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					Welcome to “Numbers don’t lie, they hide”

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Training and Development Associates, Inc.

Numbers Don’t Lie, They Hide

Financial Management for Homeless Grantees

Who Are We?


Presented by
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Training & Development Associates, Inc. www.tdainc.org


As a subcontractor of the Corporation for Supportive Housing



Sponsored by
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U.S. Department of Housing and Urban Development


Los Angeles Field Office
Training and Development Associates, Inc.

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Logistics
    

Manual and handouts Exercises Teams Questions (the ―Bin‖) Restrooms and telephones

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Training and Development Associates, Inc.

Who Are You?


Type of organization
– – –

Lead agency Sponsor Service provider Executive director Financial staff Case manager Another position
Training and Development Associates, Inc.



Your role
– – – –

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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.

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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.

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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

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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.

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It’s Time for Bingo!

Financial Management Systems

The Order of Authority
1. GAAP 2. Congress 3. OMB/GAO 4. HUD 5. HUD Grantee

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Training and Development Associates, Inc.

Relationship of Federal Regulations
Type of Entity State and Local Government Colleges and Universities Hospitals and Care Facilities Other Nonprofits For Profits (Commercial) Cost Principles A-87 A-21 Various 45 CFR 74 A-122 31 CFR 15.2 Administrative Requirements Common Rule A-122 A-110 Various A-110 A-110 FAR* Audits A-133 A-133 Various A-133 A-133 FAR*
Training and Development Associates, Inc.

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*Federal Acquisition Requirements

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

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Financial Management

Setting the Stage


Financial Management
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

Financial Analysis
–

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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

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Systematic technique for evaluating financial health of organization By quantifying information and comparing that information to similar organizations in the field

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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

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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.

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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
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HUD is the funding stream that we focus on
Training and Development Associates, Inc.

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Example of Fund Accounting
HUD SHP Revenue
–Grants –Cash

HHS

United Way

Foundation

Donor

Total

–Donations

Total Revenue Expenses
–Labor –Overhead –Administration

Total Expenses

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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.

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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

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Training and Development Associates, Inc.

Keys to a Successful System

Who is Involved in Managing Your System?
      
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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.

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Board Responsibilities
 


   
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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

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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.

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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 longterm growth
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When can the agency afford new staff?
Training and Development Associates, Inc.

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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.

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Financial Management System


Ineffective results in
– – –



Effective results in
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Major audit findings Negative publicity Funding withheld

– – –

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.

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Components of Financial Management Systems
   

Uniform administrative requirements Cost principles Audit procedures Procurement standards

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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
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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.

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Frequently Asked Questions

Who? What? How? Under SHP

Supportive Housing Program


One component of the continuum of care strategy for homelessness
–

–
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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.

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Answering the Important Question:

What is 3-6-8-8?

National Objectives


3 goals of HUD’s homeless programs
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Help participants obtain and remain in permanent housing Help participants increase skills and/or income Help participants achieve greater selfdetermination

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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.

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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

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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.

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Acquisition and Rehabilitation
    

Purchase and/or rehabilitate all or part of building
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Used for housing and/or services If not previously used for HUD Higher amounts applicable to high cost area

Pay off a current mortgage (lump sum)
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Funding limited to between $200,000 and $400,000
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50% cash match obligation 20-year use restriction
Training and Development Associates, Inc.

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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.

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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 Paid directly to landlord

 

Pay rent for individual units
–




Units must meet housing standards Rents must be reasonable No match requirement for leasing
Training and Development Associates, Inc.

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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
Training and Development Associates, Inc.



20% cash match obligation

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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.

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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

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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.

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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)

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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.

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Procurement, Match and LOCCS

Procurement

Procurement Rules


Grantees and subgrantees must adhere to federal procurement rules when purchasing
– – –

Services Supplies and materials Equipment Governmental entities: 24 CFR Part 85 Nonprofits: 24 CFR Part 84 SHP Monitoring Checklist Exhibit 13 -10, Items 1 - 17
Training and Development Associates, Inc.



Applicability
– –



Also refer to
–

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Procurement Overview


Procurement policies must be in place
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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.



Four procurement methods available
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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

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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.

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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.

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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.

