ACCOUNTING
FUNDAMENTALS FOR
NON-ACCOUNTANTS
LU
Updated January 29,2014
Accounting Fundamentals for Non-Accountants
Last Updated 29 January 2014
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1
Tribal, U.S. Territories and
Insular Areas Administrative
and Financial Guidance for
Assistance Agreements
)
Accounting Fundamentals for
N on-Accountants
Who needs to know about basic accounting fundamentals in a Tribal Nation?
All Tribal Nations need to be able to provide accurate, current, and complete disclosure of finances
under federal awards. In order to be successful, Tribal Nations need to have personnel who:
Have experience in accounting and/or an accounting education.
Have education or experience with federal assistance agreements and award requirements.
Are able to prepare and keep accurate and timely assistance agreement records and files.
Are able to produce financial reports that can be compared with the award work plan and
the budget.
In addition there are many others in the Tribal Nation who need to be familiar with, and have a good
understanding of the accounting process. These individuals may include:
Program staff involved in the day-to-day management of grants, especially those who
approve expenditures.
Tribal grants management personnel.
Tribal leaders and administrators who have oversight responsibilities.
Finance staff.
Office staff involved in grants records management and retention.
Bookkeeping and accounting staff, especially those new in their positions, can benefit by
having a better understanding of how their job functions relate to federal grants.
What is the purpose of this module?
This purpose of this module is to provide an introduction and overview of accounting fundamentals
for non-accountants. The module also covers important topics such as communication, internal
controls, documentation and recordkeeping, records retention and being prepared for a federal
audit.
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Accounting Introduction
U;S. Environmental
Protection Agency
In This Module
Accounting Introduction
Accounting Fundamentals
Chart of Accounts
General Journal
General Ledger
Balance Sheet
Income Statement
Accounts Payable
Accounts Receivable
Payroll
Receipts
Disbursements
Cash vs. Accrual Accounting Methods
12
Accounting Introduction U.S. Environmental
Protection Agency f "j
In This Module, Continued
Cost Share, Matching and In-kind Contributions
Direct and Indirect Costs
Accounting and Grants Management
Communication
Internal Controls
Documentation & Recordkeeping
Records Retention
Audits
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Accounting Introduction U.S. Environmental
Protection Agency
What is Accounting?
Accounting is the recording of financial data for
all receipts, expenditures, assets, liabilities and
net worth for the entire Tribal Nation and includes
analysis and measurement of this information.
Accounting information is reported to internal and
external decision makers.
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Accounting Introduction
U.S. Environmental
Protection Agency
What's the Difference Between Bookkeeping,
Accounting and Recordkeeping?
..
%
r-
Bookkeeping and reporting can be thought of as the
input and output of a complete accounting system.
What's the difference between accounting, bookkeeping, and reporting?
Accounting encompasses the broader responsibilities over developing and maintaining the
accounting systems under which bookkeeping functions are performed. Accounting is concerned
with the timely and accurate recording of transactions, providing useful management information,
and properly reporting such information for various user needs.
Developing and maintaining an accounting system involves setting up and maintaining an
appropriate chart of accounts for the organization. Policies and procedures are then developed to
provide guidance for all possible financial transactions from source documents (checks, purchase
orders, etc.) to journals (payroll journal, cash disbursement journal, invoice register, etc.), to general
ledger, (based on the chart of accounts), and ultimately to a variety of reports for all internal and
external needs.
Bookkeeping and accounting share two basic goals:
To keep track of income and expenses, thereby improving the organization's ability to
achieve profitability
To collect the necessary financial information about the organization's business to file
required reports.
Bookkeeping refers to the actual transactional entering and recording of data. Examples include,
writing checks, processing payroll, making deposits, recording disbursements and recording receipts.
Reporting, (the output of the data generated through various bookkeeping entries), is used for both
internal and external purposes. Internal reports are used within the organization by both
management and other personnel. Internal reporting can further be divided into financial and non-
financial data.
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Accounting Introduction U.S. Environmental J* ฃ%*'.
Protection Agency { *|
Policies, Procedures and Processes
Policy is a rule or goal, a course of action set by a
governing organization.
I
Procedure refers to the actions taken to conform to a
rule, a prescribed series of steps taken to achieve the
goal, or the way in which policy goals are achieved.
I
Process refers to a formal set of operational tasks
performed or procedural steps taken, such as regular
duties performed the same way each time.
What needs to be in place before the award is received?
Does your program have the essential systems, policies, procedures, and documentation necessary
for compliance with EPA assistance agreement regulations? Establish internal control procedures to
ensure your systems can comply with federal grant projects.
Policy is a rule or goal, a course of action set by a governing organization. Policies apply to all
programs and projects.
Procedure refers to the actions taken to conform to a rule, a proscribed series of steps taken to
achieve the goal, or the way in which policy goals are achieved. Procedures are usually set by
administrative or management personnel to help a department or project function efficiently.
Process refers to a formal set of operational tasks performed or procedural steps taken, such as
regular duties performed the same way each time. Processes are essential to effective completion of
repetitive tasks.
Use the questionnaire to periodically examine the systems, procedures, and controls set up at the
organizational level. EPA project officers and grants specialists, along with single auditors and others
periodically review for compliance but are in no way a substitute for a sound fiscal system.
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Accounting Introduction U.S. Environmental
Protection Agency { *|
Accounting - Why bother?
Internal reporting
ฐ How did we do?
ฐ Where are we going and how do we get there?
ฐ Stewardship of resources - financial and other
External accountability
ฐ Flinders/Stakeholders/Public/Government
ฐ Stewardship of resources
Accounting Introduction
Accounting Procedures
Accounting procedures are
part of a financial system
that consists of:
n Policies,
n Procedures, and
n Documents
supporting the:
n Collecting
n Recording,
n Disbursing, and
n Reporting
...of all the award recipient's financial activity.
What are the required accounting procedures?
Accounting procedures are the processes a Tribal Nation uses to record all of its financial
transactions. Accounting procedures are part of a financial system that consists of policies,
procedures, and documents supporting the recording, disbursing, and reporting of the Tribal
Nation's financial activity, so that the Tribal Nation's leadership (elected administration),
department heads, and the federal government have good information about the financial status of
a project.
