Fund Accounting Clinic

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Fund Accounting Clinic
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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

3
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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What Do You Expect?

• What are your expectations?
• Why are you here?
• What do you expect to gain from todays training
  session?
• What will be the outcome of your participation in
  this training session?

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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.

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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

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Workshop Goals

• Participants will leave with tools and techniques
  to incorporate fund accounting into the grantees
  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 Fund Accounting?
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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

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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

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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
  sourceHUD revenues HUD expensesHHS revenues
  HHS expenses

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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

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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

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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

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Common Misconceptions of Fund Accounting

• Thinking that one SNAPS grant is the same as
  another SNAPS grant
• Each grant has a separate approved budget

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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

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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

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Start with a Chart of Accounts

• Fund accounting starts from a basic building
  blockchart of accounts
• Outlines all revenue sources
• Outlines all expenditures by eligible activities

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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

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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.

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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

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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 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

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Exercise

• Family Services, Inc.
• Review the case description
• Complete the worksheet
• Answer the related questions

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How Does Financial Management Relate to Fund
Accounting?
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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

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Relationship of Federal Regulations
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OMB Accounting Standards

• Fund Accounting helps an organization comply with
  OMBs 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 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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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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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

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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
  requirements
• Not charged to any other program
• Refer to list of allowed costs in OMB Circular

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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
• 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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Grant Agreement

• Establishes compliance standards for federal
  requirements
• SuperNOFA
• Application
• Technical Submission
• OMB Circulars

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Importance of Fund Accounting toFinancial
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 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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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

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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

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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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How Does Fund Accounting Impact Running A Program?
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Impact on Program Operations

• 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 and Activity 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 and Activity 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 and Activity 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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Top 10 Timekeeping Mistakes

• Charging straight 8 hours per day or straight
  percentage of time to a grant
• Not using information from the time and activity
  report to charge the grant
• Having discrepancies between payroll and budget
• Not including sick time and vacation
• Not linking time to an eligible activity

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Top 10 Timekeeping Mistakes

• Not linking time to an eligible grant (or
  multiple grants)
• Not identifying a project or client
• Not showing time spent on ineligible activities
• Not having documentation (activity records) to
  support the time and activity report
• 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 HUDs 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 Other Funds

• 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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Exercise

• Haven House
• Review each scenario
• Select one answer for each

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How Does Fund Accounting Impact Match
Requirements?
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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

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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

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SHP Match Requirements

• Acquisition
• Rehabilitation
• New Construction
• Supportive Services
• Leasing
• Operations
• Administration
• HMIS

• 50/50
• 50/50
• 50/50
• 80/20
• None
• 75/25
• None
• 80/20

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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

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SHP Match Sources

• Rent collected from clients may be counted
  towards your match requirement
• If the rent is calculated properly and used for
  HUD eligible activities
• Remember, rent is rent, fees are fees
• and savings are savings!

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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

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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

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How Does Fund Accounting Affect Grant Reporting?
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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

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Function of Each 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 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

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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 OMBs requirement, audits
• Are a universally accepted analytical tool
• Demonstrates accountability of the Board
• Demonstrates proper stewardship of funds

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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

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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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Wrap-up
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What Have You Learned?

• Post-assessment
• Complete each true or false question

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Fund Accounting Action Plan

• Read NOFA, application, desk guide, technical
  submission, budget and OMB circulars
• Create a chart of accounts
• Create budgets based on specific SHP grant
  activities
• Develop financial management system including
  policies and procedures
• Develop a time and activity reporting system

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Fund Accounting Action Plan

• Develop allocation system for non-personnel costs
• Train staff on financial management
• Use both program and finance staff to complete
  APR
• Hire an auditor who knows A-133 requirements
• Implement checks and balances

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Wrap Up

• Cleaning out the BIN
• Evaluations
• Who you gonna call?
• Lead Agency
• HUD
• TDA
• Have a safe journey!

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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