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Financial & Grants Management Basics: 101

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1 Financial & Grants Management Basics: 101

2 Session Objectives Learn basic financial and grants management
Review reimbursing, reporting, and rebudgeting issues ________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ Learn about common audit pitfalls & issues

3 Grants & Financial Management Basics: 101
10. Grant Closeout Session Objectives 1. Regulations & Requirements 9. Audits and Site Visits 2. Financial Management Principles 8. Reimbursing, Reporting, and Rebudgeting Grants & Financial Management Basics: 101 3. Policies and Procedures 7. Cash & In-Kind Match ___________________________________________________________________________ 4. Internal Controls 6. Documenting Expenses 5. Administrative Costs

4 Regulations & Requirements

5 Nat’l & Community Svc. Act of 1990
Code of Fed. Regulations (CFR) OMB Circulars (part of CFR) State & Local Regulations Provisions Certifications and Assurances Notice of Grant Award Proposal & Budget Notice Of Funding Opportunity

6 Changes to the OMB Circulars
The OMB Circulars were first published in 1952 In 2005, grants management circulars were incorporated into the Code of Federal Regulations (CFR) The content and information is the same; however, the guidelines were streamlined and changed for consistency

7 Grant Guidelines Effective May 11, 2004 and August 31, 2005 Notes:
Federal Grant Guidelines Universities States, Local, Indian Tribal Governments Non-Profits Hospitals Administrative Requirements § 45 CFR 2543 § 2 CFR 215 (formerly A-110) § 45 CFR 2541 OMB A-102 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 Notes: CFR = Code of Federal Regulations  = Organization is subject to A-133 if it expends more than $500,000 of Federal funds in its fiscal year Locate Grants Management Circulars:

8 When do I use OMB Circulars?
The Circulars provides guidance and requirements relevant to the Federal grants in these areas: Cost Principles Administrative Requirements A-133 Audits

9 Cost Principles Requirements
Provide guidance to determine the allowable costs incurred by organizations under Federal grants Designed so that Federal awards bear their fair share of costs Provide guidance about reimbursement requirements Provide uniform standards of allowability and allocation Encourage consistency of treatment of costs 54 selected items of cost State and local = 43 identified Educational Institutions = 54 identified Non-profits = 52 identified

10 Cost Principles Examples of Costs in CFRs:
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

11 Administrative Requirements
Provide consistency and uniformity among Federal agencies in the management of grants and cooperative agreements Required all Federal agencies to issue a grants management common rule to adopt government-wide terms and conditions Specific grantmaking requirements for CNCS are in the CFRs

12 Administrative Requirements
Examples of items in CFRs: Pre-award policies Special award conditions Purpose of financial and program management Standards for financial management systems Cost sharing or matching Program income

13 A-133 Audit Requirements Provide the standards for obtaining consistency and uniformity among Federal agencies for the audit of organizations expending Federal funds Apply to all organizations that expend $500,000 or more of Federal funds in a year

14 CNCS Grant Provisions Are issued by CNCS with the Notice of Grant Award Are the guiding principles for CNCS-funded grants and cooperative agreements Contain program and financial guidelines Are binding on the grantee and subgrantee in the same manner The order of precedence if inconsistencies exists is: Notice of Grant Award AmeriCorps Special Provisions General Provisions Approved Grant Application

15 CNCS Grant Provision Requirements
Examples of items in the Provisions: Member Recruitment, Selection, and Exit Living Allowances, Other In-Service Benefits, and Taxes Member Records and Confidentiality Budget and Programmatic Changes Reporting Requirements Responsibilities under Grant Administration Financial Management Standards Program Income Safety

16 Financial Management Principles

17 Efficient Accounting System

18 Efficient Accounting System
Accounting System must be capable of: Distinguishing between grant verses non-grant related expenditures Identifying costs by program year Identifying costs by budget category Differentiating between direct and indirect costs (administrative costs) Accounting for each award/grant separately

19 Accounting System that properly segregates funds
Department of Education Grant Grant 1 AmeriCorps Grant Grant 2 Ford Foundation Grant Grant 3 NOT

