CDBG Certification Workshop

1. CDBGCertificationWorkshop July 27, 2005

2. Financial Management

3. Financial Management Setting Up a System • Appoint a financial management person • Establish accounting records • Set up or review bank account and receipting procedures • Establish payment schedules and approval procedures • Record all financial transactions

4. Financial ManagementKnowing the Rules • Governed by: • 24 CFR Part 570 • OMB Circular A-87: Cost Principles for State and local Governments (Revised May 10, 2004; Effective June 9, 2004) • 24 CFR Part 85 “Uniform Administrative Requirements for Grants…to States and Local Governments.” • Department Requirements (CDBG Manual - Chapter 13)

5. Financial ManagementKnowing the Rules Grants Management Circulars • OMB A-87 and OMB A-133 http://www.whitehouse.gov/omb/grants/grants_circulars.html Code of Federal Regulations • 24 CFR Part 85 http://www.gpoaccess.gov/cfr/retrieve.html

6. Financial ManagementRequirements Financial reporting must be…. accurate, current and complete

7. Financial ManagementRequirements • Accounting records – • In accordance with generally accepted accounting principles (GAAP). • Identify the funding source and track obligations, assets, liabilities, income, and expenditures. • Set up ledger to track by CDBG activity. • Each transaction can be traced to source documentation that corresponds to a ledger.

8. Financial ManagementRequirements • Internal Controls – • Safeguards to assure the funds are properly and solely used for the purposes to carry out the grant. • Budget Controls – • Actual expenditures and accrued obligations must be compared with budgeted amounts for each CDBG activity.

9. Financial ManagementRequirements • Allowable Costs – • Must be allowable according to revised OMB Circular A-87. • Costs must be necessary and reasonable to carry out the objectives of the grant • All expenditures should be properly allocated to the activities proposed • Indirect costs require a Cost Allocation Plan which must be submitted to the Department and approved by HUD and the Department

10. Financial ManagementRequirements • Source Documentation – • Accounting records must be supported by • Cancelled checks, paid bills, payrolls, timesheets, purchase order, invoices, payment requests, contract and subgrant award documents.

11. Financial ManagementHelp Us Follow the “Audit Trail” • Invoice and supporting documents • Request for CDBG Funds • Deposit records (bank deposit slip) • Payment records (check # or copy of the cancelled check) Invoice should match the amount on the Request for Funds

12. Financial ManagementHow To Get It Organized • Attach the following to each draw: • All invoices and supporting documentation • Deposit slip (denotes when deposit is received for the draw) • Copy of cancelled check (denotes when payment is made and check number)

13. Financial ManagementRequirements • Receipt procedures – • Receipts from Program Income or other outside sources should be promptly deposited into the proper account and recorded as a receipt. • Electronic Address – Every community has one • Payments are made through NIS for all state and federal funds

14. Financial ManagementRequirements • Bank Accounts – • Most grantees use one account • Account should be non-interest or immediately transferred to a non-interest account • May put in interest bearing account if • Drawing funds on a reimbursement basis • For Program Income

15. Financial ManagementRequirements • Payment Procedures – • The governing body should review and approve all payments • Set up a timeline for submitting invoices and payments • Payments could take up to 20 working days • Drawdowns should be made for reimbursement or immediate needs only • For housing activities, set up lines of credit when necessary (follow revised OMB A-87)

16. Financial ManagementRequirements • Payment Procedures – • Verify work is completed prior to payment • Do not make final payment until 100% completed • For OOR, get customer sign-off that work is satisfactory prior to final payment

17. Financial ManagementRequirements • Administrative Costs – • Separate out general and project administrative costs. • Employee time charged to the grant • Need timesheets • Track amount of time spent on grant and describe the grant activities worked on

18. Financial ManagementRequirements (even more) • Contract Records • Maintain a contract register • Create a file for each contract • Property Records (real or personal) • If over $300, must be approved by NDED • Must keep records and follow proper procedures

19. Financial ManagementNext:Requesting CDBG Funds(Drawdowns)

20. Financial ManagementRequesting CDBG Funds • CDBG Forms at http://crd.neded.org/publications/cdbg_forms.htm • Must have Release of Funds prior to drawing down funds • Request only amount needed for immediate obligations • No more than $5,000 for more than 10 working days on hand

21. Financial ManagementRequesting CDBG Funds • Do not exceed budgeted amounts for each activity (in Contract) • Show proportional local match for each activity • Program Income and Federal Funds on Hand must be disbursed prior to requesting additional funds

22. Financial ManagementRequesting CDBG Funds • The Request for Funds is cumulative and must show status of all approved activities • The minimum request is $500, unless it is the final draw • Amounts must be rounded to the nearest dollar • 2 by 2 table

23. Top Ten Reasons for Draws for Returning Draws 10) No Project Status Report received 9) Project needs an extension 8) Draw exceeds budgeted amount for the activity 7) Draws are sent in incorrect order From the Wahoo Home Office of Greg Cecil

24. Top Ten Reasons for Draws for Returning Draws 6) Draws do not reflect paid (or unpaid) previous request 5) Incorrect signatures (do not correspond to the Authorization to Request CDBG Funds) 4) Part I does not match Part II 3) Draw is not rounded to the nearest dollar From the Wahoo Home Office of Greg Cecil

25. Top Ten Reasons for Draws for Returning Draws 2) No proportional match 1) Math is incorrect (please double check math) And the top 2 reasons for returning Draws are…… From the Wahoo Home Office of Greg Cecil

26. Financial Management • Who is legally responsible for making sure that payments are accurate, reasonable, allowable and for activities that have been completed? • Who will it reflect poorly on, if the financial management for CDBG does not meet CDBG compliance?

