building & reviewing grant budgets advanced skills for developing and reviewing grant budgets...

Building & Reviewing Grant BudgetsAdvanced Skills for Developing and Reviewing Grant Budgets

Office of Grants Management:

Douglas Godesky, Sr. Grants OfficerDouglas Lees, Grants Mgmt Specialist

Corporation Grantee Financial Accountability Seminar July 2007

Understand how budgets fit in the “big picture”

Standardize expectations on what is a “compliant budget”

Share budget formulation tips and strategies

Answer your most pressing questions

TIP: Everything discussed is “Unless Otherwise Stated!” Typically each grant program has its own rules, guidance and specifications --- Know your program’s rules and how they differ!

TIP: Everything discussed is “Unless Otherwise Stated!” Typically each grant program has its own rules, guidance and specifications --- Know your program’s rules and how they differ!

Goals

How Budgets Fit Into the Big Picture


When does a budget have an impact in the grant lifecycle?

The Grant Life Cycle

Pre-Award Post-Award

Continuation Application or Re-compete Application

Project

Definition

Funding

AnalysisApplication

Formulation

Peer

&

Staff

Reviews

Validating

AwardPerformanceSubgrant

DesignCloseout

&

Audit


Ensures the

Details are

Covered

Follow Rules

Budgets have impact … … at every stage of the grant lifecycle

The Grant Life Cycle

Pre-Award Post-Award

Continuation Application or Re-compete Application

Project

Definition

Funding

AnalysisApplication

Formulation

Peer

&

Staff

Reviews

Validating

AwardPerformanceSubgrant

DesignCloseout

&

Audit

Keep Partner

s Complia

nt

Guide Staff

Plan What is Necessa

ry for Success

Establish

Realistic Scope

Reflects

on

Perfo

rman

ce

Define Approved and Allowab

le

Compete For Funds


Budget Design Has Impactat Every Stage of the Grant Lifecycle To plan what is necessary for success

To establish realistic scope To ensure you’ve covered the details To keep your partners compliant To compete for funds To reflect on how you’ve complied with

rules To guide your staff as they execute To define what’s expected and

approved To reflect upon your performanceTip: Involve budget

staff in project planning from the beginning and thereafter

Tip: Involve budget staff in project planning from the beginning and thereafter


Good budget planning makes things happening the way they are supposed to happen…

Negotiation

APPLICANT CORPORATION

Award

Application

Continuation Applications

Closeout Reports

Continuation Awards

Clarification Questions

How much do we need?

How much do we need?

What are some of the impacts of a poorly planned budget?

FLIP CHART LIST

Delayed award…

Post-award amendments …

…

…

…


Poor budget planning leads to challenges …

Negotiation

APPLICANT CORPORATION

Award with Special Conditions

Application

Follow-up Negotiation

Additional Questions

Resolve Special Conditions

Amended Grant

Revise Budget – Unexpected Costs

Amended Grant

Revise Budget – 10% Rule

Amended Grant

Special Approvals

Unallowable Costs

Return Application

Request Grant Extension

Amended Grant

Monitoring

Indicators

Closeout

Audit

Difficulty

Matching

Expenses

With

Budget

How much can we get?

How much can we get?

As an applicant/grantee, what is on your mind when you are faced with submitting a grant budget?

How much can I ask for? …

How much information do they need?...

…

…

How much can I ask for? …

How much information do they need?...

…

…

FLIP CHART LIST

What are some typical budget development problems you have run into?

Unclear directions/instructions…

Limited space for answers…

………

Unclear directions/instructions…

Limited space for answers…

………

FLIP CHART LIST

What is on the mind of the federal employee who will review your budget?


Corporation employees are examining ….

