Financial & Grants Management Basics: 101
Session Objectives
Learn basic financial and grants management
Review reimbursing, reporting, and rebudgeting issues
Learn about common audit pitfalls & issues
1. Regulations & Requirements
2. Financial Management Principles
3. Policies and Procedures
5. Administrative Costs
6. Documenting Expenses
7. Cash & In-Kind Match
8. Reimbursing, Reporting, and Rebudgeting
9. Audits and Site Visits
10. Grant Closeout
Grants & Financial
Management Basics: 101
4. Internal Controls
Sessio
n Obje
ctive
s
Regulations & Requirements
5
Nat’l & Community Svc. Act of 1990
Code of Fed. Regulations (CFR)
OMB Circulars (part of CFR)
State & Local Regulations
Notice Of Funding Opportunity
Notice of Grant Award
Proposal & Budget
ProvisionsCertifications and Assurances
Changes to the OMB Circulars
• The OMB Circulars were first published in 1952
• In 2005, grants management circulars were incorporated into the Code of Federal Regulations (CFR)
• The content and information is the same; however, the guidelines were streamlined and changed for consistency
Grant Guidelines
Federal Grant Guidelines Universities
States, Local, Indian Tribal Governments
Non-Profits Hospitals
Administrative Requirements
§ 45 CFR 2543§ 2 CFR 215
(formerly A-110)
§ 45 CFR 2541 OMB A-102
§ 45 CFR 2543§ 2 CFR 215 (formerly A-110)
§ 45 CFR 2543§ 2 CFR 215
(formerly A-110)
Cost Principles § 2 CFR 220 (formerly A-21)
§ 2 CFR 225 (formerly A-87)
§ 2 CFR 230 (formerly A-122)
§ 45 CFR 74 (HHS regulations)
Audit Requirements OMB A-133 OMB A-133 OMB A-133 OMB A-133
Notes:CFR = Code of Federal Regulations = Organization is subject to A-133 if it expends more than $500,000 of Federal funds in its fiscal year
Locate Grants Management Circulars: www.whitehouse.gov/omb/grants_circulars/
Effective May 11, 2004 and August 31, 2005
When do I use OMB Circulars?
The Circulars provides guidance and requirements relevant to the Federal grants in these areas:
• Cost Principles• Administrative Requirements• A-133 Audits
Cost Principles Requirements
• Provide guidance to determine the allowable costs incurred by organizations under Federal grants
• Designed so that Federal awards bear their fair share of costs
• Provide guidance about reimbursement requirements• Provide uniform standards of allowability and
allocation• Encourage consistency of treatment of costs• 54 selected items of cost
Cost Principles
Examples of Costs in CFRs:• Advertising and public relations costs • Compensation for personal services• Memberships, subscriptions, and professional
activity costs• Recruiting costs• Rental costs• Training and education costs• Travel costs
Administrative Requirements
• Provide consistency and uniformity among Federal agencies in the management of grants and cooperative agreements
• Required all Federal agencies to issue a grants management common rule to adopt government-wide terms and conditions
Specific grantmaking requirements for CNCS are in the CFRs
Administrative Requirements
Examples of items in CFRs:• Pre-award policies• Special award conditions• Purpose of financial and program management• Standards for financial management systems• Cost sharing or matching• Program income
A-133 Audit Requirements
• Provide the standards for obtaining consistency and uniformity among Federal agencies for the audit of organizations expending Federal funds
• Apply to all organizations that expend $500,000 or more of Federal funds in a year
CNCS Grant Provisions
• Are issued by CNCS with the Notice of Grant Award• Are the guiding principles for CNCS-funded grants and
cooperative agreements• Contain program and financial guidelines• Are binding on the grantee and subgrantee in the same
manner• The order of precedence if inconsistencies exists is:
1. Notice of Grant Award2. AmeriCorps Special Provisions3. General Provisions4. Approved Grant Application
CNCS Grant Provision Requirements
Examples of items in the Provisions:• Member Recruitment, Selection, and Exit• Living Allowances, Other In-Service Benefits, and Taxes• Member Records and Confidentiality• Budget and Programmatic Changes• Reporting Requirements• Responsibilities under Grant Administration• Financial Management Standards• Program Income• Safety
Financial Management Principles
Efficient Accounting System
Efficient Accounting System
Accounting System must be capable of:• Distinguishing between grant verses non-grant
