numbers don't lie, they hide
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TRANSCRIPT
Training and Development Associates, Inc.
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Welcome to Welcome to “Numbers don’t lie, they hide”“Numbers don’t lie, they hide”
Numbers Don’t Lie, They Hide
Financial Management for Homeless Grantees
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Who Are We?
Presented by– Training & Development Associates, Inc.
www.tdainc.org As a subcontractor of the Corporation for Supportive
Housing
Sponsored by– U.S. Department of Housing and Urban
Development Los Angeles Field Office
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Logistics
Manual and handouts Exercises Teams Questions (the “Bin”) Restrooms and telephones
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Who Are You?
Type of organization– Lead agency– Sponsor– Service provider
Your role– Executive director– Financial staff– Case manager– Another position
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Why Are We Here?
Different funding requirements and reports confusing Grantees have questions about HUD’s requirements Finance roles for staff and subgrantees can be
confusing Monitoring scrutiny plus new funding considerations Reliance on outside “experts” leaves some in the
dark Programs rely on software they can’t interpret Staff does not know the language or tools of financial
management
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Workshop Goals
Participants in this session will– Understand the “nuts and bolts” of financial management
and analysis– Know how to use “internal controls” to guarantee
compliance with HUD and other funder requirements– Understand the “order of authority” and, therefore, what is
required by HUD regulations, OMB Circulars and Generally Accepted Accounting Principles
– Leave with tools and techniques to address financial management and know when to seek external assistance
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Performance Benchmark
Each participant will – Leave with at least 3 new ideas, techniques or
tools to address financial management– Meet at least 2 new participants who can be their
resource person, mentor or support network after the workshop
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Table Talk: Real vs. Ideal
Discuss the difference between the ideal-world and the real-world as it applies to financial management of your HUD homeless grant
Identify 3 items and provide the following– In an ideal world _____– But in the real world _____ is
what happens– Why the real world differs from
the ideal world– Ways the real world can be more
like the ideal world
It’s Time for Bingo!
Financial Management Systems
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The Order of Authority
1. GAAP
2. Congress
3. OMB/GAO
4. HUD
5. HUD Grantee
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Relationship of Federal Regulations
*Federal Acquisition Requirements
FAR*FAR*31 CFR 15.2For Profits (Commercial)
A-133A-110A-122Other Nonprofits
Various
A-133
Various
A-110Various
45 CFR 74Hospitals and Care Facilities
A-133A-110A-21Colleges and Universities
A-133Common Rule
A-122A-87
State and Local Government
AuditsAdministrative RequirementsCost PrinciplesType of Entity
FAR*FAR*31 CFR 15.2For Profits (Commercial)
A-133A-110A-122Other Nonprofits
Various
A-133
Various
A-110Various
45 CFR 74Hospitals and Care Facilities
A-133A-110A-21Colleges and Universities
A-133Common Rule
A-122A-87
State and Local Government
AuditsAdministrative RequirementsCost PrinciplesType of Entity
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Fiscal Management System
HomelessProgram
Regulations
Procedures
Policies
Monitoring
Documentation
Financial Management
Cash Management
Internal Controls
Auditing
Budgeting
Accounting
Financial Reports
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Setting the Stage
Financial Management– Constant process of
safeguarding financial assets of organization, whether for-profit or nonprofit
– By instituting policies and practices that maintain and increase the value of assets for overall benefit of the organization
Financial Analysis– Systematic technique for
evaluating financial health of organization
– By quantifying information and comparing that information to similar organizations in the field
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The Importance of Financial Management
“Fitting in” with other funders Better planning Gaining allies Raising your “match” Sustaining future growth
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Fitting in With Other Funders and Better Planning
Funders (private and public) look at financial management to make investment decisions
Solid information helps grantees to– Realistically project the future– Seek funding for that future– Plan more accurately
Financial management is part of a multi-year planning process
Operating like a business helps organizations to– Increase program services – Not always be obsessed with raising more funds
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Fund Accounting
Your grant may be one of many funding sources that your agency has– Multiple funders leads to “fund accounting”– Your financial system must account for the
requirements of all of funding streams
While many of the requirements have a higher authority than HUD– HUD is the funding stream that we focus on
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Example of Fund Accounting
HUD SHP HHSUnited Way
Founda-tion Donor Total
Revenue–Grants–Cash–Donations
Total Revenue
Expenses–Labor–Overhead–Administration
Total Expenses
Excess Revenue
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Gaining Allies
Who is financially responsible for the viability of your organization?– Your board of governance begins to own the
program as they understand their liability and responsibility
– External funders gain confidence in your organization as you comply with the norms of the business world
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100% Equals 100%
To serve 100% of the HUD-eligible clients projected in your technical submission and approved budget…
With 100% of the projected HUD-eligible activities…
You must raise 100% of the total project costs (HUD grant and match)…
Otherwise, you are either not serving 100% of the clients or not providing 100% of the activities
Keys to a Successful System
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Who is Involved in Managing Your System?