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18
Accounting Introduction U.S. Environmental
Protection Agency
Accounting Procedures Manual
The organization's Accounting Procedures Manual must describe in writing
the accounting policies and procedures for all it's operations including
federally-issued awards.
Be sure to provide training to your program staff.
Review the manual and determine the strengths, limitations and
inconsistencies.
If you have an established policy or procedure, auditors and
EPA expect you to follow it!
Do we need an accounting manual?
The Tribal Nation must have an accounting manual. This manual should describe in writing the Tribal
Nation's accounting policies and procedures for all its operations including federally-issued awards.
For example, a general financial policy might read:
The following policies and procedures provide a framework and structure as to how the
Tribal Nation's financial accounting system will be managed and operated. The objective
of this system is to provide management with reasonable, but not absolute assurances
that assets are safeguarded against loss from unauthorized use or disposition; that the
Tribal Nation is managing its state and federal programs in compliance with laws and
regulations; transactions are executed in accordance with management's authorization
and recorded properly to permit the preparation of financial statements in accordance
with generally accepted accounting principles. The system will also provide management
and the Tribal Council the data necessary to maximize the beneficial use of financial
resources available.
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19,
A financial accounting system consists of
policies, procedures, and documents that
support the of a Tribal Nation's
financial activity.
A. recording
B. disbursing
C. reporting
D. status
E. All of the above
Accounting Introduction
Know the Terminology, Federal
Standards 8t Resources
Grants and Debarment
J.S. ENVIRONMENTAL PROTECTION AGENCY
ch: O All EPA ฎ This At
ACCRUED EXPENDITURES The charges incurred by the recipient during a given p<
(a) goods and other tangible property received;
(b) services performed bv employees, contractors, subrecipients, and other p
INCOME : The sum of:
id requiring the provision of funds for
nt and goods and other tangible
to current services or performance is required by the
ACQUISITION COST Of EQU1PMENI: The net invoice unit pnce of the equipment, including the cost of modifications
attachments, accessories, or auxKary apparatus necessary to make the property usable for the purpose for which It was
acquired. Other charges such as the cost of installation, transportation, taxes, duty or protective in transit insurance, shall be
included or excluded from the unit acquisition cost in accordance with the recipient's regular accounting practices (40 CFR
Parts BO & 31)
ADMINISTRATIVE REQUIREMENTS Those matters common to grants in general, such as financial management lands and
frequency of reports, and retention of records. Ihese are distinguished from programmatic requirements, which concern
matters that can be treated only on a program by program or grant by grant basis, such as activities
that can be supported by grants under a particular program. (40 CFR Part 31)
http://www.epa.gov/ogd/recipient/glossary.htm
Many useful terms are provided in:
The Appendix\ which can be found at
http://www.petetribal.org/images/Appendix 5.11.12.pdf.
EPA's online glossary at http://www.epa.gov/ogd/recipient/giossary.htm
If you would like additional examples or explanations, ask your grants specialist. Your grants
specialist will be happy to provide individual assistance.
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M,
Accounting Fundamentals U.S. Environmental ^4%
Protection Agency | J
Accounting Principles
P
Generally Accepted Accounting Principles
(GAAP) "
The Government Accounting Standards Board
(GASB)
Financial Accounting Standards Board (FSAB)
Internal Revenue Service (IRS)
Office of Management & Budget (OMB)
All recipients of federal funds must follow GAAP guidelines
Are we required to follow Generally Accepted Accounting Principles (GAAP)?
All recipients of federal funds must follow GAAP guidelines. Generally Accepted Accounting
Principles (GAAP) is a term used to refer to the standard framework of guidelines for financial
accounting used in any given jurisdiction; generally known as Accounting Standards. GAAP includes
the standards, conventions, and rules accountants follow in recording and summarizing
transactions, and in the preparation of financial statements. Good internal controls assure that
reliable accounting data is generated and is consistent with applicable federal laws and regulations
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(GAAP) as well as Tribal Nation policies arid procedures. Good internal controls also safeguard assets
against theft and unauthorized use, acquisition, or disposal.
Generally Accepted Accounting Principles (GAAP) www.fasab.gov/accepted.html
The Government Accounting Standards Board (GASB) is the independent organization that
establishes and improves standards of accounting and financial reporting for U.S. state and local
governments.
Government Accounting Standards Board (GASB): http://www.gasb.org/
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Accounting Fundamentals
Bathtub Analogy
(flow of assets into and out of an organization)
(ฎ)
1. Water level at the beginning of the
period (month or year) represents
the Net Assets of the organization;
water flows in through a spigot,
increasing net assets - just like
revenue.
2. Water flows out through the drain,
decreasing net assets - just like
expenses of an organization.
3. At the end of the period (month or year), we mark a new water
level in the tub.
4. The change in the water line shows how much the net assets have
increased or decreased in the period.
"If we measure the inflows and outflows separately we can better understand what
happened and why and thus we can attempt to control the net assets of the organization "
- Helen Knoll, 2/27/01J
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Accounting Fundamentals
U.S. Environmental
Protection Agency
Chart of Accounts
Chart of Accounts (Example)
December 31, 20 ii
Each transaction is
coded to an account.
The chart of accounts is
the "backbone" of an
accounting system and
lists all of the accounts in
the general ledger.
025-1300 Bank checking/savings
025-1800 Accounts Receivable
025-2100 Accounts Payable
025-2200 Salary Payable
025-2300 Salary Benefits payable
025-4000 Income
025-5000 Salary
025-5900 Salary Benefits
025-6000 Contract Labor
025-6100 Printing
025-6320 Supplies
025-6500 Equipment Rental
025-6650 Group Meetings
025-6700 Travel
025-6800 Indirect
Chart of accounts
What is the chart of accounts?
The chart of accounts lists all of the accounts in the general ledger of the Tribal Nation. Each account
is identified with an account number and it is used to record and classify financial data including
revenue and expenses. The chart of accounts could include EPA projects or "funds", rent, utilities,
and other essential expenses.