related expenditures• Identifying costs by program year• Identifying costs by budget category• Differentiating between direct and indirect costs
(administrative costs)• Accounting for each award/grant separately
Accounting System that properly segregates funds
Department of Education Grant
AmeriCorps Grant
Ford Foundation Grant
Accounting System
Grant 1
Grant 2
Grant 3
NOT
Efficient Accounting System
Accounting System must be capable of:• Distinguishing Federal funds separately from grant
funds• Recording in-kind contribution as both revenues and
expenses• Easily provide management with financial reports at
both the summary or detailed levels• Comparing outlays with budget amounts for each
award (budget vs. actual reports)• Correlating financial reports submitted to CNCS
directly to accounting information and supporting documents
Allowable, Reasonable, Allocable, and Consistent Costs
To be allowable under a grant, costs must: Be reasonable and allocable for the performance of the
award Conform to grant award limitations or cost principles Be consistent with policies and procedures that apply to
both federally-financed and other activities of the organization
Be given consistent treatment Be in accordance with Generally Accepted Accounting
Principles (GAAP) Not be included as a cost or used to meet cost sharing or
matching requirements of any other federally-financed program
Be adequately documented
Allowable - What does it Mean?
Example – Allowable?• The Program Director of BEST AmeriCorps program
decided to host a very important meeting at his home and serve beer and pizza hoping that everyone would attend.
• The purpose of the meeting was to discuss changes in the new CNCS Grant Provisions that affected the program.
• Because it was a business meeting he decided to charge the cost of the beer and pizza to the AmeriCorps grant, especially since he was providing the use of his home.
Allowable?
A cost is reasonable if:• It does not exceed what a prudent person would do under
the circumstances at the time the decision was made to incur the cost
• Consideration should be given to:– Whether the cost is ordinary and necessary for the operations of
the organization
– The restraints or requirements imposed by generally accepted sound business practices
– Whether the individuals concerned acted with prudence
– Significant deviations from established practices which may unjustifiably increase the award costs
Reasonable - What Does it Mean?
Example – Reasonable?• BEST AmeriCorps program needs 5 laptop computers for the
program so that members can learn basic computer skills. • When deciding on the model that would best suit its needs, the
Program Director received three price quotes on various models and two were within the same general price range of $650 - $700. However, one laptop appealed to him most – it met all of the necessary specifications plus being the “techie” he was it had many other “nice to have” features, such as built in webcam and mobile broadband, a 21” Hi-Def widescreen, and 8 built-in speakers and a subwoofer.
• Although the basic models were adequate, the more appealing one was $2,999, on sale, and came in crimson red, the BEST AmeriCorps program’s team color, so the Program Director ordered 5 of these laptop computers.
Reasonable?
A cost is allocable:• Based on its relative benefits received• If it is treated consistently with other costs incurred for the
same purpose in like circumstances and if it:– It is incurred specifically for the award– Benefits both the award and other work and can be distributed in
reasonable proportion to the benefits received or– Is necessary to the overall operation of the organization
Any cost allocable to a particular award may not be shifted to other Federal awards
to overcome funding deficiencies, or to avoid restrictions imposed by law or by the
terms of the award
Allocable - What Does it Mean?
Example – Allocable?• When the crimson red laptops finally arrived, the
Program Director found that funds allocated for supplies for the BEST AmeriCorps program were fully expended.
• Although the laptops were to be used only for the AmeriCorps program, BEST had another CNCS funded program through a Learn & Serve America program, so the Program Director told the accountant to charge the cost to the Learn & Serve America program since CNCS was also funding that program.
Allocable?