27. Financial ManagementQuestions? Contacts: Your friendly Program Representative. or Sheppard Perkins (402) 471-2840

28. Next:Drawdown Examples

29. CDBG Income Verification and Eligibility Determinations (Housing)

30. CDBGIncome Eligibility • This covers: • Determining Household Size • Determining Income Eligibility • What Counts As Income? • Calculating Income • Income Verification Process

31. Determining Household Size • Income limits are based upon household size Example: Adams County @ 80% AMI 1 Person – $30,650 2 Person – $35,000 3 Person - $39,400 4 Person - $43,750 5 Person – $47,250 6 Person - $50,750

32. Determining Household Size • Based on total number of family (household) members living in the unit • Except: • Foster children • Foster adults • Live-in aides

33. Determining Household Size • What if parents have 50% joint legal custody? • Unborn children and children in the process of being adopted are considered household members for determining income limits Include the child only if the child lives in the household at least 50% of the year Use self-affidavit for unborn children

34. Income Definition NDED uses Part 5 Definition, also called Annual (Gross) Income • Found at: • 24 CFR Part 5.609 (see handout)

35. Income Definition Part 5 Definition Annual income means all amounts, monetary or not, which the family expects to receive from all sources (even if head of household or spouse is temporarily absent), for the 12 month period following the move in date.

36. Income Definition • Income includes all amounts unless HUD specifically excludes • Anticipated income over the next twelve months • At a minimum, take today’s circumstances and use for the next 12 months. If evidence the income will increase, calculate the increase

37. Income Inclusions • The full amount (before payroll deductions) of wages, salaries, overtime, commissions, fees, tips, bonuses and other compensation • Net income from an operation of a business • Interest, dividends and other net income • Withdrawals of cash or assets

38. Income Inclusions Periodic payments such as Social Security Include: • Gross income (before deductions for Medicare, etc.) • Cost of living increases • SSI income received by adults on behalf of minors

39. Income Inclusions Periodic payments such as annuities, insurance policies, retirement funds, pensions and disability or death benefits Unless ….the family can document that the amounts withdrawn are reimbursement of amounts invested

40. Income Inclusions • Welfare assistance. If includes amount specifically for shelter and utilities, it can be subject to adjustment • Periodic and determinable allowances, such as alimony child support, regular gifts, etc

41. Income Inclusions Alimony/child Support: Must include the amount in the divorce decree unless, the NE Child Support Agency certifies the income is not being received – AND – the applicant has taken all legal action to collect the amount due Alimony or child support paid by a member of the family is counted, even it it is garnished from wages

42. Income Inclusions • Payments in lieu of earnings, such as unemployment or workers compensation unless it is a lump sum • All regular pay, special pay and allowances of a member of the armed forces, except hostile fire pay

43. Income Exclusions • Income from children under 18 • Earnings in excess of $480 for each full time student 18 or over (except head of household or spouse) • Payments for foster care • Amounts specifically to reimburse for medical expenses

44. Income Exclusions • Temporary, non-recurring or sporadic income, including gifts • Amounts received under specific training programs funded by HUD • Income excluded by federal statute, such as food stamp allotments

45. Income Exclusions • Property tax refunds • Income of live-in aides • Lump-sum additions such as inheritances or insurance payments • SSI or Social Security payments received as a lump sum Assume income is included unless specifically excluded

46. Calculating Income • Full Time Employees Hourly • Hourly wage x 2,080 hours = annual income Weekly • Weekly wage x 52 weeks = annual income Every two weeks • Every two weeks wage x 26 pay periods = annual income Semi-monthly • Semi-monthly wage x 24 pay periods = annual income Monthly • Monthly wages x 12 months = annual income

47. Calculating Income Self Employment Income: Net business income (IRS Schedule C) (with statement from household of 12 mo. anticipated income) + Salaries (IRS 1040 or W-2) + Other distributions unless reimbursements for expenses (IRS 1040 or W-2) Total Self Employment Income (If net business income is negative, use zero)

48. Income vs. Assets • Income includes Periodic Payments • Periodic Payments are: • Recurring payments at regular intervals • Intermittent payments • Assets include Lump Sum Payments • Lump Sum Payments are: • One time release of cash

49. Asset Definition • Items of value that could be turned into cash or produce income. • Need to consider: • Cash value of the asset (not market value) • Income produced by asset • Must be able to access • Do not include costs associated with converting it to cash

50. Asset Inclusions • If assets are greater than $5,000, annual income includes the greater of: • Actual annual income from assets or • A percentage of the value of such assets based upon current passbook savings rate, as determined by HUD