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CDBG Financial Management Requirements


Financial management systems must meet the following standards: Accurate, ... Conduct financial management methods and procedures in accordance with Generally ... – PowerPoint PPT presentation

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Title: CDBG Financial Management Requirements

CDBG Financial Management Requirements
  • For Grant Administrators

Financial Management - Objective
  • The objective of this module is to provide local
    grant administrators with a basic understanding
    of the financial management requirements related
    to the CDBG program.
  • Local grant administrators must be aware that, as
    a recipient of CDBG funds, their jurisdiction
    must be in compliance with these requirements in
    addition to any local or other state

Financial Management - Overview
  • State CDBG Programs are required to have
    financial management standards or fiscal and
    administrative requirements as described in the
    CDBG program regulations at 24 CFR 570.489(d).
  • Local CDBG recipients must comply with the
    standards established by the state.

State Standards
  • The fiscal and administrative requirements
  • established by each state CDBG program
  • must
  • Show that uses of funds comply with all
    applicable statutory and regulatory requirements
  • Document that all funds received have been spent
    only for reasonable and necessary costs of
    program operation and
  • Demonstrate that program funds have not been used
    for general expenses of State or local government.

State Standards
  • Insert state specific information related to
    whether or not the state has chosen to use Part

Financial Management Using Part 85
  • Fiscal control and accounting procedures of local
    recipients must be sufficient to
  • Permit preparation of reports required by statute
    and regulation
  • Permit tracing of funds to establish that they
    have not been used in violation of any statutory
    or regulatory restrictions

Financial Management Using Part 85 - continued
  • Financial management systems must meet the
    following standards
  • Accurate, current and complete financial
  • Accounting records that identify the source and
    application of funds
  • Effective internal controls and accountability
    for all assets
  • Budget controls with actual expenditures compared
    with budgeted amounts

Financial Management Using Part 85 - continued
  • Use of OMB cost principles (Circular A-87) in
    determining the reasonableness, allowability and
    allocability of costs
  • Complete source documentation for all accounting
  • Effective cash management to maximize timeliness
    of spending

Financial Management Using Part 85 - continued
  • Internal control and accountability must be
    maintained for all cash, real/personal property,
    and other assets.

Internal Control
  • Basic elements of internal control
  • organizational chart
  • written definition of duties
  • formal system of authorization and supervision
  • separation of duties
  • control over access to assets, blank forms, and
    confidential documents
  • comparison of actual assets and liabilities to
    financial records

Determining Allowable Costs
  • Local grant recipients must ensure that costs
    charged to the CDBG grant are allowable
  • Recipients should use OMB Circular A-87 to guide
    their determination of allowable costs
  • Standards for determining allowability apply
    equally to all cost items and apply whether a
    cost is direct or indirect

Determining Allowable Costs - continued
  • Allowable costs under CDBG, must
  • Be necessary and reasonable
  • Be allocable according to the CDBG contract
  • Be authorized or not prohibited under state/local
    laws and regulations
  • Conform to limitations or exclusions (laws,
    terms, conditions of award, etc.)
  • Be consistent with policies, regulations and

Determining Allowable Costs continued
  • Allowable costs must (continued)
  • Be in accordance with Generally Accepted
    Government Auditing Standards (GAGAS)
  • Be adequately documented
  • Be treated consistently (with non-CDBG costs)

Determining Allowable Costs - continued
  • In order to be allowable, costs must be necessary
    and reasonable to carry out the objectives of the
  • Reasonable costs must be
  • Generally recognized as ordinary and necessary
  • Related to requirements imposed by sound business
  • Related to Federal and state laws and regulations
  • Related to the terms and conditions of the award

Determining Allowable Costs - continued
  • The individuals involved in implementing the
    activity must have carried out their
    responsibilities appropriately
  • The award may have caused significant deviations
    from the established practices of the local
    recipient, which resulted in increased costs
  • The local recipient must be able to document that
    they have paid market prices for goods and

Determining Allowable Costs - continued
  • OMB Circular A-87 includes a Listing of Selected
    Items of Cost (Attachment B)
  • The specific cost items are described as
    allowable generally allowable or

Allowable CostsOMB A-87 Attachment B Listing
of selected Items of Cost(unallowable costs red
  • Advertising and public relations costs
  • Advisory councils
  • Alcoholic beverages
  • Audit costs and related services
  • Bad debts
  • Bonding costs
  • Communication costs
  • Compensation for personal services
  • Contingency provisions
  • Defense and prosecution of criminal and civil
    proceedings, and claims
  • Depreciation and use allowances
  • Donations and contributions
  • Employee morale, health, and welfare costs
  • Entertainment costs
  • Equipment and other capital expenditures
  • Fines and penalties
  • Fund raising and investment management costs
  • Gains and losses on disposition of depreciable
    property and other capital assets and substantial
    relocation of Federal programs
  • General government expenses
  • Insurance and indemnification
  • Interest
  • Lobbying
  • Maintenance, operations, and repairs
  • Materials and supplies costs
  • Meetings and conferences
  • Memberships, subscriptions, and professional
    activity costs
  • Patent costs
  • Plant and homeland security costs
  • Pre-award costs
  • Professional service costs
  • Proposal costs
  • Publication and printing costs
  • Rearrangement and alteration costs
  • Reconversion costs
  • Rental costs of building and equipment
  • Royalties and other costs for the use of patents
  • Selling and marketing
  • Taxes

