Fund Accounting Jim Corkill Accounting Services & Controls November 2011.
Fund Accounting Clinic 2 Who Are We?
Transcript of Fund Accounting Clinic 2 Who Are We?
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?Who Are We
Presented by Training and Development Associates, Inc. –Edward Hammond–Rocky Wade
Sponsored by U.S. Department of Housing and Urban Development
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?Who Are You
What type of organization do you represent?–Lead agency–Sponsor–Service provider
What is your role at the organization?–Executive Director–Financial staff–Case Manager–Another position
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?WhatDo YouExpect
What are your expectations?–Why are you here?–What do you expect to gain from today’s
training session?–What will be the outcome of your participation
in this training session?
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?WhyAre We Here
Participants should be able:–To understand what fund accounting is and
how it applies to SNAPS grants;–To prepare a budget that uses fund
accounting; and–To prepare an employee time and activity
report that reflects fund accounting.
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?WhyAre We Here
To strengthen the capacity of SNAPS grantees to:–Make sure that funded activities are eligible–Make sure eligible costs are charged to the
appropriate grant–Prepare accurate reports to be used as
management tools–Avoid recapture of SNAPS funds by HUD
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WorkshopGoals
Participants will leave with tools and techniques to incorporate fund accounting into the grantee’s procedures for:–Budgets–Time and activity reports–Reporting
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Logistics
Resource materials–Manual–Presentation–Handouts
Activities Questions (the “Bin”) Restrooms and telephones
–Please silence or turn off cell phones
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?What is FundAccounting
Simply stated:–Fund accounting is a method of recording
financial information that groups resources into funds based on the sources and the uses of those resources
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?What is FundAccounting
Not-for-profit accounting systems should operate on a fund basis–Fiscal and accounting entity
•With self-balancing accounts •Matches revenues with expenses
–Funds are segregated for the purpose of carrying out specific activities•Such as eligible activities cited in a grant
agreement
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Benefits of FundAccounting
Fund accounting tracks sources and uses of funds for each funding source–Without fund accounting, one cannot truly
analyze the revenues and expenses of a specific funding source
HUD revenues = HUD expensesHHS revenues = HHS expenses
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Benefits of FundAccounting
Allows one to evaluate each project and/or activity individually
Results in proper information for the drawdown of funds in LOCCS
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CommonMisconceptions of FundAccounting
Taking a straight percentage of costs and applying it against a grant–Fund accounting creates a link between
eligible expenditures and the actual grant funds drawn for those expenditures
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CommonMisconceptions of FundAccounting
Drawing budgeted amounts regardless of actual costs (including salary)–Time must be actual and documented
Drawing funds against multiple SHP sites instead of the specific site in an approved grant award
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CommonMisconceptions of FundAccounting
Thinking that one SNAPS grant is the same as another SNAPS grant–Each grant has a separate approved budget
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CommonMisconceptions of FundAccounting
Thinking that one can spend on anything as long as it is SNAPS related–Expenses must be allocable to a specific
grant, not just eligible within the SNAPS program
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CommonMisconceptions of FundAccounting
Drawing funds from a prior SNAPS grant to pay for a present grants’ expenditure–Each grant has a specific funding period–Excess funds are subject to recapture by HUD
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Startwith a Chart ofAccounts
Fund accounting starts from a basic building block—chart of accounts–Outlines all revenue sources–Outlines all expenditures by eligible activities
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Model Chart ofAccounts
Start with chart of revenues–Broken down by specific funding sources
Expenditures for each possible activity and sub-activity
Specific expenditure charts for each individual project
Chart of accounts grows with each new project undertaken
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Developing a Sources andUsesStatement
Develop chart of accounts for grant, then–Develop sources and uses statement outlined
in general ledger–Customized to particular SHP activity
We will use the “chart of accounts” as a basic building block through the rest of the presentation.
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Examples of FundAccounting
Budget models–Housing operations with supportive services–Leasing with supportive services–Development with supportive services–Supportive services only–HMIS only–Development only–Grantee with sponsors
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One Model
Housing operations with supportive services–Accounts for all revenues
•From HUD and others
–Accounts for all expenses •HUD-eligible and not eligible
–HUD-eligible costs classified •Direct•Allocated
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Who Uses FundAccounting
Board of Directors –Financially responsible for viability of
organization–Owns program as they understand their
liability and responsibility
External funders (including HUD)–Gain confidence in organization as it complies
with business norms
Staff and management–Tracks operations and reporting
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Exercise
Family Services, Inc.–Review the case description–Complete the worksheet–Answer the related questions
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FinancialManagement
OMB establishes guidelines for financial management–Addresses many areas of financial systems
including requirement for fund accounting–Applies to all awards of federal assistance–May apply differently to specific grants based
on role of recipient
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Relationship of Federal Regulations
24 CFR Part 8424 CFR Part 85Uniform Administrative Requirements
OMB Circular A-133OMB Circular A-133Audits
OMB Circular A-122OMB Circular A-87Cost Principles
- -Not forProfits State andLocal
Governments Area of Financial
Management
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OMBAccounting Standards
Fund Accounting helps an organization comply with OMB’s federal standards–Control and account for funds, property and
other assets–Identify source and use of all federal funds–Allow accurate, timely and complete financial
reporting–Minimize time in transfer of funds between
federal government and grantee
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Accounting Records
Tracks the sources and uses of funds Ensures that program costs are
–Incurred for the proper period–Actually paid–Expended on eligible items–Expended from the appropriate grant–Approved by appropriate officials
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Sources andUses 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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Determining Costs
Costs are only eligible if they–Are associated with an eligible client–Pay for eligible activities–Are delineated in your application (budget)–Have adequate source documentation–Meet OMB standards for being reasonable,
allowable and allocable
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CostReasonableness
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 the individuals involved
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CostAllowability
In general, cost must be–Necessary and reasonable–Allocable to the program–Authorized or not prohibited–Conform to and be consistent with rules and
requirements–Not charged to any other program
Refer to list of allowed costs in OMB Circular
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CostAllocation
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–Necessary to operations
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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 reasonable, allowable and allocable…
They are eligible for federal reimbursement!
