building & reviewing grant budgets advanced skills for developing and reviewing grant budgets...
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Building & Reviewing Grant BudgetsAdvanced Skills for Developing and Reviewing Grant Budgets
Office of Grants Management:
Douglas Godesky, Sr. Grants OfficerDouglas Lees, Grants Mgmt Specialist
Corporation Grantee Financial Accountability Seminar July 2007
Understand how budgets fit in the “big picture”
Standardize expectations on what is a “compliant budget”
Share budget formulation tips and strategies
Answer your most pressing questions
TIP: Everything discussed is “Unless Otherwise Stated!” Typically each grant program has its own rules, guidance and specifications --- Know your program’s rules and how they differ!
TIP: Everything discussed is “Unless Otherwise Stated!” Typically each grant program has its own rules, guidance and specifications --- Know your program’s rules and how they differ!
Goals
How Budgets Fit Into the Big Picture
Corporation Grantee Financial Accountability Seminar July 2007
When does a budget have an impact in the grant lifecycle?
The Grant Life Cycle
Pre-Award Post-Award
Continuation Application or Re-compete Application
Project
Definition
Funding
AnalysisApplication
Formulation
Peer
&
Staff
Reviews
Validating
AwardPerformanceSubgrant
DesignCloseout
&
Audit
Corporation Grantee Financial Accountability Seminar July 2007
Ensures the
Details are
Covered
Follow Rules
Budgets have impact … … at every stage of the grant lifecycle
The Grant Life Cycle
Pre-Award Post-Award
Continuation Application or Re-compete Application
Project
Definition
Funding
AnalysisApplication
Formulation
Peer
&
Staff
Reviews
Validating
AwardPerformanceSubgrant
DesignCloseout
&
Audit
Keep Partner
s Complia
nt
Guide Staff
Plan What is Necessa
ry for Success
Establish
Realistic Scope
Reflects
on
Perfo
rman
ce
Define Approved and Allowab
le
Compete For Funds
Corporation Grantee Financial Accountability Seminar July 2007
Budget Design Has Impactat 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 keep your partners compliant To compete for funds To reflect on how you’ve complied with
rules To guide your staff as they execute To define what’s expected and
approved To reflect upon your performanceTip: Involve budget
staff in project planning from the beginning and thereafter
Tip: Involve budget staff in project planning from the beginning and thereafter
Corporation Grantee Financial Accountability Seminar July 2007
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?
How much do we need?
What are some of the impacts of a poorly planned budget?
FLIP CHART LIST
Delayed award…
Post-award amendments …
…
…
…
Corporation Grantee Financial Accountability Seminar July 2007
Poor budget planning leads to challenges …
Negotiation
APPLICANT CORPORATION
Award with Special Conditions
Application
Follow-up Negotiation
Additional Questions
Resolve Special Conditions
Amended Grant
Revise Budget – Unexpected Costs
Amended Grant
Revise Budget – 10% Rule
Amended Grant
Special Approvals
Unallowable Costs
Return Application
Request Grant Extension
Amended Grant
Monitoring
Indicators
Closeout
Audit
Difficulty
Matching
Expenses
With
Budget
How much can we get?
How much can we get?
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 they need?...
…
…
How much can I ask for? …
How much information do they need?...
…
…
FLIP CHART LIST
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
What is on the mind of the federal employee who will review your budget?
Corporation Grantee Financial Accountability Seminar July 2007
Corporation employees are examining ….
Panel ReviewViableApplications
Staff ReviewCEO
ApprovedNegotiations
Grant Awards
Negotiation Lettervia eGrants
BUDGET LINE ITEM concerns,Costs at-risk of being unallowableUnusual Cost ItemsLack of source calculationsIndirect cost rate concernsCompliance with budget instructionsCompliance with budget worksheets
… resolve,Only allowable costs remainUnusual costs explainedBudget worksheet completed
Year over year increases okayCost ceilings metSupporting calculations for all costsIndirect cost rate obtained/valid
Budget modified in eGrants
FINANCIAL concerns,Costs not aligned with other grantsMatch sources at-risk of unallowableMatching performance/projected
… resolve, Cost alignment Qs answeredMatch confirmed as allowableMatch at minimum or higher
ADMINISTRATIVE concerns,Audit findingsMonitoring performance & concernsNew grantee no federal/CNCS experience
… develop, Special conditions
Award
Ph
ase
Corporation Grantee Financial Accountability Seminar July 2007
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 budgetis a critical skill
Budget review is a major federal staff responsibility
That is why we care so much…Individual professional judgment plays a
major role…
What is a compliant budget?