Board of Directors Local community development staff Elected officials HUD Government staff Other investors Accountants
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Staff Responsibilities
Fiduciary trust Payment of taxes Government filings Cash flow Fund accounting and
reports to funders, including HUD
Service delivery
Internal financial controls
Reports to committees Legal contracts “The books” Construction…if? Future planning and
financial projections
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Board Responsibilities
Building the agency’s financial capacity Raising the funds to maintain the
organization long-term Budgeting funds productively Managing funds wisely Reporting on funds raised Supplementing budgets Evaluating agency’s financial performance
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When Do You Need An Accountant?
Benefits justify the costs “Too many hoops” Adjunct staff and business partner Fund accounting required Funders’ requirement
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What Services Should An Accountant Provide?
Advice on tax matters, unrelated business income, tax questions
Preparation of tax forms– Quarterly IRS Form 941– Quarterly federal, state and local government tax
filings– Annual income tax returns and/or 1099’s
Analysis of management activities and advice
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What Services Should An Accountant Provide?
Assistance in establishing financial management systems
– Collecting grants, outstanding revenues and “fees for service”
– Control of inventory, asset purchases and cash Recommendations to cut expenses, increase cash
flow and price services Assistance in preparing the organization for long-
term growth– When can the agency afford new staff?
Components of a Financial Management System
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Why a Financial Management System?
Required by HUD and OMB Systems required to meet certain standards
– Control and account for funds, property and other assets
– Identify source and application of funds– Allow accurate, timely and complete reporting– Minimize time in transfer of funds between parties
Addressed through policies, procedures, practices and personnel—the “4-P’s”
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Financial Management System
Ineffective results in– Major audit findings– Negative publicity– Funding withheld
Effective results in– Sound management
decisions– Documentation supporting
program activities and expenditures
– Knowledge of regulations, policies and procedures
– Strong accounting system– Good internal controls
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Components of Financial Management Systems
Uniform administrative requirements Cost principles Audit procedures Procurement standards
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In The Final Analysis…
Like it or not, financial management is a requirement of your grant
We need to learn to appreciate it, rather than fight it! Use source documents for guidance
– Regulations 24 CFR Part 85—Governments 24 CFR Part 84—Nonprofits
– HUD’s desk guides– OMB Circulars– HUD’s Monitoring Checklist
Exhibit 13 – 8, Items 1-12
Frequently Asked Questions
Who? What? How? Under SHP
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Supportive Housing Program
One component of the continuum of care strategy for homelessness– Outreach and assessment– Immediate (emergency) shelter– Transitional housing (with support services)– Permanent housing (with support services)
Enacted in the McKinney-Vento Act
Answering the Important Question:
What is 3-6-8-8?
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National Objectives
3 goals of HUD’s homeless programs– Help participants obtain and remain in permanent
housing– Help participants increase skills and/or income– Help participants achieve greater self-
determination
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HUD Objectives
National Targets– Create new PH beds for chronically homeless persons.– Increase percentage of homeless persons staying in PH
over 6 months to 71%.– Increase percentage of homeless persons moving from
transitional housing into permanent housing to 61%.– Increase percentage of homeless persons becoming
employed by 11%.– At least 390 CoC’s will have functioning HMIS.
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Program Components
6 types of projects– Transitional Housing– Permanent Housing for people with disabilities– Supportive Services Only– Safe Havens– Innovative Supportive Housing– Homeless Management Information Systems
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Eligible Activities
8 ways to spend SHP funds– Acquisition– Rehabilitation– New construction– Leasing– Supportive services– Operating expenses– Administration– Homeless Management Information System
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Acquisition and Rehabilitation
Purchase and/or rehabilitate all or part of building– Used for housing and/or services
Pay off a current mortgage (lump sum)– If not previously used for HUD
Funding limited to between $200,000 and $400,000– Higher amounts applicable to high cost area
50% cash match obligation 20-year use restriction
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New Construction
Newly construct building for housing (not services) Funding limited to $400,000
– Covers both land and building– Funds cannot be used for demolition
Must demonstrate costs are less than for rehabilitation
50% cash match obligation 20-year use restriction
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Leasing
Leasing building for supportive housing or supportive services
– Portion of building, entire building or multiple buildings– Not building already owned– No mortgage payments or building operations
Pay rent for individual units– Paid directly to landlord
Units must meet housing standards Rents must be reasonable No match requirement for leasing
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Supportive Services
For new grantees, cost of new or increased services
