Numbers Don't Lie_ They Hide by liwenting

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

                               Training and Development
1                                        Associates, Inc.
Numbers Don’t Lie, They Hide

             Financial Management
             for Homeless Grantees
    Who Are We?

       Presented by
        –   Training & Development Associates, Inc.
                As a subcontractor of the Corporation for Supportive
       Sponsored by
        –   U.S. Department of Housing and Urban
                Los Angeles Field Office
                                                        Training and Development
3                                                                 Associates, Inc.

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

                                   Training and Development
4                                            Associates, Inc.
    Who Are You?

       Type of organization
        –   Lead agency
        –   Sponsor
        –   Service provider
       Your role
        –   Executive director
        –   Financial staff
        –   Case manager
        –   Another position

                                 Training and Development
5                                          Associates, Inc.
    Why Are We Here?

       Different funding requirements and reports confusing
       Grantees have questions about HUD’s requirements
       Finance roles for staff and subgrantees can be
       Monitoring scrutiny plus new funding considerations
       Reliance on outside ―experts‖ leaves some in the
       Programs rely on software they can’t interpret
       Staff does not know the language or tools of financial

                                               Training and Development
6                                                        Associates, Inc.
    Workshop Goals

       Participants in this session will
        –   Understand the ―nuts and bolts‖ of financial management
            and analysis
        –   Know how to use ―internal controls‖ to guarantee
            compliance with HUD and other funder requirements
        –   Understand the ―order of authority‖ and, therefore, what is
            required by HUD regulations, OMB Circulars and Generally
            Accepted Accounting Principles
        –   Leave with tools and techniques to address financial
            management and know when to seek external assistance

                                                       Training and Development
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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

                                               Training and Development
8                                                        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
9                                                        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

                              Training and Development
14                                      Associates, Inc.
     Relationship of Federal Regulations

      Type of Entity      Cost Principles   Requirements             Audits
     State and Local                        Common Rule
                                A-87                                 A-133
     Government                                A-122
     Colleges and
                                A-21            A-110                A-133
     Hospitals and           Various           Various              Various
     Care Facilities        45 CFR 74           A-110                A-133

     Other Nonprofits          A-122            A-110                A-133

     For Profits
                            31 CFR 15.2         FAR*                  FAR*

       *Federal Acquisition Requirements                     Training and Development
15                                                                     Associates, Inc.
     Fiscal Management System
                 Accounting                 Regulations

      Financial Reports                         Procedures

      Internal Controls         Homeless         Documentation

              Budgeting                         Policies

                    Auditing                Monitoring
                                                     Training and Development
16                             Management                      Associates, Inc.
     Setting the Stage

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

                                                       Training and Development
17                                                               Associates, Inc.
     The Importance of Financial

        ―Fitting in‖ with other funders
        Better planning
        Gaining allies
        Raising your ―match‖
        Sustaining future growth

                                           Training and Development
18                                                   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
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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
         –   HUD is the funding stream that we focus on
                                                 Training and Development
20                                                         Associates, Inc.
     Example of Fund Accounting

                                        United   Founda-
                        HUD SHP   HHS    Way       tion      Donor         Total

     Total Revenue

                                                       Training and Development
21   Revenue                                                     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
         –   External funders gain confidence in your
             organization as you comply with the norms of the
             business world

                                                Training and Development
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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

                                                  Training and Development
23                                                          Associates, Inc.
Keys to a Successful System
     Who is Involved in Managing
     Your System?

        Board of Directors
        Local community development staff
        Elected officials
        HUD
        Government staff
        Other investors
        Accountants
                                        Training and Development
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     Staff Responsibilities

        Fiduciary trust          Internal financial
        Payment of taxes          controls
        Government filings       Reports to committees
        Cash flow                Legal contracts
        Fund accounting and      ―The books‖
         reports to funders,      Construction…if?
         including HUD            Future planning and
        Service delivery          financial projections

                                            Training and Development
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     Board Responsibilities

        Building the agency’s financial capacity
        Raising the funds to maintain the
         organization long-term
        Budgeting funds productively
        Managing funds wisely
        Reporting on funds raised
        Supplementing budgets
        Evaluating agency’s financial performance
                                         Training and Development
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     When Do You Need An Accountant?