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Accounting Fundamentals U.S. Environmental _.-1*
Protection Agency I ^
General Journal
Is the accounting
record of transactions
Is recorded in chronological order
Please Note: With computerized accounting
software packages, other journals such as
payroll, cash receipts, cash disbursements,
procurement, accounts payable and accounts
receivable are often used instead of the general
journal.
General Journal
What should be recorded in the general journal?
The general journal, also called the Book of Original Entry, is the first place the Tribal Nation records
anything affecting their financial well-being. The general journal is the accounting record where
transactions are initially recorded in chronological order.
The general journal is a daily log of transactions. It needs to include the following:
Date the item is being recorded
Account number and name of the transaction that it affects
Debit columnthe amount that is debited to the account (subtracted from the balance)
Credit column the amount that is credited to the account (added to the balance)
Transaction descriptionan explanation of why the transaction was recorded into the Tribal
Nation's accounting records
Document reference numberthe Tribal Nation's reference code for the kind of transaction
being recorded.
For example, when payments are made the reference number can be the Check Number. If a receipt
of ordered supplies is recorded, then the vendor's invoice number or a voucher number may be
used.
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Accounting Fundamentals U.S. Environmental
Protection Agency
Document Reference Numbering System
Recorded in the General Journal
Identifies transactions
Needs to be used consistently
Cash Disbursements Journal for FY 20010/2011
DRN
Date
Description
Amount
010021
12/08/2010
Excavation
$29,600.00
010022
12/16/2010
Gate installation
$537-84
010023
12/17/2010
Clarifier
$548.35
Document reference numbering system
What does a document reference numbering system do?
A document reference numbering system is designed by a Tribal Nation to identify the transactions
that are entered into the general journal. Some systems may you use the Transaction, or
Transaction Number or ID #. If the document reference number is the Check Number, then every
time a check is written, the Check Number is used, rather than a file number or other identifier.
Whatever system the Tribal Nation uses, the system should be used consistently.
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Accounting Fundamentals U.S. Environmental
SAMPLE General Journal
December 31, 2010
Trans#
Type
Date
Num
Name
Memo
Account
Debit
Credit
1
check
12/6/2010
ck 92
AA Airlines
J. Doe airline ticket
025-6700 - Travel
700.00
1
check
12/6/2010
ck 92
AA Airlines
J. Doe airline ticket
025-1300-Bank
700.00
2
check
12/7/2010
ck93
Qx Rentals
rent for Dec -10
025-6500 Equip. Rent
1,200.00
2
check
12/7/2010
ck93
Qx Rentals
rent for Dec -10
025-1300-Bank
1,200.00
3
check
12/11/2010
ck94
Rest Hotel
J.Doe hotel exp.
025-6700 - Travel
800.00
3
check
12/11/2010
ck94
Rest Hotel
J.Doe hotel exp.
025-1300-Bank
800.00
4
wire
12/12/2010
w#25
Bank
Payroll ending 12/12/10
025-5000 - Salary
9,000.00
4
wire
12/12/2010
w#25
Bank
Payroll ending 12/12/10
025-5900 - Salary Ben.
1,530.00
4
wire
12/12/2010
w#25
Bank
Payroll ending 12/12/10
025-1300-Bank
10,530.00
5
check
12/12/2010
ck 95
ABC Supply
parts for project
025-6320 - Supply
2,800.00
5
check
12/12/2010
ck 95
ABC Supply
parts for project
025-1300-Bank
2,800.00
6
check
12/13/2010
ck 96
XYZ Hall
start-up meeting
025-6650 Group meet.
400.00
6
check
12/13/2010
ck 96
XYZ Hall
start-up meeting
025-1300-Bank.
400.00
7
check
12/15/2010
ck 97
Computer Supp.
Computer supplies
025-6320 Supplies
1,500.00
7
check
12/15/2010
ck 97
Computer Supp.
Computer supplies
025-1300-Bank
1,500.00
8
check
12/16/2010
ck 98
J. Doe
travel per diem
025-6700 travel
600.00
8
check
12/16/2010
ck 98
J. Doe
travel per diem
025-1300-Bank
600.00
9
check
12/20/2010
ck 99
USA construct.
12/01/10-12/17/10
025-6000 Contract
2,000.00
9
check
12/20/2010
ck 99
USA construct.
12/01/10-12/17/10
025-1300-Bank
2,000.00
Total
20,530.00
20,530.00
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.32
What does a document reference numbering
system do?
A. Code project ledgers
B. Enter items into the general journal
C. Identify transactions
D. Inventories equipment
E. All of the above are possible.
J
.#
Accounting Fundamentals for Non-Accountants Last Updated 29 January 2014 Page 17 of 110
Make sure journal entries are legible
easy to understand for you and others
(especially auditors)
Retain any supporting documentation toi
all entries in the journal.
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General Ledger
Compilation of all accounts that show detailed
transactions by account.
Accounts are listed in account number order in the
ledger.
Journal transactions are posted in the General Ledger by
Account number.
Shows account:
General Ledger
What goes in the general ledger?
A general ledger contains all asset, liability, and equity accounts for the Tribal Nation. It lists the
beginning balance, the detail of changes, and the ending balance in each account. The entire group
of accounts, maintained by a Tribal Nation is referred to collectively as the ledger.
What goes in the debit column?
The debit column must contain the deducted or paid amount that was recorded in the general
journal
What goes in the credit column?
The credit column must contain the amount added (i.e., deposit, refund, etc.) that was recorded in
the general Journal.
What goes in the balance column?
The balance column reports the result of adding and subtracting from the account. Debit and credit
columns must balance equally.
Beginning balances
Detail of changes
Ending balances
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Accounting Fundamentals U.S. Environmental /*
Protection Agency I ^
Posting Reference Number
Each posting to the General Ledger is given a
Posting Reference Number (PRN)
The PRN identifies the page of general journal or
any other journal (such as payroll) on which the
transaction is recorded.
Different systems may have use different
identifiers such as "journal," or "entries."
What is a posting reference number?