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GrantAgreement
Establishes compliance standards for federal requirements–SuperNOFA–Application–Technical Submission–OMB Circulars
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Importance of FundAccounting to FinancialManagement
HUD grant may be of many funding sources–Multiple grants lead to fund accounting–Multiple HUD grants lead to fund accounting–Financial management system must account
for requirements •All funding streams •Each project and/or activity
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Developing Budgets
Budgets are projections of expenses drawn from actual experience–Defines goals for a given period–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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BudgetRequirements
OMB requires organizations put budget controls into place–Starting with the application–Confirmed in the technical submission–Established with an approved budget–Analyzed throughout agency operations–Reconciled in any required reports
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BudgetRequirements
OMB requires organizations to compare and control expenditures–Keep records on budgeted amounts–Compare obligations and expenditures to
planned budgets and accomplishments–Report deviations from budgets and plan–Be prepared to request grant amendments
when the budget deviations trigger such actions
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Developing a SNAPS Budget
Study SNAPS budget requirements–Ask questions of the lead agency and/or HUD
before developing the SNAPS budget
Budget should include–Description of particular SNAPS project –All HUD-eligible activities to be funded by the
SHP grant
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Developing a SNAPS Budget
If necessary, include previous financial statements and budgets–Justifies historical assumptions used in your
budget
Contrast any budget changes from recent history –Such as increases in utilities
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Developing a SNAPS Budget
Include all budget assumptions–Especially those which might require greater
explanation–Such as substantial difference in cost from
historical assumptions
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Developing a SNAPS Budget
Include allocation of all positions funded by the SNAPS grant–Include assumptions about projected hours to
be budgeted for each position by various funding sources
Include for all funded positions–Descriptions –“Fully loaded” rates (wages and fringe
benefits)–Breakdown of costs funded by SHP grant
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Developing a SNAPS Budget
Include all sources of funds–Match allocated to a specific SNAPS eligible
activity –Budget must fully account for all costs
associated with grant
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Developing a SNAPS Budget
Funding non-HUD eligible activities –Identify source of funds–Comprehensive budget for the agency that
accounts for all HUD, cash match, and non-HUD funded activities
Analyzing the budget–One other staff member –One Board member –Analyze and ask questions
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Impact on ProgramOperations
Documenting time and activities Pro-rating costs
–Personnel–Non-personnel
Tracking other funds
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Documenting Time
Most employees work on more than one activity and/or project
OMB standards require that–Work be supported with employee time and
activity tracking system•Actual time was spent on an activity•What activity took place ( eligible client, eligible
activity)•Must be documented with activity records
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Time andActivity Reports
OMB requirements–After-the-fact determination of actual activity–Signed by individual employee, certified by
supervisor–Prepared at least monthly
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Time andActivity Reports
Used to determine actual salary expenses–Ties activities back to budget –Applies to HUD grantees, sponsors and
service providers
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Model Time andActivity Report
HUD-eligible and ineligible time allocations possible
Time accounted for within specific HUD grants
Signed by employee and certified by supervisor
Recorded after-the-fact
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. Allowable vs Allocable
The real issue with time and activity reports is not whether the activity is allowable or not…
BUT whether the time is allocable to the specific SNAPS grant
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Activity Records
Documentation that supports time and activity reports–Clients’ case notes–Calendars, logs and sign-in sheets–Daily, weekly and quarterly reports–Products and deliverables
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10 Top Timekeeping Mistakes
1. Charging straight 8 hours per day or straight percentage of time to a grant
2. Not using information from the time and activity report to charge the grant
3. Having discrepancies between payroll and budget
4. Not including sick time and vacation5. Not linking time to an eligible activity
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10 Top Timekeeping Mistakes
1. Not linking time to an eligible grant (or multiple grants)
2. Not identifying a project or client3. Not showing time spent on ineligible
activities4. Not having documentation (activity
records) to support the time and activity report
5. Not getting the time and activity report signed
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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 documentation to substantiate
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- Pro Rating Costs
Personnel costs for supportive services, operations and administration–Salaries pro-rated based on actual, not
budgeted time–Personnel costs should include benefits–Document with time and activity records
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Important Eligibility Consideration
If the client is not eligible–All costs associated with that client are
ineligible for federal reimbursement–All match associated with that client is
ineligible
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- Pro Rating Costs
Non-personnel costs for buildings and equipment –Pro-rate based on an established base
•Square footage of space•Time used •Actual mileage
–Document with logs, plans, etc.
