Numbers Don't Lie, They Hide
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Numbers Don't Lie, They Hide

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Numbers Don't Lie, They Hide Numbers Don't Lie, They Hide Presentation Transcript

  • Welcome to “Numbers don’t lie, they hide”
  • Numbers Don’t Lie, They Hide Financial Management for Homeless Grantees
  • Who Are We?
    • Presented by
      • Training & Development Associates, Inc. www.tdainc.org
        • As a subcontractor of the Corporation for Supportive Housing
    • Sponsored by
      • U.S. Department of Housing and Urban Development
        • Los Angeles Field Office
  • Logistics
    • Manual and handouts
    • Exercises
    • Teams
    • Questions (the “Bin”)
    • Restrooms and telephones
  • Who Are You?
    • Type of organization
      • Lead agency
      • Sponsor
      • Service provider
    • Your role
      • Executive director
      • Financial staff
      • Case manager
      • Another position
  • Why Are We Here?
    • Different funding requirements and reports confusing
    • Grantees have questions about HUD’s requirements
    • Finance roles for staff and subgrantees can be confusing
    • Monitoring scrutiny plus new funding considerations
    • Reliance on outside “experts” leaves some in the dark
    • Programs rely on software they can’t interpret
    • Staff does not know the language or tools of financial management
  • Workshop Goals
    • Participants in this session will
      • Understand the “nuts and bolts” of financial management and analysis
      • Know how to use “internal controls” to guarantee compliance with HUD and other funder requirements
      • Understand the “order of authority” and, therefore, what is required by HUD regulations, OMB Circulars and Generally Accepted Accounting Principles
      • Leave with tools and techniques to address financial management and know when to seek external assistance
  • Performance Benchmark
    • Each participant will
      • Leave with at least 3 new ideas, techniques or tools to address financial management
      • Meet at least 2 new participants who can be their resource person, mentor or support network after the workshop
  • Table Talk: Real vs. Ideal
    • Discuss the difference between the ideal-world and the real-world as it applies to financial management of your HUD homeless grant
    • Identify 3 items and provide the following
      • In an ideal world _____
      • But in the real world _____ is what happens
      • Why the real world differs from the ideal world
      • Ways the real world can be more like the ideal world
  • HUD’s Top Issues
    • Funds spent on eligible costs
    • Documentation of homeless status
      • If the client is not eligible, the costs are not eligible
    • Proper calculation of rents
    • Commitment of match dollars
    • Documentation of expenditures
      • You are assumed guilty until proven innocent
    • Information to report results to Congress
    • Timeliness of drawdowns
  • New Emphasis on Performance
    • HUD comprehensive monitoring handbook issued
    • Covers all CPD programs, including SHP [6509.2 REV-5]
      • Exhibit 13-8: Guide for Review of SHP Financial Management
      • Exhibit 13-9: Guide for Review of SHP Cost Allowability
      • Exhibit 13-10: Guide for Review of SHP Procurement
      • Exhibit 13-11: Guide for Review of SHP Equipment
      • Exhibit 13-12: Guide for Review of SHP Other Federal Requirements
  • It’s Time for Bingo!
  • Financial Management Systems
  • The Order of Authority
    • GAAP
    • Congress
    • OMB/GAO
    • HUD
    • HUD Grantee
  • Relationship of Federal Regulations *Federal Acquisition Requirements
  • Fiscal Management System Regulations Procedures Policies Monitoring Documentation Financial Management Cash Management Internal Controls Auditing Budgeting Accounting Financial Reports Homeless Program
  • Setting the Stage
    • Financial Management
      • Constant process of safeguarding financial assets of organization, whether for-profit or nonprofit
      • By instituting policies and practices that maintain and increase the value of assets for overall benefit of the organization
    • Financial Analysis
      • Systematic technique for evaluating financial health of organization
      • By quantifying information and comparing that information to similar organizations in the field
  • The Importance of Financial Management
    • “Fitting in” with other funders
    • Better planning
    • Gaining allies
    • Raising your “match”
    • Sustaining future growth
  • Fitting in With Other Funders and Better Planning
    • Funders (private and public) look at financial management to make investment decisions
    • Solid information helps grantees to
      • Realistically project the future
      • Seek funding for that future
      • Plan more accurately
    • Financial management is part of a multi-year planning process
    • Operating like a business helps organizations to
      • Increase program services
      • Not always be obsessed with raising more funds
  • Fund Accounting
    • Your grant may be one of many funding sources that your agency has
      • Multiple funders leads to “fund accounting”
      • Your financial system must account for the requirements of all of funding streams
    • While many of the requirements have a higher authority than HUD
      • HUD is the funding stream that we focus on
  • Example of Fund Accounting Total Expenses Excess Revenue
    • Expenses
      • Labor
      • Overhead
      • Administration
    Total Revenue
    • Revenue
      • Grants
      • Cash
      • Donations
    Total Donor Founda-tion United Way HHS HUD SHP
  • Gaining Allies
    • Who is financially responsible for the viability of your organization?
      • Your board of governance begins to own the program as they understand their liability and responsibility
      • External funders gain confidence in your organization as you comply with the norms of the business world
  • 100% Equals 100%
    • To serve 100% of the HUD-eligible clients projected in your technical submission and approved budget…
    • With 100% of the projected HUD-eligible activities…
    • You must raise 100% of the total project costs (HUD grant and match)…
    • Otherwise, you are either not serving 100% of the clients or not providing 100% of the activities
  • Keys to a Successful System
  • Who is Involved in Managing Your System?