For renewals, cost of continuing services Salaries to providers and other direct costs
(actual direct staff time) Services aimed at moving homeless to
independence– Offered while part of project– For transitional housing, services may continue for 6
months after graduating 20% cash match obligation
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Operating Expenses
Costs of operating facilities Only for new project or expanded portion of existing
project Supports function and operation of project Often referred to as indirect costs
– Standards in OMB Circulars A-87 and A-122– Pro rate costs to individual funding sources
Eligible for all components except supportive services only
25% match obligation
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Administrative Costs
You may request up to 5% of grant to cover administrative costs
– Costs associated with carrying out the grant
May be split between lead agency and sponsors Costs associated with carrying out components
ineligible No match requirement for administrative costs
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Homeless Management Information System
Computerized data collection tool Designed to capture client level system-wide
information Costs to implement and/or operate a computerized
data collection tool Characteristics and service needs of the homeless Funds cannot be used for planning or developing
new system 20% cash match obligation
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HUD Eligible Activities
For Shelter Plus Care, remember:– Housing Assistance is for the term of the grant– Service Match is $1:$1 during the term of the
grant– Service match must be for HUD-eligible activities– Administration is 8% of the grant ( after the
housing assistance)
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Eligible Clients
8 eligible categories of homelessness Not all homeless people are HUD-homeless
eligible Not all clients with disabilities are eligible for
permanent housing If a client is not eligible, all costs associated
with that client (including administration and match) are not eligible
Procurement, Match and LOCCS
Procurement
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Procurement Rules
Grantees and subgrantees must adhere to federal procurement rules when purchasing
– Services– Supplies and materials– Equipment
Applicability– Governmental entities: 24 CFR Part 85 – Nonprofits: 24 CFR Part 84
Also refer to– SHP Monitoring Checklist Exhibit 13 -10, Items 1 - 17
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Procurement Overview
Procurement policies must be in place – Must follow written procedures and document
compliance
Four procurement methods available– Small purchase (less than $100,000)– Sealed bid (construction)– Request for proposals (RFP)– Non-competitive
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Small Purchase Method
Also known as “streamlined” method May be used for purchases below $100,000 Requirements include
– Getting 3 to 5 competitive quotes – Selecting the most reasonable offer– Using purchase orders or petty cash to purchase
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Sealed Bid
Use for construction contracts and to purchase equipment and/or supplies
Process involves– Developing an invitation for bids– Publicly soliciting bids– Opening bids and announcing prices– Reviewing bids in detail– Awarding contract to winning bidder
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Request for Proposal (RFP)
Used when sealed bid not appropriate (for example, consulting services)
Process involves– Announcing and issuing RFP– Opening, reviewing and comparing proposals– If necessary, negotiating with offerors– Requesting and reviewing “best and final” offers– Awarding contract
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Non-Competitive Award
Permitted when award is infeasible under other methods and one of following applies– Item is available from only one source– Emergency situation will not permit delay– HUD authorizes non-competitive proposals
Price or cost analysis and written justification must be in files
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Contracts
Two basic types permitted– Firm fixed price
Agreed upon price, regardless of actual cost
– Cost reimbursement Estimated cost, usually with a ceiling
When using sealed bid method, firm fixed-price contract required
Other methods, use either type
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Bonding and Insurance
For contracts of $100,000 or more, completion assurance required through:– Performance and payment bonds– Deposit of cash escrow– Letters of credit
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Bonding and Insurance
Insurance requirements include– Worker’s compensation and employee liability– Auto insurance for injuries on job site– Comprehensive public liability– Property damage
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Other Contracting Requirements
Minority- and women-owned businesses– MBE and WBE outreach requirements– Must take affirmative steps to use businesses
owned by minorities and women Section 3
– applies to construction contracts– Goals for training and hiring low-income residents
of area– Goals for hiring contractors located in area
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Ethics in Contracting
Conflict of interest requirements apply– 24 CFR 583.330(e)– SHP Monitoring Checklist Exhibit 13 -12, Item 4
Gratuities and kickbacks not allowed Confidential information may not be used for
personal gain Influence peddling not allowed
Numbers Don’t Lie, They Hide
Financial Management for Homeless Grantees
DAY TWO
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Pop Quiz on Day One
3__________________ 6__________________ 8__________________ 8__________________
4__________________
14__________________
100% must equal _____ or ___________________
24 CFR, Part ______ is for governments
24 CFR, Part ______ is for not-for-profits
OMB Circular A-ll0 governs ____________
OMB Circular A-122 outlines ____________
OMB Circular A-133 governs ____________
Extra Credit Question?