Panel ReviewViableApplications

Staff ReviewCEO

ApprovedNegotiations

Grant Awards

Negotiation Lettervia eGrants

BUDGET LINE ITEM concerns,Costs at-risk of being unallowableUnusual Cost ItemsLack of source calculationsIndirect cost rate concernsCompliance with budget instructionsCompliance with budget worksheets

… resolve,Only allowable costs remainUnusual costs explainedBudget worksheet completed

Year over year increases okayCost ceilings metSupporting calculations for all costsIndirect cost rate obtained/valid

Budget modified in eGrants

FINANCIAL concerns,Costs not aligned with other grantsMatch sources at-risk of unallowableMatching performance/projected

… resolve, Cost alignment Qs answeredMatch confirmed as allowableMatch at minimum or higher

ADMINISTRATIVE concerns,Audit findingsMonitoring performance & concernsNew grantee no federal/CNCS experience

… develop, Special conditions

Award

Ph

ase


Summary: How Budgets Fit into the Big Picture Budgets impact every stage of the grant lifecycle

Budgets can not be an afterthought

Budget formulation is a known challenge to applicants

Knowing how to form a quality budgetis a critical skill

Budget review is a major federal staff responsibility

That is why we care so much…Individual professional judgment plays a

major role…

What is a compliant budget?


Compliant budgets meet three (3) requirements…

All required project costs are included

All necessary cost calculations are presented

All appropriate cost justifications are offered

Deciding what is necessary and appropriate is based on the individual professional judgment

Program and Grants Officers “certify” your budget as compliant; they must have the information they need to reach their professional comfort level


Compliant Budgets include all project costs needed to fully conduct a program Federal share + Non-federal share

Resources needed, not just minimum levels Logically related costs – “if I’m paying for this, I should be paying for

that”

Administratively required costs Required by the program; e.g., Liability insurance, allocated share of

audit fees.

Programmatically required costs within cost limits Program activity costs that are expected to be performed; e.g.,

volunteer transportation, member or volunteer support costs Limits are met; e.g., administrative cost caps, year-to-year cost growth,

sources of funds, etc.Presenting all non-federal (matching) costs is a change from expectations and advice given in the past


Compliant budgets include calculations where possible… To explain how you reached a number in your

budget

To explain what would otherwise not be obvious

To define your choice when costs can be estimated in different ways

To reflect your budget strategy


Compliant budgets do not need calculations when… Units of measure are obvious / self-explanatory

A cost is only reasonably estimated one way

Application instructions direct that calculations are not necessary

The amount is below a threshold that your grants officer considers minor enough not to be calculated

When to include supporting budget calculations

A budget request for a 12-month funding period for a locally operated program with an indirect cost rate agreement, reads as follows. How would you respond to each line item?

Accept as-is, or Require Calculation?If accept as-is, why no calculation?

Supplies $1,200

Staff Travel $12,000

Notebook Computer $3,000

Computer System $25,000

Annual Rent $6,000

Printing Project Brochure $4,000

Internet Access $295

IDEA Conference $1,400

Accountant Services $1,000

Utilities (Based on Prior Year Costs) $14,000

Annual Cell Phone Service Contracts for Staff $5,000

Staff Training 4 professionals $4,000

Food $1,200

Construction Supplies $5,000/mo. X 6 mo. X 3 Sites = $90,000

Federally Approved Indirect Cost Rate Agreement $20,000


Compliant budgets include line item cost justifications… To explain unusual costs

To explain unexpected costs

To explain high dollar costs

To explain typically unallowable costs


Compliant budgets do not need cost justifications when… The cost is one that is widely and commonly

incurred by most business efforts

The cost has been incurred in prior years under the same grant and the justification is already well established in the grant record

Application instructions direct that cost justifications are not necessary for particular items

Application instructions direct the applicant to include the particular cost item

When to include line item justificationsA budget request for a 12-month funding period for a locally operated program with an indirect cost rate agreement, reads as follows. How would you respond to each line item?

Accept or require more justification? If accept as-is, why no justification?

Supplies $1,200

Staff Travel $12,000

Notebook Computer $3,000

Computer System $25,000

Annual Rent $6,000

Printing Project Brochure $4,000

Internet Access $295

IDEA Conference $1,400

Accountant Services $1,000

Utilities (Based on Prior Year Costs) $14,000

Annual Cell Phone Service Contracts for Staff $5,000

Staff Training 4 professionals $4,000

Food $1,200

Construction Supplies $5,000/mo. X 6 mo. X 3 Sites = $90,000

Federally Approved Indirect Cost Rate Agreement $20,000


Small Amount Requested Large Amount Requested

Unique / New Costs

Common / Prior Costs

High Need for Explanation and Justification

Low Need for Calculation

Cost identification (label) only needed

Reference to prior year costs or total only needed

High Need for Explanation & Justification

High Need for Detailed Calculation

High Need for Explanation

Need for Basic Calculation

Exercise

Recognizing Compliant Budgets

Left Side of Room Right Side of Room

Examine Budgets Examine Budgets

A, B, C & D E, F, G & H

eGrants is your best guide to establishing a compliant budget on the first try

eGrants budgets are custom to match the application instructions and program you are applying to.


eGrants budget categories are customized…

Custom Budget Categories


eGrants flags incorrect entries with “Warnings” and “Error” messages….Budget Rules: Warning and Error Messages are established by each

Corporation program, specific to their grant applications for that program.

