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Fund Accounting Clinic Who Are We? Presented by Training and Development Associates, Inc. Edward Hammond Rocky Wade Sponsored by U.S. Department of Housing and Urban Development Who Are You? What type of organization do you represent? Lead agency Sponsor Service provider
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Who Are We? • Presented by Training and Development Associates, Inc. • Edward Hammond • Rocky Wade • Sponsored by U.S. Department of Housing and Urban Development
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
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?
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.
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
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
Logistics • Resource materials • Manual • Presentation • Handouts • Activities • Questions (the “Bin”) • Restrooms and telephones • Please silence or turn off cell phones
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
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
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
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
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
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
Common Misconceptions of Fund Accounting • Thinking that one SNAPS grant is the same as another SNAPS grant • Each grant has a separate approved budget
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
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
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
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
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.
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
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
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
Exercise • Family Services, Inc. • Review the case description • Complete the worksheet • Answer the related questions
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
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
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
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
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
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
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
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
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!
Grant Agreement • Establishes compliance standards for federal requirements • SuperNOFA • Application • Technical Submission • OMB Circulars
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
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
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
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
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
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
Developing a SNAPS Budget • Include all budget assumptions • Especially those which might require greater explanation • Such as substantial difference in cost from historical assumptions
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
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
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
Impact on Program Operations • Documenting time and activities • Pro-rating costs • Personnel • Non-personnel • Tracking other funds
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