Meeting Programmatic Match Requirements
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SHP Match Requirements
Acquisition Rehabilitation New Construction Supportive Services Leasing Operations Administration HMIS
50/50
50/50
50/50
80/20
None
75/25
None
80/20
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SHP Match Sources
Match must be CASH! Must document match as part of the
management of your financial system Must show that match is not being counted
as match for another federal program Must keep source documentation on file for
review when needed
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SHP Match Sources
Rent collected from clients may be counted towards your match requirement
– If the rent is calculated properly and used for HUD eligible activities
Self-Monitoring Checklists, pp. 31 to 35 HUD Notice 96-3: Certain Tenant Rent Calculations
Match can be from another federal source– ESG’s transitional housing program– HOME Program
Match is leverage but not all leverage is match
Team Exercise
Safe House Match Requirements
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HUD Eligible Activities
For Shelter Plus Care, remember:– Housing Assistance is for the term of the grant– Service Match is $1:$1 during the term of the
grant– Service match must be for HUD-eligible activities– Administration is 8% of the grant ( after the
housing assistance)
Calculating Resident Rents
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Rent can be match
Rent can be used for match if :– Properly calculated– Properly documented– Properly used
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Calculating Resident Rents
Grantees may charge participants rent under specific guidelines
Maximum rent (housing expense) is higher of– 30% of monthly adjusted income– 10% of monthly gross income– TANF rent
Utility expenses deducted
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Calculating Rents, cont’d
Annual income from all sources Income exclusions subtracted Adjustments to annual income
– Dependent allowance– Childcare allowance– Disabled assistance allowance– Medical expenses allowance– Elderly/disabled family allowance
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Calculating Rents, cont’d
General Guidelines– Review & document income annually or when
changes occur– Distinguish between employment & training
Employment = incomeTraining = stipends or reimbursements
– Fees for food & services acceptable if reasonable & not paid for by HUD or match already
Team Exercise
Tenant Rent Calculations
Line of Credit Control System (LOCCS)
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Line Of Credit Control System
LOCCS Access Authorization– HUD Form 27054
Banking information– Direct Deposit Form 1199
LOCCS Voucher for Grant Payment – HUD Form 50080
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LOCCS Access
Authorize a staff person for draw downs Maintain security of password
– If a LOCCS password is shared, one can be banned from using LOCCS forever
Access LOCCS to maintain an active password
Approving official – certification
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Direct Deposit
Banking information– Form 1199– Use Your existing bank account or establish a
new account– Submit Form 1199 to HUD Officials
Washington, DC OR Field Office
– Ensure that all banking information is accurate
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LOCCS Payment
Minimize the time elapsing between transfer of funds to recipients from the U.S. Treasury
Advance method– Expend in 3 days
Reimbursement method– No timeframe for reimbursing the general fund
account
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Tracking LOCCS Draw Downs
Cash control register– Track each draw request – Track SNAP funds by grant number and voucher
number– Maintain a cumulative balance of SNAP funds
Uniform Administrative Requirements
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Internal Controls
Combination of polices, procedures, job responsibilities, personnel and records that create accountability in financial system
Ensures funds are used and managed properly
Remember, a small investment early will reap great benefits later
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Internal Control System
Basic elements– Organizational chart– Written delineation of job duties– Accounting policy and procedures– Separation of duties– Hiring policies– Control over assets and documents– Reconciliation of records
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Internal Controls
Hiring competently trained financial personnel
Board authorizing bank accounts and checks
Recording all cash Maintaining pre-numbered
receipts Board signing checks No invoice, no check
Reconciling bank statements monthly
Having timesheets to justify payroll expenses
Recording petty cash Maintaining fireproof storage Maintaining detailed
inventory records Obtaining fidelity Insurance
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Organization Chart
Supervision of employees Lines of authority Communication Delineates responsibility, functions and duties Auditors want it!
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Segregation of Duties
Not having one person in control from inception to final recording
Having independent cross-checking
– SHP Monitoring Checklist, Exhibit 13-8, Item 14
Separating – Operational work from
record-keeping of assets– Asset custody from asset
records– Authorization of asset
purchases from custody and record-keeping
– Purchasing from receiving
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Documenting Time
For employees that work in a single indirect cost activity, document time with a timesheet
For employees that work in a single federal award category, document time with a timesheet and periodic certifications
For employees that work on more than one activity (direct or indirect), document time with timesheets supported by activity records
SHP Monitoring Checklist, Exhibit 13-8, Items 11-13 and 15-17
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Time and Activity Records
Time and activity records– Accordingly to OMB Circular and Parts 84 and 85:
After-the-fact determination of actual activity Signed by individual employee, certified by supervisor Prepared at least monthly
Applies to direct HUD grantees and subgrantees
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Date Date Date Date Date Date Date Total Hours FundingClient or service provided Source
VacationOverheadNon-HUDSickHolidayTOTAL
E m p lo y e e S ig n a t u re
S u p e rvis o r 's C e r t i fi c a t io n
S p e c ia l N o t e s , C o m m e n t s o r E x p la n a t io n s :
Sample Timesheet
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Date Date Date Date Date Date Date Total Hours FundingClient or service provided Mon. Tues. Weds. Thurs. Fri. Sat. Sun. Source1234 2 1 2 1 6 HUD #1Group Session 1 1 1 1 1 5 HHS1239 1 1 2 Casey1241 3 2 5 HUD #11256 1 1 1 1 1 5 HUD #21235 2 2 4 HUD #11255 1 1 2 ESG #11238 1 1 1 3 HUD #1Staff Meeting 2 2 OverheadFundraising Event 1 1 Unrest.1257 3 3 HUD #2
Vacation VacationOverhead OverheadNon-HUD Non-HUDSick 2 2 SickHoliday HolidayTOTAL 8 8 8 8 8 40
E m p lo y e e S ig n a t u re
S u p e rvis o r 's C e r t i fi c a t io n
S p e c ia l N o t e s , C o m m e n t s o r E x p la n a t io n s :
Sample Timesheet
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Types of Activity Sheets
Clients’ case notes Calendars, logs and sign-in sheets Palm pilots Daily, weekly and quarterly reports Products and deliverables What do you use now?