The posting reference number refers to the page of the general journal that the transactions come
from. General journal pages are usually numbered sequentially for the entire year.
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Accounting Fundamentals U.S. Environmental
SAMPLE General Ledger Detail by Account potion AgenCy
As of December 31, 2010
Type
Date
Num
Name
Memo
Amount
Balance
025-4000
Income
JE
12/30/2010
je 1
Federal Grant
Dec-10 accrual
-35,000.00
-35,000.00
Total 025-4000 Income
-35,000.00
-35,000.00
025-5000 Salary
wire
12/12/2010
wire 25
Salaries
pay ending 12/12/10
9,000.00
9,000.00
wire
12/26/2010
wire 26
Salaries
pay ending 12/26/10
8,500.00
17,500.00
JE
12/30/2010
je2
Salaries
pay accrual 12/31/10
3,000.00
20,500.00
Total 025-5000 Salary
20,500.00
20,500.00
025-5900 Salary Benefits
Wire
12/12/2010
wire 25
Salaries
pay ending 12/12/10
1,530.00
1,530.00
Wire
12/26/2010
wire 26
Salaries
pay ending 12/26/10
1,440.00
2,970.00
JE
12/30/2010
je2
Salaries
pay accrual 12/31/10
530.00
3,500.00
Total 025-5900 Salary Benefits
3,500.00
3,500.00
025-6000
Contract Labor
check
12/20/2010
ck 99
USA Construction
12/01/10-12/17/10
2,000.00
2,000.00
JE
12/30/2010
je3
USA Construction
12/18/10-12/31/10
3,000.00
5.000.00
Total 025-6000 Contract Labor
5,000.00
5,000.00
025-6320 Supplies
check
12/12/2010
ck 95
ABC Supply Co.
parts for project
2,800.00
2,800.00
check
12/15/2010
ck 97
Computer Supply Co.
computer supplies
1,500.00
4,300.00
check
12/20/2010
ck 98
Office Supp. Co.
office supplies
500.00
4,800.00
Total 025-6320 Supplies
4,800.00
4,800.00
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Accounting Fundamentals U.S. Environmental /
Protection Agency {
Dating Accounting Records
The journal records original date and
the ledger records data by account.
Which date do we put in the ledger?
The date entered into the general ledger must be the same date that appears in the general journal.
The date in the general journal is the date the information is originally recorded in the general
journal.
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40 I
Protection Agency {.O- )
Why do we need both a general
journal and a general ledger?
A. Cross checking requires the bookkeeper to look
at transactions in different ways.
B. It helps accountants check mathematical
accuracy.
C. The journal records data by date of
transaction.
D. The ledger tracks data by separate accounts.
E. All of the above
Data in the General Journal and
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Accounting Fundamentals U.S. Environmental
Protection Agency
Balance Sheet
Snapshot of an organization's financial health.
Though not recorded in detail,
the Balance Sheet shows:
ฐ Assets
ฐ Liabilities
* Equity
Financial Reporting
What must be reported?
Accurate, current, and complete disclosure of the financial results of financially-assisted activities
must be made in accordance with the financial reporting requirements of the assistance agreement
award. The provisions of 40 CFR 31.41 discuss financial reporting requirements in greater detail.
40 CFR Part 31 is provided in the Appendix.
Which financial reports are prepared and when?
Two financial reports are produced by a Tribal Nation from the general ledger accounts on a
monthly basis:
1. A balance sheet lists all the assets, things of value, liabilities (payments due to third parties),
and fund balance or fund equity.
2. A statement of revenues, expenditures, and changes in fund balance shows:
o Break-downs in the funds into various revenue streams (e.g., assistance
agreements)
o The budget
o What has been put against the project funds in specific cost categories (established
and set up in the chart of accounts)
o Balances remaining in funds
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Sample Balance Sheet
Accounting Fundamentals
U.S. Environmental
Protection Agency
BALANCE SHEET SUMMARY
December 31, 2011
ASSETS
Current Assets
Bank Checking/Savings
Accounts Receivable
Total Current Assets
90.000.00
50,000.00
40.000.00
TOTAL ASSETS
90.QQQ.QQ
LIABILITIES & EQUITY
Current Liabilities
Accounts Payable
Salary Payable
Salary Benefits Payable
Deferred Revenue
3,500.00
3,000.00
600.00
1.000.00
Total Current Liabilities
8,100.00
Equity
81,900.00
TOTAL LIABILITIES & EQUITY
90.QQQ.QQ
These records must be supported by documents, such as:
Cancelled checks
Invoices
Purchase orders
Receiving reports
Time and attendance records
Contract and subcontract award documents
Not maintaining adequate records increases a Tribal Nation's risk level. Mismanaged accounting
may open the Tribal Nation to accusations of fraud and may prevent them from receiving future
awards. They may even have to pay back funds that were transferred but not documented.
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Accounting Fundamentals U.S. Environmental
'w'"
Protection Agency
Asset Accounts
Assets: What the organization OWNS
ฐ Permanent - carryover from one year to the next until collected, sold or
destroyed, or written off when its useful life has ended
ฐ Listed in order of liquidity - ease of conversion to cash
Cash in bank accounts
Investments (market value)
Receivables - Grants, pledges, accounts, notes, loans
Inventory - items held for sale (lower of cost or market)
Prepaid expenses (future expenses paid in advance)
Property and equipment - accumulated depreciation
Refundable deposits
Accounting Fundamentals U.S. Environmental
'V
Protection Agency
Liability Accounts
Liabilities: What the organization OWES
ฐ Permanent - carryover from one year to the next until paid or earned
(deferred revenue)
ฐ Listed in order of age - when is it due?
