Numbers Don’t Lie, They Hide

Report
Welcome to
“Numbers don’t lie, they hide”
1
Training and Development
Associates, Inc.
Numbers Don’t Lie, They Hide
Financial Management
for Homeless Grantees
Who Are We?

Presented by
–
Training & Development Associates, Inc.
www.tdainc.org


Sponsored by
–
U.S. Department of Housing and Urban
Development

3
As a subcontractor of the Corporation for Supportive
Housing
Los Angeles Field Office
Training and Development
Associates, Inc.
Logistics





4
Manual and handouts
Exercises
Teams
Questions (the “Bin”)
Restrooms and telephones
Training and Development
Associates, Inc.
Who Are You?

Type of organization
–
–
–

Your role
–
–
–
–
5
Lead agency
Sponsor
Service provider
Executive director
Financial staff
Case manager
Another position
Training and Development
Associates, Inc.
Why Are We Here?







6
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
–
–
–
–
7
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
–
–
8
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
–
–
–
–
9
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.
It’s Time for Bingo!
Financial Management Systems
The Order of Authority
1. GAAP
2. Congress
3. OMB/GAO
4. HUD
5. HUD Grantee
14
Training and Development
Associates, Inc.
Relationship of Federal Regulations
Type of Entity
Audits
State and Local
Government
A-87
Common Rule
A-122
A-133
Colleges and
Universities
A-21
A-110
A-133
Hospitals and
Care Facilities
Various
45 CFR 74
Various
A-110
Various
A-133
A-122
A-110
A-133
31 CFR 15.2
FAR*
FAR*
Other Nonprofits
For Profits
(Commercial)
15
Cost Principles
Administrative
Requirements
*Federal Acquisition Requirements
Training and Development
Associates, Inc.
Fiscal Management System
Cash
Management
Accounting
Regulations
Financial Reports
Internal Controls
Procedures
Homeless
Program
Budgeting
Auditing
16
Documentation
Policies
Financial
Management
Monitoring
Training and Development
Associates, Inc.
Setting the Stage

Financial Management
–
–
17
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





18
“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
–
–
–


Financial management is part of a multi-year
planning process
Operating like a business helps organizations to
–
–
19
Realistically project the future
Seek funding for that future
Plan more accurately
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
–
–

While many of the requirements have a
higher authority than HUD
–
20
Multiple funders leads to “fund accounting”
Your financial system must account for the
requirements of all of funding streams
HUD is the funding stream that we focus on
Training and Development
Associates, Inc.
Example of Fund Accounting
HUD SHP
HHS
United
Way
Foundation
Donor
Total
Revenue
–Grants
–Cash
–Donations
Total Revenue
Expenses
–Labor
–Overhead
–Administration
Total
Expenses
21
Excess
Revenue
Training and Development
Associates, Inc.
Gaining Allies

Who is financially responsible for the
viability of your organization?
–
–
22
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
23
Training and Development
Associates, Inc.
Keys to a Successful System
Who is Involved in Managing
Your System?







25
Board of Directors
Local community development staff
Elected officials
HUD
Government staff
Other investors
Accountants
Training and Development
Associates, Inc.
Staff Responsibilities






26
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







27
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?





28
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
–
–
–

29
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
–
–


Recommendations to cut expenses, increase cash
flow and price services
Assistance in preparing the organization for longterm growth
–
30
Collecting grants, outstanding revenues and “fees for
service”
Control of inventory, asset purchases and cash
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
–
–
–
–

32
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
–
–
–
–
–
33
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




34
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


–
–
–
HUD’s desk guides
OMB Circulars
HUD’s Monitoring Checklist

35
24 CFR Part 85—Governments
24 CFR Part 84—Nonprofits
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
–
–
–
–

37
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
–
–
–
39
Help participants obtain and remain in permanent
housing
Help participants increase skills and/or income
Help participants achieve greater selfdetermination
Training and Development
Associates, Inc.
HUD Objectives
National Targets
–
–
–
–
–
40
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
–
–
–
–
–
–
41
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
–
–
–
–
–
–
–
–
42
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
–

Pay off a current mortgage (lump sum)
–


43
If not previously used for HUD
Funding limited to between $200,000 and $400,000
–

Used for housing and/or services
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
–
–