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Basic Cash Controls
Making disbursements with checks, not cash
Pre-listing and recording cash receipts by someone other than depositor
Having subsidiary and control accounts
Using pre-numbered checks
Reconciling bank statements monthly (backed by checks)
Having supporting documentation for checks
Having payroll expenses backed up by timesheets/separate bank account
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Physical Control of Assets
Keeping canceled checks in a safe, fireproof place
Periodically inventorying physical assets
Using a check protector machine vs. individually drafted checks
Using fireproof safes and locked file cabinets
Keeping duplicate records in a safe, secure off-site location
Depositing cash receipts on a daily basis
Budget Controls
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Team Exercise: We Need a Budget
Your team has won the lottery! While you have only won $100, you decide to
celebrate as a group Prepare a celebration budget
that includes– Budget assumptions– Cost estimates– Proposed expenditures
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Budget Controls
Compare and control expenditures– Keep records on budgeted amounts– Compare obligations and expenditures to planned
budgets and accomplishments– Report deviations from budgets and plan
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Developing Budgets
Budget is projection of expenses based on actual experience– Defines goals for a given period of time– 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
Accounting Records
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Accounting Records
Accounting system should include– Chart of accounts– Cash receipts journal– Cash disbursements journal– Payroll journal– General ledger
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Accounting Records
Source documentation required– SHP Monitoring Checklist Exhibit 13-8, Items 1- 4
Also, ensure that program costs were– Incurred for the proper period– Actually paid– Expended on eligible items– Approved by appropriate officials
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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
Cash and Property Management
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Cash Management
Procedures to minimize the time between receipt and disbursement of funds required
Three methods allowed– Reimbursement
Almost all SHP lead agencies use reimbursement
– Cash advance– Working capital
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Property Management
Definitions– Real property is land and improvements– Personal property is other types of property
(supplies and equipment)
SHP Monitoring Checklist 13 -11– Complies with 24 CFR 85.32 and 24 CFR 84.34
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Property Management
General requirements– Property can only be acquired for a specific purpose
Specific requirements– Use must continue for a certain period of time
Remember the SHP 20 year use restriction– Accurate records must be kept
SHP Monitoring Checklist Exhibit 13 -11, Items 1-3– Use should reflect intended purpose– Property can be disposed of only if rules are followed
There are specific requirements for SHP property SHP Monitoring Checklist Exhibit 13 -11, Item 4
Federal Cost Principles
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Cost Principles
Three components to cost principles– Cost reasonableness– Cost allowability– Cost allocation
Applicability– Governmental entities: OMB Circular A-87– Nonprofits: OMB Circular A-122
Also refer to– SHP Monitoring Checklist, Exhibit 13-9
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Determining Costs
Costs are only eligible if they can be associated with an eligible client
Costs are only eligible if they are– Eligible activity under funding program– Delineated in your application submissions and
budgets– Source documented– Reasonable, allowable and allocable
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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 individuals involved
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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 costs in OMB Circular A-122
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Table Talk: Cost Allowability
Which of the following costs are allowable?– Alcohol– Pre-award costs– Writing a Continuum of Care
grant application (fundraising)– Client graduation ceremony
(entertainment)
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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 OR– Necessary to operations
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Allowable vs. Allocable
The real issue with timesheets is not whether the activity is allowable or not…
…BUT whether the time is allocable to the specific grant.
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Table Talk: Allowable vs. Allocable
Under what circumstances could furniture, which is allocable, not be allowable?
Under what circumstances would a computer printer, which is allowable, not be allocable?
Under what circumstance would the case managers’ time, which is reasonable, not be allowable? Not be allocable?
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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… Allocable… They are eligible for federal reimbursement
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Direct and Indirect Costs
Direct costs can be identified with specific program or activity
Indirect costs are incurred for common/joint purpose benefiting more than one program or activity– Administrative salaries– Accounting expenses– Facility maintenance
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Table Talk: Direct vs. Indirect
Assign the following costs as direct or indirect– Staff salaries– Utility costs– Food– Depreciation– Insurance
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What kind of cost is it?
Direct? Indirect?
Eligible? Ineligible?
Allowable? Unallowable?
Allocable? Non-allocable?
Fixed? Variable?
Restricted? Unrestricted?
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Pro-Rating Costs
Required by HUD where full cost is not the actual cost for HUD’s piece
Must always have source documentation
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Pro-Rating Costs
Supportive service costs– Salaries pro-rated based on percentage time– Document with time and activity records reflecting
funding source
Operating expenses– Pro-rate based on percentage of space or time
used– Document with logs, plans, etc.