Short-term is less than one year vs. Long-term which is more than
one year
Accounts payable (outstanding invoices)
Accrued expenses (owed by not billed, including payroll)
Other liabilities (payroll/sales/property taxes)
Notes and loans payable
Deferred revenue (income received but not yet earned)
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Accounting Fundamentals
U.S. Environmental
Protection Agency
Fundamental Accounting Equation
Short term Assets - Short term Liabilities = Working Capital
OWNED - OWED = What's Left (Working Capital)
Assets = Liabilities + Net Assets
OWNED = OWED + What's Left
Measured at a moment in time (Usually Month or Year End)
Statement of Financial Position (Balance Sheet)
Current Assets - Current Liabilities = Working Capital
Low or negative balance could indicate problems meeting
obligations
+ Cash in bank accounts
+ Investments: maturing in less than a year
+ Receivables: grants, pledges, accounts, notes, loans
+ Inventory: goods held for sale
- Accounts payable (unpaid bills)
- Accrued expenses (owed but not billed, including payroll)
- Other liabilities (payroll, sales, property taxes)
Accounting Fundamentals
U.S. Environmental
Protection Agency
Working Capital
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Accounting Fundamentals U.S. Environmental
Changes in Net Assets
Earning (Revenue) increases Net Assets
Protection Agency
Using (Expenses) decreases Net Assets
Revenues > Expenses increases Net Assets
Expenses > Revenues decreases Net Assets
For EPA programs, generally revenues match expenses
resulting in little or no net assets.
Statement of Activity
The Statement of Activity, also known as the Income
Statement or Profit & Loss (P & L) is another common
Financial Report.
Summary of Revenues & Expenses for a specific period
(usually reported monthly, quarterly, yearly)
Shows
ฐ Income
ฐ Expenses
ฐ Net Income/Loss
Net Income/Loss for the year flows to the Balance Sheet
and either increases or decreases the equity on the
Balance Sheet.
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Statement of Activity
Revenues = Earning (increase net assets)
Grants and contributions (all kinds, including
government)
Sales of goods and services
ฐ Program services
ฐ Conferences
ฐ Fees
ฐ Sales of publications, artifacts, etc.
ฐ Unrelated business income
Rents
Interest, dividends and capital gains
U.S. Environmental
Protection Agency
Statement of Activity
Expense = Using resources (decrease net assets)
Purchase of goods and services
ฐ Salaries, payroll taxes and benefits
ฐ Rent, utilities and other facility costs
ฐ Supplies, phone, postage and delivery
ฐ Consultant and professional fees
ฐ Depreciation (allocated over the life of the asset)
n Other
Interest expense
ry
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Accounting Fundamentals U.S. Environmental
Cw'"
Protection Agency
Statement of Activity
EARNED USED = Change in net assets
For-Profit: Operating statement, Profit & Loss,
Profit and Loss, Net income or the bottom line
Monthly: First of this month to end of this month
Year-to-date: First of the year to the end of this month
Yearly: First of the year to end of the year
Temporary accounts: "Closed" at the year end
Fiscal year always starts with zero balances,
with the exception of multi-year grants.
Note: When reversing journal entries are used, the beginning balances may be negative. Some
Tribes use these when on a cash basis but are acrruing year-end expenses.
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rvv
x>
Other Accounting Fundamentals you should
be familiar with:
Accounts payables result when goods or services are not
paid for immediately at the time they are provided or
delivered.
An important subsidiary ledger of the accounting system.
Unlike long-term loans, accounts payables are short-term
obligations usually paid within 30 days.
Invoices should be checked with purchase orders prior to entering
them into the ledger.
When entering invoices - be descriptive and add any terms, i.e., "3%
10/Net 30,"and indicate what was purchased.
Accounting Fundamentals
U.S. Environmental
Protection Agency
Accounts Payable
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58
Accounting Fundamentals U.S. Environmental
Protection Agency I
Accounts Receivable
Accounts receivables are funds due from customers
(Grantor, employees, i.e., travel and payroll advances) for
goods and/or services that have been provided by the
organization but not yet paid.
Accounts Receivables are considered an asset on the
balance sheet.
A subsidiary ledger is used to track receivables.
Receivables should only be booked when proper
documentation has been received.
Be sure to maintain adequate source documentation.
59
Accounting Fundamentals U.S. Environmental
Protection Agency { *|
Payroll
Payroll is the process of paying employees of the
organization for time worked during a specified
period, which can be weekly, bi-weekly or
monthly.
Employees are paid on an hourly or salaried
basis, depending on the type of position and
level of responsibility.
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6o
Accounting Fundamentals U.S. Environmental
Protection Agency { *|
Payroll
Based on the US Department of Labor's Fair
Labor Standards Act, employees who are
categorized as exempt are executive,
administrative or professional employees who
receive an annual salary.
Generally, non exempt employees are paid on an
hourly basis and are subject to wage and hourly
laws such as overtime pay.
Payroll
The following information should appear on an
employee's time sheet:
Employee's name
Pay period
Date of each day worked in the pay period
Time in and out for each day worked (Track activity/program)
Total overtime hours worked in the pay period
Total other hours (sick time, vacation, holidays, etc.)
Budget code (Track hours worked each day by budget code)
Signature of employee
Signature of supervisor
This information is not only required by DOL, it is also checked by
auditors.
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62
Documentation and Recordkeeping U.S. Environmental
Protection Agency
Payroll
Hours Worked and Documented on Timesheet
ioo%
20% 50% 30%
10%
90%
40 hrs
8 hrs 20 hrs 12 hrs
4 hrs
36 hrs
EPA
EPA PPG NSF
EPA
Tribal
Semi-Annual Reporting
Timesheets
Timesheets
Payroll
How do we record payroll expenses?
For payroll expenses charged to awards, Tribal Nations follow the documentation rules included in
OMB Circular A-87. If an employee worked on only one assistance agreement and not on any other
projects, then the charges for the employee's salary or wages, or a percentage thereof, can be
claimed.
The employee must submit periodic certification that work was done solely for the award and
during the award period. These certifications are prepared at least semi-annually and are signed by
the employee or supervisory official having first-hand knowledge of the work performed by the
employee.
If the employee worked on more than one federal award, semiannual certifications cannot be used.
Instead, the employee must prepare time sheets identifying the actual hours worked on each
project. The time sheets must identify the project and the hours worked on each project. Or if a
portion of the employee's time is to be counted toward required nonfederal match, then timesheets
may be required depending on the grantee's accounting system for tracking match.