    • Board of Directors
    • Local community development staff
    • Elected officials
    • HUD
    • Government staff
    • Other investors
    • Accountants
  • Staff Responsibilities
    • Fiduciary trust
    • Payment of taxes
    • Government filings
    • Cash flow
    • Fund accounting and reports to funders, including HUD
    • Service delivery
    • Internal financial controls
    • Reports to committees
    • Legal contracts
    • “ The books”
    • Construction…if?
    • Future planning and financial projections
  • Board Responsibilities
    • Building the agency’s financial capacity
    • Raising the funds to maintain the organization long-term
    • Budgeting funds productively
    • Managing funds wisely
    • Reporting on funds raised
    • Supplementing budgets
    • Evaluating agency’s financial performance
  • When Do You Need An Accountant?
    • Benefits justify the costs
    • “Too many hoops”
    • Adjunct staff and business partner
    • Fund accounting required
    • Funders’ requirement
  • What Services Should An Accountant Provide?
    • Advice on tax matters, unrelated business income, tax questions
    • Preparation of tax forms
      • Quarterly IRS Form 941
      • Quarterly federal, state and local government tax filings
      • Annual income tax returns and/or 1099’s
    • Analysis of management activities and advice
  • What Services Should An Accountant Provide?
    • Assistance in establishing financial management systems
      • Collecting grants, outstanding revenues and “fees for service”
      • Control of inventory, asset purchases and cash
    • Recommendations to cut expenses, increase cash flow and price services
    • Assistance in preparing the organization for long-term growth
      • When can the agency afford new staff?
  • Components of a Financial Management System
  • Why a Financial Management System?
    • Required by HUD and OMB
    • Systems required to meet certain standards
      • Control and account for funds, property and other assets
      • Identify source and application of funds
      • Allow accurate, timely and complete reporting
      • Minimize time in transfer of funds between parties
    • Addressed through policies, procedures, practices and personnel—the “4-P’s”
  • Financial Management System
    • Ineffective results in
      • Major audit findings
      • Negative publicity
      • Funding withheld
    • Effective results in
      • Sound management decisions
      • Documentation supporting program activities and expenditures
      • Knowledge of regulations, policies and procedures
      • Strong accounting system
      • Good internal controls
  • Components of Financial Management Systems
    • Uniform administrative requirements
    • Cost principles
    • Audit procedures
    • Procurement standards
  • In The Final Analysis…
    • Like it or not, financial management is a requirement of your grant
    • We need to learn to appreciate it, rather than fight it!
    • Use source documents for guidance
      • Regulations
        • 24 CFR Part 85—Governments
        • 24 CFR Part 84—Nonprofits
      • HUD’s desk guides
      • OMB Circulars
      • HUD’s Monitoring Checklist
        • Exhibit 13 – 8, Items 1-12
  • Frequently Asked Questions Who? What? How? Under SHP
  • Supportive Housing Program
    • One component of the continuum of care strategy for homelessness
      • Outreach and assessment
      • Immediate (emergency) shelter
      • Transitional housing (with support services)
      • Permanent housing (with support services)
    • Enacted in the McKinney-Vento Act
  • Answering the Important Question: What is 3-6-8-8?
  • National Objectives
    • 3 goals of HUD’s homeless programs
      • Help participants obtain and remain in permanent housing
      • Help participants increase skills and/or income
      • Help participants achieve greater self-determination
  • HUD Objectives
    • National Targets
      • Create new PH beds for chronically homeless persons.
      • Increase percentage of homeless persons staying in PH over 6 months to 71%.
      • Increase percentage of homeless persons moving from transitional housing into permanent housing to 61%.
      • Increase percentage of homeless persons becoming employed by 11%.
      • At least 390 CoC’s will have functioning HMIS.
  • Program Components
    • 6 types of projects
      • Transitional Housing
      • Permanent Housing for people with disabilities
      • Supportive Services Only
      • Safe Havens
      • Innovative Supportive Housing
      • Homeless Management Information Systems
  • Eligible Activities
    • 8 ways to spend SHP funds
      • Acquisition
      • Rehabilitation
      • New construction
      • Leasing
      • Supportive services
      • Operating expenses
      • Administration
      • Homeless Management Information System
  • Acquisition and Rehabilitation
    • Purchase and/or rehabilitate all or part of building
      • Used for housing and/or services
    • Pay off a current mortgage (lump sum)
      • If not previously used for HUD
    • Funding limited to between $200,000 and $400,000
      • Higher amounts applicable to high cost area
    • 50% cash match obligation
    • 20-year use restriction
  • New Construction
    • Newly construct building for housing (not services)
    • Funding limited to $400,000
      • Covers both land and building
      • Funds cannot be used for demolition
    • Must demonstrate costs are less than for rehabilitation
    • 50% cash match obligation
    • 20-year use restriction
  • Leasing
    • Leasing building for supportive housing or supportive services
      • Portion of building, entire building or multiple buildings
      • Not building already owned
      • No mortgage payments or building operations
    • Pay rent for individual units
      • Paid directly to landlord
    • Units must meet housing standards
    • Rents must be reasonable
    • No match requirement for leasing
  • Supportive Services
    • For new grantees, cost of new or increased services