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Table Talk: Pro-Rating Costs
A case manager works with 30 clients under 3 different funding programs of which 8 clients are associated with this HUD grant
How would you pro-rate the case manager’s time?– Divide the total cost equally among the 3
funding programs– Charge 8/30ths of the cost to this grant– Compare the number of hours spent with
the 8 clients to that spent with all 30 clients– None of the above
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Table Talk: Pro-Rating Costs
Your HUD-funded program is located in the same facility as another program where there is only one utility meter
How would you pro-rate the utility costs?– Divide the cost equally among the 2 programs– Use the percentage of square footage used
by clients– Use the percentage of square footage used
by clients and staff– None of the above
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Cost Eligibility Summary
Costs are eligible if they are reasonable, allowable and allocable
– A cost is only a “cost” if charged to the correct budget line item
– If the client is not eligible, all costs (including administration) associated with that client are ineligible
If a cost is not specifically listed in OMB’s Circular, does that mean that the cost is allowable?
Auditing, Monitoring and Compliance
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Why Do We Need An Audit?
Universally accepted analytical tool– Ratios, standards, disciplined way of viewing numbers
Demonstrates accountability– GAAP, GAGAS, OMB Circular, HUD requirements
Demonstrates proper stewardship– Verifies internal financial controls– Demonstrates board oversight– Independently audited and adequate reporting
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Audits
Federal programs are subject to review or audit
When spending $500,000 or more in federal awards per year, specific rules apply
Grantees and subgrantees must adhere to OMB Circular A-133
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Federal Awards
Federal awards include– Grants, loans and loan guarantees– Direct assistance or appropriations – Property insurance or interest subsidies– Property, food commodities– Cooperative agreements or contracts– Other assistance
But only counts if “expended”
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Type of Audit
Program-specific audit– OK if recipient or subgrantee gets federal funds
from only one source– Involves only looking at that program
Single audit– Required if funds come from more than one
source– Involves looking at all programs and financial
statements
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Auditing Standards
Federal audits performed using Generally Accepted Government Auditing Standards– Financial information correctly presented– Internal controls exercised regarding cash
management, payroll processing, fixed assets and reporting
– Activities in compliance with program requirements
Audit report must address each area
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Compliance Requirements
A federal audit must satisfy 14 compliance requirements– Laws (for example, Davis Bacon)– Regulations covering match, eligibility, etc.– Other grant provisions including subgrantee
monitoring
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Audit Findings
Audit may include findings and questioned costs– Material weakness in internal control– Noncompliance with laws and/or regulations– Questioned costs in excess of $10,000– Fraud affecting federal award– Misrepresentation of prior audit finding
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Qualified Audits
Auditor’s work based on the work of others Uncertainties exist affecting the potential
effect of the audit Serious doubt about organization as an
ongoing concern (bankrupt?) Supplementary information not presented or
inadequate
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Review and Resolution
Audit report must be submitted to HUD within 9 months of audit period and
Submit an A-133 Audit to the Federal Clearinghouse
Grantees and subgrantees must establish system to ensure timely and appropriate resolution to audit findings
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What HUD Looks For
Audits that are “clean”– There are no findings, either financial or
management
Fund accounting applied to segregate HUD’s grants and costs associated with those grants from other funding sources
Costs that are supported with source documentation
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Hiring An Auditor
Many nonprofits need specialized auditor– Multiple funding sources requires fund accounting– Specialized experience with federal programs– Too much emphasis on cost vs. needs– Perception of low-risk of liability for agencies– Failure to recognize the needs of all interested
parties
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Specialized Auditors
Specialized auditors need to know– AICPA’s industry audit and accounting guide– GAO’s Government Auditing Standards manual– Applicable OMB Circulars – Catalogue of Federal Domestic Assistance– HUD’s program guidelines– OMB’s Compliance Supplement
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Selecting The Right Auditor
Use a competitive process with at least 3 bids Issue a request for qualifications (RFQ) that outlines
what you want Separate the technical submission from the cost
quote Issue an engagement letter GAO secondary considerations include
– Financial education and audit experience– An audit committee to handle selection– Detailed policies and procedures
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The Audit Process Is Ongoing
As one audit period ends, another audit period begins
Team Exercise
Family Services Audit Consideration
Annual Progress Reports
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Purpose of APR
Tracks project progress – Help participants obtain and remain in permanent housing– Help participants increase skills and/or income– Help participants achieve greater self-determination
Tool for HUD…and YOU!– Helps to keep your program on track– Gives you information about how the project is doing and
