Welcome to “Numbers don’t lie, they hide” Training and Development Associates, Inc.

Numbers Don’t Lie, They Hide Financial Management for Homeless Grantees

Who Are We? Presented by Sponsored by Training & Development Associates, Inc. www.tdainc.org As a subcontractor of the Corporation for Supportive Housing Sponsored by U.S. Department of Housing and Urban Development Los Angeles Field Office Training and Development Associates, Inc.

Logistics Manual and handouts Exercises Teams Questions (the “Bin”) Restrooms and telephones Training and Development Associates, Inc.

Who Are You? Type of organization Your role Lead agency Sponsor Service provider Your role Executive director Financial staff Case manager Another position Training and Development Associates, Inc.

Why Are We Here? Different funding requirements and reports confusing Grantees have questions about HUD’s requirements Finance roles for staff and subgrantees can be confusing Monitoring scrutiny plus new funding considerations Reliance on outside “experts” leaves some in the dark Programs rely on software they can’t interpret Staff does not know the language or tools of financial management Training and Development Associates, Inc.

Workshop Goals Participants in this session will Understand the “nuts and bolts” of financial management and analysis Know how to use “internal controls” to guarantee compliance with HUD and other funder requirements Understand the “order of authority” and, therefore, what is required by HUD regulations, OMB Circulars and Generally Accepted Accounting Principles Leave with tools and techniques to address financial management and know when to seek external assistance Training and Development Associates, Inc.

Performance Benchmark Each participant will Leave with at least 3 new ideas, techniques or tools to address financial management Meet at least 2 new participants who can be their resource person, mentor or support network after the workshop Training and Development Associates, Inc.

Table 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 grant Identify 3 items and provide the following In an ideal world _____ But in the real world _____ is what happens Why the real world differs from the ideal world Ways the real world can be more like the ideal world Training and Development Associates, Inc.

HUD’s Top Issues Funds spent on eligible costs Documentation of homeless status If the client is not eligible, the costs are not eligible Proper calculation of rents Commitment of match dollars Documentation of expenditures You are assumed guilty until proven innocent Information to report results to Congress Timeliness of drawdowns Training and Development Associates, Inc.

New Emphasis on Performance HUD comprehensive monitoring handbook issued Covers all CPD programs, including SHP [6509.2 REV-5] Exhibit 13-8: Guide for Review of SHP Financial Management Exhibit 13-9: Guide for Review of SHP Cost Allowability Exhibit 13-10: Guide for Review of SHP Procurement Exhibit 13-11: Guide for Review of SHP Equipment Exhibit 13-12: Guide for Review of SHP Other Federal Requirements Training and Development Associates, Inc.

It’s Time for Bingo!

Financial Management Systems

The Order of Authority GAAP Congress OMB/GAO HUD HUD Grantee Training and Development Associates, Inc.

Relationship of Federal Regulations *Federal Acquisition Requirements Training and Development Associates, Inc.

Fiscal Management System Cash Management Accounting Regulations Homeless Program Financial Reports Procedures Internal Controls Documentation Budgeting Policies Auditing Monitoring Financial Management Training and Development Associates, Inc.

Setting the Stage Financial Management Financial Analysis Constant process of safeguarding financial assets of organization, whether for-profit or nonprofit By instituting policies and practices that maintain and increase the value of assets for overall benefit of the organization Financial Analysis Systematic technique for evaluating financial health of organization By quantifying information and comparing that information to similar organizations in the field Training and Development Associates, Inc.

The Importance of Financial Management “Fitting in” with other funders Better planning Gaining allies Raising your “match” Sustaining future growth Training and Development Associates, Inc.

Fitting in With Other Funders and Better Planning Funders (private and public) look at financial management to make investment decisions Solid information helps grantees to Realistically project the future Seek funding for that future Plan more accurately Financial management is part of a multi-year planning process Operating like a business helps organizations to Increase program services Not always be obsessed with raising more funds Training and Development Associates, Inc.

Fund Accounting Your grant may be one of many funding sources that your agency has Multiple funders leads to “fund accounting” Your financial system must account for the requirements of all of funding streams While many of the requirements have a higher authority than HUD HUD is the funding stream that we focus on Training and Development Associates, Inc.

Example of Fund Accounting HUD SHP HHS United Way Founda-tion Donor Total Revenue Grants Cash Donations Total Revenue Expenses Labor Overhead Administration Total Expenses Excess Revenue Training and Development Associates, Inc.

Gaining Allies Who is financially responsible for the viability of your organization? Your board of governance begins to own the program as they understand their liability and responsibility External funders gain confidence in your organization as you comply with the norms of the business world Training and Development Associates, Inc.

100% 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 activities Training and Development Associates, Inc.

Keys to a Successful System

Who is Involved in Managing Your System? Board of Directors Local community development staff Elected officials HUD Government staff Other investors Accountants Training and Development Associates, Inc.

Staff Responsibilities Fiduciary trust Payment of taxes Government filings Cash flow Fund accounting and reports to funders, including HUD Service delivery Internal financial controls Reports to committees Legal contracts “The books” Construction…if? Future planning and financial projections Training and Development Associates, Inc.