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Contracts


Two basic types permitted
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Firm fixed price


Agreed upon price, regardless of actual cost Estimated cost, usually with a ceiling

Cost reimbursement





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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:
–

–
–

Performance and payment bonds Deposit of cash escrow Letters of credit

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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

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Training and Development Associates, Inc.

Other Contracting Requirements


Minority- and women-owned businesses
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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.



Section 3
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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.

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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 ___________________

 

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.

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Meeting Programmatic Match Requirements

SHP Match Requirements
  


   

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.

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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.

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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.

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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)

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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

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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

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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.

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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

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Training and Development Associates, Inc.

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
HUD Form 50080

LOCCS Voucher for Grant Payment
–

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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.

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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

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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
No timeframe for reimbursing the general fund account

Reimbursement method
–

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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

84

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.

86

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.

87

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

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Training and Development Associates, Inc.

Organization Chart
  




Supervision of employees Lines of authority Communication Delineates responsibility, functions and duties Auditors want it!

89

Training and Development Associates, Inc.

Segregation of Duties




Not having one person in control from inception to final recording Having independent cross-checking
–



Separating
– – –

SHP Monitoring Checklist, Exhibit 13-8, Item 14

–

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.

90

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.

91

Time and Activity Records


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

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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:

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Training and Development Associates, Inc.

Sample Timesheet
Client or service provided 1234 Group Session 1239 1241 1256 1235 1255 1238 Staff Meeting Fundraising Event 1257 Dat e Dat e Dat e Dat e Dat e Dat e Dat e Tot al Hours Mon. Tues. Weds. Thurs. Fri. Sat. Sun. 2 1 2 1 6 1 1 1 1 1 5 1 1 2 3 2 5 1 1 1 1 1 5 2 2 4 1 1 2 1 1 1 3 2 2 1 1 3 3 Funding Source HUD #1 HHS Casey HUD #1 HUD #2 HUD #1 ESG #1 HUD #1 Overhead Unrest. HUD #2

Vacation Overhead Non-HUD Sick Holiday TOTAL

2 8 8 8 8 8

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
     

Clients’ case notes Calendars, logs and sign-in sheets Palm pilots Daily, weekly and quarterly reports Products and deliverables What do you use now?

95

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.

96

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

97

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.

99

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

100

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.

101

Accounting Records

Accounting Records


Accounting system should include
– –

–
– –

Chart of accounts Cash receipts journal Cash disbursements journal Payroll journal General ledger

104

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.

105

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.

106

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

108

Training and Development Associates, Inc.

Property Management


Definitions
– –

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



SHP Monitoring Checklist 13 -11
–

109

Training and Development Associates, Inc.

Property Management
 

General requirements
–

Property can only be acquired for a specific purpose Use must continue for a certain period of time


Specific requirements
– – – –

Remember the SHP 20 year use restriction
SHP Monitoring Checklist Exhibit 13 -11, Items 1-3

Accurate records must be kept


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.

110

Federal Cost Principles

Cost Principles


Three components to cost principles
– – –

Cost reasonableness Cost allowability Cost allocation Governmental entities: OMB Circular A-87 Nonprofits: OMB Circular A-122 SHP Monitoring Checklist, Exhibit 13-9
Training and Development Associates, Inc.



Applicability
– –



Also refer to
–

112

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.

113

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

114

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


115

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)

116

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

117

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
  

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?

119

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.

120

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.

121

Table Talk: Direct vs. Indirect


Assign the following costs as direct or indirect
–

–
– – –

Staff salaries Utility costs Food Depreciation Insurance

122

Training and Development Associates, Inc.

What kind of cost is it?
Direct? Eligible? Allowable? Allocable? Fixed?
Restricted?
123

Indirect? Ineligible? Unallowable? Non-allocable? Variable?
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
– –

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.



Operating expenses
– –

125

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.

126

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.

127

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?

128

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 GAAP, GAGAS, OMB Circular, HUD requirements Verifies internal financial controls Demonstrates board oversight Independently audited and adequate reporting

Demonstrates accountability
–

Demonstrates proper stewardship
– – –

130

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

131

Training and Development Associates, Inc.