what it is accomplishing– Used to document success for other funders– Used for completing continuum gaps analysis
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Submission Requirements
Each grantee must submit an APR– If grantee does not run the project
Sponsor completes Gives to grantee for submission to HUD
A separate APR submitted for each HUD grant received– Each program component = a project = a
separate APR
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Due Date – Reporting Period
Failure to submit an APR may lead to a delay in receiving future grant funding
Due 90 days after the end of each operating year of your program
What is the operating year?– Trigger date for start and end of grant term– Starts the clock for submission of APR– Trigger varies depending on program and project
activities
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Operating Year
Projects with acquisition, rehabilitation or new construction
– Operating year begins after Obtaining a certificate of occupancy Accepting first client
Other projects– Operating year begins after
Accepting first client LOCCS draw of leasing, supportive services or operating funds
Renewal projects– Specified in grant agreement letter
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Components of APR
Basic information about project and goals Information about participants in project Information about participants leaving project Financial information and match
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APR Part I: Project Progress
No. 1: Projected level of service– At a given point in time show
Number of singles not in families Number of adults in families Number of children in families Number of families
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APR Part I: Project Progress
No. 2: Persons served– Enrolled on first day of operating year– Enrolled any time after the first day– Who left during the operating year– Still enrolled in the program on the last day of the
operating year No. 3: Project capacity No. 4: Non-homeless housed (Section 8 SRO
only)
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APR Part I: Project Progress
– Age– Gender– Race/ethnicity– Primary disability– Prior living situation
– Income change– Income source– Length of stay– Reasons for leaving– Post-project destination
Nos. 5 – 14: Demographic Data Participant information by individual, families and
chronically homeless
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APR Part I: Project Progress
No. 15: Supportive Services– Number of participants receiving discrete
categories of service– Identify those participants receiving services that
are chronically homeless
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APR Part I: Project Progress
No. 16: Goals and objectives– Shows goals and objectives
Current year’s goals and progress Next year’s goals
– Measurable goal for each year as it relates to the overall HUD program goals
Obtain and remain in permanent housing Increase skills and income Achieve greater self-determination
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APR Part I: Project Progress
No. 17: Number of beds– SHP (not completed for SSO projects)
Number of beds – Current Level Number of beds – New Effort New Effort beds in place at the end of operating year
– Shelter Plus Care Number of beds Number of dwelling units
– Section 8 SRO Number of dwelling units
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APR Part II: Financial Information
No. 18: Supportive Service– SHP funded services
Amount of SHP funds spent during operating year For discrete services outlined in application and technical
submission– S+C projects
Amount of funding from other sources Spent on services by discrete categories
– SRO projects Estimates percentage of clients who use discrete service
categories Funded outside of SRO program
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APR Part II: Financial Information
For S+C service match– 14 categories of eligible services– Match is overall
Not year-by-year Each client need not receive the same amount of
services as rental assistance.
– Examples of match [582.110] Volunteer time at $10 per hour Actual salaries paid to staff that provide services Value of lease on service facility
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APR Part II: Financial Information
No. 19: SHP leasing, supportive services, operating costs, HMIS, and administration
– Tracks SHP expenditures SHP funds drawn down during the year Cash match (by activity) Total expenditures
– Tracks sources of cash match Cash only! (no in-kind contributions, etc.) Required match varies by activity
Keep documentation on file– SHP expenditures and cash match– No regulatory guidance outside of OMB Circulars
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APR Part II: Financial Information
No. 20: SHP acquisition, rehabilitation, and new construction
– Tracks SHP expenditures Fill out in year-1 only SHP funds drawn down during the year Cash match (by activity) Total expenditures
– Tracks sources of cash match Match is $1 for $1
Keep documentation on file
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APR Part II: Financial Information
No. 21: SHP HMIS activities– Shows how SHP funds for HMIS activities were
spent during year Equipment Software Services Personnel Space and operations
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APR Part II: Problems, Changes, and Technical Assistance Request
Open-ended questions – Describe problems or changes– Solicit information on
Need for technical assistance Ways HUD could improve service Self-reflection on project improvement
Chance to give important feedback! Establish HUD relationship
Grant Amendments and Mergers
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Technical Submission
Technical submission is your contract If an activity is not specified in the technical
submission, it is not eligible Strengthening the technical submission
– Site control (within 1 year of award letter)– Restrictive covenants for 20 year use– Match raised (evidence of first year in hand)
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Spending Down the Grant
Timeliness! Timeliness! Timeliness!