Board Responsibilities Building the agency’s financial capacity Raising the funds to maintain the organization long-term Budgeting funds productively Managing funds wisely Reporting on funds raised Supplementing budgets Evaluating agency’s financial performance Training and Development Associates, Inc.

When Do You Need An Accountant? Benefits justify the costs “Too many hoops” Adjunct staff and business partner Fund accounting required Funders’ requirement Training and Development Associates, Inc.

What Services Should An Accountant Provide? Advice on tax matters, unrelated business income, tax questions Preparation of tax forms Quarterly IRS Form 941 Quarterly federal, state and local government tax filings Annual income tax returns and/or 1099’s Analysis of management activities and advice Training and Development Associates, Inc.

What Services Should An Accountant Provide? Assistance in establishing financial management systems Collecting grants, outstanding revenues and “fees for service” Control of inventory, asset purchases and cash Recommendations to cut expenses, increase cash flow and price services Assistance in preparing the organization for long-term growth When can the agency afford new staff? Training and Development Associates, Inc.

Components of a Financial Management System

Why a Financial Management System? Required by HUD and OMB Systems required to meet certain standards Control and account for funds, property and other assets Identify source and application of funds Allow accurate, timely and complete reporting Minimize time in transfer of funds between parties Addressed through policies, procedures, practices and personnel—the “4-P’s” Training and Development Associates, Inc.

Financial Management System Ineffective results in Major audit findings Negative publicity Funding withheld Effective results in Sound management decisions Documentation supporting program activities and expenditures Knowledge of regulations, policies and procedures Strong accounting system Good internal controls Training and Development Associates, Inc.

Components of Financial Management Systems Uniform administrative requirements Cost principles Audit procedures Procurement standards Training and Development Associates, Inc.

In The Final Analysis… Like it or not, financial management is a requirement of your grant We need to learn to appreciate it, rather than fight it! Use source documents for guidance Regulations 24 CFR Part 85—Governments 24 CFR Part 84—Nonprofits HUD’s desk guides OMB Circulars HUD’s Monitoring Checklist Exhibit 13 – 8, Items 1-12 Training and Development Associates, Inc.

Frequently Asked Questions Who? What? How? Under SHP

Supportive Housing Program One component of the continuum of care strategy for homelessness Outreach and assessment Immediate (emergency) shelter Transitional housing (with support services) Permanent housing (with support services) Enacted in the McKinney-Vento Act Training and Development Associates, Inc.

Answering the Important Question: What is 3-6-8-8?

National Objectives 3 goals of HUD’s homeless programs Help participants obtain and remain in permanent housing Help participants increase skills and/or income Help participants achieve greater self-determination Training and Development Associates, Inc.

HUD 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.

Program Components 6 types of projects Transitional Housing Permanent Housing for people with disabilities Supportive Services Only Safe Havens Innovative Supportive Housing Homeless Management Information Systems Training and Development Associates, Inc.

Eligible Activities 8 ways to spend SHP funds Acquisition Rehabilitation New construction Leasing Supportive services Operating expenses Administration Homeless Management Information System Training and Development Associates, Inc.

Acquisition and Rehabilitation Purchase and/or rehabilitate all or part of building Used for housing and/or services Pay off a current mortgage (lump sum) If not previously used for HUD Funding limited to between $200,000 and $400,000 Higher amounts applicable to high cost area 50% cash match obligation 20-year use restriction Training and Development Associates, Inc.

New Construction Newly construct building for housing (not services) Funding limited to $400,000 Covers both land and building Funds cannot be used for demolition Must demonstrate costs are less than for rehabilitation 50% cash match obligation 20-year use restriction Training and Development Associates, Inc.

Leasing Leasing building for supportive housing or supportive services Portion of building, entire building or multiple buildings Not building already owned No mortgage payments or building operations Pay rent for individual units Paid directly to landlord Units must meet housing standards Rents must be reasonable No match requirement for leasing Training and Development Associates, Inc.

Supportive Services For new grantees, cost of new or increased services For renewals, cost of continuing services Salaries to providers and other direct costs (actual direct staff time) Services aimed at moving homeless to independence Offered while part of project For transitional housing, services may continue for 6 months after graduating 20% cash match obligation Training and Development Associates, Inc.

Operating Expenses Costs of operating facilities Only for new project or expanded portion of existing project Supports function and operation of project Often referred to as indirect costs Standards in OMB Circulars A-87 and A-122 Pro rate costs to individual funding sources Eligible for all components except supportive services only 25% match obligation Training and Development Associates, Inc.

Administrative Costs You may request up to 5% of grant to cover administrative costs Costs associated with carrying out the grant May be split between lead agency and sponsors Costs associated with carrying out components ineligible No match requirement for administrative costs Training and Development Associates, Inc.

Homeless Management Information System Computerized data collection tool Designed to capture client level system-wide information Costs to implement and/or operate a computerized data collection tool Characteristics and service needs of the homeless Funds cannot be used for planning or developing new system 20% cash match obligation Training and Development Associates, Inc.

HUD Eligible Activities For Shelter Plus Care, remember: Housing Assistance is for the term of the grant Service Match is $1:$1 during the term of the grant Service match must be for HUD-eligible activities Administration is 8% of the grant ( after the housing assistance) Training and Development Associates, Inc.

