Download - Financial and Grants Management Institute - March 18-20, 20081 Developing and Managing Your Budget
Financial and Grants Management Institute - March 18-20, 2008 2
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
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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.
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Cost Principles
• Provide guidance about reimbursement requirements
• Provide uniform standards of allowability and allocation
• Encourage consistent treatment of costs
• Define reasonable costs
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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.
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Cost PrinciplesExamples 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
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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.
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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
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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
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Revised Grant Guidelines
Federal Grant Guidelines
UniversitiesStates, Local, Indian Tribal Governments
Non-Profits Hospitals
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 OMB A-133 OMB A-133 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
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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
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Summary: How Budgets Fit into the Big Picture
• Budgets impact every stage of the grant lifecycleBudgets can not be an afterthought
• Budget formulation is a known challenge to applicants
Knowing how to form a quality budgetis a critical skill
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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 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
Tip: Involve budget and finance staff in project planning from the beginning and thereafter
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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?
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What are some of the impacts of a poorly planned budget?
FLIP CHART LIST
Delayed award…
Post-award amendments
…
…
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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
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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
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AmeriCorps Budgeting – What Do I Need to Know?
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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
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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
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Direct CostsCosts 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
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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
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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
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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 2008. 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.
AmeriCorps Funding Year 1, 2, 3 4 5 6 7 8 9 10+ Grantee Share Requirements 24% 26% 30% 34% 38% 42% 46% 50%
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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)
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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%
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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
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AmeriCorps Budget StructureSection 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
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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
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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
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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
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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.