The total hours recorded on the time sheet must represent the total hours for which the employee
worked and was paid. To be allowable, labor costs must be based on accurate time sheets reflecting
the actual activities of all employees.
If an employee worked more hours than paid or compensated, then the employee's gross pay must
be allocated based on the hours worked.
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Timesheets
Use timesheets NOT estimates.
Record actual hours worked.
Budget estimates or other distribution percentages determined before or after the services are
performed do not qualify as source documentation for charges to federal awards, but they may be
used for interim accounting purposes, provided that:
The Tribal Nation's system for establishing the estimates produces reasonable
approximations of the activity actually performed.
When using time and effort certifications rather than time sheets:
o Comparisons of actual costs to budgeted distributions are made quarterly and based
on the monthly activity reports.
o Costs charged to federal awards (i.e., to reflect adjustments made as a result of the
activity actually performed) may be recorded annually, if the quarterly comparisons
show the differences between budgeted and actual costs are less than ten percent
of the overall budget.
o Budget estimates or other distribution percentages are revised as necessary, at least
quarterly, to reflect changed circumstances (e.g., employee's time begins to be
allocated to more than one funding source, or employee had to take leave without
pay unexpectedly).
EPA recommends a revised budget be filed with the EPA Project Officer when budget changes are
necessary.
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6,
Accounting Fundamentals U.S. Environmental
Protection Agency | xMMj j
Cash Flow Projection
Internal analysis to be prepared and updated by finance staff
I Account
1 May
1 June 1
I July I
1 August
Revenue and receivable
- Grants
- Notes
- Other Receivables
Newgrants/gifts expected
Other income/receipts
Payroll, taxes & benefits
Monthly expenses
Payments on
-Receivables
-Other debt
- Other
payments / expenses
Increase (decrease)
Cash-beginning of month
Cash-end of month
Make sure you deposit the money in the bank as soon as possible and get it recorded in the general
ledger!
65
Accounting Fundamentals U.S. Environmental
Protection Agency | |
Receipts
Money received for donations, memberships,
admissions, sales of goods, and all other revenue
streams of the organization are considered
receipts.
Receipts can be in the form of cash, check,
charge card, or electronic payment methods
such as Automated Clearing House (ACH) or
Automated Standard Application for Payment
(ASAP).
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66
Accounting Fundamentals U.S. Environmental
Protection Agency | Jmy j
Receipts
Regardless of method of payment, all receipts
must be documented and recorded in an
organized and timely manner.
In other words - get the money in the bank as
soon as possible and get it recorded to the
general ledger!
Accounting Fundamentals
U.S. Environmental
Protection Agency | xM&j f
Disbursements
Disbursements are funds paid out by an
organization for:
Purchases of goods and services
Indirect costs
Refunds to customers
Petty Cash
Employee reimbursement
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68
Disbursements
Disbursements are usually made either by check, electronic transfer,
or if available, a tribal credit card.
An organization may have more than one checldng account available
for use, but most will assign one specific account for "operational"
use.
Recommend having a separate account for each major cost center.
In the case of indirect costs, transfers to other funds is needed.
The organization will need to establish who on staff is authorized to
initiate and authorize expenditures on its behalf.
M.
Accounting Fundamentals U.S. Environmental
Protection Agency | j
Accrual Accounting Method
The accrual method of
accounting is
recommended by EPA.
n Income is counted when the
underlying grant eligible
expenditures are made.
ป Expenses are counted when
the goods or services are
received or incurred.
Accounting Processes
Which accounting system is recommended?
There are two types of accounting methods cash and accrual. The recipient needs to choose either
the cash or accrual accounting method and use it throughout the award period. It is important to
understand the basics of the two principal methods of keeping track of income and expenses cash
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and accrual basis accounting. These methods differ only in the timing of transactions, including sales
and purchases, when they are credited or debited to your accounts.
The accrual method or accrual basis accounting is the more commonly used method of accounting.
Under the accrual method, transactions are counted when the order is made, the item is delivered,
or the services occur, regardless of when the money for them (receivables) is actually received or
paid. In other words, income is counted when the sale occurs, and expenses are counted when the
goods or services are received. You don't have to wait until you see the money, or actually pay
money out of your checking account, to record a transaction.
2o
Accounting Fundamentals U.S. Environmental
Protection Agency
Cash Accounting Method
The cash method of
accounting is accepted
when used consistently
throughout the award
period.
n Income is not counted until
cash (or a check) is actually
received.
ฐ Expenses are not counted
until they are actually paid.
Under the cash method or cash basis accounting, income is not counted until cash (or a check) is
actually received, and expenses are not counted until they are actually paid.
The method you use is your decision although accrual is generally the accepted system for nonprofit
organizations. EPA highly recommends the accrual basis of accounting.
Note: Entities often account for activity on a cash basis during the year and adjust to an accrual
basis at year end for external reporting purposes.
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Accounting Fundamentals U.S. Environmental
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Cash vs. Accrual Comparison
Cash Basis Accrual Basis
REVENUE
Recorded when received/ Recognized when earned
deposited
EXPENSE
Recorded when paid/disbursed Recognized when incurred
There are two accepted grant accounting methods: cash basis or
accrual basis. Choose one method and be consistent!
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72
Which accounting method does EPA
recommend?
A. Accrual basis
B. Assets and liabilities
C. Cash basis
D. Fund basis
E. None of the above
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26
U.S. Environmental
Protection Agency
(4)
Cost Share arid Matching
The portion of allowable project costs that a recipient
contributes toward completing its project. Common to
tribal grants is a 20% cost share/match of a federal award.
mo% cost share/match
Fedeml Shape Reeipleiit Match
SljOOO
Check the Terms and Conditions to make sure the match percent is not a
calculation against total project costs.
Cost Sharing, Matching, and In-kind Contributions
How do we account for cost sharing, matching, and in-kind contributions?
Cost Share is defined as the portion of allowable project costs that a recipient contributes toward
completing its project - costs not borne by the Federal Government (40 CFR Part 31.24) In-kind
services can also be added to an assistance award by the recipient. Some examples of a recipient's
in-kind contribution to an award are: volunteer hours, personnel hours, equipment, supplies and so
on. Recipients' may choose to meet their cost share or match requirements through in-kind
contributions.