Eligible Clients 8 eligible categories of homelessness Not all homeless people are HUD-homeless eligible Not all clients with disabilities are eligible for permanent housing If a client is not eligible, all costs associated with that client (including administration and match) are not eligible Training and Development Associates, Inc.

Procurement, Match and LOCCS

Procurement

Procurement Rules Grantees and subgrantees must adhere to federal procurement rules when purchasing Services Supplies and materials Equipment Applicability Governmental entities: 24 CFR Part 85 Nonprofits: 24 CFR Part 84 Also refer to SHP Monitoring Checklist Exhibit 13 -10, Items 1 - 17 Training and Development Associates, Inc.

Procurement Overview Procurement policies must be in place Must follow written procedures and document compliance Four procurement methods available Small purchase (less than $100,000) Sealed bid (construction) Request for proposals (RFP) Non-competitive Training and Development Associates, Inc.

Small Purchase Method Also known as “streamlined” method May be used for purchases below $100,000 Requirements include Getting 3 to 5 competitive quotes Selecting the most reasonable offer Using purchase orders or petty cash to purchase Training and Development Associates, Inc.

Sealed Bid Use for construction contracts and to purchase equipment and/or supplies Process involves Developing an invitation for bids Publicly soliciting bids Opening bids and announcing prices Reviewing bids in detail Awarding contract to winning bidder Training and Development Associates, Inc.

Request for Proposal (RFP) Used when sealed bid not appropriate (for example, consulting services) Process involves Announcing and issuing RFP Opening, reviewing and comparing proposals If necessary, negotiating with offerors Requesting and reviewing “best and final” offers Awarding contract Training and Development Associates, Inc.

Non-Competitive Award Permitted when award is infeasible under other methods and one of following applies Item is available from only one source Emergency situation will not permit delay HUD authorizes non-competitive proposals Price or cost analysis and written justification must be in files Training and Development Associates, Inc.

Contracts Two basic types permitted Firm fixed price Agreed upon price, regardless of actual cost Cost reimbursement Estimated cost, usually with a ceiling When using sealed bid method, firm fixed-price contract required Other methods, use either type Training and Development Associates, Inc.

Bonding and Insurance For contracts of $100,000 or more, completion assurance required through: Performance and payment bonds Deposit of cash escrow Letters of credit Training and Development Associates, Inc.

Bonding and Insurance Insurance requirements include Worker’s compensation and employee liability Auto insurance for injuries on job site Comprehensive public liability Property damage Training and Development Associates, Inc.

Other Contracting Requirements Minority- and women-owned businesses MBE and WBE outreach requirements Must take affirmative steps to use businesses owned by minorities and women Section 3 applies to construction contracts Goals for training and hiring low-income residents of area Goals for hiring contractors located in area Training and Development Associates, Inc.

Ethics in Contracting Conflict of interest requirements apply 24 CFR 583.330(e) SHP Monitoring Checklist Exhibit 13 -12, Item 4 Gratuities and kickbacks not allowed Confidential information may not be used for personal gain Influence peddling not allowed Training and Development Associates, Inc.

Numbers Don’t Lie, They Hide Financial Management for Homeless Grantees DAY TWO

Pop Quiz on Day One 3__________________ 6__________________ 8__________________ 4__________________ 14__________________ 100% must equal _____ or ___________________ 24 CFR, Part ______ is for governments 24 CFR, Part ______ is for not-for-profits OMB Circular A-ll0 governs ____________ OMB Circular A-122 outlines ____________ OMB Circular A-133 governs ____________ Extra Credit Question? Training and Development Associates, Inc.

Meeting Programmatic Match Requirements

SHP Match Requirements Acquisition Rehabilitation New Construction Supportive Services Leasing Operations Administration HMIS 50/50 80/20 None 75/25 Training and Development Associates, Inc.

SHP Match Sources Match must be CASH! Must document match as part of the management of your financial system Must show that match is not being counted as match for another federal program Must keep source documentation on file for review when needed Training and Development Associates, Inc.

SHP Match Sources Rent collected from clients may be counted towards your match requirement If the rent is calculated properly and used for HUD eligible activities Self-Monitoring Checklists, pp. 31 to 35 HUD Notice 96-3: Certain Tenant Rent Calculations Match can be from another federal source ESG’s transitional housing program HOME Program Match is leverage but not all leverage is match Training and Development Associates, Inc.

Safe House Match Requirements Team Exercise Safe House Match Requirements

HUD Eligible Activities For Shelter Plus Care, remember: Housing Assistance is for the term of the grant Service Match is $1:$1 during the term of the grant Service match must be for HUD-eligible activities Administration is 8% of the grant ( after the housing assistance) Training and Development Associates, Inc.

Calculating Resident Rents

Rent can be match Rent can be used for match if : Properly calculated Properly documented Properly used Training and Development Associates, Inc.

Calculating Resident Rents Grantees may charge participants rent under specific guidelines Maximum rent (housing expense) is higher of 30% of monthly adjusted income 10% of monthly gross income TANF rent Utility expenses deducted Training and Development Associates, Inc.

Calculating Rents, cont’d Annual income from all sources Income exclusions subtracted Adjustments to annual income Dependent allowance Childcare allowance Disabled assistance allowance Medical expenses allowance Elderly/disabled family allowance Training and Development Associates, Inc.