Grantees must be consistent in assigning costs:• Whether a direct cost or an indirect cost• Regardless of the source of funding, i.e., federally or non-
federally sponsored activities, and• Following written cost allocation plan, as applicable
Key wording in the cost principles:• Consistent with that paid for similar work in the organization’s
other activities • Distributed to awards and other activities in a consistent pattern• The organization must follow a consistent, equitable procedure• Charges must be consistent with those normally allowed in like
circumstances in the organization’s non-Federally-sponsored activities
Consistent - What Does it Mean?
Example – Consistently Applied?• The BEST AmeriCorps program was running low on
office supplies and postage stamps.
• Since the Program Director couldn’t wait any longer for the office manager to provide the supplies, he purchased them and charged them to the AmeriCorps grant.
Consistently Applied?
Policies & Procedures
Policies & Procedures• Policies and procedures are a set of written documents
that describe an organization's policies for operation – “what is to be done” the procedures necessary to fulfill the policies – “how it is to be
completed”• All staff must be familiar with these documents• Documents must be kept up-to-date• Documents should explain the rationale and include
principal transactions and completed forms• Documents must incorporate Federal and CNCS grant
regulations and provisions
Policies & Procedures• Required by Federal grant regulations• Non-profit organizations have additional
requirements – Form 990 submitted to IRS• Other Key Policies & Procedures to document• AmeriCorps Programs
CD provided in 2008
See Grantee Central
See Handout
Helpful guide and handbook for developing Policies and Procedures
Internal Controls
Are You an Internal Control User?
When you leave home in the morning to go to work,
do you lock the doors to your house? _____________
If you do, that's your own "internal control" to safeguard the assets you own in your home
Congratulations, you are an internal control user!!
Why Have Internal Controls?
• Improve accountability to customers – CNCS, trustees, funders, public
• Help organization achieve performance & budget targets
• Improve reliability of financial reporting
• Improve compliance with laws & regulations
• Prevent loss of resources & public assets
• Prevent loss of public trust
• Reduce legal liability
Who is Responsible?
Everyone within the organization has some role in internal controls
Roles vary depending upon level of responsibility: • Executives establish the presence of integrity, ethics,
competence and a positive control environment
• Directors and department heads have oversight responsibility for internal controls within their units
• Managers and supervisory personnel are responsible for executing control policies and procedures at the detail level within their specific unit
• Each individual within a unit is to be cognizant of proper internal control procedures associated with their specific job responsibilities
Elements of Internal Controls
Internal control systems operate at different levels of effectiveness
Determining effectiveness is based on an assessment of whether these 5 components are present and functioning:
1. Control Environment – sets the tone of an organization2. Risk Assessment – identifying & analyzing internal and external risk3. Control Activities – management’s directives carried out through
policies and procedures 4. Information and Communication – providing timely information to the
right people down, across, and up5. Monitoring – assessing the quality of the system’s performance over
time
Administrative Costs
DefinitionsSpecific expenses related to theoperations of a specific projectDirect Costs
Indirect/Administrative
Costs
General expenses related to overall administration of anorganization receiving CNCS funds
Expenses incurred for common or joint objectives and cannot be readily identifiable with a specific project or cost objective
What are Direct Costs?
• Allowable direct expenses for members, e.g., living allowances and insurance costs
• Costs for staff who train, place, or supervise• Member’s benefit programs• Evaluations of programs• Supplies and Facility costs • Travel
What are Administrative Costs?• Accounting, auditing, contracting, budgeting, and
general legal services• Facility occupancy costs, e.g., rent, utilities,
insurance, taxes, and maintenance • General liability insurance that protects the
organization (not directly related to a program)• Director’s and Officer’s liability insurance• Depreciation on building & equipment• Office Supplies• General & Administrative salaries & wages
What cannot be included as Administrative Costs?