    • For renewals, cost of continuing services
    • Salaries to providers and other direct costs (actual direct staff time)
    • Services aimed at moving homeless to independence
      • Offered while part of project
      • For transitional housing, services may continue for 6 months after graduating
    • 20% cash match obligation
  • Operating Expenses
    • Costs of operating facilities
    • Only for new project or expanded portion of existing project
    • Supports function and operation of project
    • Often referred to as indirect costs
      • Standards in OMB Circulars A-87 and A-122
      • Pro rate costs to individual funding sources
    • Eligible for all components except supportive services only
    • 25% match obligation
  • Administrative Costs
    • You may request up to 5% of grant to cover administrative costs
      • Costs associated with carrying out the grant
    • May be split between lead agency and sponsors
    • Costs associated with carrying out components ineligible
    • No match requirement for administrative costs
  • Homeless Management Information System
    • Computerized data collection tool
    • Designed to capture client level system-wide information
    • Costs to implement and/or operate a computerized data collection tool
    • Characteristics and service needs of the homeless
    • Funds cannot be used for planning or developing new system
    • 20% cash match obligation
  • HUD Eligible Activities
    • For Shelter Plus Care, remember:
      • Housing Assistance is for the term of the grant
      • Service Match is $1:$1 during the term of the grant
      • Service match must be for HUD-eligible activities
      • Administration is 8% of the grant ( after the housing assistance)
  • Eligible Clients
    • 8 eligible categories of homelessness
    • Not all homeless people are HUD-homeless eligible
    • Not all clients with disabilities are eligible for permanent housing
    • If a client is not eligible, all costs associated with that client (including administration and match) are not eligible
  • Procurement, Match and LOCCS
  • Procurement
  • Procurement Rules
    • Grantees and subgrantees must adhere to federal procurement rules when purchasing
      • Services
      • Supplies and materials
      • Equipment
    • Applicability
      • Governmental entities: 24 CFR Part 85
      • Nonprofits: 24 CFR Part 84
    • Also refer to
      • SHP Monitoring Checklist Exhibit 13 -10, Items 1 - 17
  • Procurement Overview
    • Procurement policies must be in place
      • Must follow written procedures and document compliance
    • Four procurement methods available
      • Small purchase (less than $100,000)
      • Sealed bid (construction)
      • Request for proposals (RFP)
      • Non-competitive
  • Small Purchase Method
    • Also known as “streamlined” method
    • May be used for purchases below $100,000
    • Requirements include
      • Getting 3 to 5 competitive quotes
      • Selecting the most reasonable offer
      • Using purchase orders or petty cash to purchase
  • Sealed Bid
    • Use for construction contracts and to purchase equipment and/or supplies
    • Process involves
      • Developing an invitation for bids
      • Publicly soliciting bids
      • Opening bids and announcing prices
      • Reviewing bids in detail
      • Awarding contract to winning bidder
  • Request for Proposal (RFP)
    • Used when sealed bid not appropriate (for example, consulting services)
    • Process involves
      • Announcing and issuing RFP
      • Opening, reviewing and comparing proposals
      • If necessary, negotiating with offerors
      • Requesting and reviewing “best and final” offers
      • Awarding contract
  • Non-Competitive Award
    • Permitted when award is infeasible under other methods and one of following applies
      • Item is available from only one source
      • Emergency situation will not permit delay
      • HUD authorizes non-competitive proposals
    • Price or cost analysis and written justification must be in files
  • Contracts
    • Two basic types permitted
      • Firm fixed price
        • Agreed upon price, regardless of actual cost
      • Cost reimbursement
        • Estimated cost, usually with a ceiling
    • When using sealed bid method, firm fixed-price contract required
    • Other methods, use either type
  • Bonding and Insurance
    • For contracts of $100,000 or more, completion assurance required through:
      • Performance and payment bonds
      • Deposit of cash escrow
      • Letters of credit
  • Bonding and Insurance
    • Insurance requirements include
      • Worker’s compensation and employee liability
      • Auto insurance for injuries on job site
      • Comprehensive public liability
      • Property damage
  • Other Contracting Requirements
    • Minority- and women-owned businesses
      • MBE and WBE outreach requirements
      • Must take affirmative steps to use businesses owned by minorities and women
    • Section 3
      • applies to construction contracts
      • Goals for training and hiring low-income residents of area
      • Goals for hiring contractors located in area
  • Ethics in Contracting
    • Conflict of interest requirements apply
      • 24 CFR 583.330(e)
      • SHP Monitoring Checklist Exhibit 13 -12, Item 4
    • Gratuities and kickbacks not allowed
    • Confidential information may not be used for personal gain
    • Influence peddling not allowed
  • Numbers Don’t Lie, They Hide Financial Management for Homeless Grantees DAY TWO
  • Pop Quiz on Day One
    • 3__________________
    • 6__________________
    • 8__________________
    • 8__________________
    • 4__________________
    • 14__________________
    • 100% must equal _____ or ___________________
    • 24 CFR, Part ______ is for governments
    • 24 CFR, Part ______ is for not-for-profits
    • OMB Circular A-ll0 governs ____________
    • OMB Circular A-122 outlines ____________
    • OMB Circular A-133 governs ____________
    • Extra Credit Question?
