2. 4/28/2015 Presented by David McQuay, Jr., CPA 1 Non-Profit Financial Management Florida Non-profit Housing, Inc. Self-help Housing Conference

3. 4/28/2015 Presented by David McQuay, Jr., CPA 2 Vision Statement To improve the agency’s financial management and reporting efficiency. (rowing harder does not help if the boat is headed in the wrong direction) To identify types of risks and procedures to minimize risks. (problem-solving is finding ways to get you from where you are to where you want to be)

4. 4/28/2015 Presented by David McQuay, Jr., CPA 3 Goals and Objectives Improving nonprofit financial management Understanding the risk assessment process Understanding financial statements

5. 4/28/2015 Presented by David McQuay, Jr., CPA 4 Nonprofit Financial Management (1) Accurate, current and complete disclosure of the financial results of each program in accordance with the applicable reporting requirements. (2) Records that identify adequately the source and application of funds for each program activity. Financial management systems shall provide for the following

6. 4/28/2015 Presented by David McQuay, Jr., CPA 5 Nonprofit Financial Management (3) Effective control over and accountability for all funds, property and other assets. All such assets shall be adequately safeguard and assure they are used solely for authorized purposes. Financial management systems shall provide for the following

7. 4/28/2015 Presented by David McQuay, Jr., CPA 6 Nonprofit Financial Management (4) Comparison of expenditures with budget amounts for each award. Whenever appropriate, financial information should be related to performance and unit cost data. (5) Written cash management procedures Financial management systems shall provide for the following

8. 4/28/2015 Presented by David McQuay, Jr., CPA 7 Nonprofit Financial Management (6) Written accounting procedures to assure compliance with grant award and other laws (7) Accounting records including cost accounting records that are supported by source documentation. Financial management systems shall provide for the following

9. 4/28/2015 Presented by David McQuay, Jr., CPA 8 Nonprofit Financial Management Transactions are properly recorded and accounted for to: (i) Permit the preparation of reliable financial statements and Federal reports; (ii) Maintain accountability over assets; and (iii) Demonstrate compliance with laws, regulations, and other compliance requirements;. The objectives of internal control pertaining to the compliance requirements for Federal programs (Internal Control Over Federal Programs), as found in §____.105 of OMB Circular A-133, are as follows:

10. 4/28/2015 Presented by David McQuay, Jr., CPA 9 Nonprofit Financial Management Financial transactions must be authorized, classified, executed and recorded in compliance with program objective. Funds, property, and other assets are safeguarded against loss from unauthorized use or disposition. Management must communicate the above criteria to employees, board of directors and grantors.

11. 4/28/2015 Presented by David McQuay, Jr., CPA 10 How Did We Get Here? The grant application --RD § 1944.410 processing pre-applications, applications, and completing grant dockets. Provide a detailed proposal of its goals including a list of other activities the applicant is engaged in and expects to continue, and a statement as to other sources of funding and whether it will have sufficient funds to assure continued operation of the other activities for at least the period of the agreement.

12. 4/28/2015 Presented by David McQuay, Jr., CPA 11 Why Implement Criteria? RD instruction 1944-I exhibit A paragraph (e)(3). (3) grant termination will be based on the following: (I)failure to establish an accounting system acceptable to rural development.

13. 4/28/2015 Presented by David McQuay, Jr., CPA 12 Available Options Accounting systems that are easy to maintain (cost vs. Benefit) Well developed budgets (forecast) plans Well defined financial policies and procedures Well defined personnel policies and procedures

14. 4/28/2015 Presented by David McQuay, Jr., CPA 13 Recommendations Procedures to communicate, evaluate and monitor Budget vs. Actual reporting Monthly reporting to management and board Reconciling grantee reports to financial records

15. 4/28/2015 Presented by David McQuay, Jr., CPA 14 What to Do Next? Review grantee regulations and guidance – RD instruction 1944-I –Administrative requirements OMB A-110 –Cost principles OMB A-122 –Grantee audit requirements OMB A-133 Review adequacy of –Accounting systems –Written policies and procedures

16. 4/28/2015 Presented by David McQuay, Jr., CPA 15 Grantee’s Fiduciary Roles Self-help grantee’s fiduciary responsibilities RD instruction 1902-A PART 1902 - SUPERVISED BANK ACCOUNTS

17. 4/28/2015 Presented by David McQuay, Jr., CPA 16 How Did We Get Here? §1944.425 handling and accounting for borrower loan funds. The extent of grantees involvement will depend on the experience of the grantee and the amount of authority delegated to them by the district director in accordance with § 1924.6(c).

18. 4/28/2015 Presented by David McQuay, Jr., CPA 17 What is the criteria? (1) The grantee acts in the same capacity as a construction manager in the group Purchase of material and services. (2) The grantee has an adequate bookkeeping system approved by the District Director to assure that funds in each RH account are properly distributed and maintained.