20 Efficient Accounting System
Accounting System must be capable of: Distinguishing Federal funds separately from grant funds Recording in-kind contribution as both revenues and expenses Easily provide management with financial reports at both the summary or detailed levels Comparing outlays with budget amounts for each award (budget vs. actual reports) Correlating financial reports submitted to CNCS directly to accounting information and supporting documents

21 Allowable, Reasonable, Allocable, and Consistent Costs

22 Allowable - What does it Mean?
To be allowable under a grant, costs must: Be reasonable and allocable for the performance of the award Conform to grant award limitations or cost principles Be consistent with policies and procedures that apply to both federally-financed and other activities of the organization Be given consistent treatment Be 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

23 Example – Allowable? Allowable?
The Program Director of BEST AmeriCorps program decided to host a very important meeting at his home and serve beer and pizza hoping that everyone would attend. The purpose of the meeting was to discuss changes in the new CNCS Grant Provisions that affected the program. Because it was a business meeting he decided to charge the cost of the beer and pizza to the AmeriCorps grant, especially since he was providing the use of his home. Allowable?

24 Reasonable - What Does it Mean?
A cost is reasonable if: It does not exceed what a prudent person would do under the circumstances at the time the decision was made to incur the cost Consideration should be given to: Whether the cost is ordinary and necessary for the operations of the organization The restraints or requirements imposed by generally accepted sound business practices Whether the individuals concerned acted with prudence Significant deviations from established practices which may unjustifiably increase the award costs

25 Example – Reasonable? Reasonable?
BEST AmeriCorps program needs 5 laptop computers for the program so that members can learn basic computer skills. When deciding on the model that would best suit its needs, the Program Director received three price quotes on various models and two were within the same general price range of $650 - $700. However, one laptop appealed to him most – it met all of the necessary specifications plus being the “techie” he was it had many other “nice to have” features, such as built in webcam and mobile broadband, a 21” Hi-Def widescreen, and 8 built-in speakers and a subwoofer. Although the basic models were adequate, the more appealing one was $2,999, on sale, and came in crimson red, the BEST AmeriCorps program’s team color, so the Program Director ordered 5 of these laptop computers. Reasonable?

26 Allocable - What Does it Mean?
A cost is allocable: Based on its relative benefits received If it is treated consistently with other costs incurred for the same purpose in like circumstances and if it: It is incurred specifically for the award Benefits both the award and other work and can be distributed in reasonable proportion to the benefits received or Is necessary to the overall operation of the organization Any cost allocable to a particular award may not be shifted to other Federal awards to overcome funding deficiencies, or to avoid restrictions imposed by law or by the terms of the award

27 Example – Allocable? Allocable?
When the crimson red laptops finally arrived, the Program Director found that funds allocated for supplies for the BEST AmeriCorps program were fully expended. Although the laptops were to be used only for the AmeriCorps program, BEST had another CNCS funded program through a Learn & Serve America program, so the Program Director told the accountant to charge the cost to the Learn & Serve America program since CNCS was also funding that program. Allocable?

28 Consistent - What Does it Mean?
Grantees must be consistent in assigning costs: Whether a direct cost or an indirect cost Regardless of the source of funding, i.e., federally or non-federally sponsored activities, and Following written cost allocation plan, as applicable Key wording in the cost principles: Consistent with that paid for similar work in the organization’s other activities Distributed to awards and other activities in a consistent pattern The organization must follow a consistent, equitable procedure Charges must be consistent with those normally allowed in like circumstances in the organization’s non-Federally-sponsored activities

29 Example – Consistently Applied?
The BEST AmeriCorps program was running low on office supplies and postage stamps. Since the Program Director couldn’t wait any longer for the office manager to provide the supplies, he purchased them and charged them to the AmeriCorps grant. Consistently Applied?

