Financial Management - Slide 1

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Financial Management - Slide 1

  1. 1. CDBG Financial Management For Local Officials
  2. 2. Financial Management - Objective <ul><li>The objective of this module is to provide local government officials with a basic understanding of the financial management requirements related to the CDBG program </li></ul><ul><li>Local officials must be aware that, as a recipient of CDBG funds, their jurisdiction must be in compliance with these requirements in addition to any local or other state requirements </li></ul>
  3. 3. Objective - continued <ul><li>Local officials are ultimately responsible for the accuracy and adequacy of records and reports related to management of the CDBG funds their jurisdiction has received </li></ul>
  4. 4. Financial Management - Overview <ul><li>State CDBG Programs are required to have financial management standards or fiscal and administrative requirements as described in the program regulations at 24 CFR 570.489(d) </li></ul><ul><li>Local CDBG recipients must comply with the standards established by the state </li></ul>
  5. 5. State Standards <ul><li>The fiscal and administrative requirements established by each state CDBG program must: </li></ul><ul><li>Show that uses of funds comply with all applicable statutory and regulatory requirements </li></ul><ul><li>Document that all funds received have been spent only for reasonable and necessary costs of program operation </li></ul><ul><li>Demonstrate that program funds have not been used for general expenses of State or local government </li></ul>
  6. 6. Financial Management Using Part 85 <ul><li>Fiscal control and accounting procedures of local recipients must be sufficient to: </li></ul><ul><ul><li>Permit preparation of reports required by statute and regulation </li></ul></ul><ul><ul><li>Permit tracing of funds to establish that they have not been used in violation of any statutory or regulatory restrictions </li></ul></ul>
  7. 7. Financial Management Using Part 85 - continued <ul><li>Financial management systems of state and local CDBG recipients must meet the following standards: </li></ul><ul><ul><li>Accurate, current and complete financial reporting </li></ul></ul><ul><ul><li>Accounting records that identify the source and application of funds </li></ul></ul><ul><ul><li>Effective internal controls and accountability for all assets </li></ul></ul>
  8. 8. Financial Management Using Part 85 - continued <ul><ul><li>Budget controls with actual expenditures compared with budgeted amounts </li></ul></ul><ul><ul><li>Use of OMB cost principles (Circular A-87) in determining the reasonableness, allowability and allocability of costs </li></ul></ul><ul><ul><li>Complete source documentation for all accounting records </li></ul></ul><ul><ul><li>Effective cash management to maximize timeliness of spending </li></ul></ul>
  9. 9. Financial Management Using Part 85 - continued <ul><li>Internal control and accountability must be maintained for all cash, real/personal property, and other assets </li></ul>
  10. 10. Internal Control <ul><li>Basic elements of internal control </li></ul><ul><ul><li>organizational chart </li></ul></ul><ul><ul><li>written definition of duties </li></ul></ul><ul><ul><li>formal system of authorization and supervision </li></ul></ul><ul><ul><li>separation of duties </li></ul></ul><ul><ul><li>control over access to assets, blank forms, and confidential documents </li></ul></ul><ul><ul><li>comparison of actual assets and liabilities to financial records </li></ul></ul>
  11. 11. Determining Allowable Costs <ul><li>Allowable cost </li></ul><ul><ul><li>determine if costs are reasonable, allowable, and allocated appropriately (to the grant) </li></ul></ul><ul><ul><li>Follow OMB Circular A-87 </li></ul></ul><ul><li>Cost is allowable under CDBG if it is: </li></ul><ul><ul><li>necessary, reasonable, directly related to the grant </li></ul></ul><ul><ul><li>authorized by the grantee </li></ul></ul><ul><ul><li>not prohibited under Federal, state or local laws </li></ul></ul><ul><ul><li>consistently treated </li></ul></ul><ul><li>An expense may be claimed only once </li></ul>
  12. 12. OMB Circular A-87 OMB A-87 Attachment B: (Unallowable) Listing of selected Items of Cost <ul><li>Advertising and public relations costs </li></ul><ul><li>Advisory councils </li></ul><ul><li>Alcoholic beverages </li></ul><ul><li>Audit costs and related services </li></ul><ul><li>Bad debts </li></ul><ul><li>Bonding costs </li></ul><ul><li>Communication costs </li></ul><ul><li>Compensation for personal services </li></ul><ul><li>Contingency provisions </li></ul><ul><li>Defense and prosecution of criminal and civil proceedings, and claims </li></ul><ul><li>Depreciation and use allowances </li></ul><ul><li>Donations and contributions </li></ul><ul><li>Employee morale, health, and welfare costs </li></ul><ul><li>Entertainment costs </li></ul><ul><li>Equipment and other capital expenditures </li></ul><ul><li>Fines and penalties </li></ul><ul><li>Fund raising and investment management costs </li></ul><ul><li>Gains and losses on disposition of depreciable property and other capital assets and substantial relocation of Federal programs </li></ul><ul><li>General government expenses </li></ul><ul><li>Goods