        Benefits justify the costs
        ―Too many hoops‖
        Adjunct staff and business partner
        Fund accounting required
        Funders’ requirement

                                          Training and Development
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     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
         –   Annual income tax returns and/or 1099’s
        Analysis of management activities and
                                                 Training and Development
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     What Services Should An
     Accountant Provide?

        Assistance in establishing financial management
         –   Collecting grants, outstanding revenues and ―fees for
         –   Control of inventory, asset purchases and cash
        Recommendations to cut expenses, increase cash
         flow and price services
        Assistance in preparing the organization for long-
         term growth
         –   When can the agency afford new staff?

                                                        Training and Development
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Components of a
Financial Management
     Why a Financial Management

        Required by HUD and OMB
        Systems required to meet certain standards
         –   Control and account for funds, property and other
         –   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
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     Financial Management System

        Ineffective results in        Effective results in
         –   Major audit findings       –   Sound management
         –   Negative publicity             decisions
         –   Funding withheld           –   Documentation supporting
                                            program activities and
                                        –   Knowledge of regulations,
                                            policies and procedures
                                        –   Strong accounting system
                                        –   Good internal controls

                                                   Training and Development
33                                                           Associates, Inc.
     Components of Financial Management

        Uniform administrative requirements
        Cost principles
        Audit procedures
        Procurement standards

                                         Training and Development
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     In The Final Analysis…

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

                                                  Training and Development
35                                                          Associates, Inc.
Frequently Asked Questions

            Who? What? How?
            Under SHP
     Supportive Housing Program

        One component of the continuum of care
         strategy for homelessness
         –   Outreach and assessment
         –   Immediate (emergency) shelter
         –   Transitional housing (with support services)
         –   Permanent housing (with support services)
        Enacted in the McKinney-Vento Act

                                                 Training and Development
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Answering the Important

           What is 3-6-8-8?
     National Objectives

        3 goals of HUD’s homeless programs
         –   Help participants obtain and remain in permanent
         –   Help participants increase skills and/or income
         –   Help participants achieve greater self-

                                               Training and Development
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     HUD Objectives

     National Targets
        –   Create new PH beds for chronically homeless persons.
        –   Increase percentage of homeless persons staying in PH
            over 6 months to 71%.
        –   Increase percentage of homeless persons moving from
            transitional housing into permanent housing to 61%.
        –   Increase percentage of homeless persons becoming
            employed by 11%.
        –   At least 390 CoC’s will have functioning HMIS.

                                                    Training and Development
40                                                            Associates, Inc.
     Program Components

        6 types of projects
         –   Transitional Housing
         –   Permanent Housing for people with disabilities
         –   Supportive Services Only
         –   Safe Havens
         –   Innovative Supportive Housing
         –   Homeless Management Information Systems

                                                Training and Development
41                                                        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
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     Acquisition and

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

                                                       Training and Development
43                                                               Associates, Inc.
     New Construction

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

                                                   Training and Development
44                                                           Associates, Inc.

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

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

        Costs of operating facilities
        Only for new project or expanded portion of existing
        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
47                                                               Associates, Inc.
     Administrative Costs

        You may request up to 5% of grant to cover
         administrative costs
         –   Costs associated with carrying out the grant
        May be split between lead agency and sponsors
        Costs associated with carrying out components
        No match requirement for administrative costs

                                                        Training and Development
48                                                                Associates, Inc.
     Homeless Management
     Information System

        Computerized data collection tool
        Designed to capture client level system-wide
        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
49                                                      Associates, Inc.
     HUD Eligible Activities

        For Shelter Plus Care, remember:
         –   Housing Assistance is for the term of the grant
         –   Service Match is $1:$1 during the term of the
         –   Service match must be for HUD-eligible activities
         –   Administration is 8% of the grant ( after the
             housing assistance)

                                                 Training and Development
50                                                         Associates, Inc.
     Eligible Clients

        8 eligible categories of homelessness
        Not all homeless people are HUD-homeless
        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
51                                                      Associates, Inc.
Procurement, Match and LOCCS
     Procurement Rules

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

                                                       Training and Development
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     Procurement Overview

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

        Also known as ―streamlined‖ method
        May be used for purchases below $100,000
        Requirements include
         –   Getting 3 to 5 competitive quotes
         –   Selecting the most reasonable offer
         –   Using purchase orders or petty cash to purchase