    • Meeting Programmatic Match Requirements
  • 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
  • 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
  • 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
        • Self-Monitoring Checklists, pp. 31 to 35
        • HUD Notice 96-3: Certain Tenant Rent Calculations
    • Match can be from another federal source
      • ESG’s transitional housing program
      • HOME Program
    • Match is leverage but not all leverage is match
  • Team Exercise Safe House Match Requirements
  • HUD Eligible Activities
    • For Shelter Plus Care , remember:
      • Housing Assistance is for the term of the grant
      • Service Match is $1:$1 during the term of the grant
      • Service match must be for HUD-eligible activities
      • Administration is 8% of the grant ( after the housing assistance)
  • Calculating Resident Rents
  • Rent can be match
    • Rent can be used for match if :
      • Properly calculated
      • Properly documented
      • Properly used
  • Calculating Resident Rents
    • Grantees may charge participants rent under specific guidelines
    • Maximum rent (housing expense) is higher of
      • 30% of monthly adjusted income
      • 10% of monthly gross income
      • TANF rent
    • Utility expenses deducted
  • Calculating Rents, cont’d
    • Annual income from all sources
    • Income exclusions subtracted
    • Adjustments to annual income
      • Dependent allowance
      • Childcare allowance
      • Disabled assistance allowance
      • Medical expenses allowance
      • Elderly/disabled family allowance
  • Calculating Rents, cont’d
    • General Guidelines
      • Review & document income annually or when changes occur
      • Distinguish between employment & training
        • Employment = income
        • Training = stipends or reimbursements
      • Fees for food & services acceptable if reasonable & not paid for by HUD or match already
  • Team Exercise Tenant Rent Calculations
  • Line of Credit Control System (LOCCS)
  • Line Of Credit Control System
    • LOCCS Access Authorization
      • HUD Form 27054
    • Banking information
      • Direct Deposit Form 1199
    • LOCCS Voucher for Grant Payment
      • HUD Form 50080
  • LOCCS Access
    • Authorize a staff person for draw downs
    • Maintain security of password
      • If a LOCCS password is shared, one can be banned from using LOCCS forever
    • Access LOCCS to maintain an active password
    • Approving official – certification
  • Direct Deposit
    • Banking information
      • Form 1199
      • Use Your existing bank account or establish a new account
      • Submit Form 1199 to HUD Officials
        • Washington, DC OR Field Office
      • Ensure that all banking information is accurate
  • LOCCS Payment
    • Minimize the time elapsing between transfer of funds to recipients from the U.S. Treasury
    • Advance method
      • Expend in 3 days
    • Reimbursement method
      • No timeframe for reimbursing the general fund account
  • Tracking LOCCS Draw Downs
    • Cash control register
      • Track each draw request
      • Track SNAP funds by grant number and voucher number
      • Maintain a cumulative balance of SNAP funds
  • Uniform Administrative Requirements
  • Internal Controls
    • Combination of polices, procedures, job responsibilities, personnel and records that create accountability in financial system
    • Ensures funds are used and managed properly
    • Remember, a small investment early will reap great benefits later
  • Internal Control System
    • Basic elements
      • Organizational chart
      • Written delineation of job duties
      • Accounting policy and procedures
      • Separation of duties
      • Hiring policies
      • Control over assets and documents
      • Reconciliation of records
  • Internal Controls
    • Hiring competently trained financial personnel
    • Board authorizing bank accounts and checks
    • Recording all cash
    • Maintaining pre-numbered receipts
    • Board signing checks
    • No invoice, no check
    • Reconciling bank statements monthly
    • Having timesheets to justify payroll expenses
    • Recording petty cash
    • Maintaining fireproof storage
    • Maintaining detailed inventory records
    • Obtaining fidelity Insurance
  • Organization Chart
    • Supervision of employees
    • Lines of authority
    • Communication
    • Delineates responsibility, functions and duties
    • Auditors want it!
  • Segregation of Duties
    • Not having one person in control from inception to final recording
    • Having independent cross-checking
      • SHP Monitoring Checklist, Exhibit 13-8, Item 14
    • Separating
      • Operational work from record-keeping of assets
      • Asset custody from asset records
      • Authorization of asset purchases from custody and record-keeping
      • Purchasing from receiving
  • Documenting Time
    • For employees that work in a single indirect cost activity, document time with a timesheet
    • For employees that work in a single federal award category, document time with a timesheet and periodic certifications
    • For employees that work on more than one activity (direct or indirect), document time with timesheets supported by activity records
    • SHP Monitoring Checklist, Exhibit 13-8, Items 11-13 and 15-17
  • Time and Activity Records
    • Time and activity records
      • Accordingly to OMB Circular and Parts 84 and 85:
        • After-the-fact determination of actual activity
        • Signed by individual employee, certified by supervisor
        • Prepared at least monthly
    • Applies to direct HUD grantees and subgrantees
  • Sample Timesheet
  • Sample Timesheet
  • Types of Activity Sheets
    • Clients’ case notes
    • Calendars, logs and sign-in sheets
    • Palm pilots
    • Daily, weekly and quarterly reports
    • Products and deliverables
    • What do you use now?
  • Basic Cash Controls
    • Making disbursements with checks, not cash
    • Pre-listing and recording cash receipts by someone other than depositor
    • Having subsidiary and control accounts
    • Using pre-numbered checks
    • Reconciling bank statements monthly (backed by checks)
    • Having supporting documentation for checks
    • Having payroll expenses backed up by timesheets/separate bank account
  • Physical Control of Assets
    • Keeping canceled checks in a safe, fireproof place
    • Periodically inventorying physical assets
    • Using a check protector machine vs. individually drafted checks
    • Using fireproof safes and locked file cabinets
    • Keeping duplicate records in a safe, secure off-site location
    • Depositing cash receipts on a daily basis
  • Budget Controls
  • Team Exercise: We Need a Budget
    • Your team has won the lottery!