Corporation Grantee Financial Accountability Seminar July 2007
Compliant budgets meet three (3) requirements…
All required project costs are included
All necessary cost calculations are presented
All appropriate cost justifications are offered
Deciding what is necessary and appropriate is based on the individual professional judgment
Program and Grants Officers “certify” your budget as compliant; they must have the information they need to reach their professional comfort level
Corporation Grantee Financial Accountability Seminar July 2007
Compliant Budgets include all project costs needed to fully conduct a program Federal share + Non-federal share
Resources needed, not just minimum levels Logically related costs – “if I’m paying for this, I should be paying for
that”
Administratively required costs Required by the program; e.g., Liability insurance, allocated share of
audit fees.
Programmatically required costs within cost limits Program activity costs that are expected to be performed; e.g.,
volunteer transportation, member or volunteer support costs Limits are met; e.g., administrative cost caps, year-to-year cost growth,
sources of funds, etc.Presenting all non-federal (matching) costs is a change from expectations and advice given in the past
Corporation Grantee Financial Accountability Seminar July 2007
Compliant budgets include calculations where possible… To explain how you reached a number in your
budget
To explain what would otherwise not be obvious
To define your choice when costs can be estimated in different ways
To reflect your budget strategy
Corporation Grantee Financial Accountability Seminar July 2007
Compliant budgets do not need calculations when… Units of measure are obvious / self-explanatory
A cost is only reasonably estimated one way
Application instructions direct that calculations are not necessary
The amount is below a threshold that your grants officer considers minor enough not to be calculated
When to include supporting budget calculations
A budget request for a 12-month funding period for a locally operated program with an indirect cost rate agreement, reads as follows. How would you respond to each line item?
Accept as-is, or Require Calculation?If accept as-is, why no calculation?
Supplies $1,200
Staff Travel $12,000
Notebook Computer $3,000
Computer System $25,000
Annual Rent $6,000
Printing Project Brochure $4,000
Internet Access $295
IDEA Conference $1,400
Accountant Services $1,000
Utilities (Based on Prior Year Costs) $14,000
Annual Cell Phone Service Contracts for Staff $5,000
Staff Training 4 professionals $4,000
Food $1,200
Construction Supplies $5,000/mo. X 6 mo. X 3 Sites = $90,000
Federally Approved Indirect Cost Rate Agreement $20,000
Corporation Grantee Financial Accountability Seminar July 2007
Compliant budgets include line item cost justifications… To explain unusual costs
To explain unexpected costs
To explain high dollar costs
To explain typically unallowable costs
Corporation Grantee Financial Accountability Seminar July 2007
Compliant budgets do not need cost justifications when… The cost is one that is widely and commonly
incurred by most business efforts
The cost has been incurred in prior years under the same grant and the justification is already well established in the grant record
Application instructions direct that cost justifications are not necessary for particular items
Application instructions direct the applicant to include the particular cost item
When to include line item justificationsA budget request for a 12-month funding period for a locally operated program with an indirect cost rate agreement, reads as follows. How would you respond to each line item?
Accept or require more justification? If accept as-is, why no justification?
Supplies $1,200
Staff Travel $12,000
Notebook Computer $3,000
Computer System $25,000
Annual Rent $6,000
Printing Project Brochure $4,000
Internet Access $295
IDEA Conference $1,400
Accountant Services $1,000
Utilities (Based on Prior Year Costs) $14,000
Annual Cell Phone Service Contracts for Staff $5,000
Staff Training 4 professionals $4,000
Food $1,200
Construction Supplies $5,000/mo. X 6 mo. X 3 Sites = $90,000
Federally Approved Indirect Cost Rate Agreement $20,000
Corporation Grantee Financial Accountability Seminar July 2007
Small Amount Requested Large Amount Requested
Unique / New Costs
Common / Prior Costs
High Need for Explanation and Justification
Low Need for Calculation
Cost identification (label) only needed
Reference to prior year costs or total only needed
High Need for Explanation & Justification
High Need for Detailed Calculation
High Need for Explanation
Need for Basic Calculation
Exercise
Recognizing Compliant Budgets
Left Side of Room Right Side of Room
Examine Budgets Examine Budgets
A, B, C & D E, F, G & H
eGrants is your best guide to establishing a compliant budget on the first try
eGrants budgets are custom to match the application instructions and program you are applying to.