30 Policies & Procedures

31 Policies & Procedures Policies and procedures are a set of written documents that describe an organization's policies for operation – “what is to be done” the procedures necessary to fulfill the policies – “how it is to be completed” All staff must be familiar with these documents Documents must be kept up-to-date Documents should explain the rationale and include principal transactions and completed forms Documents must incorporate Federal and CNCS grant regulations and provisions

32 Helpful guide and handbook for developing Policies and Procedures
Policies & Procedures Required by Federal grant regulations Non-profit organizations have additional requirements – Form 990 submitted to IRS Other Key Policies & Procedures to document AmeriCorps Programs See Handout Helpful guide and handbook for developing Policies and Procedures See Grantee Central CD provided in 2008

33 Internal Controls

34 Are You an Internal Control User?
When you leave home in the morning to go to work, do you lock the doors to your house? _____________ If you do, that's your own "internal control" to safeguard the assets you own in your home Congratulations, you are an internal control user!!

35 Why Have Internal Controls?
Improve accountability to customers CNCS, trustees, funders, public Help organization achieve performance & budget targets Improve reliability of financial reporting Improve compliance with laws & regulations Prevent loss of resources & public assets Prevent loss of public trust Reduce legal liability

36 Who is Responsible? Everyone within the organization has some role in internal controls Roles vary depending upon level of responsibility: Executives establish the presence of integrity, ethics, competence and a positive control environment Directors and department heads have oversight responsibility for internal controls within their units Managers and supervisory personnel are responsible for executing control policies and procedures at the detail level within their specific unit Each individual within a unit is to be cognizant of proper internal control procedures associated with their specific job responsibilities

37 Elements of Internal Controls
Internal control systems operate at different levels of effectiveness Determining effectiveness is based on an assessment of whether these 5 components are present and functioning: Control Environment – sets the tone of an organization Risk Assessment – identifying & analyzing internal and external risk Control Activities – management’s directives carried out through policies and procedures Information and Communication – providing timely information to the right people down, across, and up Monitoring – assessing the quality of the system’s performance over time Internal control systems operate at different levels of effectiveness. Determining whether a particular internal control system is effective is a judgment resulting from an assessment of whether the five components - Control Environment, Risk Assessment, Control Activities, Information and Communication, and Monitoring - are present and functioning. Effective controls provide reasonable assurance regarding the accomplishment of established objectives

38 Administrative Costs

39 Definitions Direct Costs Indirect/ Administrative Costs
Specific expenses related to the operations of a specific project General expenses related to overall administration of an organization receiving CNCS funds Expenses incurred for common or joint objectives and cannot be readily identifiable with a specific project or cost objective Indirect/ Administrative Costs

40 What are Direct Costs? Allowable direct expenses for members, e.g., living allowances and insurance costs Costs for staff who train, place, or supervise Member’s benefit programs Evaluations of programs Supplies and Facility costs Travel

41 What are Administrative Costs?
Accounting, auditing, contracting, budgeting, and general legal services Facility occupancy costs, e.g., rent, utilities, insurance, taxes, and maintenance General liability insurance that protects the organization (not directly related to a program) Director’s and Officer’s liability insurance Depreciation on building & equipment Office Supplies General & Administrative salaries & wages

42 What cannot be included as Administrative Costs?
Bad debts Entertainment costs Fines and penalties Fundraising Interest on borrowed capital Lobbying Relocation Costs Taxes

43 CNCS 5% Administrative Rate
Option 1 Use the CNCS “fixed 5%” Administrative costs are limited by statute: Costs cannot exceed 5% of total Corporation share Grantees may charge up to 5% of the total CNCS funds expended, provided that the grantee’s administrative match does not exceed 10% of all direct costs CaliforniaVolunteers Guidelines: 4% = Subgrantee 1% = CaliforniaVolunteers

44 Federally Approved Indirect Cost Rate
Option 2 Use the Federally approved Indirect Cost Rate

45 Obtaining a Federally Approved Indirect Cost Rate
Can my organization have an indirect cost rate? Yes. If your organization is a direct recipient of Federal grant funds No. If your organization receives only pass-through Federal grant funds, then your organization is limited to using the 5% and 10% fixed rates stipulated for CNCS grants