Warning Messages: You can proceed with the information in place but you are warned that it may not be compliant with the application guidance.

Error Messages: You can not proceed with the information, the system will prevent you from moving to the next step until the information is edited.

Need for Help When Using eGrants: Be sure to distinguish between needs:Technical Help Needs: eGrants Help DeskApplication Help Needs: Your assigned Program Officer

Obtain a help desk “ticket number” if the problem is not immediately resolved

Your Program Officer can escalate a technical problem if you have not received a timely solution


Budget Tip: Providing calculations and/or justification/explanation is the fastest path to resultsIf you provide the information up front, Corporation Staff

will not need to ask for clarification.

You likely have the information in your budget backup – why not just share it?

Time saved.

Your program design and accounting system should be anticipating and recording all costs regardless of your decisions on the grant budget

What are you attesting to when you submit a budget?


Accountability for “…all data … is true and correct …


Budget Tip: Administrative Costs

If you use a flat administrative cost rate plus include typical indirect costs as direct, you must include an explanation for the every line item with an apparent duplication of costs

CNCS Fixed Percentage Option (NCSA Only), for accounting for administrative (indirect) costs, (when statute allows) provides a flat administrative amount.

There is no written description of the pool of costs that are assumed covered when you use the CNCS fixed percentage Administrative costs option.

Fixed Percentage Administrative costs are assumed to cover typical administrative indirect overhead costs: space, furnishings, general supplies, utilities, back office administration, accounting, auditing, and similar.

Capped administrative costs are designed to limit indirect cost reimbursement.

When choosing between Fixed Percentage Option and use of Federally Approved Indirect Cost Rate Agreement, “do the math!”


Budget Tip: It is possible to get a provisional indirect cost rate from CNCS if you are pursuing a negotiated indirect cost rate

A provisional rate will be valid until a final rate agreement is reached/established.


Budget Tip: Providing details on fringe benefit rates

Sample Employee Benefits Estimation Process (Use when Building Budgets)

Annual Leave Earned Sick Leave Taken Holidays

Subtotal (a) – Release Time FICA $100,245 State Unemployment Compensation $17,040 Worker’s Compensation Insurance $13,140 Medical Insurance $168,200 Pension $105,120

Subtotal (b) – Required Coverage $403,745

Total Employee Fringe Benefits (a) + (b) $403,745

Allocation Base: Total Salaries $1,314,000 Less Release Time

Chargeable Salaries $1,314,000

Employee Finge Benefit Rate Fringe Benefits $403,745 Allocation Base $1,314,000

Fringe Rate 30.73%

1. When the benefit rate is > 30% of salaries, professional judgment is typically to expect a breakdown by element.

2. When different rates apply to different employees.


Budget Tip: Rounding

Round and split federal and non-federal shares in a similar manner, rounding to an appropriate level

Round cost estimates when possible

Leads to smoother budget review, execution and closeout

Supplies Example:

Actual Annual Cost: $4555 in prior year, or about $379.58 / month

Budget Request:

Supply Cost Narrative: “Average monthly cost for general office supplies based on prior year spending patterns”

Calculation Narrative: “$400/month*12 = $4800”


Budget Tip: Rent / Space

Simplified Method:The organization uses all space in a similar manner;All space/rent is accounted for as indirect;

Direct Allocation Method:Indirect rate represents space/rent costs that

support general & administrative activityDirect costs represent space/rent associated with

direct activities accordingly by benefit to the project

(a) Use the same method for federal as well as non-federal money

(b) Clearly inform the Corporation of the method you are using


Budget Tip: Grant Writing Expenses

If you use indirect / administrative reimbursement to pay for grant writing, you will not have funds to pay for the indirect costs that the fee/rate was intended to fund, and those costs can not be shifted to other federal funding sources

Grant Writing = Fundraising

Fundraising, not allowable (in most cases)