    • While you have only won $100, you decide to celebrate as a group
    • Prepare a celebration budget that includes
      • Budget assumptions
      • Cost estimates
      • Proposed expenditures
  • Budget Controls
    • Compare and control expenditures
      • Keep records on budgeted amounts
      • Compare obligations and expenditures to planned budgets and accomplishments
      • Report deviations from budgets and plan
  • Developing Budgets
    • Budget is projection of expenses based on actual experience
      • Defines goals for a given period of time
      • Provides ability to monitor progress
      • Identifies significant variances between financial goals and how resources are actually used
    • Budgets should never be submitted to decision-makers and funding sources without including assumptions
  • Drawing Down Budgeted Funds
    • Drawdown for actual expenses by line item
    • Homeless programs allow
      • Moving up to 10% between line items (notify HUD)
      • More than 10% (request HUD approval to amend budget)
    • Implication of budget amendments
      • Initially funded for a specific purpose
      • Revising budgets too much may trigger funding reconsideration, amendments and additional HUD scrutiny
  • Accounting Records
  • Accounting Records
    • Accounting system should include
      • Chart of accounts
      • Cash receipts journal
      • Cash disbursements journal
      • Payroll journal
      • General ledger
  • Accounting Records
    • Source documentation required
      • SHP Monitoring Checklist Exhibit 13-8, Items 1- 4
    • Also, ensure that program costs were
      • Incurred for the proper period
      • Actually paid
      • Expended on eligible items
      • Approved by appropriate officials
  • 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
  • Cash and Property Management
  • Cash Management
    • Procedures to minimize the time between receipt and disbursement of funds required
    • Three methods allowed
      • Reimbursement
        • Almost all SHP lead agencies use reimbursement
      • Cash advance
      • Working capital
  • Property Management
    • Definitions
      • Real property is land and improvements
      • Personal property is other types of property (supplies and equipment)
    • SHP Monitoring Checklist 13 -11
      • Complies with 24 CFR 85.32 and 24 CFR 84.34
  • Property Management
    • General requirements
      • Property can only be acquired for a specific purpose
    • Specific requirements
      • Use must continue for a certain period of time
        • Remember the SHP 20 year use restriction
      • Accurate records must be kept
        • SHP Monitoring Checklist Exhibit 13 -11, Items 1-3
      • Use should reflect intended purpose
      • Property can be disposed of only if rules are followed
        • There are specific requirements for SHP property
        • SHP Monitoring Checklist Exhibit 13 -11, Item 4
  • Federal Cost Principles
  • Cost Principles
    • Three components to cost principles
      • Cost reasonableness
      • Cost allowability
      • Cost allocation
    • Applicability
      • Governmental entities: OMB Circular A-87
      • Nonprofits: OMB Circular A-122
    • Also refer to
      • SHP Monitoring Checklist, Exhibit 13-9
  • Determining Costs
    • Costs are only eligible if they can be associated with an eligible client
    • Costs are only eligible if they are
      • Eligible activity under funding program
      • Delineated in your application submissions and budgets
      • Source documented
      • Reasonable, allowable and allocable
  • Cost Reasonableness
    • Costs charged to federal award must be necessary, reasonable and directly related to the grant
    • Look at the following
      • Whether cost is ordinary and necessary
      • Market prices for comparable goods and services
      • Benefit to individuals involved
  • 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 costs in OMB Circular A-122
  • Table Talk: Cost Allowability
    • Which of the following costs are allowable?
      • Alcohol
      • Pre-award costs
      • Writing a Continuum of Care grant application (fundraising)
      • Client graduation ceremony (entertainment)
  • Cost Allocation
    • A cost is allocable to a HUD program if it is
      • Treated consistently with other similar costs
      • Incurred specifically for the program
      • Benefits program or can be distributed based on a reasonable proportion OR
      • Necessary to operations
  • Allowable vs. Allocable
    • The real issue with timesheets is not whether the activity is allowable or not… …BUT whether the time is allocable to the specific grant.
  • Table Talk: Allowable vs. Allocable
    • Under what circumstances could furniture, which is allocable, not be allowable?
    • Under what circumstances would a computer printer, which is allowable, not be allocable?
    • Under what circumstance would the case managers’ time, which is reasonable, not be allowable? Not be allocable?
  • 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… Allocable… They are eligible for federal reimbursement
  • Direct and Indirect Costs
    • Direct costs can be identified with specific program or activity
    • Indirect costs are incurred for common/joint purpose benefiting more than one program or activity
      • Administrative salaries
      • Accounting expenses
      • Facility maintenance
  • Table Talk: Direct vs. Indirect
    • Assign the following costs as direct or indirect
      • Staff salaries
      • Utility costs
      • Food
      • Depreciation
      • Insurance
  • What kind of cost is it?
  • Pro-Rating Costs
    • Required by HUD where full cost is not the actual cost for HUD’s piece
    • Must always have source documentation
  • Pro-Rating Costs
    • Supportive service costs
      • Salaries pro-rated based on percentage time
      • Document with time and activity records reflecting funding source
    • Operating expenses
      • Pro-rate based on percentage of space or time used
      • Document with logs, plans, etc.
  • Table Talk: Pro-Rating Costs
    • A case manager works with 30 clients under 3 different funding programs of which 8 clients are associated with this HUD grant
    • How would you pro-rate the case manager’s time?
      • Divide the total cost equally among the 3 funding programs
      • Charge 8/30ths of the cost to this grant
      • Compare the number of hours spent with the 8 clients to that spent with all 30 clients
      • None of the above
  • Table Talk: Pro-Rating Costs
    • Your HUD-funded program is located in the same facility as another program where there is only one utility meter
    • How would you pro-rate the utility costs?
      • Divide the cost equally among the 2 programs
      • Use the percentage of square footage used by clients
      • Use the percentage of square footage used by clients and staff
      • None of the above
  • Cost Eligibility Summary
    • Costs are eligible if they are reasonable, allowable and allocable
      • A cost is only a “cost” if charged to the correct budget line item
      • If the client is not eligible, all costs (including administration) associated with that client are ineligible
    • If a cost is not specifically listed in OMB’s Circular, does that mean that the cost is allowable?
  • Auditing, Monitoring and Compliance
  • Why Do We Need An Audit?