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77
U.S. Environmental
Protection Agency ฎ>
Cost Share and Matching (continued)
Mandatory - when stated in the Catalog of
Federal Domestic Assistance (CFDA)
program listing
Voluntary - negotiated in the agreement and
required after signing the award
Cost Share and Match are essentially the same (and are often used interchangeably), and it can be
mandatory or voluntary. It is mandatory when the statute or program requires it (usually stated in
the CFDA). It's usually required in the form of a percentage of the total project costs ("matching" the
federal costs...so if it's 50% cost share/match, it would be 50% of the total project cost and would
match the federal share dollar for dollar). Voluntary cost share is exactly what it sounds like the -
the recipient volunteers to provide it even when it is not required by the program. But once they do
volunteer it and sign the award agreement, they are required to provide it - they've made a
commitment, voluntary or not. Both mandatory match and voluntary match can occur in the same
grant. This happens when the applicant chooses to provide more match than is required.
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In-Kind Contributions
Non-monetary contributions with a quantifiable
value, such as donations of:
ฐ Time and effort = actual/market value
ฐ Goods or services = market value
ฐ Supplies or equipment = market value
Third-party - contributed by someone other
than the recipient or EPA
In-kind contributions and services can be used as match if not from a federal agency. It is a non-
monetary contribution that can be quantified monetarily in some way (see the explanation below).
Third-party in-kind just means it is an in-kind contribution coming from someone other than the
recipient or grantor. This may be a partner or someone with whom they are collaborating. When
EPA provides in-kind services (e.g., lab services, office space, etc.), they cannot be used as match
because they count as part of the federal government's contribution.
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Document Worth
Cost sharing, matching, and in-kind
contributions are gifts or donations of time,
goods, and/or sendees made toward the project
by the Tribal Nation or other benefactors.
Track and account for all funding in the same
way, including market value of donations.
Contact your EPA Project Officer if you think
your organization may qualify for a cost share
waiver.
Cost sharing, matching, and in-kind contributions are gifts or donations of time, goods, and/or
services made toward the project by the Tribal Nation or other benefactors. These contributions
must be tracked and accounted for in the same manner as EPA funding. Accounting for third party
in-kind contributions provides an accurate record of the true cost of the project.
For example:
Supplies donated by a third party need to be kept in a separate file with:
o A signed form from the third party
o Description of the contribution and how the supplies were used
o A copy of the invoice from the third party, if possible
Supplies should be valued at market value when reporting the contribution and cannot be
paid for with any federal funds.
Time donated by the Tribal Nation need to:
o Be recorded by the employee
o Explain how much time was donated on the project
o Contain the employee's signature
o State that time and effort recorded were spent on the project
This time cannot be paid for with any federal funds.
Your organization may request a waiver of the cost share requirement, if the cost share will impose
an undue hardship. Check with your EPA project officer to see if your organization should request a
waiver.
How to account for and report cost sharing, matching, and in-kind contributions is explained in the
following documents provided in the Appendix.
40 CFR 31.24
2 CFR Part 225, Appendix B, section 12 the OMB Circular A-87
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8i
Direct and Indirect Costs U.S. Environmental
Protection Agency i 4|^ |
Direct versus Indirect Costs
Develop a Cost Policy Statement for classifying
costs as direct or indirect.
ฐ Direct costs can be readily assigned to a
particular project.
ฐ Indirect costs are those that cannot be readily
assigned to a particular project.
Direct vs. Indirect Costs
2 CFR Part 225, OMB Circular A-87 makes clear that for classifying costs under every accounting
system as direct or indirect, there is no universal rule. For this reason, it is very important for a
Tribal Nation to develop a Cost Policy Statement for classifying costs as direct or indirect. For
example, an indirect cost policy statement might read:
It shall be the responsibility of the Finance Officer, working in consultation with the
General Manager, to monitor indirect cost recoveries and to ensure that indirect (i.e.,
central administrative) costs are fully recovered in each fiscal year. All federal, state,
private, and tribal sources of funding shall be required to contribute the required
prorated share of costs per the federally negotiated indirect cost rate. No agreement for
any grant, contract or other funding source that becomes available to the Tribal Nation
but which does not allow for the full recovery of indirect shall be entered into or
accepted by the Tribal Nation until a source of any projected indirect shortfall has clearly
been identified and obligated. Within the limits of any budgetary authority established
by the Tribal Council, the Finance Officer shall propose, and the General Manager
approve such reprogramming or budget modifications as may be necessary to
accomplish this objective.
Developing a Cost Policy Statement will greatly reduce, but not necessarily eliminate, any future
disagreements over the allowability of costs, whether they are direct or indirect.
The basic difference between direct and indirect cost is how easily a cost can be identified and
assigned with a high degree of accuracy to a particular project.
Direct costs can be readily assigned to a particular project.
Indirect costs are those that cannot be readily assigned to a particular project.
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Regulations permit minor direct cost items to be treated as indirect costs for practicality, as long as
all such items receive consistent treatment.
Direct Costs
Examples of direct costs include:
ฐ Personnel
ฐ Supplies
ฐ Equipment
ฐ Travel
Only when directly involved in or needed to meet
the award project objectives.
Direct Costs
Direct costs are costs that can be identified specifically for accomplishing the work under the award.
Examples of direct costs include:
Compensation of employees for the time devoted to the performance of the award
Cost of materials acquired, consumed, or expended specifically for the purpose of the award
Equipment used specifically to perform the work under the award
Travel expenses incurred specifically to carry out the award
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Which project expenses are usually
categorized as indirect costs?
A. Environmental impact measuring devices
B. Water, power, and communication bills
(Unless used for a dedicated project funded
facility)
C. Employee compensation
D. Travel to work sites
E. All of the above
Indirect costs are:
n Not readily identifiable with a particular project or program
n Necessary to success of the award project
An indirect cost rate is:
n Negotiated in advance of the assistance agreement *
= You can only charge indirect costs if you have an approved
indirect cost rate.*
n Applied consistently to all grant programs
* EPA Interim Guidance Option: Tribes without an approved IDC may use a flat 10%
IDC of salaries & wages while in process of negotiation.