≠ Bad debts ≠ Entertainment costs ≠ Fines and penalties ≠ Fundraising ≠ Interest on borrowed capital ≠ Lobbying ≠ Relocation Costs≠ Taxes
CNCS 5% Administrative Rate
Administrative costs are limited by statute: Costs cannot exceed 5% of total Corporation share Grantees may charge up to 5% of the total CNCS
funds expended, provided that the grantee’s administrative match does not exceed 10% of all direct costs
CaliforniaVolunteers Guidelines: 4% = Subgrantee 1% = CaliforniaVolunteers
Use the CNCS “fixed 5%”Option 1
Federally Approved Indirect Cost Rate
Option 2 Use the Federally approved Indirect Cost Rate
Obtaining a Federally ApprovedIndirect Cost Rate
1. Can my organization have an indirect cost rate? • Yes. If your organization is a direct recipient of
Federal grant funds
• No. If your organization receives only pass-through Federal grant funds, then your organization is limited to using the 5% and 10% fixed rates stipulated for CNCS grants
Documenting Administrative Costs
1. Using the CNCS 5% Rate (45 CFR 2540.110)• Not subject to supporting cost documentation• “Not Auditable”? If direct costs charged to CNCS are
questioned, and deemed unallowable:– Payback funds for disallowed direct costs– Payback funds for administrative costs claimed based on the
disallowed direct costs• Unreimbursed indirect costs may be applied to
meeting operational matching requirements
2. Using a Federally Approved Indirect Cost Rate• Must maintain related supporting
documentation for audit• Charges are based on documented expenses
Documenting Expenses
AllowableAllocable
ReasonableConsistently Applied
Document, Document, Document
Why Retain Documentation?• To track incoming information
• To review information
• To provide historical evidence
• To provide evidence of accomplishments
• To assist during the audit or site visit
Documentation Basics
Establish a written record retention policy
See Handout
Defining Source Documentation • Physical information:
– Hard copy– Soft copy: CD, flash drive, server, microfilm
• Source: – Internal to the organization– External sources
• Benefits supports a value, cost, or performance criteria relative to the grant
CaliforniaVolunteers may request this during site visits or desk reviews
• Signed timesheets with supervisory approval
• Quarterly payroll returns (941)
• Payroll register
• Personnel file with salary/wage information
• Employment contract
• Cancelled checks
• Direct deposit schedule
Salary
Key Documentation Issue
See Handout
Reimbursements, Reporting & Rebudgeting
Reimbursement is made based on actual expenses
Reimbursements may not be for estimated, unauthorized, or unallowable expenses
Invoices must be for approved and budgeted expenditures that programs have already incurred
No advances allowed
Reimbursements
Subgrantees/Programs must submit:• 3 Copies = CaliforniaVolunteers Invoice Form
(CV 100)
• 3 Copies = Periodic Expense Report (PER)
Reimbursements
CaliforniaVolunteers allows monthly or quarterly reimbursement but program must designate which method it will use
Must also have up-to-date and current:1. Member hours in WBRS
2. PERs
3. FSRs
4. Program Reports
Must also demonstrate compliance with program operations, i.e., no outstanding corrective action
Reimbursements
AmeriCorps Grant Provisions“Financial management systems must be capable of distinguishing expenditures attributable to this grant from expenditures not attributable to this grant. The systems must be able to identify costs by programmatic year and by budget category and to differentiate between direct and indirect costs or administrative costs.”
Reimbursements
Record in-kind contribution as both revenues and expenses
AmeriCorps Grant Provisions“A living allowance is not a wage. Programs must not pay a living allowance on an hourly basis. Programs should pay the living allowance in regular increments, such as weekly or bi-weekly, paying an increased increment only on the basis of increased living expenses such as food, housing, or transportation. Payments should not fluctuate based on the number of hours served in a particular time period, and must cease when a member concludes a term of service.”