    • Universally accepted analytical tool
      • Ratios, standards, disciplined way of viewing numbers
    • Demonstrates accountability
      • GAAP, GAGAS, OMB Circular, HUD requirements
    • Demonstrates proper stewardship
      • Verifies internal financial controls
      • Demonstrates board oversight
      • Independently audited and adequate reporting
  • Audits
    • Federal programs are subject to review or audit
    • When spending $500,000 or more in federal awards per year, specific rules apply
    • Grantees and subgrantees must adhere to OMB Circular A-133
  • Federal Awards
    • Federal awards include
      • Grants, loans and loan guarantees
      • Direct assistance or appropriations
      • Property insurance or interest subsidies
      • Property, food commodities
      • Cooperative agreements or contracts
      • Other assistance
    • But only counts if “expended”
  • Type of Audit
    • Program-specific audit
      • OK if recipient or subgrantee gets federal funds from only one source
      • Involves only looking at that program
    • Single audit
      • Required if funds come from more than one source
      • Involves looking at all programs and financial statements
  • Auditing Standards
    • Federal audits performed using Generally Accepted Government Auditing Standards
      • Financial information correctly presented
      • Internal controls exercised regarding cash management, payroll processing, fixed assets and reporting
      • Activities in compliance with program requirements
    • Audit report must address each area
  • Compliance Requirements
    • A federal audit must satisfy 14 compliance requirements
      • Laws (for example, Davis Bacon)
      • Regulations covering match, eligibility, etc.
      • Other grant provisions including subgrantee monitoring
  • Audit Findings
    • Audit may include findings and questioned costs
      • Material weakness in internal control
      • Noncompliance with laws and/or regulations
      • Questioned costs in excess of $10,000
      • Fraud affecting federal award
      • Misrepresentation of prior audit finding
  • Qualified Audits
    • Auditor’s work based on the work of others
    • Uncertainties exist affecting the potential effect of the audit
    • Serious doubt about organization as an ongoing concern (bankrupt?)
    • Supplementary information not presented or inadequate
  • Qualified Audits
    • Unaudited information not consistent with audited data
    • Deviation from GAAP due to unusual circumstances
    • Auditor unable to perform all aspects of the engagement
      • In adequate records to support assertions in the financial statements
    • Financial statements do not contain all disclosures needed for a fair presentation
  • Review and Resolution
    • Audit report must be submitted to HUD within 9 months of audit period and
    • Submit an A-133 Audit to the Federal Clearinghouse
    • Grantees and subgrantees must establish system to ensure timely and appropriate resolution to audit findings
  • What HUD Looks For
    • Audits that are “clean”
      • There are no findings, either financial or management
    • Fund accounting applied to segregate HUD’s grants and costs associated with those grants from other funding sources
    • Costs that are supported with source documentation
  • Hiring An Auditor
    • Many nonprofits need specialized auditor
      • Multiple funding sources requires fund accounting
      • Specialized experience with federal programs
      • Too much emphasis on cost vs. needs
      • Perception of low-risk of liability for agencies
      • Failure to recognize the needs of all interested parties
  • Specialized Auditors
    • Specialized auditors need to know
      • AICPA’s industry audit and accounting guide
      • GAO’s Government Auditing Standards manual
      • Applicable OMB Circulars
      • Catalogue of Federal Domestic Assistance
      • HUD’s program guidelines
      • OMB’s Compliance Supplement
  • Selecting The Right Auditor
    • Use a competitive process with at least 3 bids
    • Issue a request for qualifications (RFQ) that outlines what you want
    • Separate the technical submission from the cost quote
    • Issue an engagement letter
    • GAO secondary considerations include
      • Financial education and audit experience
      • An audit committee to handle selection
      • Detailed policies and procedures
  • Using An Audit Committee
    • Nominate and terminate the firm
    • Negotiate fees
    • Determine the type, scope and timing of the audit
    • Discuss internal control weaknesses
    • Review financial and audit reports
    • Monitor and evaluate performance
    • Oversee the accounting policies
    • Follow up on findings and corrective actions
  • On the Lighter Side!
    • What is an auditor?
      • Someone who arrives after the battle and bayonets the wounded
    • What are the three types of accountants in the world?
      • Those who can count and those who can’t
    • What do accountants suffer from that ordinary people don’t?
      • Depreciation
  • The Audit Process Is Ongoing
    • As one audit period ends, another audit period begins
  • Team Exercise Family Services Audit Consideration
  • Annual Progress Reports
  • Purpose of APR
    • Tracks project progress
      • Help participants obtain and remain in permanent housing
      • Help participants increase skills and/or income
      • Help participants achieve greater self-determination
    • Tool for HUD…and YOU!
      • Helps to keep your program on track
      • Gives you information about how the project is doing and what it is accomplishing
      • Used to document success for other funders
      • Used for completing continuum gaps analysis
  • Submission Requirements
    • Each grantee must submit an APR
      • If grantee does not run the project
        • Sponsor completes
        • Gives to grantee for submission to HUD
    • A separate APR submitted for each HUD grant received
      • Each program component = a project = a separate APR
  • Due Date – Reporting Period
    • Failure to submit an APR may lead to a delay in receiving future grant funding
    • Due 90 days after the end of each operating year of your program
    • What is the operating year?