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Grant Amendments
Program changes during grant term Scope of changes
– Significant– Minor
HUD involvement and approval– Informed (minor)– Review and approval (significant)
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Scope of Changes
Significant changes– Departure from application– And substantially affects implementation– HUD approval required and amended grant agreement
Minor changes– Departures from application– But does not substantially affect implementation– No HUD approval or amended grant agreement– Must document change
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Examples of Significant Changes
Substantial amendment needed when– New grantee or name change– Change in project site– Change in project activities– Shift over 10% of funds from one activity to
another (cumulative)– Change in population or number of participants
served
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HUD Approval
Written request to field office with revised application– Letter– Revised application exhibit(s)– If applicable, new ConPlan certification
Field office approval and amendment of grant agreements
Application must remain competitive Reduced rating requires HQ’s approval
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Reduced Rating Examples
“Lower quality” – Housing and/or services lower quality than
originally funded– Less experienced provider– Innovative features eliminated– Cost effectiveness reduced– Site moved to area of less need
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Recapture of Funds
Whole grants or portion of grants Used to fund additional projects next year Reasons
– Lack of site control– Slow expenditure of funds– Noncompliance with grant agreement– Unspent or surplus funds
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Recapture of Funds
Lack of site control– Must obtain within 1 year of award notification– Statutory (cannot be waived)– Exception where site control lost (rare)
Slow expenditure of funds– Acquisition, rehabilitation or new construction must begin
within 3 months OR residents must begin occupancy within 9 months of agreement
– Leasing, operating or supportive services must begin within 3 months of availability
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Recapture of Funds
Noncompliance with grant agreement– Any instance of default– Factors beyond grantee’s control considered
Unspent funds– During grant term– Costs are less than anticipated– Funds may be shifted to other activities or carried forward
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Recapture of Funds
Surplus funds– Upon expiration of grant– Unspent funds – Unless term extension received or final draw-
down is pending
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Merging SHP Grants
Under certain conditions, grants may be merged Applies to grantees with 2 or more grants that meet
criteria– Grants must be the same component – Grants must have same period (expiration)– Instructions included in SHP operating instructions
Shelter Plus Care grants may also be merged
Financial Statements and Analysis
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What is Financial Analysis?
Tool to analyze financial information in a systematic manner
Quantify one’s financial questions “An art, not a science” Using standard ratios and measures Language of lenders and investors
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The Process of Financial Analysis
“Spreading the numbers” Reviewing basic credit questions
– Is the organization liquid?– Is the organization profitable?– Is there adequate cash flow to operate?
Preparing follow-up questions Calculating and analyzing ratios
– Compare this organization to others Trend analysis
– The key is getting better
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Documents to Review
Three years of financial statements
– Revenue and Expenses– Balance Sheets– Cash Flow Statements– Corporate tax returns– Bank statements
Why 3 years?
Projected financial statements for the next3 to 5 years
Interim financial statements
– Depending on the timing of the yearly statements
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Fund Accounting
Fund accounting matches sources and uses of funds for each funding sources
Without fund accounting, you cannot truly analyze the revenues and expenses of a specific funding source
Applies the principles of financial analysis to each funding source
Introduction to Financial Statements
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Financial Statements
Balance sheet– What an organization owns (assets) – What an organization owes (liabilities)
Income statement– Revenue– Expenses– Revenue in excess of expenses (profit)
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Notes to Financial Statements
Provides extra detail about the information in the financial statements– Terms and conditions of financing, leases, etc.– Loans to staff and officers– Collection and payment terms– Inter-fund transfers– Valuation of assets– Outstanding receivables (grants)– Pending litigation or contingent liabilities
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Forms of Financial Statements
In-house financial statements– Prepared internally by organization – Used for day-to-day operations
Compiled financial statements– Auditor takes information from organization and compiles it
into proper format– Only as good as information provided by organization– Auditor does not test information– Least expensive independently prepared
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Forms of Financial Statements
Reviewed financial statements– Auditor reviews information provided by organization– Provides limited verification– Key tests completed to validate information
Audited financial statements– Auditor evaluates all aspects of organization’s finances– Verifies assets, debt, other obligations and liabilities– Most thorough and expensive
Session Ten:Numbers Don’t Lie, They Hide
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Operating Cycles
Purchasing Inventory
Collecting Receivables
Paying Others
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Grantee’s Operating Cycle
Even not-for-profits have an operating cycle and a need for working capital
“Seasonality” – timing is everything Investing in fixed vs. variable expenses
– Fixed expenses drive up the need to raise revenues on a regular basis
Don’t buy stuff until you need it– Lease now, buy later– Collect now, pay on time
Grants are not cash until collected
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Team Exercise: Rehab, Inc.
Analyze the finances of a typical SHP grantee using the BIG 4!
Final Thoughts
What Should I Remember When I Get Back Home?
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Top Ten of Financial Management
Numbers don’t lie, they hide Only CASH pays the bills Pledges (and grants) are not cash until they
are collected Always match sources and uses of funds Even nonprofits have an operating cycle and
a need for working capital
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Top Ten of Financial Management
Fixed expenses drive up breakeven and the need to raise more funds
Lease now, buy later! Collect now, pay on terms!
Price your services to pay yourself It is not someone else’s responsibility (not
the bank, the accountant or the funder) “What’s love got to do with it?”
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Wrap Up
Cleaning out the bin Evaluations Climate check Who you gonna’ call?
– Lead Agency– HUD– TDA
Have a safe journey!
Training & Development Associates
131 Atkinson Street, Suite BLaurinburg, North Carolina 28352(910) 277-1275(910) 277-2816 Faxwww.TDAinc.org