Fund Accounting Clinic

1. Fund Accounting Clinic

2. Who Are We? • Presented by Training and Development Associates, Inc. • Edward Hammond • Rocky Wade • Sponsored by U.S. Department of Housing and Urban Development

3. Who Are You? • What type of organization do you represent? • Lead agency • Sponsor • Service provider • What is your role at the organization? • Executive Director • Financial staff • Case Manager • Another position

4. What Do You Expect? • What are your expectations? • Why are you here? • What do you expect to gain from today’s training session? • What will be the outcome of your participation in this training session?

5. Why Are We Here? • Participants should be able: • To understand what fund accounting is and how it applies to SNAPS grants; • To prepare a budget that uses fund accounting; and • To prepare an employee time and activity report that reflects fund accounting.

6. Why Are We Here? • To strengthen the capacity of SNAPS grantees to: • Make sure that funded activities are eligible • Make sure eligible costs are charged to the appropriate grant • Prepare accurate reports to be used as management tools • Avoid recapture of SNAPS funds by HUD

7. Workshop Goals • Participants will leave with tools and techniques to incorporate fund accounting into the grantee’s procedures for: • Budgets • Time and activity reports • Reporting

8. Logistics • Resource materials • Manual • Presentation • Handouts • Activities • Questions (the “Bin”) • Restrooms and telephones • Please silence or turn off cell phones

9. What is Fund Accounting?

10. What is Fund Accounting? • Simply stated: • Fund accounting is a method of recording financial information that groups resources into funds based on the sources and the uses of those resources

11. What is Fund Accounting? • Not-for-profit accounting systems should operate on a fund basis • Fiscal and accounting entity • With self-balancing accounts • Matches revenues with expenses • Funds are segregated for the purpose of carrying out specific activities • Such as eligible activities cited in a grant agreement

12. Benefits of Fund Accounting • Fund accounting tracks sources and uses of funds for each funding source • Without fund accounting, one cannot truly analyze the revenues and expenses of a specific funding sourceHUD revenues = HUD expensesHHS revenues = HHS expenses

13. Benefits of Fund Accounting • Allows one to evaluate each project and/or activity individually • Results in proper information for the drawdown of funds in LOCCS

14. Common Misconceptions of Fund Accounting • Taking a straight percentage of costs and applying it against a grant • Fund accounting creates a link between eligible expenditures and the actual grant funds drawn for those expenditures

15. Common Misconceptions of Fund Accounting • Drawing budgeted amounts regardless of actual costs (including salary) • Time must be actual and documented • Drawing funds against multiple SHP sites instead of the specific site in an approved grant award

16. Common Misconceptions of Fund Accounting • Thinking that one SNAPS grant is the same as another SNAPS grant • Each grant has a separate approved budget

17. Common Misconceptions of Fund Accounting • Thinking that one can spend on anything as long as it is SNAPS related • Expenses must be allocable to a specific grant, not just eligible within the SNAPS program

18. Common Misconceptions of Fund Accounting • Drawing funds from a prior SNAPS grant to pay for a present grants’ expenditure • Each grant has a specific funding period • Excess funds are subject to recapture by HUD

19. Start with a Chart of Accounts • Fund accounting starts from a basic building block—chart of accounts • Outlines all revenue sources • Outlines all expenditures by eligible activities

20. Model Chart of Accounts • Start with chart of revenues • Broken down by specific funding sources • Expenditures for each possible activity and sub-activity • Specific expenditure charts for each individual project • Chart of accounts grows with each new project undertaken

21. Developing a Sources and Uses Statement • Develop chart of accounts for grant, then • Develop sources and uses statement outlined in general ledger • Customized to particular SHP activity • We will use the “chart of accounts” as a basic building block through the rest of the presentation.

22. Examples of Fund Accounting • Budget models • Housing operations with supportive services • Leasing with supportive services • Development with supportive services • Supportive services only • HMIS only • Development only • Grantee with sponsors

23. One Model • Housing operations with supportive services • Accounts for all revenues • From HUD and others • Accounts for all expenses • HUD-eligible and not eligible • HUD-eligible costs classified • Direct • Allocated

24. Who Uses Fund Accounting • Board of Directors • Financially responsible for viability of organization • Owns program as they understand their liability and responsibility • External funders (including HUD) • Gain confidence in organization as it complies with business norms • Staff and management • Tracks operations and reporting

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

26. How Does Financial Management Relate to Fund Accounting?

27. Financial Management • OMB establishes guidelines for financial management • Addresses many areas of financial systems including requirement for fund accounting • Applies to all awards of federal assistance • May apply differently to specific grants based on role of recipient