      • Trigger date for start and end of grant term
      • Starts the clock for submission of APR
      • Trigger varies depending on program and project activities
  • Operating Year
    • Projects with acquisition, rehabilitation or new construction
      • Operating year begins after
        • Obtaining a certificate of occupancy
        • Accepting first client
    • Other projects
      • Operating year begins after
        • Accepting first client
        • LOCCS draw of leasing, supportive services or operating funds
    • Renewal projects
      • Specified in grant agreement letter
  • Components of APR
    • Basic information about project and goals
    • Information about participants in project
    • Information about participants leaving project
    • Financial information and match
  • APR Part I: Project Progress
    • No. 1: Projected level of service
      • At a given point in time show
        • Number of singles not in families
        • Number of adults in families
        • Number of children in families
        • Number of families
  • APR Part I: Project Progress
    • No. 2: Persons served
      • Enrolled on first day of operating year
      • Enrolled any time after the first day
      • Who left during the operating year
      • Still enrolled in the program on the last day of the operating year
    • No. 3: Project capacity
    • No. 4: Non-homeless housed (Section 8 SRO only)
  • APR Part I: Project Progress
      • Age
      • Gender
      • Race/ethnicity
      • Primary disability
      • Prior living situation
      • Income change
      • Income source
      • Length of stay
      • Reasons for leaving
      • Post-project destination
    • Nos. 5 – 14: Demographic Data
    • Participant information by individual, families and chronically homeless
  • APR Part I: Project Progress
    • No. 15: Supportive Services
      • Number of participants receiving discrete categories of service
      • Identify those participants receiving services that are chronically homeless
  • APR Part I: Project Progress
    • No. 16: Goals and objectives
      • Shows goals and objectives
        • Current year’s goals and progress
        • Next year’s goals
      • Measurable goal for each year as it relates to the overall HUD program goals
        • Obtain and remain in permanent housing
        • Increase skills and income
        • Achieve greater self-determination
  • APR Part I: Project Progress
    • No. 17: Number of beds
      • SHP (not completed for SSO projects)
        • Number of beds – Current Level
        • Number of beds – New Effort
        • New Effort beds in place at the end of operating year
      • Shelter Plus Care
        • Number of beds
        • Number of dwelling units
      • Section 8 SRO
        • Number of dwelling units
  • APR Part II: Financial Information
    • No. 18: Supportive Service
      • SHP funded services
        • Amount of SHP funds spent during operating year
        • For discrete services outlined in application and technical submission
      • S+C projects
        • Amount of funding from other sources
        • Spent on services by discrete categories
      • SRO projects
        • Estimates percentage of clients who use discrete service categories
        • Funded outside of SRO program
  • APR Part II: Financial Information
    • For S+C service match
      • 14 categories of eligible services
      • Match is overall
        • Not year-by-year
        • Each client need not receive the same amount of services as rental assistance.
      • Examples of match [582.110]
        • Volunteer time at $10 per hour
        • Actual salaries paid to staff that provide services
        • Value of lease on service facility
  • APR Part II: Financial Information
    • No. 19: SHP leasing, supportive services, operating costs, HMIS, and administration
      • Tracks SHP expenditures
        • SHP funds drawn down during the year
        • Cash match (by activity)
        • Total expenditures
      • Tracks sources of cash match
        • Cash only! (no in-kind contributions, etc.)
        • Required match varies by activity
    • Keep documentation on file
      • SHP expenditures and cash match
      • No regulatory guidance outside of OMB Circulars
  • APR Part II: Financial Information
    • No. 20: SHP acquisition, rehabilitation, and new construction
      • Tracks SHP expenditures
        • Fill out in year-1 only
        • SHP funds drawn down during the year
        • Cash match (by activity)
        • Total expenditures
      • Tracks sources of cash match
        • Match is $1 for $1
    • Keep documentation on file
  • APR Part II: Financial Information
    • No. 21: SHP HMIS activities
      • Shows how SHP funds for HMIS activities were spent during year
        • Equipment
        • Software
        • Services
        • Personnel
        • Space and operations
  • APR Part II: Problems, Changes, and Technical Assistance Request
    • Open-ended questions
      • Describe problems or changes
      • Solicit information on
        • Need for technical assistance
        • Ways HUD could improve service
        • Self-reflection on project improvement
    • Chance to give important feedback!
    • Establish HUD relationship
  • Emphases in the Revised APR
    • Renumeration of services to the chronically homeless
    • Reporting of HMIS activities
    • Racial and ethnicity reporting
    • Certification of continuing SHP services
    • Persons-served worksheet (new tool)
    • Exiting program
      • Participant leaves project, stops receiving rental assistance, and/or services
      • Not expected to return
      • Return after 90 days, new participant
      • Return within 90 days, not counted as exiting program
  • Grant Amendments and Mergers
  • Technical Submission
    • Technical submission is your contract
    • If an activity is not specified in the technical submission, it is not eligible
    • Strengthening the technical submission
      • Site control (within 1 year of award letter)
      • Restrictive covenants for 20 year use
      • Match raised (evidence of first year in hand)
  • Spending Down the Grant
    • Timeliness!
    • Timeliness!
    • Timeliness!