Corporation Grantee Financial Accountability Seminar July 2007
eGrants budget categories are customized…
Custom Budget Categories
Corporation Grantee Financial Accountability Seminar July 2007
eGrants flags incorrect entries with “Warnings” and “Error” messages….Budget Rules: Warning and Error Messages are established by each
Corporation program, specific to their grant applications for that program.
Warning Messages: You can proceed with the information in place but you are warned that it may not be compliant with the application guidance.
Error Messages: You can not proceed with the information, the system will prevent you from moving to the next step until the information is edited.
Need for Help When Using eGrants: Be sure to distinguish between needs:Technical Help Needs: eGrants Help DeskApplication Help Needs: Your assigned Program Officer
Obtain a help desk “ticket number” if the problem is not immediately resolved
Your Program Officer can escalate a technical problem if you have not received a timely solution
Corporation Grantee Financial Accountability Seminar July 2007
Budget Tip: Providing calculations and/or justification/explanation is the fastest path to resultsIf you provide the information up front, Corporation Staff
will not need to ask for clarification.
You likely have the information in your budget backup – why not just share it?
Time saved.
Your program design and accounting system should be anticipating and recording all costs regardless of your decisions on the grant budget
What are you attesting to when you submit a budget?
Corporation Grantee Financial Accountability Seminar July 2007
Accountability for “…all data … is true and correct …
Corporation Grantee Financial Accountability Seminar July 2007
Budget Tip: Administrative Costs
If you use a flat administrative cost rate plus include typical indirect costs as direct, you must include an explanation for the every line item with an apparent duplication of costs
CNCS Fixed Percentage Option (NCSA Only), for accounting for administrative (indirect) costs, (when statute allows) provides a flat administrative amount.
There is no written description of the pool of costs that are assumed covered when you use the CNCS fixed percentage Administrative costs option.
Fixed Percentage Administrative costs are assumed to cover typical administrative indirect overhead costs: space, furnishings, general supplies, utilities, back office administration, accounting, auditing, and similar.
Capped administrative costs are designed to limit indirect cost reimbursement.
When choosing between Fixed Percentage Option and use of Federally Approved Indirect Cost Rate Agreement, “do the math!”
Corporation Grantee Financial Accountability Seminar July 2007
Budget Tip: It is possible to get a provisional indirect cost rate from CNCS if you are pursuing a negotiated indirect cost rate
A provisional rate will be valid until a final rate agreement is reached/established.
Corporation Grantee Financial Accountability Seminar July 2007
Budget Tip: Providing details on fringe benefit rates
Sample Employee Benefits Estimation Process (Use when Building Budgets)
Annual Leave Earned Sick Leave Taken Holidays
Subtotal (a) – Release Time FICA $100,245 State Unemployment Compensation $17,040 Worker’s Compensation Insurance $13,140 Medical Insurance $168,200 Pension $105,120