                                               Training and Development
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     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
57                                                       Associates, Inc.
     Request for Proposal (RFP)

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

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

        For contracts of $100,000 or more,
         completion assurance required through:
         –   Performance and payment bonds
         –   Deposit of cash escrow
         –   Letters of credit

                                             Training and Development
61                                                     Associates, Inc.
     Bonding and Insurance

        Insurance requirements include
         –   Worker’s compensation and employee liability
         –   Auto insurance for injuries on job site
         –   Comprehensive public liability
         –   Property damage

                                               Training and Development
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     Other Contracting Requirements

        Minority- and women-owned businesses
         –   MBE and WBE outreach requirements
         –   Must take affirmative steps to use businesses
             owned by minorities and women
        Section 3
         –   applies to construction contracts
         –   Goals for training and hiring low-income residents
             of area
         –   Goals for hiring contractors located in area
                                                 Training and Development
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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
64                                                        Associates, Inc.
Numbers Don’t Lie, They Hide

             Financial Management
             for Homeless Grantees

                      DAY TWO
     Pop Quiz on Day One
        3__________________           24 CFR, Part ______ is for
        6__________________            governments
        8__________________           24 CFR, Part ______ is for
        8__________________            not-for-profits

        4__________________           OMB Circular A-ll0 governs
                                       OMB Circular A-122 outlines
        14__________________           ____________
                                       OMB Circular A-133
        100% must equal _____ or       governs ____________
                                       Extra Credit Question?
                                                   Training and Development
66                                                           Associates, Inc.
Meeting Programmatic
Match Requirements
     SHP Match Requirements

        Acquisition           50/50
        Rehabilitation        50/50
        New Construction      50/50
        Supportive Services   80/20
        Leasing               None
        Operations            75/25
        Administration        None
        HMIS                  80/20

                                       Training and Development
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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
69                                                 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
                 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
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Team Exercise

      Safe House Match
     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
         –   Service match must be for HUD-eligible activities
         –   Administration is 8% of the grant ( after the
             housing assistance)

                                                 Training and Development
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Calculating Resident Rents
     Rent can be match

        Rent can be used for match if :
         –   Properly calculated
         –   Properly documented
         –   Properly used

                                           Training and Development
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     Calculating Resident Rents

        Grantees may charge participants rent under
         specific guidelines
        Maximum rent (housing expense) is higher of
         –   30% of monthly adjusted income
         –   10% of monthly gross income
         –   TANF rent
        Utility expenses deducted

                                              Training and Development
75                                                      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
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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

                                                Training and Development
77                                                        Associates, Inc.
Team Exercise

      Tenant Rent
Line of Credit Control
System (LOCCS)
     Line Of Credit Control System

        LOCCS Access Authorization
         –   HUD Form 27054
        Banking information
         –   Direct Deposit Form 1199
        LOCCS Voucher for Grant Payment
         –   HUD Form 50080

                                        Training and Development
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     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
        Approving official – certification

                                              Training and Development
81                                                      Associates, Inc.
     Direct Deposit

        Banking information
         –   Form 1199
         –   Use Your existing bank account or establish a
             new account
         –   Submit Form 1199 to HUD Officials
                 Washington, DC OR Field Office
         –   Ensure that all banking information is accurate

                                                   Training and Development
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     LOCCS Payment

        Minimize the time elapsing between transfer
         of funds to recipients from the U.S. Treasury
        Advance method
         –   Expend in 3 days
        Reimbursement method
         –   No timeframe for reimbursing the general fund

                                               Training and Development
83                                                       Associates, Inc.
     Tracking LOCCS Draw Downs

        Cash control register
         –   Track each draw request
         –   Track SNAP funds by grant number and voucher
         –   Maintain a cumulative balance of SNAP funds

                                             Training and Development
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Uniform Administrative
     Internal Controls

        Combination of polices, procedures, job
         responsibilities, personnel and records that
         create accountability in financial system
        Ensures funds are used and managed
        Remember, a small investment early will
         reap great benefits later

                                           Training and Development
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     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
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     Internal Controls

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

                                                     Training and Development
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     Organization Chart

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

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     Segregation of Duties

        Not having one person             Separating
         in control from inception          –   Operational work from
         to final recording                     record-keeping of assets
        Having independent                 –   Asset custody from asset
                                            –   Authorization of asset
         –   SHP Monitoring
                                                purchases from custody
             Checklist, Exhibit 13-8,
             Item 14                            and record-keeping
                                            –   Purchasing from