Calculating Rents, cont’d General Guidelines Review & document income annually or when changes occur Distinguish between employment & training Employment = income Training = stipends or reimbursements Fees for food & services acceptable if reasonable & not paid for by HUD or match already Training and Development Associates, Inc.

Tenant Rent Calculations Team Exercise Tenant Rent Calculations

Line of Credit Control System (LOCCS)

Line Of Credit Control System LOCCS Access Authorization HUD Form 27054 Banking information Direct Deposit Form 1199 LOCCS Voucher for Grant Payment HUD Form 50080 Training and Development Associates, Inc.

LOCCS Access Authorize a staff person for draw downs Maintain security of password If a LOCCS password is shared, one can be banned from using LOCCS forever Access LOCCS to maintain an active password Approving official – certification Training and Development Associates, Inc.

Direct Deposit Banking information Form 1199 Use Your existing bank account or establish a new account Submit Form 1199 to HUD Officials Washington, DC OR Field Office Ensure that all banking information is accurate Training and Development Associates, Inc.

LOCCS Payment Minimize the time elapsing between transfer of funds to recipients from the U.S. Treasury Advance method Expend in 3 days Reimbursement method No timeframe for reimbursing the general fund account Training and Development Associates, Inc.

Tracking LOCCS Draw Downs Cash control register Track each draw request Track SNAP funds by grant number and voucher number Maintain a cumulative balance of SNAP funds Training and Development Associates, Inc.

Uniform Administrative Requirements

Internal Controls Combination of polices, procedures, job responsibilities, personnel and records that create accountability in financial system Ensures funds are used and managed properly Remember, a small investment early will reap great benefits later Training and Development Associates, Inc.

Internal Control System Basic elements Organizational chart Written delineation of job duties Accounting policy and procedures Separation of duties Hiring policies Control over assets and documents Reconciliation of records Training and Development Associates, Inc.

Internal Controls Hiring competently trained financial personnel Board authorizing bank accounts and checks Recording all cash Maintaining pre-numbered receipts Board signing checks No invoice, no check Reconciling bank statements monthly Having timesheets to justify payroll expenses Recording petty cash Maintaining fireproof storage Maintaining detailed inventory records Obtaining fidelity Insurance Training and Development Associates, Inc.

Organization Chart Supervision of employees Lines of authority Communication Delineates responsibility, functions and duties Auditors want it! Training and Development Associates, Inc.

Segregation of Duties Not having one person in control from inception to final recording Having independent cross-checking SHP Monitoring Checklist, Exhibit 13-8, Item 14 Separating Operational work from record-keeping of assets Asset custody from asset records Authorization of asset purchases from custody and record-keeping Purchasing from receiving Training and Development Associates, Inc.

Documenting Time For employees that work in a single indirect cost activity, document time with a timesheet For employees that work in a single federal award category, document time with a timesheet and periodic certifications For employees that work on more than one activity (direct or indirect), document time with timesheets supported by activity records SHP Monitoring Checklist, Exhibit 13-8, Items 11-13 and 15-17 Training and Development Associates, Inc.

Time and Activity Records Accordingly to OMB Circular and Parts 84 and 85: After-the-fact determination of actual activity Signed by individual employee, certified by supervisor Prepared at least monthly Applies to direct HUD grantees and subgrantees Training and Development Associates, Inc.

Sample Timesheet Training and Development Associates, Inc.

Sample Timesheet Training and Development Associates, Inc.

Types of Activity Sheets Clients’ case notes Calendars, logs and sign-in sheets Palm pilots Daily, weekly and quarterly reports Products and deliverables What do you use now? Training and Development Associates, Inc.

Basic Cash Controls Making disbursements with checks, not cash Pre-listing and recording cash receipts by someone other than depositor Having subsidiary and control accounts Using pre-numbered checks Reconciling bank statements monthly (backed by checks) Having supporting documentation for checks Having payroll expenses backed up by timesheets/separate bank account Training and Development Associates, Inc.

Physical Control of Assets Keeping canceled checks in a safe, fireproof place Periodically inventorying physical assets Using a check protector machine vs. individually drafted checks Using fireproof safes and locked file cabinets Keeping duplicate records in a safe, secure off-site location Depositing cash receipts on a daily basis Training and Development Associates, Inc.

Budget Controls

Team Exercise: We Need a Budget Your team has won the lottery! While you have only won $100, you decide to celebrate as a group Prepare a celebration budget that includes Budget assumptions Cost estimates Proposed expenditures Training and Development Associates, Inc.

Budget Controls Compare and control expenditures Keep records on budgeted amounts Compare obligations and expenditures to planned budgets and accomplishments Report deviations from budgets and plan Training and Development Associates, Inc.

Developing Budgets Budget is projection of expenses based on actual experience Defines goals for a given period of time Provides ability to monitor progress Identifies significant variances between financial goals and how resources are actually used Budgets should never be submitted to decision-makers and funding sources without including assumptions Training and Development Associates, Inc.

Drawing Down Budgeted Funds Drawdown for actual expenses by line item Homeless programs allow Moving up to 10% between line items (notify HUD) More than 10% (request HUD approval to amend budget) Implication of budget amendments Initially funded for a specific purpose Revising budgets too much may trigger funding reconsideration, amendments and additional HUD scrutiny Training and Development Associates, Inc.

