedTraining and Development Associates, Inc.
193Team Exercise: Rehab, Inc. Analyze the finances of a typical SHP grantee using the BIG 4!Training and Development Associates, Inc.
194What Should I Remember When I Get Back Home? Final ThoughtsWhat Should I Remember When I Get Back Home?
195Top Ten of Financial Management Numbers don’t lie, they hideOnly CASH pays the billsPledges (and grants) are not cash until they are collectedAlways match sources and uses of fundsEven nonprofits have an operating cycle and a need for working capitalTraining and Development Associates, Inc.
196Top Ten of Financial Management Fixed expenses drive up breakeven and the need to raise more fundsLease now, buy later! Collect now, pay on terms!Price your services to pay yourselfIt is not someone else’s responsibility (not the bank, the accountant or the funder)“What’s love got to do with it?”Training and Development Associates, Inc.
197Wrap Up Cleaning out the bin Evaluations Climate check Who you gonna’ call?Lead AgencyHUDTDAHave a safe journey!Training and Development Associates, Inc.
198Training & Development Associates 131 Atkinson Street, Suite BLaurinburg, North Carolina 28352(910)(910) Fax