  • Grant Amendments
    • Program changes during grant term
    • Scope of changes
      • Significant
      • Minor
    • HUD involvement and approval
      • Informed (minor)
      • Review and approval (significant)
  • Scope of Changes
    • Significant changes
      • Departure from application
      • And substantially affects implementation
      • HUD approval required and amended grant agreement
    • Minor changes
      • Departures from application
      • But does not substantially affect implementation
      • No HUD approval or amended grant agreement
      • Must document change
  • Examples of Significant Changes
    • Substantial amendment needed when
      • New grantee or name change
      • Change in project site
      • Change in project activities
      • Shift over 10% of funds from one activity to another (cumulative)
      • Change in population or number of participants served
  • HUD Approval
    • Written request to field office with revised application
      • Letter
      • Revised application exhibit(s)
      • If applicable, new ConPlan certification
    • Field office approval and amendment of grant agreements
    • Application must remain competitive
    • Reduced rating requires HQ’s approval
  • Reduced Rating Examples
    • “Lower quality”
      • Housing and/or services lower quality than originally funded
      • Less experienced provider
      • Innovative features eliminated
      • Cost effectiveness reduced
      • Site moved to area of less need
  • Recapture of Funds
    • Whole grants or portion of grants
    • Used to fund additional projects next year
    • Reasons
      • Lack of site control
      • Slow expenditure of funds
      • Noncompliance with grant agreement
      • Unspent or surplus funds
  • Recapture of Funds
    • Lack of site control
      • Must obtain within 1 year of award notification
      • Statutory (cannot be waived)
      • Exception where site control lost (rare)
    • Slow expenditure of funds
      • Acquisition, rehabilitation or new construction must begin within 3 months OR residents must begin occupancy within 9 months of agreement
      • Leasing, operating or supportive services must begin within 3 months of availability
  • Recapture of Funds
    • Noncompliance with grant agreement
      • Any instance of default
      • Factors beyond grantee’s control considered
    • Unspent funds
      • During grant term
      • Costs are less than anticipated
      • Funds may be shifted to other activities or carried forward
  • Recapture of Funds
    • Surplus funds
      • Upon expiration of grant
      • Unspent funds
      • Unless term extension received or final draw-down is pending
  • Merging SHP Grants
    • Under certain conditions, grants may be merged
    • Applies to grantees with 2 or more grants that meet criteria
      • Grants must be the same component
      • Grants must have same period (expiration)
      • Instructions included in SHP operating instructions
    • Shelter Plus Care grants may also be merged
  • Financial Statements and Analysis
  • What is Financial Analysis?
    • Tool to analyze financial information in a systematic manner
    • Quantify one’s financial questions
    • “An art, not a science”
    • Using standard ratios and measures
    • Language of lenders and investors
  • The Process of Financial Analysis
    • “ Spreading the numbers”
    • Reviewing basic credit questions
      • Is the organization liquid?
      • Is the organization profitable?
      • Is there adequate cash flow to operate?
    • Preparing follow-up questions
    • Calculating and analyzing ratios
      • Compare this organization to others
    • Trend analysis
      • The key is getting better
  • Documents to Review
    • Three years of financial statements
      • Revenue and Expenses
      • Balance Sheets
      • Cash Flow Statements
      • Corporate tax returns
      • Bank statements
    • Why 3 years?
    • Projected financial statements for the next 3 to 5 years
    • Interim financial statements
      • Depending on the timing of the yearly statements
  • Fund Accounting
    • Fund accounting matches sources and uses of funds for each funding sources
    • Without fund accounting, you cannot truly analyze the revenues and expenses of a specific funding source
    • Applies the principles of financial analysis to each funding source
  • Introduction to Financial Statements
  • Financial Statements
    • Balance sheet
      • What an organization owns (assets)
      • What an organization owes (liabilities)
    • Income statement
      • Revenue
      • Expenses
      • Revenue in excess of expenses (profit)
  • Notes to Financial Statements
    • Provides extra detail about the information in the financial statements
      • Terms and conditions of financing, leases, etc.
      • Loans to staff and officers
      • Collection and payment terms
      • Inter-fund transfers
      • Valuation of assets
      • Outstanding receivables (grants)
      • Pending litigation or contingent liabilities
  • Forms of Financial Statements
    • In-house financial statements
      • Prepared internally by organization
      • Used for day-to-day operations
    • Compiled financial statements
      • Auditor takes information from organization and compiles it into proper format
      • Only as good as information provided by organization
      • Auditor does not test information
      • Least expensive independently prepared
  • Forms of Financial Statements
    • Reviewed financial statements
      • Auditor reviews information provided by organization
      • Provides limited verification
      • Key tests completed to validate information
    • Audited financial statements
      • Auditor evaluates all aspects of organization’s finances
      • Verifies assets, debt, other obligations and liabilities
      • Most thorough and expensive
  • Session Ten: Numbers Don’t Lie, They Hide
  • Operating Cycles Purchasing Inventory Collecting Receivables Paying Others
  • Grantee’s Operating Cycle
    • Even not-for-profits have an operating cycle and a need for working capital
    • “ Seasonality” – timing is everything
    • Investing in fixed vs. variable expenses
      • Fixed expenses drive up the need to raise revenues on a regular basis
    • Don’t buy stuff until you need it
      • Lease now, buy later
      • Collect now, pay on time
    • Grants are not cash until collected
  • Team Exercise: Rehab, Inc.
    • Analyze the finances of a typical SHP grantee using the BIG 4!
  • Final Thoughts What Should I Remember When I Get Back Home?
  • Top Ten of Financial Management
    • Numbers don’t lie, they hide
    • Only CASH pays the bills
    • Pledges (and grants) are not cash until they are collected
    • Always match sources and uses of funds
    • Even nonprofits have an operating cycle and a need for working capital
  • Top Ten of Financial Management
    • Fixed expenses drive up breakeven and the need to raise more funds
    • Lease now, buy later! Collect now, pay on terms!
    • Price your services to pay yourself
    • It is not someone else’s responsibility (not the bank, the accountant or the funder)
    • “What’s love got to do with it?”
  • Wrap Up
    • Cleaning out the bin
    • Evaluations
    • Climate check
    • Who you gonna’ call?
      • Lead Agency
      • HUD
      • TDA
    • Have a safe journey!
  • Training & Development Associates 131 Atkinson Street, Suite B Laurinburg, North Carolina 28352 (910) 277-1275 (910) 277-2816 Fax www.TDAinc.org