Accounting Records

Accounting Records Accounting system should include Chart of accounts Cash receipts journal Cash disbursements journal Payroll journal General ledger Training and Development Associates, Inc.

Accounting Records Source documentation required SHP Monitoring Checklist Exhibit 13-8, Items 1- 4 Also, ensure that program costs were Incurred for the proper period Actually paid Expended on eligible items Approved by appropriate officials Training and Development Associates, Inc.

Sources and Uses of Funds Up-to-date information on sources and uses of funds Amount of federal funds received and authorization of funds Obligations of funds and un-obligated balances Assets and liabilities Program income Expenses by grant year and program Training and Development Associates, Inc.

Cash and Property Management

Cash Management Procedures to minimize the time between receipt and disbursement of funds required Three methods allowed Reimbursement Almost all SHP lead agencies use reimbursement Cash advance Working capital Training and Development Associates, Inc.

Property Management Definitions SHP Monitoring Checklist 13 -11 Real property is land and improvements Personal property is other types of property (supplies and equipment) SHP Monitoring Checklist 13 -11 Complies with 24 CFR 85.32 and 24 CFR 84.34 Training and Development Associates, Inc.

Property Management General requirements Specific requirements Property can only be acquired for a specific purpose Specific requirements Use must continue for a certain period of time Remember the SHP 20 year use restriction Accurate records must be kept SHP Monitoring Checklist Exhibit 13 -11, Items 1-3 Use should reflect intended purpose Property can be disposed of only if rules are followed There are specific requirements for SHP property SHP Monitoring Checklist Exhibit 13 -11, Item 4 Training and Development Associates, Inc.

Federal Cost Principles

Cost Principles Three components to cost principles Applicability Cost reasonableness Cost allowability Cost allocation Applicability Governmental entities: OMB Circular A-87 Nonprofits: OMB Circular A-122 Also refer to SHP Monitoring Checklist, Exhibit 13-9 Training and Development Associates, Inc.

Determining Costs Costs are only eligible if they can be associated with an eligible client Costs are only eligible if they are Eligible activity under funding program Delineated in your application submissions and budgets Source documented Reasonable, allowable and allocable Training and Development Associates, Inc.

Cost Reasonableness Costs charged to federal award must be necessary, reasonable and directly related to the grant Look at the following Whether cost is ordinary and necessary Market prices for comparable goods and services Benefit to individuals involved Training and Development Associates, Inc.

Cost Allowability In general, cost must be Necessary and reasonable Allocable to the program Authorized or not prohibited Conform to and be consistent with rules and requirements Not charged to any other program Refer to list of costs in OMB Circular A-122 Training and Development Associates, Inc.

Table Talk: Cost Allowability Which of the following costs are allowable? Alcohol Pre-award costs Writing a Continuum of Care grant application (fundraising) Client graduation ceremony (entertainment) Training and Development Associates, Inc.

Cost Allocation A cost is allocable to a HUD program if it is Treated consistently with other similar costs Incurred specifically for the program Benefits program or can be distributed based on a reasonable proportion OR Necessary to operations Training and Development Associates, Inc.

Allowable 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.

Table 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.

Determining Eligibility If properly procured, cost is reasonable If on approved budget, cost is allowable If directly linked to grant, cost is allocable Therefore, if costs are… Reasonable… Allowable… Allocable… They are eligible for federal reimbursement Training and Development Associates, Inc.

Direct and Indirect Costs Direct costs can be identified with specific program or activity Indirect costs are incurred for common/joint purpose benefiting more than one program or activity Administrative salaries Accounting expenses Facility maintenance Training and Development Associates, Inc.

Table Talk: Direct vs. Indirect Assign the following costs as direct or indirect Staff salaries Utility costs Food Depreciation Insurance Training and Development Associates, Inc.

What kind of cost is it? Training and Development Associates, Inc.

Pro-Rating Costs Required by HUD where full cost is not the actual cost for HUD’s piece Must always have source documentation Training and Development Associates, Inc.

Pro-Rating Costs Supportive service costs Operating expenses Salaries pro-rated based on percentage time Document with time and activity records reflecting funding source Operating expenses Pro-rate based on percentage of space or time used Document with logs, plans, etc. Training and Development Associates, Inc.

Table 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 grant How would you pro-rate the case manager’s time? Divide the total cost equally among the 3 funding programs Charge 8/30ths of the cost to this grant Compare the number of hours spent with the 8 clients to that spent with all 30 clients None of the above Training and Development Associates, Inc.

Table Talk: Pro-Rating Costs Your HUD-funded program is located in the same facility as another program where there is only one utility meter How would you pro-rate the utility costs? Divide the cost equally among the 2 programs Use the percentage of square footage used by clients Use the percentage of square footage used by clients and staff None of the above Training and Development Associates, Inc.

Cost Eligibility Summary Costs are eligible if they are reasonable, allowable and allocable A cost is only a “cost” if charged to the correct budget line item If the client is not eligible, all costs (including administration) associated with that client are ineligible If a cost is not specifically listed in OMB’s Circular, does that mean that the cost is allowable? Training and Development Associates, Inc.