Reimbursements
No “lump sum” if member completes term earlyNo “lump sum” if member starts late, e.g., “make up” missed payments
30 Days = Target Date– Reimbursement may take up to 45 days
Reimbursement requests received after due date will be processed in the following monthDelays Occur Because:
– Incomplete or incorrect invoices– Insufficient match– Missing documentation– Failure to update member hours in WBRS or to
correctly submit them– Failure to submit Progress Report
Payments from CaliforniaVolunteers
Key Elements of Financial Reporting
• Prepare all financial reports with information from the organization’s accounting system
• Review and reconciliation the information to ensure accuracy prior to report submission
• Files must have the proper documentation to support all information reported in financial reports
• Submit all reports on time
Reporting Requirements
1. Periodic Expense Report (PER) • Due to CaliforniaVolunteers office by the
25th day of the each month or quarter• Must be submitted via hard copy• 3 copies of the PER are required• Required documents include: PER and
invoice cover sheet
Failure to submit the PER on time will result in reimbursement delays
Reporting Requirements2. Financial Status Report (FSR)
• Due to CaliforniaVolunteers office by the 15th day after the end of the reporting period
• Must be submitted via hard copy• One (1) copy of the FSR is required• Required documents include:
• Program Income Form• Submission of all PERs for reporting period
Prior to the due date1. By e-mail, request an extension2. Provide reason why an extension is needed3. State expected date of completion
PERs and FSRs– Submit extension request to Grants
Management Associate (Jesse Delis)
Late Reports?
Program Income
Program Income Form• There are 2 alternatives to use program income:
1. Additive – added to funds committed to the program and used to further program objectives
2. Deductive – deducted from total allowable costs of the program to determine the net allowable costs for which the Federal share is based
Program Income • Gross Program Income – All funds collected as
a direct result of grant funded-activities• Net Program Income – The amount after
deducting costs associated with generating the income
• All Program Income must be used for grant-related purposes
• Program Income and the supporting documentation is “auditable”
Key Reporting Issues
• Program Income– These were the common errors found on the
April 30, 2009 Program Income Forms• Program Income used as match was erroneously
reported as Program Income– Corrective Action: If all your program income was used
as match, your Program Income Form should be blank
• Program Income Form was not submitted at the same time as the FSR
– Corrective Action: Submit the FSR and the Program Income Form at the same time, not separately
CaliforniaVolunteers must receive written approval from CNCS for these budgetary changes:
– Specific costs requiring approval under the cost principles, such as:• Overtime pay, rearrangement and alternation costs, and pre-
award costs
– Purchases of equipment over $5,000 using CNCS funds, unless specified in the approved application and budget
– Changes in the cumulative budget line items that amount to 10% or more of the total budget, unless the CNCS share is $100,000 or less• The total budget includes both the CNCS and grantee shares• Grantees may transfer funds among approved direct costs
categories when the cumulative amount of such transfers do not exceed 10% of the total budget
Rebudgeting
CaliforniaVolunteersKey Rebudgeting Issues
• Budget changes are made before CaliforniaVolunteers approved the change
• Adequate written justification was not provided• Budget Revision Request Form was incomplete• Inadequate monitoring of budget throughout the
year resulted in major budget changes at year-end, instead of periodically throughout the year
CaliforniaVolunteersRebudgeting Requests
Submit a Budget Revision Request Form (CV 200)• Narrative justification – explain why a redistribution of funds is
needed• Spreadsheet with the original CNCS share budget, proposed
budget, and difference between two budgets• Spreadsheet with the original Subgrantee share budget,
proposed budget, and difference between two budgets• Must be signed by the Program Director and faxed to
CaliforniaVolunteers Program Associate• Program Associate reviews it and approves program changes
and the Grants Management Associate reviews it for fiscal accuracy
• CaliforniaVolunteers will either approve or deny – wait to take action only after receiving approval
Your budget = estimate of expected costs• Estimates may change as the program is
implemented• Review budget monthly• Request budget revisions promptly• Do not wait until last month of year to request
budget modification
Rebudgeting Pointers
Federal Audits:OIG and A-133
What is an Audit
Examines a Corporation program or activity1. Financial Audits
• Audits of costs incurred on grants and contracts, indirect costs, and internal controls
2. Performance Audits• Audits of economy and efficiency of programs
– Measure achievement of desired results or benefits
Office of Inspector General
What’s the OIG Audit Process?
1. Notification Letter in writing
2. Entrance Conference • To provide audit scope and objectives
3. Survey Phase (planning phase) • To obtain grantee’s background, mission,
resources, responsibilities, key personnel, operating systems and controls
What’s the OIG Audit Process?