46 Documenting Administrative Costs
Using the CNCS 5% Rate (45 CFR ) Not subject to supporting cost documentation “Not Auditable”? If direct costs charged to CNCS are questioned, and deemed unallowable: Payback funds for disallowed direct costs Payback funds for administrative costs claimed based on the disallowed direct costs Unreimbursed indirect costs may be applied to meeting operational matching requirements Using a Federally Approved Indirect Cost Rate Must maintain related supporting documentation for audit Charges are based on documented expenses

47 Documenting Expenses

48 Document, Document, Document
Allowable Allocable Reasonable Consistently Applied 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. 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. Allowable = To be allowable under an award, costs must: (1) be reasonable, (2) conform to any limitations or exclusions set forth in the cost principles or in the grant award, (3) be consistent with policies and procedures that apply uniformly to both federally-financed and non federal financed activities, (4) be accorded consistent treatment, (5) be determined in accordance with Generally Accepted Accounting Principles (GAAP) and Governmental Accounting Standards Board (GASB), (6) not be included as a cost or used to meet cost sharing or matching requirements of any other federally-financed program in either the current or a prior period, and (7) be adequately documented.

49 Establish a written record retention policy
Documentation Basics Why Retain Documentation? To track incoming information To review information To provide historical evidence To provide evidence of accomplishments To assist during the audit or site visit See handout Maintaining Source Documentation Where is your filing cabinet? How safe is your filing cabinet? What is your filing system? How are your documents filed? Retaining Source Documentation Retain all financial records: 3 years from date of submission of final Financial Status Report Final report = This means the report submitted by Commission or Parent of National Direct 3 years from final audit resolution when there is an on-going audit Storing Documentation Marking Storage Boxes Long-term Storage Establish a written record retention policy See Handout

50 Defining Source Documentation
Physical information: Hard copy Soft copy: CD, flash drive, server, microfilm Source: Internal to the organization External sources Benefits  supports a value, cost, or performance criteria relative to the grant What is source documentation? Physical: Hard = paper documents, such as purchase orders, invoices, timesheets, reimbursement vouchers, travel vouchers Soft copy = computer system, floppy disks, CD disks, thumb drives, Source: Internal = documentation created within the organization External = banks, vendors, customers Benefits: Can the documentation support the value of the goods or services, as well as meet the performance of the program objective CaliforniaVolunteers may request this during site visits or desk reviews

51 Key Documentation Issue
Salary Signed timesheets with supervisory approval Quarterly payroll returns (941) Payroll register Personnel file with salary/wage information Employment contract Cancelled checks Direct deposit schedule This is a common audit finding and site visit issue – timesheets documenting salary paid 2 CFR 220 [A-21] = educational institutions 2 CFR 225 [A-87] = state, local and indian tribal governments 2 CFR 230 [A-122] = non-profits See Handout

52 Reimbursements, Reporting & Rebudgeting

53 Reimbursements Reimbursement is made based on actual expenses
Reimbursements may not be for estimated, unauthorized, or unallowable expenses Invoices must be for approved and budgeted expenditures that programs have already incurred No advances allowed

54 Reimbursements Subgrantees/Programs must submit:
3 Copies = CaliforniaVolunteers Invoice Form (CV 100) 3 Copies = Periodic Expense Report (PER) CaliforniaVolunteers allows monthly or quarterly reimbursement but program must designate which method it will use

55 Reimbursements Must also have up-to-date and current:
Member hours in WBRS PERs FSRs Program Reports Must also demonstrate compliance with program operations, i.e., no outstanding corrective action

56 Reimbursements AmeriCorps Grant Provisions
“Financial management systems must be capable of distinguishing expenditures attributable to this grant from expenditures not attributable to this grant. The systems must be able to identify costs by programmatic year and by budget category and to differentiate between direct and indirect costs or administrative costs.”  Record in-kind contribution as both revenues and expenses