19. 4/28/2015 Presented by David McQuay, Jr., CPA 18 What Is the Criteria? (3) The grantee receives no compensation in the way of profit or overhead for this service and all discounts and rebates received in connection with the purchase of materials or services are passed on to the participating families. (4) The grantee has a record-keeping system which shows that the costs of the materials and services were prorated to each borrower's account in relation to the actual material and service used by each borrower.

20. 4/28/2015 Presented by David McQuay, Jr., CPA 19 Types of Activities 1902.8 authority to establish supervised bank accounts, deposit loan checks and other funds, countersign checks, close accounts, and execute all forms in connection with supervised bank account transactions. 1902.9deposits. 1902.10withdrawals 1902.14reconciliation of accounts 1902.15closing accounts

21. 4/28/2015 Presented by David McQuay, Jr., CPA 20 Recommendation What form of accounting system to use? Manual versus automated Record retention Identify other criteria and action items

22. 4/28/2015 Presented by David McQuay, Jr., CPA 21 Cost Allocation Plans Rural development guidance § 1944.410 processing pre-applications, applications, and completing grant dockets

23. 4/28/2015 Presented by David McQuay, Jr., CPA 22 How Did We Get Here? (A) (8) A list of other activities the applicant is engaged in and expects to continue, and a statement as to other sources of funding and whether it will have sufficient funds to assure continued operation of the other activities for at least the period of the agreement

24. 4/28/2015 Presented by David McQuay, Jr., CPA 23 What Is Criteria If multi-funded, its cost allocation plan or indirect cost rate must be part of the pre-application. (E) (8) indirect or direct cost policy and proposed indirect cost rate developed in accordance with 7 CFR part 3015 and part 3016.Form SF–424, ‘‘application for federal assistance.’’

25. 4/28/2015 Presented by David McQuay, Jr., CPA 24 Vocabulary Indirect cost Direct cost Cost allocation plan Indirect cost proposal Administrative cost Cost policy statement

26. 4/28/2015 Presented by David McQuay, Jr., CPA 25 Definitions "Indirect Costs" are those costs which are not readily identifiable with a particular cost objective but nevertheless are necessary to the general operation of a non-profit organization and the conduct of the activities it performs. The cost of executive salaries, payroll, accounting, personnel, depreciation, general telephone expenses, general travel and supplies expenses are examples of expenses usually considered as indirect costs.

27. 4/28/2015 Presented by David McQuay, Jr., CPA 26 Definitions "Direct Costs" are those costs that can be specifically identified with a particular cost objective. For example, salaries, fringe benefits and travel of a project director who is working 100% of the time on a DOL grant/contract are direct costs. Some non-profit organizations also classify as direct costs common or joint costs that can be readily assignable (allocated) to cost objectives, e.g., occupancy costs are allocated to a DOL grant/contract as direct costs based on square feet of space occupied.

28. 4/28/2015 Presented by David McQuay, Jr., CPA 27 Definitions Cost Allocation Plan" is a document that identifies, accumulates, and distributes allowable direct and indirect costs to cost objectives. The plan also identifies the allocation methods used for distribution to cost objectives on the basis of relative benefits received. The cost objectives include specific grants, cooperative agreements, contracts, programs, projects, titles/cost categories within a grant, a product or service provided to cost centers, or other activities of a non-profit organization, e.g. fund raising, services to members.

29. 4/28/2015 Presented by David McQuay, Jr., CPA 28 Definitions "Indirect Cost Proposal" means the documentation prepared by an organization to substantiate its claim for the reimbursement of indirect costs. This proposal provides the basis for the review and negotiation leading to the establishment of an organization's indirect cost rate, i.e., ratio between total indirect expenses and some financial base.

30. 4/28/2015 Presented by David McQuay, Jr., CPA 29 Definitions "Administrative Costs" consists of all direct and indirect costs associated with the management of an organization's programs. Non-profit organizations need to refer to their grant/contract terms and conditions for the applicable definition of "Administrative Costs" and any related limitations.

31. 4/28/2015 Presented by David McQuay, Jr., CPA 30 Definitions "Cost Policy Statement" is a document that identifies a non-profit organization's policy on the costs that it considers direct, and the costs it considers indirect and the rationale to support those costs.

32. 4/28/2015 Presented by David McQuay, Jr., CPA 31 Available Options Cost allocation plan Indirect cost proposal Documentation for both

33. 4/28/2015 Presented by David McQuay, Jr., CPA 32 Recommendations Recommended strategies Expected Results under each methods proposed What to do next Identify action items

34. 4/28/2015 Presented by David McQuay, Jr., CPA 33 The End Questions Reference materials and web site links What to do next Action items