Auditing, Monitoring and Compliance

Why Do We Need An Audit? Universally accepted analytical tool Ratios, standards, disciplined way of viewing numbers Demonstrates accountability GAAP, GAGAS, OMB Circular, HUD requirements Demonstrates proper stewardship Verifies internal financial controls Demonstrates board oversight Independently audited and adequate reporting Training and Development Associates, Inc.

Audits Federal programs are subject to review or audit When spending $500,000 or more in federal awards per year, specific rules apply Grantees and subgrantees must adhere to OMB Circular A-133 Training and Development Associates, Inc.

Federal Awards Federal awards include But only counts if “expended” Grants, loans and loan guarantees Direct assistance or appropriations Property insurance or interest subsidies Property, food commodities Cooperative agreements or contracts Other assistance But only counts if “expended” Training and Development Associates, Inc.

Type of Audit Program-specific audit Single audit OK if recipient or subgrantee gets federal funds from only one source Involves only looking at that program Single audit Required if funds come from more than one source Involves looking at all programs and financial statements Training and Development Associates, Inc.

Auditing Standards Federal audits performed using Generally Accepted Government Auditing Standards Financial information correctly presented Internal controls exercised regarding cash management, payroll processing, fixed assets and reporting Activities in compliance with program requirements Audit report must address each area Training and Development Associates, Inc.

Compliance Requirements A federal audit must satisfy 14 compliance requirements Laws (for example, Davis Bacon) Regulations covering match, eligibility, etc. Other grant provisions including subgrantee monitoring Training and Development Associates, Inc.

Audit Findings Audit may include findings and questioned costs Material weakness in internal control Noncompliance with laws and/or regulations Questioned costs in excess of $10,000 Fraud affecting federal award Misrepresentation of prior audit finding Training and Development Associates, Inc.

Qualified Audits Auditor’s work based on the work of others Uncertainties exist affecting the potential effect of the audit Serious doubt about organization as an ongoing concern (bankrupt?) Supplementary information not presented or inadequate Training and Development Associates, Inc.

Qualified Audits Unaudited information not consistent with audited data Deviation from GAAP due to unusual circumstances Auditor unable to perform all aspects of the engagement In adequate records to support assertions in the financial statements Financial statements do not contain all disclosures needed for a fair presentation Training and Development Associates, Inc.

Review and Resolution Audit report must be submitted to HUD within 9 months of audit period and Submit an A-133 Audit to the Federal Clearinghouse Grantees and subgrantees must establish system to ensure timely and appropriate resolution to audit findings Training and Development Associates, Inc.

What HUD Looks For Audits that are “clean” There are no findings, either financial or management Fund accounting applied to segregate HUD’s grants and costs associated with those grants from other funding sources Costs that are supported with source documentation Training and Development Associates, Inc.

Hiring An Auditor Many nonprofits need specialized auditor Multiple funding sources requires fund accounting Specialized experience with federal programs Too much emphasis on cost vs. needs Perception of low-risk of liability for agencies Failure to recognize the needs of all interested parties Training and Development Associates, Inc.

Specialized Auditors Specialized auditors need to know AICPA’s industry audit and accounting guide GAO’s Government Auditing Standards manual Applicable OMB Circulars Catalogue of Federal Domestic Assistance HUD’s program guidelines OMB’s Compliance Supplement Training and Development Associates, Inc.

Selecting The Right Auditor Use a competitive process with at least 3 bids Issue a request for qualifications (RFQ) that outlines what you want Separate the technical submission from the cost quote Issue an engagement letter GAO secondary considerations include Financial education and audit experience An audit committee to handle selection Detailed policies and procedures Training and Development Associates, Inc.

Using An Audit Committee Nominate and terminate the firm Negotiate fees Determine the type, scope and timing of the audit Discuss internal control weaknesses Review financial and audit reports Monitor and evaluate performance Oversee the accounting policies Follow up on findings and corrective actions Training and Development Associates, Inc.

On the Lighter Side! What is an auditor? Someone who arrives after the battle and bayonets the wounded What are the three types of accountants in the world? Those who can count and those who can’t What do accountants suffer from that ordinary people don’t? Depreciation Training and Development Associates, Inc.

The Audit Process Is Ongoing As one audit period ends, another audit period begins Training and Development Associates, Inc.

Family Services Audit Consideration Team Exercise Family Services Audit Consideration

Annual Progress Reports

Purpose of APR Tracks project progress Tool for HUD…and YOU! Help participants obtain and remain in permanent housing Help participants increase skills and/or income Help participants achieve greater self-determination Tool for HUD…and YOU! Helps to keep your program on track Gives you information about how the project is doing and what it is accomplishing Used to document success for other funders Used for completing continuum gaps analysis Training and Development Associates, Inc.

Submission Requirements Each grantee must submit an APR If grantee does not run the project Sponsor completes Gives to grantee for submission to HUD A separate APR submitted for each HUD grant received Each program component = a project = a separate APR Training and Development Associates, Inc.

Due Date – Reporting Period Failure to submit an APR may lead to a delay in receiving future grant funding Due 90 days after the end of each operating year of your program What is the operating year? Trigger date for start and end of grant term Starts the clock for submission of APR Trigger varies depending on program and project activities Training and Development Associates, Inc.

