Post on 16-Dec-2015
transcript
CPA & Advisory Services
Beyond Your Numbers
Keys to Successful Financial Management of Grant & Contribution
Funding
Scott W. Gold, CPA
BKD, LLP
October 12, 2006
Beyond Your Numbers
Today’s Agenda
Grants and contributions defined Contents of the grant/contribution file Tracking revenues and expenditures Cash draw procedures Proper financial accounting treatment Compliance and reporting Financial status report issues Strategic planning opportunities
CPA & Advisory Services
Beyond Your Numbers
Grants and Contributions Defined
Beyond Your Numbers
Grants vs Contributions
Exchange vs Non-exchange transactions Guidance in FASB No 116 on distinguishing
contributions from other transactions Generally governmental funding awards are
considered exchange transactions (grants), however there are exceptions
The first step is to determine grant vs contribution for all types of awards you have
Beyond Your Numbers
Grants vs Contributions
Get it in writing Notice of Award Letter from Donor
Importance of the original source of the funding Inquiry to knowledgeable person
Grants defined Federal State Local government
Beyond Your Numbers
Grants vs Contributions
Contributions defined Private source foundations
• Many private foundations use the term “grant” in their agreements
Donors Why do we care about the distinction?
Proper accounting Restrictions on use of funds
CPA & Advisory Services
Beyond Your Numbers
Contents of the Grant/Contribution File
Beyond Your Numbers
Documentation is King
It is important to maintain detailed files for each grant or contribution your organization receives
These files should be maintained for at least three years after the acceptance of the award
It is important to be able to identify specific expenditures that were charged to each grant or contribution
Beyond Your Numbers
Contents of File
Copy of original signed application, if applicableNotice of grant/contribution award (all copies, all
pages)Copies of all correspondence Copies of required reporting (UDS, FSR, other)Copy of audited financial statementsDetail record of all revenues and expenditures
(including inventory of fixed assets purchased)
CPA & Advisory Services
Beyond Your Numbers
Tracking Grant Revenues and Expenditures
Beyond Your Numbers
General Ledger Maintenance
Multiple grants should be tracked independently Tracking for grants with specific restrictions
• Important to ensure that enough specific expenditures have been incurred to justify grant funding
• Consider if indirect costs can be allocated
Tracking for grants that have similar purposes (“double-dipping” issue)
CPA & Advisory Services
Beyond Your Numbers
Cash Draw Down Procedures
Beyond Your Numbers
Grant Draw Processes & Procedures
Important to establish consistent methodology for conducting grant draws
Advance drawing of grants is generally negative absent a unique financial situation
Federal CHC grant is a reimbursement grant Grant funds must be expended within 3 business days
of federal cash receipt Grant funds requested must be supported by known
incurred expenditures
Beyond Your Numbers
Contribution Cash Processes & Procedures
Advance basis Cash is restricted until used for specific purpose
Reimbursement basis Submission of expenditures for reimbursement
CPA & Advisory Services
Beyond Your Numbers
Proper Financial Accounting Treatment
Beyond Your Numbers
Revenue & Expenditure Recognition
Revenue should be recognized only as qualified expenditures are incurred
Grant funds drawn in advance of qualified expenditures is recorded as deferred revenue (liability)
Contribution revenue received in advance is recorded as temporarily restricted net assets (equity)
Beyond Your Numbers
Revenue & Expenditure Recognition
Expenditures include operating expenses, capital asset transactions & other
OMB Circular A-122 rules only apply to federal cash expenditures
Beyond Your Numbers
Accounts Receivable and Cash Recording
Restricted Cash when received in advanceGrants receivable booked when
expenditures have been incurred before cash receipt
Contribution receivable booked when promise is made
Beyond Your Numbers
Grant Example
We have received a federal grant for HIV. Revenue and expenditure recognition:
At the time the expenditure is incurred• Debit expense or capital asset• Credit accounts payable or cash• Debit grants receivable if cash has not yet been drawn or
deferred revenue if cash was drawn in advance• Credit grant revenue
At the receipt of the cash• Debit cash• Credit grants receivable if expenditure has been made or
deferred revenue if drawn in advance
Beyond Your Numbers
Contribution Example
We have received a grant from a private source foundation for a restricted purpose
Revenue and expenditure recognition: At the time of the notice of award
• Debit contribution receivable• Credit temporarily restricted net assets
At the time of the expenditure is incurred• Debit expense or capital asset• Credit accounts payable or cash• Debit temporarily restricted net assets (TRNA)• Credit TRNA released from restriction (contribution revenue)
At the receipt of the cash• Debit cash• Credit grants receivable
Beyond Your Numbers
Contribution Example
What if the private source contribution is unrestricted? Implied restriction of time until it is
expended Same accounting as for restricted
contribution (previous example) Many times contributions are received and
expended in the same fiscal period
CPA & Advisory Services
Beyond Your Numbers
Compliance and Reporting
Beyond Your Numbers
PIN 98-23
Financial System Expectations Accounting & Internal Controls Budget Billing & Collections Independent Financial Audit
Beyond Your Numbers
Budget
Reflects the level & scope of services to be provided within the constraints of the health center’s resources
Should reflect available resources & required expenditures
Should be approved by the health center’s governing body
Particular emphasis on health center revenue streams
Beyond Your Numbers
Grant Funds:No Strings Attached?
