Financial and Grants Management Institute - March 18-20, Developing and Managing Your Budget

Financial and Grants Management Institute - March 18-20, Session Objectives 1.Identify costs attributable to your grant 2.Provide participants with tools and resources to create an effective grant budget 3.Provide guidance for managing grant budget effectively once it is created

Financial and Grants Management Institute - March 18-20, Cost Principles Used to determine the allowable costs incurred by organizations under grants or contracts. Principles are designed so that federal awards bear their fair share of the cost. Information about factors that affect allowability and information about reasonable, necessary, and allocable costs. There is a list of selected costs that are specifically addressed.

Financial and Grants Management Institute - March 18-20, Cost Principles Provide guidance about reimbursement requirements Provide uniform standards of allowability and allocation Encourage consistent treatment of costs Define reasonable costs

Financial and Grants Management Institute - March 18-20, Reasonable Costs A cost is reasonable if it does not exceed that which would be incurred by a “prudent person” under the circumstances prevailing at the time the decision was made to incur the costs. The question of the reasonableness of specific costs must be scrutinized with particular care in connection with organizations or divisions which receive the preponderance of their support from awards made by Federal agencies.

Financial and Grants Management Institute - March 18-20, Cost Principles Examples of costs described in Circular: Advertising and public relations costs Compensation for personal services Memberships, subscriptions, and professional activity costs Recruiting costs Rental costs Training and education costs Travel costs

Financial and Grants Management Institute - March 18-20, Factors Affecting Allowability of Costs To be allowable under an award, costs must meet the following general criteria: Be reasonable, ordinary, necessary and allocable under OMB principles. Conform to any limitations set forth in OMB principles and in the award as to types or amount of cost items. Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the organization. Be accorded consistent treatment. Be determined in accordance with Generally Accepted Accounting Principles (GAAP). Not be included as a cost or used to meet cost sharing or matching requirements of any other Federally-financed program. Be adequately documented.

Financial and Grants Management Institute - March 18-20, Key Elements of Costs Allowable –Conform to any limitation or exclusion set forth in the OMB Cost Principle Circulars/Code of Federal Regulations or in the award as to types or amount of cost items. –Be determined in accordance with Generally Accepted Accounting Principles (GAAP) Allocable –A cost is allocable to a particular cost objective, such as a grant, contract, project, service, or other activity, in accordance with the relative benefits received. –A cost is allocable to a Federal award if it is treated consistently with other costs incurred for the same purpose in like circumstances

Financial and Grants Management Institute - March 18-20, Key Elements of Costs Reasonable –A cost is reasonable if, in its nature or amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the costs Necessary –The cost is of a type generally recognized as ordinary and necessary for the operation of the organization or the performance of the award

Financial and Grants Management Institute - March 18-20, Revised Grant Guidelines Federal Grant Guidelines Universities States, Local, Indian Tribal Governments Non-ProfitsHospitals Administrative Requirements § 45 CFR 2543 § 2 CFR 215 (formerly A-110) § 45 CFR 2541 OMB A-102 § 45 CFR 2543 § 2 CFR 215 (formerly A-110) § 45 CFR 2543 § 2 CFR 215 (formerly A-110) Cost Principles § 2 CFR 220 (formerly A-21) § 2 CFR 225 (formerly A-87) § 2 CFR 230 (formerly A-122) § 45 CFR 74 (HHS regulations) Audit Requirements * OMB A-133 Notes: CFR = Code of Federal Regulations * = Organization is subject to A-133 if it expends more than $500,000 in Federal funds in its fiscal year Effective May 11, 2004 and August 31, 2005

Financial and Grants Management Institute - March 18-20, Budgeting – The BIG Picture

Financial and Grants Management Institute - March 18-20, Managing The Budget Process What is a Budget? –A financial blueprint projecting expenditures for the grant award period, e.g. six months; one year; three years; etc. Uses: –Management oversight –Fundraising –Accountability –Forecasting

Financial and Grants Management Institute - March 18-20, Summary: How Budgets Fit into the Big Picture Budgets impact every stage of the grant lifecycle Budgets can not be an afterthought Budget formulation is a known challenge to applicants Knowing how to form a quality budget is a critical skill

Financial and Grants Management Institute - March 18-20, Budget Design Has Impact at Every Stage of the Grant Lifecycle To plan what is necessary for success To establish realistic scope To ensure you’ve covered the details To compete for funds To keep your partners compliant To reflect on how you’ve complied with rules To guide your staff as they execute the program To define what’s expected and approved To reflect upon your performance Tip: Involve budget and finance staff in project planning from the beginning and thereafter

Financial and Grants Management Institute - March 18-20, Good budget planning makes things happening the way they are supposed to happen… Negotiation APPLICANT CORPORATION Award Application Continuation Applications Closeout Reports Continuation Awards Clarification Questions How much do we need?