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     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
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     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

                                                         Training and Development
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     Sample Timesheet
                                         Dat e Dat e Dat e Dat e Dat e Dat e Dat e Tot al Hours Funding
          Client or service provided                                                           Source


          Employee Signature

          Supervisor's Certification

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

          Vacation                                                                            Vacation
          Overhead                                                                            Overhead
          Non-HUD                                                                             Non-HUD
          Sick                                                     2                        2 Sick
          Holiday                                                                             Holiday
          TOTAL                              8       8   8   8     8                       40

          Employee Signature

          Supervisor's Certification

          Special Notes, Comments or Explanations:                                         Training and Development
94                                                                                                   Associates, Inc.
     Types of Activity Sheets

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

                                          Training and Development
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     Basic Cash Controls

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

                                               Training and Development
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     Physical Control of Assets

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

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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
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      Budget Controls

         Compare and control expenditures
          –   Keep records on budgeted amounts
          –   Compare obligations and expenditures to planned
              budgets and accomplishments
          –   Report deviations from budgets and plan

                                               Training and Development
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      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
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Accounting Records
      Accounting Records

         Accounting system should include
          –   Chart of accounts
          –   Cash receipts journal
          –   Cash disbursements journal
          –   Payroll journal
          –   General ledger

                                           Training and Development
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      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

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      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

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Cash and Property
      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

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      Property Management

         Definitions
          –   Real property is land and improvements
          –   Personal property is other types of property
              (supplies and equipment)
         SHP Monitoring Checklist 13 -11
          –   Complies with 24 CFR 85.32 and 24 CFR 84.34

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      Property Management

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

         Three components to cost principles
          –   Cost reasonableness
          –   Cost allowability
          –   Cost allocation
         Applicability
          –   Governmental entities: OMB Circular A-87
          –   Nonprofits: OMB Circular A-122
         Also refer to
          –   SHP Monitoring Checklist, Exhibit 13-9

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      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
          –   Source documented
          –   Reasonable, allowable and allocable
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      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

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      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
          –   Not charged to any other program
         Refer to list of costs in OMB Circular A-122
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      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

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      Cost Allocation

         A cost is allocable to a HUD program if it is
          –   Treated consistently with other similar costs
          –   Incurred specifically for the program
          –   Benefits program or can be distributed based on a
              reasonable proportion OR
          –   Necessary to operations

                                                 Training and Development
117                                                        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.

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      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?

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      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…
                   They are eligible for federal reimbursement

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      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
121                                                  Associates, Inc.
      Table Talk: Direct vs. Indirect

         Assign the following costs as direct or
          –   Staff salaries
          –   Utility costs
          –   Food
          –   Depreciation
          –   Insurance

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      What kind of cost is it?

       Direct?           Indirect?
       Eligible?         Ineligible?
       Allowable?        Unallowable?
       Allocable?        Non-allocable?
       Fixed?            Variable?
      Restricted?        Unrestricted?
                                     Training and Development
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      Pro-Rating Costs

       Required by HUD where full cost is not
        the actual cost for HUD’s piece
       Must always have source

                                    Training and Development
124                                           Associates, Inc.
      Pro-Rating Costs

         Supportive service costs
          –   Salaries pro-rated based on percentage time
          –   Document with time and activity records reflecting
              funding source
         Operating expenses
          –   Pro-rate based on percentage of space or time
          –   Document with logs, plans, etc.

                                                  Training and Development
125                                                         Associates, Inc.
      Table Talk: Pro-Rating Costs

         A case manager works with 30 clients under 3
          different funding programs of which 8 clients are
          associated with this HUD grant
         How would you pro-rate the case manager’s time?
          –   Divide the total cost equally among the 3
              funding programs
          –   Charge 8/30ths of the cost to this grant
          –   Compare the number of hours spent with
              the 8 clients to that spent with all 30 clients
          –   None of the above
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      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
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      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
          –   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?

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Auditing, Monitoring and
      Why Do We Need An Audit?

