Harris County Community Services Department

1. Harris County Community Services Department FINANCE ACCOUNTING SECTION LaKenya Wilson - Grant Accounting Manager Andrea Thomas – Senior Grant Accountant LaKeitha Bryant – Senior Grant Accountant Samuel Thompson – Grant Accountant David Picazo – Grant Accountant

2. HUD Rule Citations (CDBG) Governmental Entities: • OMB Circular A-133 - Audits • 2 CFR Part 225 (A-87) - Cost Principles • 24 CFR Part 85 - Procurement Nonprofits: • OMB Circular A-133 - Audits • 2 CFR 230 (A-122) - Cost Principles • 24 CFR Part 84 - Procurement • 2 CFR Part 215 (A-110) - Uniform Admin. Requirements and… Please don’t forgetYOUR GRANT AGREEMENTwith Harris County.

3. Financial Mgmt. System Financial management systems are required to meet certain standards. Your financial systems must be able to: • Control & account for funds, property & other assets • Identify source & application of funds • Allow accurate, complete & timely reporting • Minimize the time between expending funds and seeking reimbursements from CSD

4. Internal Controls What are internal controls? Internal controls are those measures taken by the organization for the purpose of: • Protecting resources against waste, fraud, and inefficiency by helping detect and prevent errors and/or abuses; • ensuring accuracy and reliability in accounting and operating data; • securing compliance with the policies of the organization; and • evaluating the level of performance in all organizational units of the organization.

5. Internal Controls Effective controls provide reasonable assurance regarding the accomplishment of established objectives. An effective internal control system generally consists of five components: • Control Environment – Management integrity • Risk Assessment – Does management plan and consider the possibility of errors within certain activities • Control Activities – Has management employed policies and procedures designed to prevent certain errors • Information and Communication – Has management received feedback or reports as to the effectiveness of a procedure and has that information been communicated to involved individuals • Monitoring – Is there an independent verification function or internal audit function, or does management routinely spot check compliance with procedures

6. Internal Control System More specific examples and elements: • Organizational chart that provides clear definition of functional areas within your organization • Written delineation of job duties • Accounting policy & procedures • Separation of duties • Hiring policies • Control over assets & documents • Reconciliation of records

7. Budget Controls Compare & control expenditures • Keep records on budgeted amounts • Compare obligations & expenditures to planned budgets & accomplishments • Report deviations from budgets & forecasts

8. Accounting Controls & Records Accounting system should include: • Chart of accounts • Cash receipts journal • Cash disbursements journal • Payroll journal • General ledger

9. Accounting Records (Cont’d) Source documentation required (match/leverage included): • All expenditures must be supported by the appropriate source documentation: copies of cancelled checks, invoices, purchase orders, receipts, time distribution reports, bank statements, etc. Also, ensure that program costs were: • Expended on eligible items • Incurred for the proper period • Approved by appropriate officials • Actually paid

10. Record Retention • CDBG records must be kept for 5 years after program year in which activity was funded: effectively 6 years • Recipients of federal funds are also responsible for proper recordkeeping and retention. Records should be sufficient to establish an audit trail for all transactions involving federal funds. An audit trail for federal funds starts with the preparation of the grant application or contract proposal and should include records adequate to support statements in the application document.

11. AdditionalRequirements Additional financial rules apply: • Cost Principles • Audit of your books (OMB A-133) • Procurement standards

12. Cost Principles Requirements can be found in 2 CFR Parts 225 & 230 (OMB Circulars A-87 & A-122) Three components to cost principles: • Cost reasonableness Is the amount being claimed necessary and reasonable? (a.k.a the prudent person test) • Cost allowability Is the amount allowable under circulars & regulations? • Cost allocation Can the amount be reasonably and accurately allocated to the program?

13. Cost Reasonableness Costs charged to CDBG must be necessary, reasonable & directly related to the grant. Look at: • Whether cost is ordinary & necessary • Market prices for comparable goods/services • Individuals involved

14. Cost Allowability In general, cost must be: • Statutorily allowed • Authorized or not expressly prohibited • Conform to & consistent with rules & requirements • Not charged to any other program

15. Cost Allocation A cost is allocable to the 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

16. Direct & Indirect Costs Direct costs can be identified with specific programs or activities. Indirect costs are incurred for common/joint purposes benefiting more than one program or activity • Administrative salaries • Accounting expenses • Facility maintenance

17. Audits Federal programs are subject to review or audit When spending $500,000.00 or more in “Federal awards” per year, specific rules apply Grantees & Sub-recipients must adhere to OMB Circular A-133

18. Procurement Rules Sub-recipients must adhere to Federal procurement rules in 24 CFR Parts 84 & 85 when purchasing: • Services • Supplies & materials • Equipment Procurement policies must be in place Must follow written procedures & document compliance

19. ImportantNotice Please be advised that “DIRECT DEPOSIT” is available.

20. Financial Forms Financial resources are available on the following websites: http://www.csd.hctx.net/ http://www.hud.gov/ • As a “rule of thumb”GREENand WHITE= GO&PINK,GREYandYELLOW=NO!! • Please refer to the Sub-recipient Accounting Procedures Manuals provided. • Also, failure to update the current invoice with any previous adjustments may postpone payment byAT LEAST2 weeks!!

21. Technical Assistance Please don’t hesitate to seek Technical Assistance, if necessary!

22. Harris County Community Services Department FINANCE MONITORING SECTION Vladimir Petsev – Finance Monitoring Manager StevenDimayuga – Finance Monitor Peter Broussard – Finance Monitor

23. Financial Monitoring When Does the Monitoring Process Start? “It starts at the beginning” CSD’s grant accountants and financial monitoring staff review the terms and details of the agreement and approved budgets at the start-up of your grant. This gives us a chance to plan our monitoring efforts and to see “what” and “how” your organization will deliver your CDBG services.

24. Financial Monitoring What Are The Types of Monitoring? 1.Desk Reviews – This is an on-going process through the lifespan of the grant. It entails: A. A review of expenses for allowability, proper cost allocation, and a comparison to those expenses to the budget which are listed in the Financial Reporting portion of your monthly reimbursement requests. B. A review of your annual audit by monitoring staff and the County Auditor’s Office. (note): You should receive a notification letter issued by the Co. Auditor’s requesting a copy of your audit.

25. Financial Monitoring What Are The Types of Monitoring? 2. On-site Monitoring Visits – You may expect CSD to perform an annual and/or periodic visit (when deemed necessary) as well as follow up visits to check on the progress of correcting noted concerns and/or findings. Additionally, CSD’s Financial Monitoring section performs detailed testing & collection of source documentation in order to perform match verification during and near the program year end.

26. Financial Monitoring What and How We Conduct Financial Monitoring for On-Site Visits First, you’ll get a “Notification Letter”. During the onsite visit we will: • Conduct an entrance conference, test and review compliance with Federal Regulations. • Review your Internal Controls Systems. • Review and verify eligibility of your leverage. • Based on sample testing, perform a detailed verification and determine the eligibility of expenditures you claimed. • Lastly, you’ll get a Monitoring Results Letter.

27. Financial Monitoring Technical Assistance If you need help….we are always available upon your request. We can provide: • Resources and Templates • Sample policies and procedures • Knowledge and experience. And if we don’t know the answers to your questions, we’ll find them out for you.

28. Questions and Answers