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- Allocating Non Personnel Costs
Space–Square footage–Usage (logs)
Motor pool–Miles driven–Days used (logs)
Computers–Separate by function–System usage
Printing and reproduction–Number of copies–Separate by function–Key/code access
Telephone–Number of instruments–Separate by function–Usage (logs)
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Tracking OtherFunds
Fees for services Rents collected from residents Mandatory savings accounts Also, application of receipts that reduce
expenses–Management fees–Rebates–Discounts
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100% 100%Equals
To serve 100% of the clients With 100% of the activities You must raise 100% of the total project
costs –HUD grant plus match
If not, you are either –Not serving 100% of the clients –Not providing 100% of the activities
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Meeting MatchObligation
Calculating match–Expenditures–Less SNAPS reimbursement–Equals Cash Match
For example, an agency has incurred $100,000 of eligible operations costs
$100,000 Total expenditures–$75,000 SHP reimbursement=$25,000 Cash match
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SHPMatchRequirements
Acquisition Rehabilitation New Construction Supportive Services Leasing Operations Administration HMIS
50/50 50/50 50/50 80/20 None 75/25 None 80/20
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SHPMatch 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
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SHPMatch Sources
Rent collected from clients may be counted towards your match requirement–If the rent is calculated properly and used for
HUD eligible activities
Remember, rent is rent, fees are feesand savings are savings!
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SNAPSMatch Sources
Match can be from another HUD source–CDBG Program–HOME Program
•for acquisition, rehabilitation or new construction
–Make sure match is eligible and authorized by the federal funding source
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?What Is NotMatch
Rent is not always match Fees are not match
–Fees are charged for a specific non -SNAPS use
Savings are not match–Savings belong to the client, not the agency
Non-cash donations are not match Cash pledged to another grant is not
match
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Reporting YourFinances
APR shows how grantee has performed financially during an operating year
Financial statements show financial condition of organization at a point in time
Audit verifies all financial accounts over a specific period of time, usually a fiscal year
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Function of EachReport
Verifies all revenues and expenses for a specific period and shows whether financially sound
Audits
Shows all sources of funds and uses of funds at a point in time to help operate the organization
Financial Statements
Matches SHP draws and cash match to eligible SHP activities for HUD compliance
Annual Progress Report
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Annual Progress Report
APR used to track project progress –Information on clients and services–Information on expenditures and match
Each grantee must submit an APR–Supported with source documentation on file
Separate APRs submitted for each grant received–Budget Systems Match APR→ → →
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Components ofAPR
Part I includes information on clients and activities
Part II provides financial information–Expenditures and match for leasing,
supportive services, operations, HMIS, administration, acquisition, rehabilitation and new construction
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Completing the APR
Ensure you are using the most recent APR Have program and finance staff complete
APR together –Parts I and II must be consistent
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Financial Statements
Shows financial information at a point in time–Balance sheet (assets and liabilities)–Revenue and expenses
Shows a positive or negative fund balance over time
Shows whether revenues are greater than expenses
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Audit Requirement
Federal programs subject to audit–Spending $500,000 or more in federal awards
per year–OMB Circular A-133 standards apply
In addition to OMB’s requirement, audits–Are a universally accepted analytical tool–Demonstrates accountability of the Board–Demonstrates proper stewardship of funds
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OMBStandards
A-133 single audit–Funds come from more than one source–Involves looking at all programs individually
and organization as a whole
Select auditor who knows requirements–More than a “clean bill of health”–Auditor must understand program compliance
•Not all auditors check for compliance with federal regulations, including fund accounting
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Auditing Standards
Audits look at–Correct presentation of financial information–Financial management systems–Activities generally in compliance with program
requirements
Audit report must address each area Audit does not assure there will be no monitoring
findings–Narrower scope of work than monitoring–Auditors may not determine compliance with all HUD
requirements
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FundAccounting Action Plan
1. Read NOFA, application, desk guide, technical submission, budget and OMB circulars
2. Create a chart of accounts3. Create budgets based on specific SHP
grant activities4. Develop financial management system
including policies and procedures5. Develop a time and activity reporting
system
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FundAccounting Action Plan
1. Develop allocation system for non-personnel costs
2. Train staff on financial management3. Use both program and finance staff to
complete APR4. Hire an auditor who knows A-133
requirements5. Implement checks and balances
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WrapUp
Cleaning out “the BIN” Evaluations Who you gonna’ call?
–Lead Agency–HUD–TDA
Have a safe journey!
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ForFuture Reference
Training & Development Associates, Inc.131 Atkinson Street, Suite B
Laurinburg, NC 28352
910/277-1275 (O)910/277-2816 (F)
www.tdainc.org