28. Relationship of Federal Regulations

29. OMB Accounting Standards • Fund Accounting helps an organization comply with OMB’s federal standards • Control and account for funds, property and other assets • Identify source and use of all federal funds • Allow accurate, timely and complete financial reporting • Minimize time in transfer of funds between federal government and grantee

30. Accounting Records • Tracks the sources and uses of funds • Ensures that program costs are • Incurred for the proper period • Actually paid • Expended on eligible items • Expended from the appropriate grant • Approved by appropriate officials

31. 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

32. Determining Costs • Costs are only eligible if they • Are associated with an eligible client • Pay for eligible activities • Are delineated in your application (budget) • Have adequate source documentation • Meet OMB standards for being reasonable, allowable and allocable

33. Cost Reasonableness • Costs charged to federal award must be necessary, reasonable and directly related to the grant • Look at the following • Whether cost is ordinary and necessary • Market prices for comparable goods and services • Benefit to the individuals involved

34. Cost Allowability • In general, cost must be • Necessary and reasonable • Allocable to the program • Authorized or not prohibited • Conform to and be consistent with rules and requirements • Not charged to any other program • Refer to list of allowed costs in OMB Circular

35. Cost Allocation • A cost is allocable to a HUD program if it is • Treated consistently with other similar costs • Incurred specifically for the program • Benefits program or can be distributed based on a reasonable proportion • Necessary to operations

36. Determining Eligibility • If properly procured, cost is reasonable • If on approved budget, cost is allowable • If directly linked to grant, cost is allocable • Therefore, if costs are reasonable, allowable and allocable… • They are eligible for federal reimbursement!

37. Grant Agreement • Establishes compliance standards for federal requirements • SuperNOFA • Application • Technical Submission • OMB Circulars

38. Importance of Fund Accounting toFinancial Management • HUD grant may be of many funding sources • Multiple grants lead to fund accounting • Multiple HUD grants lead to fund accounting • Financial management system must account for requirements • All funding streams • Each project and/or activity

39. Developing Budgets • Budgets are projections of expenses drawn from actual experience • Defines goals for a given period • Provides ability to monitor progress • Identifies significant variances between financial goals and how resources are actually used • Budgets should never be submitted to decision-makers and funding sources without including assumptions

40. Budget Requirements • OMB requires organizations put budget controls into place • Starting with the application • Confirmed in the technical submission • Established with an approved budget • Analyzed throughout agency operations • Reconciled in any required reports

41. Budget Requirements • OMB requires organizations to compare and control expenditures • Keep records on budgeted amounts • Compare obligations and expenditures to planned budgets and accomplishments • Report deviations from budgets and plan • Be prepared to request grant amendments when the budget deviations trigger such actions

42. Developing a SNAPS Budget • Study SNAPS budget requirements • Ask questions of the lead agency and/or HUD before developing the SNAPS budget • Budget should include • Description of particular SNAPS project • All HUD-eligible activities to be funded by the SHP grant

43. Developing a SNAPS Budget • If necessary, include previous financial statements and budgets • Justifies historical assumptions used in your budget • Contrast any budget changes from recent history • Such as increases in utilities

44. Developing a SNAPS Budget • Include all budget assumptions • Especially those which might require greater explanation • Such as substantial difference in cost from historical assumptions

45. Developing a SNAPS Budget • Include allocation of all positions funded by the SNAPS grant • Include assumptions about projected hours to be budgeted for each position by various funding sources • Include for all funded positions • Descriptions • “Fully loaded” rates (wages and fringe benefits) • Breakdown of costs funded by SHP grant

46. Developing a SNAPS Budget • Include all sources of funds • Match allocated to a specific SNAPS eligible activity • Budget must fully account for all costs associated with grant

47. Developing a SNAPS Budget • Funding non-HUD eligible activities • Identify source of funds • Comprehensive budget for the agency that accounts for all HUD, cash match, and non-HUD funded activities • Analyzing the budget • One other staff member • One Board member • Analyze and ask questions

48. How Does Fund Accounting Impact Running A Program?

49. Impact on Program Operations • Documenting time and activities • Pro-rating costs • Personnel • Non-personnel • Tracking other funds

50. Documenting Time • Most employees work on more than one activity and/or project • OMB standards require that • Work be supported with employee time and activity tracking system • Actual time was spent on an activity • What activity took place ( eligible client, eligible activity) • Must be documented with activity records