Operating Year Projects with acquisition, rehabilitation or new construction Operating year begins after Obtaining a certificate of occupancy Accepting first client Other projects LOCCS draw of leasing, supportive services or operating funds Renewal projects Specified in grant agreement letter Training and Development Associates, Inc.

Components of APR Basic information about project and goals Information about participants in project Information about participants leaving project Financial information and match Training and Development Associates, Inc.

APR Part I: Project Progress No. 1: Projected level of service At a given point in time show Number of singles not in families Number of adults in families Number of children in families Number of families Training and Development Associates, Inc.

APR Part I: Project Progress No. 2: Persons served Enrolled on first day of operating year Enrolled any time after the first day Who left during the operating year Still enrolled in the program on the last day of the operating year No. 3: Project capacity No. 4: Non-homeless housed (Section 8 SRO only) Training and Development Associates, Inc.

APR Part I: Project Progress Nos. 5 – 14: Demographic Data Participant information by individual, families and chronically homeless Age Gender Race/ethnicity Primary disability Prior living situation Income change Income source Length of stay Reasons for leaving Post-project destination Training and Development Associates, Inc.

APR Part I: Project Progress No. 15: Supportive Services Number of participants receiving discrete categories of service Identify those participants receiving services that are chronically homeless Training and Development Associates, Inc.

APR Part I: Project Progress No. 16: Goals and objectives Shows goals and objectives Current year’s goals and progress Next year’s goals Measurable goal for each year as it relates to the overall HUD program goals Obtain and remain in permanent housing Increase skills and income Achieve greater self-determination Training and Development Associates, Inc.

APR Part I: Project Progress No. 17: Number of beds SHP (not completed for SSO projects) Number of beds – Current Level Number of beds – New Effort New Effort beds in place at the end of operating year Shelter Plus Care Number of beds Number of dwelling units Section 8 SRO Training and Development Associates, Inc.

APR Part II: Financial Information No. 18: Supportive Service SHP funded services Amount of SHP funds spent during operating year For discrete services outlined in application and technical submission S+C projects Amount of funding from other sources Spent on services by discrete categories SRO projects Estimates percentage of clients who use discrete service categories Funded outside of SRO program Training and Development Associates, Inc.

APR Part II: Financial Information For S+C service match 14 categories of eligible services Match is overall Not year-by-year Each client need not receive the same amount of services as rental assistance. Examples of match [582.110] Volunteer time at $10 per hour Actual salaries paid to staff that provide services Value of lease on service facility Training and Development Associates, Inc.

APR Part II: Financial Information No. 19: SHP leasing, supportive services, operating costs, HMIS, and administration Tracks SHP expenditures SHP funds drawn down during the year Cash match (by activity) Total expenditures Tracks sources of cash match Cash only! (no in-kind contributions, etc.) Required match varies by activity Keep documentation on file SHP expenditures and cash match No regulatory guidance outside of OMB Circulars Training and Development Associates, Inc.

APR Part II: Financial Information No. 20: SHP acquisition, rehabilitation, and new construction Tracks SHP expenditures Fill out in year-1 only SHP funds drawn down during the year Cash match (by activity) Total expenditures Tracks sources of cash match Match is $1 for $1 Keep documentation on file Training and Development Associates, Inc.

APR Part II: Financial Information No. 21: SHP HMIS activities Shows how SHP funds for HMIS activities were spent during year Equipment Software Services Personnel Space and operations Training and Development Associates, Inc.

APR Part II: Problems, Changes, and Technical Assistance Request Open-ended questions Describe problems or changes Solicit information on Need for technical assistance Ways HUD could improve service Self-reflection on project improvement Chance to give important feedback! Establish HUD relationship Training and Development Associates, Inc.

Emphases in the Revised APR Renumeration of services to the chronically homeless Reporting of HMIS activities Racial and ethnicity reporting Certification of continuing SHP services Persons-served worksheet (new tool) Exiting program Participant leaves project, stops receiving rental assistance, and/or services Not expected to return Return after 90 days, new participant Return within 90 days, not counted as exiting program Training and Development Associates, Inc.

Grant Amendments and Mergers

Technical Submission Technical submission is your contract If an activity is not specified in the technical submission, it is not eligible Strengthening the technical submission Site control (within 1 year of award letter) Restrictive covenants for 20 year use Match raised (evidence of first year in hand) Training and Development Associates, Inc.

Spending Down the Grant Timeliness! Training and Development Associates, Inc.

Grant Amendments Program changes during grant term Scope of changes Significant Minor HUD involvement and approval Informed (minor) Review and approval (significant) Training and Development Associates, Inc.

Scope of Changes Significant changes Minor changes Departure from application And substantially affects implementation HUD approval required and amended grant agreement Minor changes Departures from application But does not substantially affect implementation No HUD approval or amended grant agreement Must document change Training and Development Associates, Inc.

Examples of Significant Changes Substantial amendment needed when New grantee or name change Change in project site Change in project activities Shift over 10% of funds from one activity to another (cumulative) Change in population or number of participants served Training and Development Associates, Inc.

HUD Approval Written request to field office with revised application Letter Revised application exhibit(s) If applicable, new ConPlan certification Field office approval and amendment of grant agreements Application must remain competitive Reduced rating requires HQ’s approval Training and Development Associates, Inc.