         Universally accepted analytical tool
          –   Ratios, standards, disciplined way of viewing numbers
         Demonstrates accountability
          –   GAAP, GAGAS, OMB Circular, HUD requirements
         Demonstrates proper stewardship
          –   Verifies internal financial controls
          –   Demonstrates board oversight
          –   Independently audited and adequate reporting

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

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      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
         But only counts if ―expended‖
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      Type of Audit

         Program-specific audit
          –   OK if recipient or subgrantee gets federal funds
              from only one source
          –   Involves only looking at that program
         Single audit
          –   Required if funds come from more than one
          –   Involves looking at all programs and financial

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      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
         Audit report must address each area
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      Compliance Requirements

         A federal audit must satisfy 14 compliance
          –   Laws (for example, Davis Bacon)
          –   Regulations covering match, eligibility, etc.
          –   Other grant provisions including subgrantee

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      Audit Findings

         Audit may include findings and questioned
          –   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

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      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

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      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
         Grantees and subgrantees must establish
          system to ensure timely and appropriate
          resolution to audit findings

                                          Training and Development
139                                                 Associates, Inc.
      What HUD Looks For

         Audits that are ―clean‖
          –   There are no findings, either financial or
         Fund accounting applied to segregate HUD’s
          grants and costs associated with those
          grants from other funding sources
         Costs that are supported with source
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      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

                                                 Training and Development
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      Specialized Auditors

         Specialized auditors need to know
          –   AICPA’s industry audit and accounting guide
          –   GAO’s Government Auditing Standards manual
          –   Applicable OMB Circulars
          –   Catalogue of Federal Domestic Assistance
          –   HUD’s program guidelines
          –   OMB’s Compliance Supplement

                                              Training and Development
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      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
         Issue an engagement letter
         GAO secondary considerations include
          –   Financial education and audit experience
          –   An audit committee to handle selection
          –   Detailed policies and procedures
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      The Audit Process Is Ongoing

         As one audit period ends, another audit
          period begins

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146                                                 Associates, Inc.
Team Exercise

      Family Services Audit
Annual Progress
      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
         Tool for HUD…and YOU!
          –   Helps to keep your program on track
          –   Gives you information about how the project is doing and
              what it is accomplishing
          –   Used to document success for other funders
          –   Used for completing continuum gaps analysis

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      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

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      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
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      Operating Year

         Projects with acquisition, rehabilitation or new
          –   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
         Renewal projects
          –   Specified in grant agreement letter

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      Components of APR

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

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      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

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      APR Part I: Project Progress

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

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

                                                    Training and Development
156                                                           Associates, Inc.
      APR Part I: Project Progress

         No. 15: Supportive Services
          –   Number of participants receiving discrete
              categories of service
          –   Identify those participants receiving services that
              are chronically homeless

                                                   Training and Development
157                                                          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

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      APR Part I: Project Progress

         No. 17: Number of beds
          –   SHP (not completed for SSO projects)
                  Number of beds – Current Level
                  Number of beds – New Effort
                  New Effort beds in place at the end of operating year
          –   Shelter Plus Care
                  Number of beds
                  Number of dwelling units
          –   Section 8 SRO
                  Number of dwelling units
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      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
          –   S+C projects
                  Amount of funding from other sources
                  Spent on services by discrete categories
          –   SRO projects
                  Estimates percentage of clients who use discrete service
                  Funded outside of SRO program

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      APR Part II: Financial Information

         For S+C service match
          –   14 categories of eligible services
          –   Match is overall
                  Not year-by-year
                  Each client need not receive the same amount of
                   services as rental assistance.
          –   Examples of match [582.110]
                  Volunteer time at $10 per hour
                  Actual salaries paid to staff that provide services
                  Value of lease on service facility

                                                            Training and Development
161                                                                   Associates, Inc.
      APR Part II: Financial Information

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

                                                                 Training and Development
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      APR Part II: Financial Information

         No. 20: SHP acquisition, rehabilitation, and new
          –   Tracks SHP expenditures
                  Fill out in year-1 only
                  SHP funds drawn down during the year
                  Cash match (by activity)
                  Total expenditures
          –   Tracks sources of cash match
                  Match is $1 for $1
         Keep documentation on file
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      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

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      APR Part II: Problems, Changes, and
      Technical Assistance Request

         Open-ended questions
          –   Describe problems or changes
          –   Solicit information on
                  Need for technical assistance
                  Ways HUD could improve service
                  Self-reflection on project improvement
         Chance to give important feedback!
         Establish HUD relationship
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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)

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      Spending Down the Grant

         Timeliness!
         Timeliness!
         Timeliness!