Subtotal (b) – Required Coverage $403,745
Total Employee Fringe Benefits (a) + (b) $403,745
Allocation Base: Total Salaries $1,314,000 Less Release Time
Chargeable Salaries $1,314,000
Employee Finge Benefit Rate Fringe Benefits $403,745 Allocation Base $1,314,000
Fringe Rate 30.73%
1. When the benefit rate is > 30% of salaries, professional judgment is typically to expect a breakdown by element.
2. When different rates apply to different employees.
Corporation Grantee Financial Accountability Seminar July 2007
Budget Tip: Rounding
Round and split federal and non-federal shares in a similar manner, rounding to an appropriate level
Round cost estimates when possible
Leads to smoother budget review, execution and closeout
Supplies Example:
Actual Annual Cost: $4555 in prior year, or about $379.58 / month
Budget Request:
Supply Cost Narrative: “Average monthly cost for general office supplies based on prior year spending patterns”
Calculation Narrative: “$400/month*12 = $4800”
Corporation Grantee Financial Accountability Seminar July 2007
Budget Tip: Rent / Space
Simplified Method:The organization uses all space in a similar manner;All space/rent is accounted for as indirect;
Direct Allocation Method:Indirect rate represents space/rent costs that
support general & administrative activityDirect costs represent space/rent associated with
direct activities accordingly by benefit to the project
(a) Use the same method for federal as well as non-federal money
(b) Clearly inform the Corporation of the method you are using
Corporation Grantee Financial Accountability Seminar July 2007
Budget Tip: Grant Writing Expenses
If you use indirect / administrative reimbursement to pay for grant writing, you will not have funds to pay for the indirect costs that the fee/rate was intended to fund, and those costs can not be shifted to other federal funding sources
Grant Writing = Fundraising
Fundraising, not allowable (in most cases)
It is not appropriate to account for the cost of grant writing and development as a direct cost since the costs are typically incurred before the grant was awarded, or if for a future grant, they are not allocable to the current grant
Corporation Grantee Financial Accountability Seminar July 2007
Budget Tip: “Eyebrow” raising requests (or omissions)
Some budget line items will always be examined in detail; provide justification in advance for:
• Food
• Local program gear
• Public Service Announcements (PSA)
• Advertising
• Ceremonies
Not having a cost in your budget also can bring a focus to your project:
• If something is not in the budget, auditors have tended to question the cost
• Lack of personnel costs in federal or non-federal share with no explanation
Corporation Grantee Financial Accountability Seminar July 2007
Budget Tip (Commissions): Your records on the number of years a sub-grantee has been receiving funding are considered correctYou will encounter discrepancies between eGrants versus your
records
If you encounter such a discrepancy, take these steps: Pass the information to your Program Officer with cc to the Grants
Officer; include details to support the correction Presumption is that you have the correct information Calculate matching budgets using your records The Corporation has a protocol for the Program Officer to follow to
verify the correction The Commission will be notified by the Program Officer of the outcome,
usually confirmation/agreement
Corporation Grantee Financial Accountability Seminar July 2007
Budget Design Strategy:
Including projected costs in every object class minimizes potential for required post-award federal approvals
Budget Object Classes: Personnel, Fringe, Travel, Supplies, Equipment, Contracts/Subgrants, Other, Indirect (Administrative).
Prior Federal Approval Required: To cumulatively move >10% of total budget between object classes, or to expend funds in an object class that was not funded.
Strategy: By including all project costs in your budget you ……minimize the potential of having unapproved
budget object classes; and,…raise the dollar threshold that defines the 10%
limit.
Rules on prior approvals apply to non-federal share of the budget as well as the federal share
Budget Design Strategy (Typically for Commissions):
When sub-granting, balance well established programs with new programs to ensure that match is met at the prime grant level
Prime grantee compliance with match: Measured by combining match provided by all subgrantee (cumulative performance); underperforming sub-grantees can be carried by over performing sub-grantees
Corporation Grantee Financial Accountability Seminar July 2007
Budget Design Strategy
Use a Budget Checklist
No unexplained amounts Staff time does not exceed 100% if handling multiple
projects Staff time accurately reflects what the project will
consume Aligns tells the same story as the proposal narrative Includes only costs to be incurred during grant period Includes all items contributed by other sources Follows all known application instructions Adds up per cost line item and overall Costs for every phase of the program are included
Corporation Grantee Financial Accountability Seminar July 2007
Budget Design Strategy: Consider all possible exceptions to the routine Are the salaries in the proposal accounting for
cost of living increases?
If new staff persons are being hired, is the necessary additional space and equipment being considered?
If equipment is needed, is it necessary to purchase or is leasing the more appropriate approach?
If additional space is rented, are the increased costs of insurance, utilities, maintenance and other impacts accounted for?
Corporation Grantee Financial Accountability Seminar July 2007
Logical Conclusions & Other Advice1. Time invested in developing a compliant, and complete budget
facilitates effective and hassle-free grant administration at prime and sub-grant levels
2. Budgets can be designed to minimize the need for changes and the likelihood that later federal reviews/approvals will be needed
3. A properly approved budget is: A financial blueprint to help an organization meet its goals
and objectives Aligned with the program description and all budget
discussion therein A tool to help ensure an organization is meeting matching
requirements
4. Programs should: Periodically review budget to actual expenses Assure budget changes are properly approved Review movements between line items and verify if they are
within provision guidelines
Questions
Electronic copies of this material can be found at The Resource Centerhttp://nationalserviceresources.org/Search for Financial Accountability Seminar
Corporation Grantee Financial Accountability Seminar July 2007
!! PARTICIPANT NOTICES !!
CERTIFICATES FOR TRAINING: All participants who attend and complete three or more sessions of the Financial Accountability Seminars can pick up a certificate of participation Sunday afternoon, Monday or Tuesday morning.
CFO – OIG – OGM SUNDAY CLOSING PLENARY: Please attend the Plenary Session [Sunday 3:15 –Salon G] with Jerry Bridges, Carol Bates and Peg Rosenberry to hear about OIG audit plans, address issues that arose during the day and learn about upcoming changes in grants policy.
RESOURCE TABLE: Please take advantage of this opportunity to meet with and discuss your questions and concerns with our experts who include presenters and a special guest from the Division of Payment Management at HHS.