Numbers Don't Lie, They Hide

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”


133

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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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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– 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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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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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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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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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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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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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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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

Economy & Finance

Numbers Don't Lie, They Hide