It is not appropriate to account for the cost of grant writing and development as a direct cost since the costs are typically incurred before the grant was awarded, or if for a future grant, they are not allocable to the current grant


Budget Tip: “Eyebrow” raising requests (or omissions)

Some budget line items will always be examined in detail; provide justification in advance for:

• Food

• Local program gear

• Public Service Announcements (PSA)

• Advertising

• Ceremonies

Not having a cost in your budget also can bring a focus to your project:

• If something is not in the budget, auditors have tended to question the cost

• Lack of personnel costs in federal or non-federal share with no explanation


Budget Tip (Commissions): Your records on the number of years a sub-grantee has been receiving funding are considered correctYou will encounter discrepancies between eGrants versus your

records

If you encounter such a discrepancy, take these steps: Pass the information to your Program Officer with cc to the Grants

Officer; include details to support the correction Presumption is that you have the correct information Calculate matching budgets using your records The Corporation has a protocol for the Program Officer to follow to

verify the correction The Commission will be notified by the Program Officer of the outcome,

usually confirmation/agreement


Budget Design Strategy:

Including projected costs in every object class minimizes potential for required post-award federal approvals

Budget Object Classes: Personnel, Fringe, Travel, Supplies, Equipment, Contracts/Subgrants, Other, Indirect (Administrative).

Prior Federal Approval Required: To cumulatively move >10% of total budget between object classes, or to expend funds in an object class that was not funded.

Strategy: By including all project costs in your budget you ……minimize the potential of having unapproved

budget object classes; and,…raise the dollar threshold that defines the 10%

limit.

Rules on prior approvals apply to non-federal share of the budget as well as the federal share

Budget Design Strategy (Typically for Commissions):

When sub-granting, balance well established programs with new programs to ensure that match is met at the prime grant level

Prime grantee compliance with match: Measured by combining match provided by all subgrantee (cumulative performance); underperforming sub-grantees can be carried by over performing sub-grantees


Budget Design Strategy

Use a Budget Checklist

No unexplained amounts Staff time does not exceed 100% if handling multiple

projects Staff time accurately reflects what the project will

consume Aligns tells the same story as the proposal narrative Includes only costs to be incurred during grant period Includes all items contributed by other sources Follows all known application instructions Adds up per cost line item and overall Costs for every phase of the program are included


Budget Design Strategy: Consider all possible exceptions to the routine Are the salaries in the proposal accounting for

cost of living increases?

If new staff persons are being hired, is the necessary additional space and equipment being considered?

If equipment is needed, is it necessary to purchase or is leasing the more appropriate approach?

If additional space is rented, are the increased costs of insurance, utilities, maintenance and other impacts accounted for?


Logical Conclusions & Other Advice1. Time invested in developing a compliant, and complete budget

facilitates effective and hassle-free grant administration at prime and sub-grant levels

2. Budgets can be designed to minimize the need for changes and the likelihood that later federal reviews/approvals will be needed

3. A properly approved budget is: A financial blueprint to help an organization meet its goals

and objectives Aligned with the program description and all budget

discussion therein A tool to help ensure an organization is meeting matching

requirements

4. Programs should: Periodically review budget to actual expenses Assure budget changes are properly approved Review movements between line items and verify if they are

within provision guidelines

Questions

Electronic copies of this material can be found at The Resource Centerhttp://nationalserviceresources.org/Search for Financial Accountability Seminar


!! PARTICIPANT NOTICES !!

CERTIFICATES FOR TRAINING: All participants who attend and complete three or more sessions of the Financial Accountability Seminars can pick up a certificate of participation Sunday afternoon, Monday or Tuesday morning.

CFO – OIG – OGM SUNDAY CLOSING PLENARY: Please attend the Plenary Session [Sunday 3:15 –Salon G] with Jerry Bridges, Carol Bates and Peg Rosenberry to hear about OIG audit plans, address issues that arose during the day and learn about upcoming changes in grants policy.

RESOURCE TABLE: Please take advantage of this opportunity to meet with and discuss your questions and concerns with our experts who include presenters and a special guest from the Division of Payment Management at HHS.

building & reviewing grant budgets advanced skills for developing and reviewing grant budgets...

Documents

budget staff

budget design

budget worksheets

quality budget

planned budget

grant lifecycle budgets

good budget planning

grant program