or services for personal use </li></ul><ul><li>Idle facilities and idle capacity </li></ul><ul><li>Insurance and indemnification </li></ul><ul><li>Interest </li></ul><ul><li>Lobbying </li></ul><ul><li>Maintenance, operations, and repairs </li></ul><ul><li>Materials and supplies costs </li></ul><ul><li>Meetings and conferences </li></ul><ul><li>Memberships, subscriptions, and professional activity costs </li></ul><ul><li>Patent costs </li></ul><ul><li>Plant and homeland security costs </li></ul><ul><li>Pre-award costs </li></ul><ul><li>Professional service costs </li></ul><ul><li>Proposal costs </li></ul><ul><li>Publication and printing costs </li></ul><ul><li>Rearrangement and alteration costs </li></ul><ul><li>Reconversion costs </li></ul><ul><li>Rental costs of building and equipment </li></ul><ul><li>Royalties and other costs for the use of patents </li></ul><ul><li>Selling and marketing </li></ul><ul><li>Taxes </li></ul><ul><li>Termination costs applicable to sponsored agreements </li></ul><ul><li>Training costs </li></ul><ul><li>Travel costs. </li></ul>
  13. 13. Allowable Costs <ul><li>Advertising </li></ul><ul><li>Audits </li></ul><ul><li>Bonding </li></ul><ul><li>Insurance </li></ul><ul><li>Meetings </li></ul><ul><li>Professional Services </li></ul><ul><li>Publications and Printing </li></ul><ul><li>Training </li></ul><ul><li>Travel </li></ul>
  14. 14. Unallowable Costs <ul><li>Alcoholic Beverages </li></ul><ul><li>Bad debts </li></ul><ul><li>Contingency provisions </li></ul><ul><li>Defense and prosecution of criminal and civil proceedings </li></ul><ul><li>Fund raising </li></ul><ul><li>General government expenses </li></ul><ul><li>Lobbying </li></ul><ul><li>Fines and penalties </li></ul>
  15. 15. Pre-agreement Costs <ul><li>State CDBG program regulations allow for reimbursement of costs incurred before the establishment of a formal grant relationship between the state and the unit of general local government </li></ul><ul><li>State must have established procedures (which may include environmental requirements) </li></ul><ul><li>Costs must be incurred for eligible activities </li></ul>
  16. 16. Annual Audit Requirements <ul><li>Single Audit </li></ul><ul><ul><li>OMB Circular A-133 requires entities that expend $500,000 or more during a fiscal year* in federal awards (from all sources) have a Single Audit conducted for that fiscal year. </li></ul></ul><ul><li>Audits must be in accordance with Generally Accepted Government Auditing Standards (GAGAS) and OMB A-133 </li></ul>
  17. 17. Annual Audit Requirements continued <ul><li>The State may determine when audit must be submitted </li></ul><ul><li>  Instructions </li></ul><ul><ul><li>Include date of entity’s fiscal year end </li></ul></ul><ul><ul><li>List sources of all federal expenditures </li></ul></ul>
  18. 18. Annual Audits Knowing the Rules <ul><li>Local Governments and Non-Profit Organizations receiving Federal Funds: </li></ul><ul><ul><li>Single Audit Act and OMB Circular A-133 </li></ul></ul><ul><ul><li>www.whitehouse.gov/omb/grants/grants </li></ul></ul><ul><ul><li>circulars.html </li></ul></ul>
  19. 19. Annual Audit Requirements <ul><li>Upon completion, the Grantee must: </li></ul><ul><ul><li>Submit a copy of the Audit to the State </li></ul></ul><ul><ul><li>If no Audit Findings or questioned costs, grantee may provide written notification to the state that audit was conducted in accordance with A-133 </li></ul></ul><ul><ul><li>Submit copies of Collection Form (SF-SAC) and/or Reporting Package to Federal Clearinghouse, and each federal awarding agency as appropriate </li></ul></ul>
  20. 20. Annual Audit Requirements <ul><li>The Grantee is responsible for follow-up and corrective action on all audit findings. </li></ul><ul><li>The Grantee must prepare a corrective action plan to address each audit finding. Plan must include: </li></ul><ul><ul><li>Name of person responsible </li></ul></ul><ul><ul><li>Corrective action planned </li></ul></ul><ul><ul><li>Anticipated completion date </li></ul></ul>
  21. 21. Auditor Selection <ul><li>Must be selected through procurement </li></ul><ul><li>Request for Proposal most appropriate </li></ul><ul><li>Should be CPA or licensed public accountant </li></ul><ul><li>Must be experienced with Single Audits, CDBG programs, and local government </li></ul><ul><li>Verify completion and timeliness of previous audits </li></ul><ul><li>CDBG funds can pay for grant’s share of Audit </li></ul><ul><li>Charge to General Administration </li></ul>
  22. 22. Financial Management Conclusion <ul><li>Local governments that receive CDBG funds must: </li></ul><ul><ul><li>Comply with applicable Federal, state and local laws, regulations, standards, and procedures </li></ul></ul><ul><ul><li>Conduct financial management procedures in accordance with Generally Accepted Government Auditing Standards (GAGAS) </li></ul></ul>
  23. 23. Conclusion - continued <ul><li>Local officials must be aware that all financial management practices will be: </li></ul><ul><ul><li>Monitored by the state CDBG program </li></ul></ul><ul><ul><li>Examined closely by independent auditors </li></ul></ul><ul><ul><li>Make sure that your financial </li></ul></ul><ul><ul><li>management practices are sound! </li></ul></ul>

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