57 Reimbursements AmeriCorps Grant Provisions
“A living allowance is not a wage. Programs must not pay a living allowance on an hourly basis. Programs should pay the living allowance in regular increments, such as weekly or bi-weekly, paying an increased increment only on the basis of increased living expenses such as food, housing, or transportation. Payments should not fluctuate based on the number of hours served in a particular time period, and must cease when a member concludes a term of service.” No “lump sum” if member completes term early No “lump sum” if member starts late, e.g., “make up” missed payments

58 Payments from CaliforniaVolunteers
30 Days = Target Date Reimbursement may take up to 45 days Reimbursement requests received after due date will be processed in the following month Delays Occur Because: Incomplete or incorrect invoices Insufficient match Missing documentation Failure to update member hours in WBRS or to correctly submit them Failure to submit Progress Report

59 Key Elements of Financial Reporting
Prepare all financial reports with information from the organization’s accounting system Review and reconciliation the information to ensure accuracy prior to report submission Files must have the proper documentation to support all information reported in financial reports Submit all reports on time

60 Reporting Requirements
Periodic Expense Report (PER) Due to CaliforniaVolunteers office by the 25th day of the each month or quarter Must be submitted via hard copy 3 copies of the PER are required Required documents include: PER and invoice cover sheet Failure to submit the PER on time will result in reimbursement delays

61 Reporting Requirements
Financial Status Report (FSR) Due to CaliforniaVolunteers office by the 15th day after the end of the reporting period Must be submitted via hard copy One (1) copy of the FSR is required Required documents include: Program Income Form Submission of all PERs for reporting period

62 Late Reports? Prior to the due date PERs and FSRs
By , request an extension Provide reason why an extension is needed State expected date of completion PERs and FSRs Submit extension request to Grants Management Associate (Jesse Delis)

63 Program Income Program Income Form
There are 2 alternatives to use program income: Additive – added to funds committed to the program and used to further program objectives Deductive – deducted from total allowable costs of the program to determine the net allowable costs for which the Federal share is based

64 Program Income Gross Program Income – All funds collected as a direct result of grant funded-activities Net Program Income – The amount after deducting costs associated with generating the income All Program Income must be used for grant-related purposes Program Income and the supporting documentation is “auditable”

65 Key Reporting Issues Program Income
These were the common errors found on the April 30, 2009 Program Income Forms Program Income used as match was erroneously reported as Program Income Corrective Action: If all your program income was used as match, your Program Income Form should be blank Program Income Form was not submitted at the same time as the FSR Corrective Action: Submit the FSR and the Program Income Form at the same time, not separately

66 Rebudgeting CaliforniaVolunteers must receive written approval from CNCS for these budgetary changes: Specific costs requiring approval under the cost principles, such as: Overtime pay, rearrangement and alternation costs, and pre-award costs Purchases of equipment over $5,000 using CNCS funds, unless specified in the approved application and budget Changes in the cumulative budget line items that amount to 10% or more of the total budget, unless the CNCS share is $100,000 or less The total budget includes both the CNCS and grantee shares Grantees may transfer funds among approved direct costs categories when the cumulative amount of such transfers do not exceed 10% of the total budget

67 CaliforniaVolunteers Key Rebudgeting Issues
Budget changes are made before CaliforniaVolunteers approved the change Adequate written justification was not provided Budget Revision Request Form was incomplete Inadequate monitoring of budget throughout the year resulted in major budget changes at year-end, instead of periodically throughout the year

68 CaliforniaVolunteers Rebudgeting Requests
Submit a Budget Revision Request Form (CV 200) Narrative justification – explain why a redistribution of funds is needed Spreadsheet with the original CNCS share budget, proposed budget, and difference between two budgets Spreadsheet with the original Subgrantee share budget, proposed budget, and difference between two budgets Must be signed by the Program Director and faxed to CaliforniaVolunteers Program Associate Program Associate reviews it and approves program changes and the Grants Management Associate reviews it for fiscal accuracy CaliforniaVolunteers will either approve or deny – wait to take action only after receiving approval

69 Rebudgeting Pointers Your budget = estimate of expected costs
Estimates may change as the program is implemented Review budget monthly Request budget revisions promptly Do not wait until last month of year to request budget modification

