YouthBuild

Financial Management

DOL Requirements

• DOL adapted OMB Circular A -102 under 29 CFR Part 97– States follow their own policies and procedures as long as they

are consistent with federal requirements

• DOL adapted OMB Circular A-110 under 29 CFR Part 95

• DOL continues to apply the requirements of 29 CFR Parts 95 and 97 until 2 CFR part 215 becomes final

Department of Labor - ETA GranteesApplicable OMB Circulars and Federal Regulations

OMB Circulars DOL Regulations

Nature of Grantee/Subgrantee

Federal Audit Requirement

s

Federal Cost Principles

Uniform Administrative Requirements

UniformAdministrative Requirements

State/Local, & Indian Tribal Governments

A-133Revised 6/27/03

(effective 12/31/03)

A-87Revised

05/10/04

A-102Amended8/29/97

29 CFR Part 97.20

Institutions of Higher Education

A-21Revised05/10/04

A-110Amended9/30/99

Republished as 2 CFR Part 215

5/11/04

29 CFR Part 95.21

Non-Profits A-122Amended 05/10/04

Hospitals 45 CFR Part 74

For-Profits Per program or grant

agreement

48 CFR Part 31(FAR)

Per program or grant agreement

All Financial SystemsMust Adhere to 7 separate standards

• 1. Financial reporting– System must permit preparation of Federal

financial reports– Must report accruals

• 2. Accounting records– Adequately identify grant funds

• Awards, obligations, assets, liabilities, income and expenditures

– Supported by source documentation– Must be maintained in accordance with GAAP

Financial Standards

• 3. Internal controls– System to protect integrity of funds– Accountability for cash, property & other

assets

• 4. Budget controls– Comparison of actual expenditures (outlays)

to approved budget plan– Compliance with line item requirements– Prevents overspending

More Financial Standards

• 5. Allowable costs– Only allowable costs charged– Only allocable costs charged

• 6. Source documentation– Costs must trace to authorizing document– Proof that costs are allowable & allocable

• 7. Cash management– System to control cash assets

The Four Main Cost Principles

• OMB A-21 Educational Institutions

• OMB A-87 State/Local Governments and Indian Tribes

• OMB A-122 Non-profit Organizations

• 48 CFR 31 Contract Cost Principles and Procedures dealing with Commercial Organizations

Federal Cost Principles

• Purpose – provides that the Federal government bears its fair share of costs except where restricted or prohibited by law– Reasonable & Necessary

• “Prudent Person Rule”

– Allocable• Clearly benefit program• Both direct & indirect costs

Factors Affecting Allowability of Costs

• Authorized or not prohibited

• Consistent with the Federal Rules & Circulars

• Consistent treatment– Across time & program lines– Direct & indirect costs

Allowability

• Not used as match– Unless specifically authorized

• Documented– Traceable to source documentation

• Consistent with GAAP– Accounting standards & treatment

Allowability

• Conform to limitations/exclusions contained in the cost principles

• Net of applicable credits

Allowable Costs

• Associated Real Property Costs

– Rehabilitation of existing structure

– Construction of building.

• Architectural Fees

– Proportionate share

• On-site Training supervisor

• Construction Management

Allowable Costs

• Participant Costs– Payments for work related activities

• Davis-Bacon Act

– Trainees Tools and Clothing– Stipends– Supportive Services– Benefit Costs

Allowable with Conditions

• Examples– Personal services– Advertising of program/grant only– Equipment (with prior approval)– Operating leases for real property– Memberships

• Prior Approval– Needed BEFORE incurring cost– May exist in grant agreement

Unallowable costs

• Acquisition cost for land and building

• Brokerage Fees

• Losses, fines & penalties

• Contingency reserves

• Donations and contributions

Unallowable

• Alcoholic beverages

• Goodwill

• Lobbying

• Legal expenses for prosecution of claims, ALJ audit appeals or civil actions

• Entertainment – Allowable for certain WIA Youth recreation

activities

Direct and Indirect Costs

• Identify costs that are direct and indirect:• Direct Costs – any costs that can be directly

identified with a specific grant• Indirect Costs – any costs shared among

multiple programs for which a definitive amount can not be directly attributed to a specific grant

• Direct and indirect costs can be either administrative or program costs

Direct and Indirect Costs

• For example:• Direct costs – Informational System costs for a

specific grant:• Administrative: all costs directly related to financial recording

and reporting• Program: all costs directly related to performance tracking

and reporting

• Indirect costs – Equipment maintenance and operational costs for an office working with multiple programs

• Administrative: general office copiers and printers• Program: motor vehicles used for transporting participants

Indirect Costs/Rate

• Costs that are not readily identified with a particular cost objective.

• May be defined as a % of base such as salaries but never the total federal grant award

• Always indirect but may include program costs

Limitations

• PL 109-234 – $172,200

• Administrative Costs– 15%

• Community and Public Facilities– 10%

PL 109-234

• Applies to all ETA appropriated funds– All grants, contracts and interagency

agreements

• Limits salary and bonus payments to individuals

• Implementation guidance in TEGL 5-06

Who is covered?

