Fund Accounting Jim Corkill Accounting Services & Controls November 2011.
Fund Accounting Clinic Presentation - HUD Exchange · What is Fund Accounting? Not-for-profit...
Transcript of Fund Accounting Clinic Presentation - HUD Exchange · What is Fund Accounting? Not-for-profit...
Fund Accounting Clinic
Who Are We?
� Presented by Training and Development Associates – Edward Hammond – Rocky Wade
� Sponsored by U.S. Department of Housing and Urban Development
2
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
3
What Do You Expect?
� 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?
4
Why Are 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.
5
Why Are 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
6
Workshop Goals
� Participants will leave with tools and techniques to incorporate fund accounting into the grantee’s procedures for: – Budgets – Time and activity reports – Reporting
7
Logistics
� Resource materials – Manual – Presentation – Handouts
� Activities � Questions (the “Bin”) � Restrooms and telephones
– Please silence or turn off cell phones
8
What is Fund Accounting?
What is Fund Accounting?
� 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
10
What is Fund Accounting?
� 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
11
Benefits of Fund Accounting
� 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 expenses
HHS revenues = HHS expenses
12
Line of Credit Control System
(LOCCS)
Benefits of Fund Accounting
� Allows one to evaluate each project and/or activity individually � Results in proper information for the
drawdown of funds in LOCCS
Line of Credit Control System
(LOCCS)
13
Common Misconceptions of Fund Accounting � 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
14
Common Misconceptions of Fund Accounting � 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
15
Common Misconceptions of Fund Accounting � Thinking that one SNAPS grant is the
same as another SNAPS grant – Each grant has a separate approved budget
16
Common Misconceptions of Fund Accounting � 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
17
Common Misconceptions of Fund Accounting � 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
18
Start with a Chart of Accounts
� Fund accounting starts from a basic building block—chart of accounts – Outlines all revenue sources – Outlines all expenditures by eligible activities
Model Chart of Accounts
Model Chart of Accounts
19
Model Chart of Accounts
� 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
20
Developing a Sources and Uses Statement � 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.
21
Examples of Fund Accounting
� 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
22
Model Source and Use
Statements
Model Source and Use
Statements
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
23
Who Uses Fund Accounting
� 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
24
Exercise
� Family Services, Inc. – Review the case description – Complete the worksheet – Answer the related questions
25
How Does Financial Management Relate to Fund Accounting?
Financial Management
� 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
27
Relationship of Federal Regulations
Area of Financial Management
State and Local Governments Not-for-Profits
Cost Principles OMB Circular A-87 OMB Circular A-122
Audits OMB Circular A-133 OMB Circular A-133
Uniform Administrative Requirements
24 CFR Part 85 24 CFR Part 84
28
OMB Accounting 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
29
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
30
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
31
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
32
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 the individuals involved
33
Cost Allowability
� In general, cost must be – Necessary and reasonable – Allocable to the program – Authorized or not prohibited – Conform to and be consistent with rules and
requirements – Not charged to any other program
� Refer to list of allowed costs in OMB Circular
34
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 – Necessary to operations
35
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!
36
restriction and requirements
3. Develop procedures
restriction and requirements
3. Develop procedures
To-Do ListTo-Do List
1. Read grantRead grant1. agreementagreement
2. Learn scope ofLearn scope of2.
Grant Agreement
� Establishes compliance standards for federal requirements – SuperNOFA – Application – Technical Submission – OMB Circulars
37
Importance of Fund Accounting to Financial Management � 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 forrequirements
• All funding streams
• Each project and/or activity
38
Local Government
Foundations
State Government
Donors
HUD 2
HUD 1
HUD 3
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
39
Budget Requirements
� 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
40
Budget Requirements
� 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
41
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
42
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
43
Developing a SNAPS Budget
� Include all budget assumptions – Especially those which might require greater
explanation – Such as substantial difference in cost from
historical assumptions
44
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) 45
– Breakdown of costs funded by SHP grant
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
46
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
47
How Does Fund Accounting Impact Running A Program?