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169                                   Associates, Inc.
      Grant Amendments

         Program changes during grant term
         Scope of changes
          –   Significant
          –   Minor
         HUD involvement and approval
          –   Informed (minor)
          –   Review and approval (significant)

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      Scope of Changes

         Significant changes
          –   Departure from application
          –   And substantially affects implementation
          –   HUD approval required and amended grant agreement
         Minor changes
          –   Departures from application
          –   But does not substantially affect implementation
          –   No HUD approval or amended grant agreement
          –   Must document change

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      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

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      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
         Application must remain competitive
         Reduced rating requires HQ’s approval

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      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

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      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

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      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)
         Slow expenditure of funds
          –   Acquisition, rehabilitation or new construction must begin
              within 3 months OR residents must begin occupancy within
              9 months of agreement
          –   Leasing, operating or supportive services must begin within
              3 months of availability

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      Recapture of Funds

         Noncompliance with grant agreement
          –   Any instance of default
          –   Factors beyond grantee’s control considered
         Unspent funds
          –   During grant term
          –   Costs are less than anticipated
          –   Funds may be shifted to other activities or carried forward

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      Recapture of Funds

         Surplus funds
          –   Upon expiration of grant
          –   Unspent funds
          –   Unless term extension received or final draw-
              down is pending

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      Merging SHP Grants

         Under certain conditions, grants may be merged
         Applies to grantees with 2 or more grants that meet
          –   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

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Financial Statements and
      What is Financial

         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

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      The Process of Financial Analysis

         ―Spreading the numbers‖
         Reviewing basic credit questions
          –   Is the organization liquid?
          –   Is the organization profitable?
          –   Is there adequate cash flow to operate?
         Preparing follow-up questions
         Calculating and analyzing ratios
          –   Compare this organization to others
         Trend analysis
          –   The key is getting better
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      Documents to Review

         Three years of financial       Projected financial
          statements                      statements for the next
          –   Revenue and Expenses        3 to 5 years
          –   Balance Sheets             Interim financial
          –   Cash Flow Statements        statements
          –   Corporate tax returns       –   Depending on the timing
          –   Bank statements                 of the yearly statements
         Why 3 years?

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      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

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Introduction to Financial
      Financial Statements

         Balance sheet
          –   What an organization owns (assets)
          –   What an organization owes (liabilities)
         Income statement
          –   Revenue
          –   Expenses
          –   Revenue in excess of expenses (profit)

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      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
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      Forms of Financial Statements

         In-house financial statements
          –   Prepared internally by organization
          –   Used for day-to-day operations
         Compiled financial statements
          –   Auditor takes information from organization and compiles it
              into proper format
          –   Only as good as information provided by organization
          –   Auditor does not test information
          –   Least expensive independently prepared

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      Forms of Financial Statements

         Reviewed financial statements
          –   Auditor reviews information provided by organization
          –   Provides limited verification
          –   Key tests completed to validate information
         Audited financial statements
          –   Auditor evaluates all aspects of organization’s finances
          –   Verifies assets, debt, other obligations and liabilities
          –   Most thorough and expensive

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      Session Ten:
Numbers Don’t Lie, They Hide
      Operating Cycles


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      Grantee’s Operating Cycle

         Even not-for-profits have an operating cycle and a
          need for working capital
         ―Seasonality‖ – timing is everything
         Investing in fixed vs. variable expenses
          –   Fixed expenses drive up the need to raise revenues on a
              regular basis
         Don’t buy stuff until you need it
          –   Lease now, buy later
          –   Collect now, pay on time
         Grants are not cash until collected
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      Team Exercise: Rehab, Inc.

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

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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

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195                                                 Associates, Inc.
      Top Ten of Financial Management

         Fixed expenses drive up breakeven and the
          need to raise more funds
         Lease now, buy later! Collect now, pay on
         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?‖
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      Wrap Up

         Cleaning out the bin
         Evaluations
         Climate check
         Who you gonna’ call?
          –   Lead Agency
          –   HUD
          –   TDA
         Have a safe journey!
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Training & Development

          131 Atkinson Street, Suite B
          Laurinburg, North Carolina 28352
          (910) 277-1275
          (910) 277-2816 Fax

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