• Individuals paid with ETA appropriated funds

• Direct recipients and all subrecipients

• Direct costs

• Costs paid through an Indirect Cost Rate

• Vendors are not subject to limitation

Sub-recipients & Vendors

• Sub-recipients & vendors can:– Receive funds directly from a Federal agency – Receive funds through a sub-award or pass-

thru from a grantee

• Difference between sub-recipients & vendors is:– Critical in determination of applicable Federal

grant management requirements & rules• Sub-recipients must follow such rules & vendors

do not

What is subject to limitation?

• Covered individuals– Anyone receiving wages or bonus payments from

sub-recipients from ETA appropriations

• Salaries paid at a specific rate• Bonus payments paid to the individual• Exclusions

– Fringe benefits– Non-monetary compensation such as a car

Salaries

• Wages paid to an individual in accordance with IRS instructions– Included in W-2– Full Time RATE not exceed Executive Level II– 2007 maximum is $168,000– 2008 maximum is $172,200– Adjusted annually by OPM

• Expressed as annual or hourly amount

• Calendar year basis – IRS definition

Bonuses

• Included in IRS form W-2– Reported as income on form 1040

• Includes monetary awards, bonus payments, and monetary prizes

• Calendar year application – same as salaries

• Excludes non-monetary compensation and corporate profit

Profits and Profit Sharing

• Corporate profits paid on per share basis that have required investment are excluded

• Profit sharing, when part of personnel policies, as supplement to salary are included

• Sole proprietor or partnership– Income realized on Schedule C or E, IRS

Form 1040

Other Considerations

• Salaries paid by multiple fund sources must be allocated and calculated accordingly

• Salaries paid through indirect cost rates must be calculated accordingly

Administrative Limitations

• 20 CFR 672.505(a)

• No more than 15% of grant award

Administration Costs (WIA Definition)

• 20 CFR 667.220 – applies to all grants and programs receiving WIA Title 1 funds

• Allocable portion of necessary and reasonable costs that are not related to direct provisions of workforce services

• Coordination of and provision of general administrative functions (continued)

Administration Costs (WIA Definition)

• Financial and cash management

• Procurement and purchasing

• Personnel and property management

• Payroll, audit and general legal services

• Oversight and monitoring activities

• Costs of information systems related to administrative functions

Administration Costs (WIA Definition)

Awards or contracts solely for the performance of administrative functions i.e. a contract to a CPA firm to perform financial

monitoring of subrecipients

Allocating costs of personnel who performs both administrative and program services such as: Salaries for executive staff Travel for program or administrative purposes

Administration Costs

Total expenditures equals All program costs which includes:

All direct and indirect costs not defined as administrative expenditures

Plus

All administrative costs which includes: All direct and indirect costs identified as

administrative expenditures

Community and Public Facilities

• Maximum 10% of grant award– Supervision and Training Costs– Rehabilitation or construction of public or

community facilities

Budgets

Standard Form (SF)-424A

Initial and Modification

SF-424A

Standardized form Approved by OMB Used by all Federal agencies

Handout

SF-424A

• Section A – Budget summary

• Section B – Budget categories

• Section C – Non-Federal resources

• Section D – Cash needs

• Section E – Future funding

• Section F – Other budget information

Keep Needs in Mind

• Administrative costs

• Program costs

• Direct costs

• Indirect costs

• Cost allocation plan

Section B – Budget Categories

(a) Personnel (f)Contractual

(b) Fringe Benefits (g) Construction

(c) Travel (h) Other

(d) Equipment (j) Indirect Costs

(e) Supplies

YouthBuild Cost Items

• Which category?– Tools– Equipment– Construction Supplies – Construction– Architectural Fees

Budget Narrative

• Clearly written narrative

• Links appropriate resources to meet project objectives

• Budget in line with resources requested

• Qualifications of key staff sufficient to assure proper direction, management and completion of the project

Why Do We Track Costs?

• Is the grant “on-track” financially

• Is there a potential need for a modification

• Are costs proportionate to outcomes

• Is match generated as required

• Are budget controls in place and followed– Financial management standards

Budget Modification

• Submit to Grant Officer in writing• Any changes to

– Salaries – Fringe benefits– Indirect costs

• Changes to all other budget categories– Resulting in an increase or decrease by 20

percent or more

Budget Modification

• Complete the worksheets– Documents the need for change

• Revise the SF-424A– Reflects new totals– Incorporates all changes

• Revise the budget narrative

• Submit to the FPO

Resources

• Where to find the OMB Circulars and Code of Federal Regulations

• OMB Circulars:

www.whitehouse.gov/omb/circulars/index.html

• 29 & 48 CFR:

www.access.gpo.gov

Questions