Reduced Rating Examples “Lower quality” Housing and/or services lower quality than originally funded Less experienced provider Innovative features eliminated Cost effectiveness reduced Site moved to area of less need Training and Development Associates, Inc.

Recapture of Funds Whole grants or portion of grants Used to fund additional projects next year Reasons Lack of site control Slow expenditure of funds Noncompliance with grant agreement Unspent or surplus funds Training and Development Associates, Inc.

Recapture of Funds Lack of site control Slow expenditure of funds Must obtain within 1 year of award notification Statutory (cannot be waived) Exception where site control lost (rare) Slow expenditure of funds Acquisition, rehabilitation or new construction must begin within 3 months OR residents must begin occupancy within 9 months of agreement Leasing, operating or supportive services must begin within 3 months of availability Training and Development Associates, Inc.

Recapture of Funds Noncompliance with grant agreement Unspent funds Any instance of default Factors beyond grantee’s control considered Unspent funds During grant term Costs are less than anticipated Funds may be shifted to other activities or carried forward Training and Development Associates, Inc.

Recapture of Funds Surplus funds Upon expiration of grant Unspent funds Unless term extension received or final draw-down is pending Training and Development Associates, Inc.

Merging SHP Grants Under certain conditions, grants may be merged Applies to grantees with 2 or more grants that meet criteria Grants must be the same component Grants must have same period (expiration) Instructions included in SHP operating instructions Shelter Plus Care grants may also be merged Training and Development Associates, Inc.

Financial Statements and Analysis

What is Financial Analysis? Tool to analyze financial information in a systematic manner Quantify one’s financial questions “An art, not a science” Using standard ratios and measures Language of lenders and investors Training and Development Associates, Inc.

The Process of Financial Analysis “Spreading the numbers” Reviewing basic credit questions Is the organization liquid? Is the organization profitable? Is there adequate cash flow to operate? Preparing follow-up questions Calculating and analyzing ratios Compare this organization to others Trend analysis The key is getting better Training and Development Associates, Inc.

Documents to Review Three years of financial statements Why 3 years? Revenue and Expenses Balance Sheets Cash Flow Statements Corporate tax returns Bank statements Why 3 years? Projected financial statements for the next 3 to 5 years Interim financial statements Depending on the timing of the yearly statements Training and Development Associates, Inc.

Fund Accounting Fund accounting matches sources and uses of funds for each funding sources Without fund accounting, you cannot truly analyze the revenues and expenses of a specific funding source Applies the principles of financial analysis to each funding source Training and Development Associates, Inc.

Introduction to Financial Statements

Financial Statements Balance sheet Income statement What an organization owns (assets) What an organization owes (liabilities) Income statement Revenue Expenses Revenue in excess of expenses (profit) Training and Development Associates, Inc.

Notes to Financial Statements Provides extra detail about the information in the financial statements Terms and conditions of financing, leases, etc. Loans to staff and officers Collection and payment terms Inter-fund transfers Valuation of assets Outstanding receivables (grants) Pending litigation or contingent liabilities Training and Development Associates, Inc.

Forms of Financial Statements In-house financial statements Prepared internally by organization Used for day-to-day operations Compiled financial statements Auditor takes information from organization and compiles it into proper format Only as good as information provided by organization Auditor does not test information Least expensive independently prepared Training and Development Associates, Inc.

Forms of Financial Statements Reviewed financial statements Auditor reviews information provided by organization Provides limited verification Key tests completed to validate information Audited financial statements Auditor evaluates all aspects of organization’s finances Verifies assets, debt, other obligations and liabilities Most thorough and expensive Training and Development Associates, Inc.

Session Ten: Numbers Don’t Lie, They Hide

Operating Cycles Collecting Receivables Paying Others Purchasing Inventory Training and Development Associates, Inc.

Grantee’s Operating Cycle Even not-for-profits have an operating cycle and a need for working capital “Seasonality” – timing is everything Investing in fixed vs. variable expenses Fixed expenses drive up the need to raise revenues on a regular basis Don’t buy stuff until you need it Lease now, buy later Collect now, pay on time Grants are not cash until collected Training and Development Associates, Inc.

Team Exercise: Rehab, Inc. Analyze the finances of a typical SHP grantee using the BIG 4! Training and Development Associates, Inc.

What Should I Remember When I Get Back Home? Final Thoughts What Should I Remember When I Get Back Home?

Top Ten of Financial Management Numbers don’t lie, they hide Only CASH pays the bills Pledges (and grants) are not cash until they are collected Always match sources and uses of funds Even nonprofits have an operating cycle and a need for working capital Training and Development Associates, Inc.

Top Ten of Financial Management Fixed expenses drive up breakeven and the need to raise more funds Lease now, buy later! Collect now, pay on terms! Price your services to pay yourself It 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.

Wrap Up Cleaning out the bin Evaluations Climate check Who you gonna’ call? Lead Agency HUD TDA Have a safe journey! Training and Development Associates, Inc.

Training & Development Associates 131 Atkinson Street, Suite B Laurinburg, North Carolina 28352 (910) 277-1275 (910) 277-2816 Fax www.TDAinc.org