Unallowable Costs
  • Unallowable Costs (per A-87, Attachment B)
  • Alcoholic Beverages
  • Bad Debts
  • Contingencies
  • Contributions Donations
  • Defense and prosecution of criminal and civil
    proceedings and claims
  • Entertainment
  • Fines and Penalties
  • Fund raising and investment management costs
  • General government expenses
  • Idle facilities and idle capacity
  • Lobbying

  • All accounting records must be supported by
    source documentationKEY!!!
  • CDBG costs charged must be incurred during grant
  • Funds must be expended on allowable items
  • Expenditures must be approved by responsible
    grantee official
  • Documentation must explain the basis of costs

Budget Control
  • Budget control as a management tool
  • control expenditures and compare to approved
    operational budget
  • Control and compare expenditures to approved
    budget by
  • maintaining record of the amounts budgeted
  • recording unexpended and unobligated balances
  • comparing actual against projected funds

Cash Management
  • Disbursements/payments
  • Standard the time elapsed for the transfer of
    funds and disbursement by the state and unit of
    local government grantee shall be minimal for
    payment methods and procedures used

Cash Management - continued
  • Disbursement/payment methods
  • Reimbursements payments made as a reimbursement
    for costs already paid by grantee
  • Cash advance disbursements made to pay for
    expenses/costs invoiced or billed to grantee.
    These must be only for source documented costs

Cash Management - continued
  • Cash management fund transfers must be in
    compliance, which includes
  • Accurate information in the disbursement request
  • Compliance with the general standard---CDBG funds
    are disbursed to pay for CDBG program costs
    within 3 business days of the receipt of funds
  • Erroneously drawn funds must be returned in a
    timely manner

Financial Reporting
  • Financial reporting must be accurate and current
    and include complete disclosure of the financial
    results of funded activities in accordance with
    financial reporting requirements of the state
  • At a minimum the reporting must include
  • amount budgeted
  • disbursements to date
  • program income and other
  • actual expenditures/disbursements

Pre-agreement Costs
  • State CDBG program regulations at 24 CFR 570.489
    (b) allow for reimbursement of costs incurred by
    a local CDBG recipient before the establishment
    of a formal grant relationship between the state
    and the unit of general local government
  • State must have established procedures (which may
    include environmental requirements)
  • Costs must be incurred for eligible activities

Annual AuditRequirements
  • Single Audit
  • OMB Circular A-133 requires entities that expend
    500,000 or more during a fiscal year in federal
    awards (from all sources) have a Single Audit
    conducted for that fiscal year.
  • Audits must be in accordance with Generally
    Accepted Government Auditing Standards (GAGAS)
    and OMB A-133

Annual Audit Requirementscontinued
  • The State may determine when the audit is due
  • Instructions
  • Include date of entitys fiscal year end
  • List sources of all federal expenditures

Annual AuditsKnowing the Rules
  • Local Governments and Non-Profit Organizations
    receiving Federal Funds
  • Single Audit Act and OMB Circular A-133
  • circulars.html

Annual AuditRequirements
  • Upon completion, the Grantee must
  • Submit a copy of the Audit to the State
  • If there are no Audit Findings or questioned
    costs, the grantee may provide written
    notification to the state that an audit was
    conducted in accordance with A-133
  • Submit copies of Collection Form (SF-SAC) and/or
    Reporting Package to Federal Clearinghouse, and
    each federal awarding agency as appropriate

Annual AuditRequirements
  • The Grantee is responsible for follow-up and
    corrective action on all audit findings.
  • Prepare a corrective action plan to address each
    audit finding including
  • name of person responsible
  • corrective action planned
  • anticipated completion date.

Auditor Selection
  • Must procure
  • Request for Proposal most appropriate
  • Should be CPA or licensed public accountant
  • Must be experienced with Single Audits, CDBG
    programs, and local government
  • Verify completion and timeliness of previous
  • CDBG funds can pay for grants share of Audit
  • Charge to General Administration

Financial ManagementConclusion
  • Local governments that receive CDBG funds must
  • Comply with applicable Federal, state and local
    laws, regulations, standards, and procedures
  • Conduct financial management methods and
    procedures in accordance with Generally Accepted
    Government Auditing Standards (GAGAS)
  • All financial management practices will be
  • Monitored by the state CDBG program
  • Examined closely by auditors

Conclusion - continued
  • Local officials and grant administrators must be
    aware that all financial management practices
    will be
  • Monitored by the state CDBG program
  • Examined closely by independent auditors
  • Make sure that your financial
  • management practices are sound!