70 Federal Audits: OIG and A-133

71 What is an Audit Examines a Corporation program or activity
Financial Audits Audits of costs incurred on grants and contracts, indirect costs, and internal controls Performance Audits Audits of economy and efficiency of programs Measure achievement of desired results or benefits

72 Office of Inspector General

73 What’s the OIG Audit Process?
Notification Letter in writing Entrance Conference To provide audit scope and objectives Survey Phase (planning phase) To obtain grantee’s background, mission, resources, responsibilities, key personnel, operating systems and controls

74 What’s the OIG Audit Process?
Develop the Audit Program A set of procedures for auditors to follow Field Work Auditors complete the audit following the procedures in the audit program Exit Conference A verbal briefing of auditor’s findings work with the opportunity to confirm information, ask questions, and obtain clarifying information

75 What’s the OIG Audit Process?
Draft Report Issued to the auditee and Corporation officials a request to provide written comments in 30 days Corporation & Grantee Response The Corporation and Grantee each respond in writing to the draft report and comments are published in the final report Final Report Issued after reviewing auditee’s and Corporation’s comments with complete description of findings and recommendations for corrective action

76 Common Pitfalls & Issues
7 Main Areas: Member Eligibility Member Files & Records Member Costs Match Reports Administrative Areas General Management See Handout

77 OIG Hotline 1-800-452-8210 or
Report suspected fraud, waste, or abuse All Information is confidential You can remain anonymous or Website:

78 Grant Closeout

79 CaliforniaVolunteers: Annual Closeout Procedures
CaliforniaVolunteers closes all subgrants on an annual basis: Fiscal Activities Program Activities Program staff and Fiscal staff must coordinate Closeout activities

80 CaliforniaVolunteers Annual AmeriCorps Closeout Procedures
Fiscal Activities Final Reimbursement Invoices - Due within 60 days of grant termination Review all obligations to ensure all expenses have been paid Final invoices will only be processed for payment after the program submits all required documentation attesting to the completeness of member records and the retention site Errors in reimbursement requests (over or under) discovered after closeout must be brought to the attention of the Commission ASAP for resolution Final PER = Due within 60 days of grant end FSR = Due by April 15th following end of grant

81 CaliforniaVolunteers Annual AmeriCorps Closeout Procedures
Program Activities There are 7 steps needed to complete the programmatic closeout of your grant. They are: Verification of complete and accurate entry of member time logs into WBRS for each AmeriCorps member in your program Verification that all Exit Forms have been entered into WBRS for all AmeriCorps members in your program Print out a program reconciliation report from WBRS to verify that all members have been exited with appropriate education award

82 CaliforniaVolunteers Annual AmeriCorps Closeout Procedures
Program Activities Review of all member files and submission of Member Files Closeout Certification Form Completion of final Progress Report Due 15th day after the program end date Submission of printed final Progress Report, signed and dated by Program Director Submission of cover letter, on letterhead, that steps 1-6 are completed, including information where files will be stored and the process for document retrieval in the event of an audit

83 Final Grant Closeout CaliforniaVolunteers must:
Pay outstanding obligations Close subgrants Ensure FFR and PSC-272 are equal Enter final FFR in eGrants Submit closeout documents to CNCS Return unobligated funds CV cannot fix problems or return funds after funds have been returned to the Federal Government

84 Final Grant Closeout Subgrantee must: Submit Final FSR
Submit Equipment Inventory Form Submit Residual Supplies Form Submit Progress Report

85 CNCS: Deobligating Funds
CNCS will deobligate any authorized grant funds not drawn down at the end of the project period Deobligation reduces the amount of authorized funds to equal the amounts disbursed and drawn down for the grantee and its subgrantees Grantees do not have access to deobligated funds

86 CNCS: Subsequent Audit
CaliforniaVolunteers and CNCS retain right to conduct a subsequent audit or other review of a grant – closeout does not change this right Notice of audit may extend the 3 year record retention requirement Subgrantees and Grantee must: Retain all records for 3 years from when the Commission (grantee) submits the final FSR Requirement is included in the CNCS Grant Provisions

87 Questions?

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