fund accounting clinic

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

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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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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?

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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 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

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 source

HUD 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 block—chart 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

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

Area of Financial Management

State and Local Governments

Not-for-Profits

Cost Principles OMB Circular A-87 OMB Circular A-122

AuditsOMB Circular A-133

OMB Circular A-133

Uniform Administrative Requirements

24 CFR Part 85 24 CFR Part 84

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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

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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

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

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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Top 10 Timekeeping Mistakes

6. Not linking time to an eligible grant (or multiple grants)

7. Not identifying a project or client8. Not showing time spent on ineligible

activities9. Not having documentation (activity

records) to support the time and activity report

10.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 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

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 feesand 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

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

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

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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 OMB’s 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

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

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 procedures

5. Develop a time and activity reporting system

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Fund Accounting Action Plan

6. Develop allocation system for non-personnel costs

7. Train staff on financial management8. Use both program and finance staff

to complete APR9. Hire an auditor who knows A-133

requirements10.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