Indirect Costs
Indirect costs are negotiated in advance. Indirect costs are the costs incurred by a Tribal Nation that
are not readily identifiable with a particular project or program but are nevertheless necessary to
the Tribal Nation's operation and the performance of its programs.
Types of costs that are usually treated as indirect costs include:
Operating and maintaining facilities
o Electricity
o Rent
o Phone service
Depreciation
Administrative salaries
o Secretary for travel
Direct and Indirect Costs
U.S. Environmental
Protection Agency
Indirect Costs
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In theory, all such costs might be charged directly. When it is not practical to charge them directly,
costs are grouped into a common pool and distributed to the organization's programs through a
cost allocation process.
An indirect cost rate is applied to each assistance agreement award. Assistance agreements are
charged for an item directly or indirectly, but not through both methods. Charging with both
methods is called double charging and is not allowed.
87
Direct and Indirect Costs
U.S. Environmental
Protection Agency j \Mmy *|
Indirect Cost (IDC) Rate
Negotiate with your cognizant federal agency
The Department of Interior (DOI)/Interior
Business Center (IBC)/Indirect Cost Services
(ICS)
The DOI's Interior Business Center negotiates
the Indirect Cost (IDC) rate
3fi
The DOI's Interior Business Center sends the
IDC rate agreement to you
2 Ik.
Department of the Interior/Indirect Cost Services is the Federal cognizant agency
designated by OMB to negotiate indirect cost rates for all Indian Tribal Governments and
their component units regardless of funding.
EPA's Office of Grants and Debarment is planning to issue a Grants Policy Issuance (GPI) that
provides a more flexible approach to Tribal indirect cost rate funding. To ensure Tribes are
provided adequate indirect cost funding as soon as possible, EPA is implementing the
options under the draft policy until a final version is issued. The current version of the GPU
identifies three additional options for Tribes to claim indirect costs, including using:
1. Fixed/carry forward rates less than 3 years old
2. Current provisional/final indirect cost rates approved for us in an existing DOI grant,
or
3. A flat rate of 10% of salaries and wages.
For more information check with your EPA project officer and/or grants specialist!
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88
Which project expenses are usually
categorized as direct costs?
A. Payments on office and warehouse space
B. Maintenance staff
C. The Tribal Council receptionist's salary and
benefits
D. Travel to a conference for the grant project
E. All of the above
0
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92
Accounting and Grants Management U.S. Environmental
Protection Agency | Jmy j
Accounting and Grant Awards
Grant awards are made to organizations
Grantees must be in compliance with
organizational policies and procedures as well as
federal requirements
Organizational requirements may be more
restrictive than federal requirements and can
not be less restrictive than federal
requirements.
93
Accounting and Grants Management U.S. Environmental
Protection Agency | ^
Grants Management
Hierarchy of Grant Requirements
Program Laws (Statutes)
Cross-Cutting Laws (Assurances, Compliance, Executive
Orders)
Code of Federal Regulations (Administrative Rules)
Office of Management and Budget Circulars and
Compliance Supplement
EPA's Office of Grants and Debarment
Internal controls should be based on this hierarchy, and
structured and implemented to ensure proper financial
reporting and effective and efficient operations.
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94
Accounting and Grants Management
U.S. Environmental
Protection Agency
<ง>
Accounting and Grants Management
Accepting an award agreement means the recipient
agrees to comply with:
Title 40 CFR Part 31.22 - Administrative
Requirements
OMB Circular A-87 - Cost Principles codified in Title 2
CFR Part 225
OMB Circular A - 133 (When the recipient spends
$500,000 or more in federal funds in a fiscal year.)
All documents are available to the public upon request.
Which financial rules are we agreeing to follow when we get an award?
When the Tribal Nation accepts a federal assistance award they agree to follow the accounting and
financial standards established in the federal regulations 40 CFR Part 31.22 (Administrative
Requirements), OMB Circular A-87 found in 2 CFR Part 225 (Cost Principles) and OMB Circular A-133
(When the recipient spends $500,000 or more in federal funds in a fiscal year.
EPA, the Inspector General, the Comptroller of the United States, or any other duly authorized
representative has the right to timely and unrestricted access to any books, documents, papers, or
other records of the Tribal Nation that are pertinent to the awards. They have the right to conduct
audits, examinations, and take excerpts, transcripts, and copies of such documents. This right also
includes timely and reasonable access to Tribal personnel for the purposes of interviews and
discussions related to such documents.
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Accounting and Grants Management U.S. Environmental /Lป\
Protection Agency i j
Spending Grant Funds
Comply with internal and external regulations,
policies and procedures.
Consider "audit readiness" for every transaction.
Review expenditures versus budget on a regular
basis.
No supplanting or cost-shifting.
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Accounting and Grants Management U.S. Environmental
Protection Agency | ^
Cost Shifting is not Allowed
EPA Grant
GGP Grant
Supplies Budget
$5,000
Supplies Budget
$15,000
$1,500 ea. x 4 computers =
$6,000
$1,500 ea. x 2 computers =
$3,000
2 personnel use computers
$1,500 x 2 computers =
$3,000
4 personnel use computers
$1,500 x 4 computers =
$6,000
Allocable
-&
CO
0
0
0
Allocable
$6,000
Not allocable
-&
CO
0
0
0
Not allocable
$0
Need
$3,000
Balance Remaining
$3,000
Under the principles of OMB Circular A-87, Attachment A any cost allocable to a specific EPA award
may not be charged to other federal awards. Using the same charges on different awards is
prohibited practice and is unallowable. Such a practice constitutes unallowable cost shifting*.
For instance, cost overruns under an award that has no more funds available may
not be charged to another award or placed in indirect cost pools. The cost overrun
would have to be funded by unrestricted Tribal funds.
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Just because an expense is allowable under the OMB cost principles does not mean they are
allocable to the grant award.
For example, you purchase four computers. They are charged to the budget under
the supply line, which is an allowable cost. