Determining Income and Allowance for the HOME ProgramSlide 1

Sharpening Your Skills: Financial Management for Rural CHDOsSlide 1

Financial Management and Federal Compliance

Issues for Nonprofit Organizations

Welcome

Introductions so that we become familiar with your face.

There are easel pads along the wall for you to answer a few questions about your organizations. Please take a minute to write in your answers if possible to the questions listed.

Remember, our networking is important.

Housekeeping

Please turn off your cell phone and electronic devices. Where are the restrooms and emergency exits? Evaluation forms will be distributed at the end of the

training, if you will be leaving early let us know and we’ll provide you with an evaluation form at that time.

Anne Duffy, CPA

Chief Financial Officer

Vermont Housing & Conservation Board

Financial Management of Federal Funds

• What you’ve agreed to do (compliance requirements)

• How to make sure you do it (internal control systems)

Internal Controls

5 Components of the Internal Control Structure

• Control Environment• Risk Assessment• Control Activities• Information & Communication• Monitoring

Regulations - OMB (Office of Management & Budget)

General compliance requirements come from these Circulars (and may be built into agency CFR’s):

– OMB Circular A-110 Administrative Requirements

– OMB Circular A-122 Cost Principles

– OMB Circular A-133 Audit Requirements

OMB A-110 - Administrative Requirements

1. Standards for Financial Management

2. Activities & Costs allowed (OMB A-122)

3. Reporting

4. Period of Availability of Funds

5. Matching

6. Cash Management

7. Eligibility

8. Procurement standards

9. Record retention

10.Program income

11.Plus more!

Best Practices

• Involve appropriate staff during application and initial budget process

• Parallel systems across grants (don’t reinvent the wheel for each grant)

• Pull together team at inception of grant– Communicate grant

info (budgets, award, regs., etc.)

– Establish/review controls over grant (cost approvals, financial accounting & reporting)

• Document, document, document….

The morale of the story is…

• It’s not enough to get it right – you also need to have a system in place to get it right!

• Dot your i’s, cross your t’s….

• Document, document, document..

Carolyn BellRural Housing Service

Monitoring Section 523 Grants

What is RD’s responsibility• RD’s responsibility is to assist grantees to be successful and avoid fraud, waste

and abuse• Quarterly Meetings/Reports• Note any issues discussed and work with contractors and grantees to resolve

them• Maintain contact with grantees• Partnership and communication between grantees and RD is critical

Types of Audits• Performance Audits – look at specific requirements, measures

or defined business practices. Agency can use these make improvements to program performance or reduce program costs

• Financial Statement Audit – determine if organization’s financial statements correctly represent their financial position in accordance with Generally Accepted Accounting Principals (GAAP)– Single Audits under OMB Circular A-133

Audit Requirements for Section 523 Grants

• In accordance with RD Instruction 1944-I– 7-CFR-3015, 3016, 3019

• Annual Audits – due 90 days after end of grantee’s fiscal year, grant closeout or termination to include audit of a sampling of borrower loan funds – In accordance with Generally Accepted Government Auditing

Standards (GAGAS)– OMB Circulars

Grant Close Out

• SF-425 Federal Financial Report (Previously SF 269A- Financial Status Report)• Due 90 days after

completion of grant

• Performance Reporta. Exhibit B –quarterly

report

• Property Report – Account of property acquired with TA funds

• Records and Accounts – Retain for 3 years

Closeout Reports

Section 533 Housing Preservation Grant

overview provided by

Bonnie Edwards-JacksonFinance and Loan Analyst

Preservation and Direct Loan Division202 690 0759 | bonnie.edwards@wdc.usda.gov

Rural Housing Service, Multi-Family Housing

ObjectiveThe Section 533 Housing Preservation Grants Program funds are used to renovate deteriorating homes and rental properties by persons who have low and very low incomes

Eligibility

The following are able to receive grants to repair these properties and bring them up to code:– Nonprofit organizations– Public bodies– Native American tribes

Section 533 Housing Preservation Grant

Rural Housing Service, Multi-Family Housing

Fund uses:

Section 533 Housing Preservation Grant

Rural Housing Service, Multi-Family Housing

HPG Funds May Not Be Used To:

Assist in the construction or completion of an addition or a new dwelling.Refinance any debt or obligation of the grantee or the individual homeowner

Grantee Must Comply With The:

Terms of the Grant Agreement Statement of Activities Budget

Section 533 Housing Preservation Grant

Rural Housing Service, Multi-Family Housing

Dave Johnson, CPA

Dixon Hughes Goodman LLP

Auditor’s Perspective

• Internal Control Over Compliance• Rules for Compliance

– 24 CFR 84 Not-for-profits– 24 CFR 85 State and Local Governments

24 CFR 84 is HUD’s adoption\codification of Office of Management and Budgets Circular A-110

Auditor’s Perspective

• How does auditor determine what rules to test for compliance and internal control over compliance?– Federal CFDA Number: Catalog of Federal Domestic

Assistance. – CFDA – Contains detailed program descriptions for

Federal Assistance Programs– Annual OMB Circular A-133 Compliance Supplement– Find applicable requirements for CFDA #

Auditor’s Perspective

• Example Specific Program Compliance Requirements– Eligibility– Reporting

• Financial• Performance• Special

– Special Tests for Program

Auditor’s Perspective

• Example of General Compliance Requirements– Activities Allowed or Unallowed– Allowable Costs/Cost Principles– Cash Management– Davis-Bacon Act– Equipment and Real Property Management– Matching, Level of Effort, Earmarking– Period of Availability of Federal Funds– Procurement and Suspension and Debarment

Auditor’s Perspective

• Audit Tests are based upon General Compliance Requirements and Specific Requirements (Compliance Supplement)– Auditor must identify internal applicable internal controls

over compliance.– Auditor must test effectiveness of internal controls over

compliance– Auditor must test compliance.

Auditor’s Perspective - Conclusion

– Audit Reports Provided by Audit Firm• General audit report on financial statements under

both GAAS and GAGAS.• General report on internal control over federal financial

assistance.• Specific report of internal control and compliance on

federal programs tested.• Listing of findings with response from management.• Filing of Single Audit Submission with Clearinghouse

– Emphasis: Internal Controls Over Compliance

Questions?