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Fund Balances & Administrative Carryover

Fund Balances & Administrative Carryover. Types of Fund Balances. Three types of fund balances in CACFP SAE carryover (State Level) Food service account fund balance (day care centers) 10% Administrative f unds carryover (day care homes) Accumulation of unspent funds Restricted in nature.

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Fund Balances & Administrative Carryover

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  1. Fund Balances & Administrative Carryover

  2. Types of Fund Balances • Three types of fund balances in CACFP • SAE carryover (State Level) • Food service account fund balance (day care centers) • 10% Administrative funds carryover (day care homes) • Accumulation of unspent funds • Restricted in nature

  3. Carryover Funds - SAE • SAE funds which are available to the State Agency for obligation and expenditure during the second year of the grant • Maximum carryover of 20% into the next fiscal year • % applied to the SAE award for current fiscal year, excluding any prior year carryover

  4. Carryover Funds - SAE • SAE funds in excess of the 20% returned to USDA • First in first out when expending SAE into next fiscal year • Plan ahead • 1.5% Audit Grant • SAE Grant

  5. Maximize Your SAE Carryover • Use Audit Funds to support review staff • PS / fringe / indirect • Travel • A-133 Audits for institutions • Budget to expend all of the Audit Funds • Close-out Audit Funds before SAE • Regulations allow any over expended Audit Funds to be applied against the SAE Grant • SAE to Audit not allowed

  6. Audit Funds • Current formula $15k per $1 million in entitlement (SAE $25k per $1 million) • Made available for conducting audits & reviews • Reimburse institutions for CACFP portion of A-133 Audit

  7. Audit Funds cont’d • Before Audit Funds were reduced from 2% NYS paid $150,000 annually to institutions for A-133 Audits • DOH Audit Clearinghouse determined amount to be reimbursed to institutions • Funding not available after reduced to 1.5%

  8. For the purpose of conducting audits and reviews • Program review staff • Over 500 program reviews required annually based on more than 1,500 institutions • Clerks audit and review monthly claims for reimbursement • Average of 1,800 monthly claims • Changes with automation • DOH Audit Clearinghouse • Originally funded three positions

  9. Food Service Account Day Care Centers • FNS Instruction 796-2, Rev 3 • Establishes program standards, principles and guidelines for the use of CACFP funds by sponsoring organizations • Basis for the standards • 7 CFR 3016, 3018 & 3019 • OMB Circulars A-87 & A-122 • 48 CFR Part 31

  10. Excessive Fund Balances • State agency must determine what they consider an excessive balance in the food service account • State agency cannot reduce future reimbursement payments or recover funds to reduce the account balance • Reduce fund balance through improvements or expansion

  11. Excessive Fund Balances cont’d • Program funds are restricted • Excess funds cannot be used for other than program purposes: • Cover non-program operations • Increase salaries or fringe benefits cost for the purpose of reducing the balance • Financial management system must have the ability to identify source and application of funds

  12. Policy and Procedure • Does your state have a policy in place regarding what is considered an excessive fund balance? • What’s reasonable? • How do you determine if there is a fund balance? • Site visit – not spending full reimbursement • A-133 Audit of IRS 990

  13. Fund Balance Disclosed During Site Visit • Sponsor spends less than 50% of the CACFP claim amount during the claim month, accountant will expand the scope of the financial review to the previous six months. • If a six month review of the sponsor’s financial records documents a cumulative fund balance in excess of 50% of the claim amount for the same period, the sponsor will be identified as having an excess fund balance in CACFP

  14. Fund Balance Disclosed During Site Visit cont’d • This finding will be included in the administrative review report, requiring corrective action. • The sponsor will be required to submit a corrective action plan that identifies (1) their plan to spend the entire monthly CACFP reimbursement to support their non-profit food service program and (2) their plan to spend down their existing fund balance. • CACFP will evaluate and approve their corrective action plan as part of the follow-up to the administrative review

  15. Program Review Disclosed FB

  16. A-133 Audit Disclosed FB • The fiscal year 2011 A-133 Audit disclosed the sponsor’s fund balance has increased since the program review the previous year

  17. Example of a small For-ProfitFinancial Management System?

  18. Technical Assistance • Small for-profits • Check book used as their financial management system • No tracking of unspent CACFP funds • Potential of using the funds for other than intended purposes • At a minimum separate CACFP account • Qualified staff to give technical assistance

  19. The Summary of Federal Awards indicates the sponsoring organization spent only 21.3% of the reimbursement for fiscal year 2010 78% of the CACFP reimbursement was spent during 2011 $58,739 fund balance accumulated over two years for a program receiving an average monthly reimbursement of $4,656

  20. Update to FNS Instruction 796-2 Rev 3 • USDA - regional office requested input on changes to the instruction January 2012 • NYS – CACFP recommendations for Nonprofit Food Service Account • More specifics regarding need for corrective action to reduce the fund balance • Limit fund balance to limit exposure for abuse of program funds

  21. Update to FNS Instruction 796-2 Rev 3, cont’d • Limit the fund balance to three months reimbursement based on average monthly reimbursement for previous fiscal year • How to implement a plan to spend down the excess funds: • serving higher quality food • increase free fruits and vegetables • purchase needed kitchen equipment • Give State agencies the option to deny advances for sponsors with large fund balance

  22. Healthy, Hunger-Free Kids Act of 2010 • Family day care home (FDCH) sponsoring organizations permitted to carryover up to 10% of unused administrative payments into the next fiscal year • Bye, bye to “Lesser of Three/Four” beginning with FFY 2011 • Administrative reimbursement based on homes times rate

  23. Carry Over of Unused Administrative Payments • Guidance issued April 8, 2011 • Carry over not to exceed 10% of the preceding year’s administrative payments • Excess over the 10% allowed must be returned to the State agency • Sponsors are not required to carry over all or part of the excess into the next fiscal year • Has the sponsor been unable to spend the fully amount in previous years?

  24. Reimbursement Carryover cont’d • Actual carryover may not be determined until after the FDCH budge has already been approved by the State agency due to the submission claims, pending administrative payment and finalizing year end expenditures • Sponsors should review current and anticipated needs to determine if they can truly use the carryover • Carry over administrative funds must be expended on a first-in-first-out basis (FIFO)

  25. Reimbursement Carryover cont’d • Administrative funds that are carried over must be included in the new year’s FDCH budget • Before they request to amend their current year budget, sponsors should determine how the funds can be expended quickly to meet FIFO • Fill unmet needs that the program did not included in original budget request

  26. Admin Carryover Updates • Intent of the provision was to simplify administrative reimbursements • “Homes x Rates” doesn’t always work • CNP Memo – CACFP 10-2012 provides options • Allows administrative reimbursement to be made on actual expenditures to avoid accumulation of large fund balance that must be recovered each year

  27. Admin Carryover Updates cont’d • Sponsor administrative reimbursement based on actual expenditures, then not able to carry over funds into next fiscal year • Administrative payments will equal the sponsor’s expenses • State agencies are not required to offer the option of reimbursement based on actual expenditures

  28. Admin Carryover Updates cont’d • By law, sponsors cannot be required to accept reimbursement method that results in the reimbursements lower that the “homes x rate” calculation. • The intent is to lessen the burden for State agencies and sponsors regarding returning administrative funds

  29. Admin Carryover Reporting • New territory • Carryover reimbursement • Expended “first-in-first-out” • How do your sponsors report expenditures, monthly, y-t-d, quarterly • Method to report the carryover amount as expended • Verification the funds have been fully expended

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