Federal Awards


Federal awards include
– –

–
– – –

Grants, loans and loan guarantees Direct assistance or appropriations Property insurance or interest subsidies Property, food commodities Cooperative agreements or contracts Other assistance


132

But only counts if ―expended‖
Training and Development Associates, Inc.

Type of Audit


Program-specific audit
– –

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.



Single audit
– –

133

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


134

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

135

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

136

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.

137

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.

139

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.

140

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

141

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

142

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.

143

The Audit Process Is Ongoing


As one audit period ends, another audit period begins

146

Training and Development Associates, Inc.

Team Exercise

Family Services Audit Consideration

Annual Progress Reports

Purpose of APR


Tracks project progress
– – –

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.



Tool for HUD…and YOU!
– – – –

149

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.

150

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.

151

Operating Year


Projects with acquisition, rehabilitation or new construction
–

Operating year begins after
 

Obtaining a certificate of occupancy Accepting first client



Other projects
–

Operating year begins after
 

Accepting first client LOCCS draw of leasing, supportive services or operating funds



Renewal projects
–

Specified in grant agreement letter
Training and Development Associates, Inc.

152

Components of APR
   

Basic information about project and goals Information about participants in project Information about participants leaving project Financial information and match

153

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

154

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

 
155

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

156

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

157

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.

158

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 Number of beds Number of dwelling units Number of dwelling units
Training and Development Associates, Inc.

–

Shelter Plus Care
 

–

Section 8 SRO


159

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 Amount of funding from other sources Spent on services by discrete categories Estimates percentage of clients who use discrete service categories Funded outside of SRO program

–

S+C projects
 

–

SRO projects
 

160

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. 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.

–

Examples of match [582.110]
  

161

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 Cash only! (no in-kind contributions, etc.) Required match varies by activity

–

Tracks sources of cash match
 



Keep documentation on file
–
–

SHP expenditures and cash match No regulatory guidance outside of OMB Circulars
Training and Development Associates, Inc.

162

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 Match is $1 for $1

–

Tracks sources of cash match




Keep documentation on file
Training and Development Associates, Inc.

163

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

164

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




165

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
– – –

Site control (within 1 year of award letter) Restrictive covenants for 20 year use Match raised (evidence of first year in hand)

168

Training and Development Associates, Inc.

Spending Down the Grant
  

Timeliness! Timeliness! Timeliness!

169

Training and Development Associates, Inc.

Grant Amendments
 

Program changes during grant term Scope of changes
–

–

Significant Minor Informed (minor) Review and approval (significant)
Training and Development Associates, Inc.



HUD involvement and approval
– –

170

Scope of Changes


Significant changes
– – –

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



Minor changes
– – – –

171

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.

172

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

173

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

174

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.

175

Recapture of Funds


Lack of site control
– – –

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



Slow expenditure of funds
–

–

176

Training and Development Associates, Inc.

Recapture of Funds


Noncompliance with grant agreement
– –

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



Unspent funds
– – –

177

Training and Development Associates, Inc.

Recapture of Funds


Surplus funds
– –

–

Upon expiration of grant Unspent funds Unless term extension received or final drawdown is pending

178

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

179

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

181

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 The key is getting better
Training and Development Associates, Inc.



Trend analysis
–

182

Documents to Review


Three years of financial statements
– – – – –



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?

183

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.

184

Introduction to Financial Statements

Financial Statements


Balance sheet
– –

What an organization owns (assets) What an organization owes (liabilities) Revenue Expenses Revenue in excess of expenses (profit)
Training and Development Associates, Inc.



Income statement
– – –

186

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.

187

Forms of Financial Statements


In-house financial statements
– –

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.



Compiled financial statements
– – –

–

188

Forms of Financial Statements


Reviewed financial statements
– – –

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



Audited financial statements
– – –

189

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
–

Fixed expenses drive up the need to raise revenues on a regular basis Lease now, buy later Collect now, pay on time



Don’t buy stuff until you need it
– –



Grants are not cash until collected
Training and Development Associates, Inc.

192

Team Exercise: Rehab, Inc.


Analyze the finances of a typical SHP grantee using the BIG 4!

193

Training and Development Associates, Inc.

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.

195

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.

196

Wrap Up
  



Cleaning out the bin Evaluations Climate check Who you gonna’ call?
– – –

Lead Agency HUD TDA


197

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


				
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