Impact on Program Operations
� Documenting time and activities � Pro-rating costs
– Personnel – Non-personnel
� Tracking other funds
49
Timesheets and Activity Records
� Timesheets account for actual time spent on an eligible activity � Timesheets show the
“output” of one’s efforts � Timesheets are
necessary for payroll and accounting for one’s wages and compensation
� Activity records are the back up documentation that shows what was done during the time � Activity records show
the “outcome “ of one’s effort
50
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
51
Timekeeping Requirements
� OMB requirements – After-the-fact determination of actual activity – Signed by individual employee or by
supervisor with first hand knowledge of employee’s work
– Prepared at least monthly – Charges to awards for salaries and wages
must be based on documented payrolls approved by responsible official of organization [OMB Circular A-122]
52
Important Distinction
� OMB Circular A-122 requirements(nonprofits) – Charges for salaries and wages must be
based on documented payrolls approved by aresponsible official of the organization
– Distribution of salaries and wages must besupported by personnel activity reports exceptwhen a substitute system has been approved
– Reports must be signed by individualemployee or by a responsible supervisoryofficial having first hand knowledge ofemployee’s activities
53
Important Distinction
� OMB Circular A-87 requirements (governments) – Charges for salaries and wages must be
based on payrolls and approved by a responsible official of the governmental unit
– Personnel activity reports must be signed by the employee
54
Addressing Problems
� Where past time documentation has not been adequate, HUD may require grantees adopt stricter standards
55
Time and Activity Reports
� Used to determine actual salary expenses
– Ties activities back to budget – Applies to HUD grantees, sponsors and
service providers
Model Time and Activity
Report
Model Time and Activity
Report
56
Personnel Activity Reports
� All personnel activity reports must be signed by the individual employee, or by a responsible official having first hand knowledge of the activities performed by the employee � Payrolls must be approved by a
responsible official of the organization
57
Model Time and Activity Report
� HUD-eligible and ineligible time allocations possible � Time accounted for within specific HUD
grants � Signed by employee or supervisor � Recorded after-the-fact
58
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
59
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
60
Top 10 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 vacation 5. Not linking time to an eligible activity
61
Top 10 Timekeeping Mistakes
6. Not linking time to an eligible grant (ormultiple grants)
7. Not identifying a project or client 8. Not showing time spent on ineligible
activities 9. Not having documentation (activity
records) to support the time and activity report
10.Not getting either the timesheet or the activity report signed
62
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
63
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
64
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
65
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.
66
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)
67
Tracking Other Funds
� Fees for services � Rents collected from residents � Mandatory savings accounts � Also, application of receipts that reduce
expenses – Management fees – Rebates – Discounts
68
Exercise
� Haven House – Review each scenario – Select one answer for each
69
How Does Fund Accounting Impact Match Requirements?
100% Equals 100%
� 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
71
Meeting Match Obligation
� 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
72
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
73
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
74
SHP Match Sources
� Rent collected from clients may be counted towards your match requirement – If the rent is calculated properly and used for
HUD eligible activities
Remember, rent is rent, fees are fees
and savings are savings!
75
SNAPS Match 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
76
What Is Not Match?
� 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
77
How Does Fund Accounting Affect Grant Reporting?
Reporting Your Finances
� 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
79
Function of Each Report
Annual Progress Report
Matches SHP draws and cash match to eligible SHP activities for HUD compliance
Financial Statements
Shows all sources of funds and uses of funds at a point in time to help operate the organization
Audits Verifies all revenues and expenses for a specific period and shows whether financially sound
80
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
Common Mistake
Budget in technical
submission does not align with budget in
APR
Common Mistake
Budget in technical
submission does not align with budget in
APR
81
Components of APR
� 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
82
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
Checklist for Completing
APR
Checklist for Completing
APR
83
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
84
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
85
OMB Standards
� 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
86
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
87
Wrap-up
What Have You Learned?
� Post-assessment � Complete each true or false
question
89
Fund Accounting Action Plan
1. Read NOFA, application, desk guide,technical submission, budget and OMBcirculars
2. Create a chart of accounts 3. Create budgets based on specific SHP
grant activities 4. Develop financial management system
including policies and procedures 5. Develop a time and activity reporting
system 90
Fund Accounting Action Plan
6. Develop allocation system for non-personnel costs
7. Train staff on financial management 8. Use both program and finance staff to
complete APR 9. Hire an auditor who knows A-133
requirements 10. Implement checks and balances
91
Wrap Up
� Cleaning out “the BIN” � Evaluations � Who you gonna’ call?
– Lead Agency – HUD – TDA
� Have a safe journey!
92
For Future Reference
Training & Development Associates, Inc.
131 Atkinson Street, Suite B
Laurinburg, NC 28352
910/277-1275 (O)
910/277-2816 (F)
www.tdainc.org
93