44
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
–
–
–

Pay rent for individual units
–



45
Portion of building, entire building or multiple buildings
Not building already owned
No mortgage payments or building operations
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
–
–

46
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
–
–


47
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
–



48
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






49
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:
–
–
–
–
50
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




51
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
–
–
–

Applicability
–
–

Governmental entities: 24 CFR Part 85
Nonprofits: 24 CFR Part 84
Also refer to
–
54
Services
Supplies and materials
Equipment
SHP Monitoring Checklist Exhibit 13 -10, Items 1 - 17
Training and Development
Associates, Inc.
Procurement Overview

Procurement policies must be in place
–

Four procurement methods available
–
–
–
–
55
Must follow written procedures and document
compliance
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
–
–
–
56
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
–
–
–
–
–
57
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
–
–
–
–
–
58
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
–
–
–

59
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

–
Cost reimbursement



60
Agreed upon price, regardless of actual cost
Estimated cost, usually with a ceiling
When using sealed bid method, firm fixedprice 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:
–
–
–
61
Performance and payment bonds
Deposit of cash escrow
Letters of credit
Training and Development
Associates, Inc.
Bonding and Insurance

Insurance requirements include
–
–
–
–
62
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
–
–

Section 3
–
–
–
63
MBE and WBE outreach requirements
Must take affirmative steps to use businesses
owned by minorities and women
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
–
–



64
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__________________
8__________________

4__________________




14__________________






100% must equal _____ or
___________________

66
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








68
Acquisition
Rehabilitation
New Construction
Supportive Services
Leasing
Operations
Administration
HMIS
50/50
50/50
50/50
80/20
None
75/25
None
80/20
Training and Development
Associates, Inc.
SHP Match Sources




69
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



Match can be from another federal source
–
–

70
Self-Monitoring Checklists, pp. 31 to 35
HUD Notice 96-3: Certain Tenant Rent Calculations
ESG’s transitional housing program
HOME Program
Match is leverage but not all leverage is match
Training and Development
Associates, Inc.
Team Exercise
Safe House Match
Requirements
HUD Eligible Activities

For Shelter Plus Care, remember:
–
–
–
–
72
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 :
–
–
–
74
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
–
–
–

75
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
–
–
–
–
–
76
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

–
77
Fees for food & services acceptable if reasonable
& not paid for by HUD or match already
Training and Development
Associates, Inc.
Team Exercise
Tenant Rent
Calculations
Line of Credit Control
System (LOCCS)
Line Of Credit Control System

LOCCS Access Authorization
–

Banking information
–

Direct Deposit Form 1199
LOCCS Voucher for Grant Payment
–
80
HUD Form 27054
HUD Form 50080
Training and Development
Associates, Inc.
LOCCS Access


Authorize a staff person for draw downs
Maintain security of password
–


81
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

–
82
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
–

Reimbursement method
–
83
Expend in 3 days
No timeframe for reimbursing the general fund
account
Training and Development
Associates, Inc.
Tracking LOCCS Draw Downs

Cash control register
–
–
–
84
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



86
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
–
–
–
–
–
–
–
87
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






88
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





89
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
–
–
–
–
90
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




91
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

Time and activity records
–
Accordingly to OMB Circular and Parts 84 and 85:




92
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
Client or service provided
Dat e Dat e Dat e Dat e Dat e Dat e Dat e Tot al Hours Funding
Source
Vacation
Overhead
Non-HUD
Sick
Holiday
TOTAL
Employee Signature
Supervisor's Certification
Special Notes, Comments or Explanations:
93
Training and Development
Associates, Inc.
Sample Timesheet
Dat e Dat e Dat e Dat e Dat e Dat e Dat e Tot al Hours
Client or service provided Mon. Tues. Weds. Thurs. Fri.
Sat. Sun.
1234
2
1
2
1
6
Group Session
1
1
1
1
1
5
1239
1
1
2
1241
3
2
5
1256
1
1
1
1
1
5
1235
2
2
4
1255
1
1
2
1238
1
1
1
3
Staff Meeting
2
2
Fundraising Event
1
1
1257
3
3
Vacation
Overhead
Non-HUD
Sick
Holiday
TOTAL
2
8
8
8
8
8
Funding
Source
HUD #1
HHS
Casey
HUD #1
HUD #2
HUD #1
ESG #1
HUD #1
Overhead
Unrest.
HUD #2
Vacation
Overhead
Non-HUD
2 Sick
Holiday
40
Employee Signature
Supervisor's Certification
Special Notes, Comments or Explanations:
94
Training and Development
Associates, Inc.
Types of Activity Sheets