If you accept the grant, accept the rules It is the responsibility of health center
management to understand the set of rules that accompanies each grant award
Noncompliance with any grant rules could result in significant risk to those with fiduciary responsibilities at the health center
Beyond Your Numbers
Applicable Rules & Regulations
Governing federal regulations - most of which are available on the internet OMB Circulars A-110, A-122 & A-133
• A-110 - Management of federal grant funds• A-122 - Cost principles• A-133 - Audit requirements
Section 330 of the Public Health Services Act Code of Federal Regulations Policy Information Notices (PIN) & Program Assistance
Letters (PAL)
Beyond Your Numbers
Scope of Project
Important to know what activities are included & excluded from your scope of project as defined by the BPHC
Changes in the scope of project should be communicated to & approved by the BPHC in writing
Important to designate management level position to monitor compliance
Beyond Your Numbers
Scope of Project
Risks of not including qualified health center activities in the scope of project FTCA Coverage Medicare & Medicaid FQHC reimbursement Pharmacy benefits Other
Beyond Your Numbers
Grant Reporting
Required reports to be filed under the community health center grant include: FSR (annually) UDS (annually) Federal Cash Transactions Report (quarterly) Other
Federal reporting accomplished through submission of an annual FSR
CPA & Advisory Services
Beyond Your Numbers
Financial Status Report (FSR) Issues
Beyond Your Numbers
FSR – A General Overview
The FSR is an official claim of expenditures submitted to the federal granting agency
It is a comprehensive report of all financial transactions relative to the approved project
It identifies allowable total outlays & the revenue sources utilized to satisfy such outlays
Beyond Your Numbers
FSR – A General Overview
Upon completion, the amount, if any, of unobligated federal grant funds, and/or undisbursed (“excess”) program income will be determined
Section 330 programs are generally “last dollar” programs - necessary to understand & monitor spending order of health center funds
Beyond Your Numbers
FSR Terminology
Total outlaysProgram IncomeState, local & other operational fundingUnobligated balance of federal grant fundsUndisbursed (“excess”) program income
Beyond Your Numbers
Total Outlays
Total outlays represent expenditures incurred for the budget period prepared on the “modified” accrual basis of accounting
Generally begins with total expenses reported in the audited financial statements on the “full” accrual basis of accounting
Reconciliation from “full” to “modified” accrual basis is required
Beyond Your Numbers
Program Income
Represents the amount of fees, premiums & third-party reimbursements accrued from health center operations during the budget period
Generally, will be net patient service revenue less provision for bad debts
Comparison will be made to expected program income included on the NGA
Beyond Your Numbers
State, Local & Other Operational Funding
Represents all resources from the approved project that are not program income or Section 330 federal grant funds
Resources from state, local & other sources (other than net patient service revenue) that are not designated for the approved project may be excluded from the FSR
Beyond Your Numbers
Unobligated Balance of Federal Funds
Represents grant funds authorized for the budget period not required to satisfy allowable outlays (unspent grant funds)
What should I do if this situation occurs?
Beyond Your Numbers
Undisbursed (“Excess”) Program Income
Represents the amount of fees, premiums & third-party reimbursements, after adjustments for uncollectible accounts, which exceeds the amount of expected program income identified on the NGA
What implication does this have for my health center?
Beyond Your Numbers
FSR Issues
Appropriate budgeting of program income is critical (best advice - be realistic, but conservative)
Interim planning is important for management of program revenues
Financial statement audit should reconcile with the FSR
Beyond Your Numbers
FSR Example
ABC Community Health Center Total allowable outlays = $7,000,000 Program income = $4,000,000 Budgeted program income = $3,000,000 Other sources of revenue = $1,000,000 Federal CHC grant = $3,000,000
In above circumstance, ABC CHC would have excess program income of $1,000,000 & $0 of unobligated federal funds
Beyond Your Numbers
FSR Example
ABC Community Health Center Total allowable outlays = $7,000,000 Program income = $4,000,000 Budgeted program income = $4,000,000 Other sources of revenue = $1,000,000 Federal CHC grant = $3,000,000
In above circumstance, ABC CHC would have excess program income of $0 & $1,000,000 of unobligated federal funds
Beyond Your Numbers
FSR Issues
Strategies for avoiding unobligated federal funds Establishment of authorized reserve funds Accurate assessment of net realizable value of
accounts receivable Accurate recording of cost report settlements Accrual of expenses in accordance with generally
accepted accounting principles Prepayment of known recurring non-salary costs
CPA & Advisory Services
Beyond Your Numbers
Strategic Planning Opportunities
Beyond Your Numbers
Current Financial Issues
Increased pressure to grow & expand services without increasing reimbursements
Increased scrutiny of financial results by the federal granting agency & other external users of audited financial statements Recent BPHC focus on current ratio, use of
federal grant money & overall health center financial viability
The President’s initiative is over – now what?
Beyond Your Numbers
Current Financial Issues
Increased tightening of state budgets resulting in reduced services and/or payments
Strategic financial planning is now more important than ever before
Beyond Your Numbers
Opportunities
What do we want funded? Current operations - Expanded services - Defined service
• Medical, Dental, Mental Health, Pharmacy Capital needs
Beyond Your Numbers
Opportunities
Would we do this without the funding?Will the money continue into the future?Are there other revenue streams generated by
the funded activity?The compliance trap and opportunity costSeek funding with less restrictions
CPA & Advisory Services
Beyond Your Numbers
Best Wishes for Financial Success for Your Health Center!
sgold@bkd.com,
BKD, LLP
417 865-8701