4. Develop the Audit Program• A set of procedures for auditors to follow
5. Field Work• Auditors complete the audit following the
procedures in the audit program
6. Exit Conference• A verbal briefing of auditor’s findings work with the
opportunity to confirm information, ask questions, and obtain clarifying information
What’s the OIG Audit Process?
7. Draft Report• Issued to the auditee and Corporation officials a request to
provide written comments in 30 days
8. Corporation & Grantee Response• The Corporation and Grantee each respond in writing to
the draft report and comments are published in the final report
9. Final Report• Issued after reviewing auditee’s and Corporation’s
comments with complete description of findings and recommendations for corrective action
Common Pitfalls & Issues7 Main Areas:
1. Member Eligibility2. Member Files & Records3. Member Costs4. Match 5. Reports6. Administrative Areas7. General Management See Handout
OIG HotlineOIG HotlineReport suspected fraud, waste, or abuseReport suspected fraud, waste, or abuse
All Information is confidentialAll Information is confidential
You can remain anonymousYou can remain anonymous
1-800-452-82101-800-452-8210oror
[email protected]@cncsig.govWebsite: Website: www.cncsig.gov
Grant Closeout
CaliforniaVolunteers:Annual Closeout Procedures
CaliforniaVolunteers closes all subgrants on an annual basis:
1. Fiscal Activities
2. Program Activities
Program staff and Fiscal staff must coordinate Closeout activities
CaliforniaVolunteers Annual AmeriCorps Closeout Procedures
Fiscal Activities1. Final Reimbursement Invoices - Due within 60 days of grant
termination
• Review all obligations to ensure all expenses have been paid• Final invoices will only be processed for payment after the
program submits all required documentation attesting to the completeness of member records and the retention site
• Errors in reimbursement requests (over or under) discovered after closeout must be brought to the attention of the Commission ASAP for resolution
2. Final PER = Due within 60 days of grant end3. FSR = Due by April 15th following end of grant
Program Activities There are 7 steps needed to complete the programmatic closeout
of your grant. They are:
1. Verification of complete and accurate entry of member time logs into WBRS for each AmeriCorps member in your program
2. Verification that all Exit Forms have been entered into WBRS for all AmeriCorps members in your program
3. Print out a program reconciliation report from WBRS to verify that all members have been exited with appropriate education award
CaliforniaVolunteers Annual AmeriCorps Closeout Procedures
Program Activities 4. Review of all member files and submission of Member Files
Closeout Certification Form 5. Completion of final Progress Report
• Due 15th day after the program end date6. Submission of printed final Progress Report, signed and dated by
Program Director7. Submission of cover letter, on letterhead, that steps 1-6 are
completed, including information where files will be stored and the process for document retrieval in the event of an audit
CaliforniaVolunteers Annual AmeriCorps Closeout Procedures
Final Grant Closeout
CaliforniaVolunteers must:
1. Pay outstanding obligations2. Close subgrants3. Ensure FFR and PSC-272 are equal4. Enter final FFR in eGrants5. Submit closeout documents to CNCS6. Return unobligated funds
CV cannot fix problems or return funds after funds have been returned to the Federal Government
Final Grant CloseoutSubgrantee must:
1. Submit Final FSR2. Submit Equipment Inventory Form3. Submit Residual Supplies Form4. Submit Progress Report
CNCS: Deobligating Funds• CNCS will deobligate any authorized grant funds not drawn
down at the end of the project period
• Deobligation reduces the amount of authorized funds to equal the amounts disbursed and drawn down for the grantee and its subgrantees
• Grantees do not have access to deobligated funds
CNCS: Subsequent Audit
• CaliforniaVolunteers and CNCS retain right to conduct a subsequent audit or other review of a grant – closeout does not change this right
• Notice of audit may extend the 3 year record retention requirement
Subgrantees and Grantee must:• Retain all records for 3 years from when the Commission
(grantee) submits the final FSR• Requirement is included in the CNCS Grant Provisions
Questions?Questions?