95
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




96
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



97
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
–
–
–
99
Budget assumptions
Cost estimates
Proposed expenditures
Training and Development
Associates, Inc.
Budget Controls

Compare and control expenditures
–
–
–
100
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
–
–
–

101
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.
Accounting Records
Accounting Records

Accounting system should include
–
–
–
–
–
104
Chart of accounts
Cash receipts journal
Cash disbursements journal
Payroll journal
General ledger
Training and Development
Associates, Inc.
Accounting Records

Source documentation required
–

Also, ensure that program costs were
–
–
–
–
105
SHP Monitoring Checklist Exhibit 13-8, Items 1- 4
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
–
–
–
–
–
106
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

–
–
108
Almost all SHP lead agencies use reimbursement
Cash advance
Working capital
Training and Development
Associates, Inc.
Property Management

Definitions
–
–

SHP Monitoring Checklist 13 -11
–
109
Real property is land and improvements
Personal property is other types of property
(supplies and equipment)
Complies with 24 CFR 85.32 and 24 CFR 84.34
Training and Development
Associates, Inc.
Property Management

General requirements
–

Property can only be acquired for a specific purpose
Specific requirements
–
Use must continue for a certain period of time

–
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


110
Remember the SHP 20 year use restriction
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
–
–

Governmental entities: OMB Circular A-87
Nonprofits: OMB Circular A-122
Also refer to
–
112
Cost reasonableness
Cost allowability
Cost allocation
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
–
–
–
–
113
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
–
–
–
114
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
–
–
–
–
–

115
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?
–
–
–
–
116
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
–
–
–
–
117
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.
118
Training and Development
Associates, Inc.
Table Talk: Allowable vs. Allocable



119
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




120
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
–
–
–
121
Administrative salaries
Accounting expenses
Facility maintenance
Training and Development
Associates, Inc.
Table Talk: Direct vs. Indirect

Assign the following costs as direct or
indirect
–
–
–
–
–
122
Staff salaries
Utility costs
Food
Depreciation
Insurance
Training and Development
Associates, Inc.
What kind of cost is it?
123
Direct?
Indirect?
Eligible?
Ineligible?
Allowable?
Unallowable?
Allocable?
Non-allocable?
Fixed?
Variable?
Restricted?
Unrestricted?
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

124
Training and Development
Associates, Inc.
Pro-Rating Costs

Supportive service costs
–
–

Operating expenses
–
–
125
Salaries pro-rated based on percentage time
Document with time and activity records reflecting
funding source
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?
–
–
–
–
126
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?
–
–
–
–
127
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
–
–

128
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
–

Demonstrates accountability
–

GAAP, GAGAS, OMB Circular, HUD requirements
Demonstrates proper stewardship
–
–
–
130
Ratios, standards, disciplined way of viewing numbers
Verifies internal financial controls
Demonstrates board oversight
Independently audited and adequate reporting
Training and Development
Associates, Inc.
Audits



131
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
–
–
–
–
–
–

132
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
–
–
133
OK if recipient or subgrantee gets federal funds
from only one source
Involves only looking at that program
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
–
–
–

134
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
–
–
–
135
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
–
–
–
–
–
136
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




137
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.
Review and Resolution



139
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”
–


140
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
–
–
–
–
–
141
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
–
–
–
–
–
–
142
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
–
–
–
143
Financial education and audit experience
An audit committee to handle selection
Detailed policies and procedures
Training and Development
Associates, Inc.
The Audit Process Is Ongoing

146
As one audit period ends, another audit
period begins
Training and Development
Associates, Inc.
Team Exercise
Family Services Audit
Consideration
Annual Progress
Reports
Purpose of APR

Tracks project progress
–
–
–

Tool for HUD…and YOU!
–
–
–
–
149
Help participants obtain and remain in permanent housing
Help participants increase skills and/or income
Help participants achieve greater self-determination
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



A separate APR submitted for each HUD
grant received
–
150
Sponsor completes
Gives to grantee for submission to HUD
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?
–
–
–
151
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