Financial and Grants Management Institute - March 18-20, What are some of the impacts of a poorly planned budget? FLIP CHART LIST Delayed award… Post-award amendments …

Financial and Grants Management Institute - March 18-20, As an applicant/grantee, what is on your mind when you are faced with submitting a grant budget? How much can I ask for? … How much information do t hey need?... … How much can I ask for? … How much information do t hey need?... … FLIP CHART LIST

Financial and Grants Management Institute - March 18-20, What are some typical budget development problems you have run into? Unclear directions/instructions… Limited space for answers… … Unclear directions/instructions… Limited space for answers… … FLIP CHART LIST

Financial and Grants Management Institute - March 18-20, AmeriCorps Budgeting – What Do I Need to Know?

Financial and Grants Management Institute - March 18-20, Grant Specific Functions of an AmeriCorps Budget Becomes part of the grantee’s contractual obligation Serves as a blueprint for the activities supported under the grant Helps ensure conformance to provisions and regulatory restrictions Used to monitor and measure progress towards meeting matching requirements Used to monitor and compare to budget to actual expenses

Financial and Grants Management Institute - March 18-20, Costs Types Why know the difference between the two kinds of costs? –Cost characteristics to properly classify expenses Cost Types: –Direct costs that correlate with the program and its objectives, such as: –Member support –Training –Indirect costs, also known as administrative costs, are costs to operate the organization, not directly or easily attributable to the program/project

Financial and Grants Management Institute - March 18-20, Direct Costs Costs that are directly attributable to meeting the goals and objectives of the programs. They include: Allowable, direct charges for members Costs for staff who train, recruit or supervise members Member gear Costs for independent program evaluations Costs for travel

Financial and Grants Management Institute - March 18-20, Administrative Costs Administrative costs are general or centralized expenses of overall administration of an organization that receives assistance from CNCS. Include items such as: Accounting, auditing, general legal service Costs for internal evaluation General liability insurance Salaries & benefits related to general organizational management and support

Financial and Grants Management Institute - March 18-20, CNCS Budgets Overall Budget Checks Are matching requirements being met Graduated matching requirement based on number of years program has operated Cost per member service year Consistent numbers of members, slots

Financial and Grants Management Institute - March 18-20, Match Requirements As part of the Corporation’s 2008 appropriations, Congress changed the requirements for matching AmeriCorps grants. In general, the new requirements will apply to the grants that were submitted in January of In most cases, programs funded in 2007 or earlier (and which do not receive 2008 funding) must continue to meet the 15% and 33% match requirements.

Financial and Grants Management Institute - March 18-20, Essence of an AmeriCorps Budget Budget is broken down by three sections –Section I: Program Operating Costs –Section II: Member Costs –Section III: Administrative Costs Multiple funding sources: Federal funds (CNCS) and matching funds (state, local and private) (subgrantees)

Financial and Grants Management Institute - March 18-20, AmeriCorps Budget Structure Section I: Program Operating Costs Personnel Personnel Fringe Benefits Staff Travel Member Travel Equipment Supplies Member Training Evaluation Other Federal Share (CNCS) for Section I cannot exceed 67%

Financial and Grants Management Institute - March 18-20, AmeriCorps Budget Structure Section II: Member Costs Living Allowance Member Support Costs – FICA – Worker’s Compensation – Health Care Subgrantee’s matching contributions for member costs, excluding health care, must be in non-federal monies, unless otherwise authorized

Financial and Grants Management Institute - March 18-20, AmeriCorps Budget Structure Section III: Indirect or Administrative Costs Two methods to recover administrative costs: – Organization has an approved federally negotiated indirect cost rate  Requires approval from Federal Government – Grantee share is limited to 5% of Corporation’s share of actual expenses and the difference is allowable as match Organization uses fixed five percent rule – Requires approval by Corporation – Grantee match for administrative funds may not exceed 10% of all direct expenditures

Financial and Grants Management Institute - March 18-20, Budget Monitoring

Financial and Grants Management Institute - March 18-20, What Are Budget Controls Reviews of budget to actual expenses regularly to avoid cost overruns Identification of expenditures that many not be budgeted to ensure they can be claimed Identification of expenditures that may need approval before being claimed

Financial and Grants Management Institute - March 18-20, Key Budgetary Controls Budgetary controls include: Regular monitoring of budgets to actual year-to-date and current period expenditures or outlays Explaining any budget variations that are unexpected or unusual and determining necessary adjustments Ensuring compliance with laws, regulations, and CNCS provisions, particularly matching percentage requirements Requesting prior approvals for modification, if necessary Assure budget changes are properly approved

Financial and Grants Management Institute - March 18-20, AmeriCorps programs must obtain prior approval for: Changes to increase or reallocate funds for the member support category Purchase of equipment over $5,000 that was not included in the original budget Cumulative reallocation exceeding 10% of total budget Substantial changes in level of participant supervision Sub-grants or contracts not included in original budget Budget Management

Financial and Grants Management Institute - March 18-20, Exercise

Financial and Grants Management Institute - March 18-20, Taking it Home! 1.Have a clear understanding of the budget process and allowability of costs to include in the budget. 2.Create a process to monitor the budget to ensure compliance. 3.Be sure your budget supports your program design.