Other projects
–
Operating year begins after



Accepting first client
LOCCS draw of leasing, supportive services or operating
funds
Renewal projects
–
152
Obtaining a certificate of occupancy
Accepting first client
Specified in grant agreement letter
Training and Development
Associates, Inc.
Components of APR




153
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




154
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
–
–
–
–


155
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
–
–
–
–
–
156
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
–
–
157
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


–
Measurable goal for each year as it relates to the
overall HUD program goals



158
Current year’s goals and progress
Next year’s 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)



–
Shelter Plus Care


–
Number of beds
Number of dwelling units
Section 8 SRO

159
Number of beds – Current Level
Number of beds – New Effort
New Effort beds in place at the end of operating year
Number of dwelling units
Training and Development
Associates, Inc.
APR Part II: Financial Information

No. 18: Supportive Service
–
SHP funded services


–
S+C projects


–
Amount of funding from other sources
Spent on services by discrete categories
SRO projects


160
Amount of SHP funds spent during operating year
For discrete services outlined in application and technical
submission
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


–
Examples of match [582.110]



161
Not year-by-year
Each client need not receive the same amount of
services as rental assistance.
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



–
Tracks sources of cash match



Cash only! (no in-kind contributions, etc.)
Required match varies by activity
Keep documentation on file
–
–
162
SHP funds drawn down during the year
Cash match (by activity)
Total expenditures
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




–
Tracks sources of cash match


163
Fill out in year-1 only
SHP funds drawn down during the year
Cash match (by activity)
Total expenditures
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





164
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





165
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.
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
–
–
–
168
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



169
Timeliness!
Timeliness!
Timeliness!
Training and Development
Associates, Inc.
Grant Amendments


Program changes during grant term
Scope of changes
–
–

HUD involvement and approval
–
–
170
Significant
Minor
Informed (minor)
Review and approval (significant)
Training and Development
Associates, Inc.
Scope of Changes

Significant changes
–
–
–

Minor changes
–
–
–
–
171
Departure from application
And substantially affects implementation
HUD approval required and amended grant agreement
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
–
–
–
–
–
172
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
–
–
–



173
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”
–
–
–
–
–
174
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
–
–
–
–
175
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
–
–
176
Must obtain within 1 year of award notification
Statutory (cannot be waived)
Exception where site control lost (rare)
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
–
–
–
177
Any instance of default
Factors beyond grantee’s control considered
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
–
–
–
178
Upon expiration of grant
Unspent funds
Unless term extension received or final drawdown 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
–
–
–

179
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?





181
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
–
–
–


Preparing follow-up questions
Calculating and analyzing ratios
–

Compare this organization to others
Trend analysis
–
182
Is the organization liquid?
Is the organization profitable?
Is there adequate cash flow to operate?
The key is getting better
Training and Development
Associates, Inc.
Documents to Review

Three years of financial
statements
–
–
–
–
–

183
Revenue and Expenses
Balance Sheets
Cash Flow Statements
Corporate tax returns
Bank statements


Projected financial
statements for the next
3 to 5 years
Interim financial
statements
–
Depending on the timing
of the yearly statements
Why 3 years?
Training and Development
Associates, Inc.
Fund Accounting



184
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
–
–
–
186
What an organization owns (assets)
What an organization owes (liabilities)
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
–
–
–
–
–
–
–
187
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
–
–

Compiled financial statements
–
–
–
–
188
Prepared internally by organization
Used for day-to-day operations
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
–
–
–

Audited financial statements
–
–
–
189
Auditor reviews information provided by organization
Provides limited verification
Key tests completed to validate information
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
Paying
Others
Collecting
Receivables
Purchasing
Inventory
191
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
–

Don’t buy stuff until you need it
–
–

192
Fixed expenses drive up the need to raise revenues on a
regular basis
Lease now, buy later
Collect now, pay on time
Grants are not cash until collected
Training and Development
Associates, Inc.
Team Exercise: Rehab, Inc.

193
Analyze the finances of a typical SHP
grantee using the BIG 4!
Training and Development
Associates, Inc.
Final Thoughts
What Should I
Remember When I Get
Back Home?
Top Ten of Financial Management





195
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





196
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?
–
–
–

197
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

similar documents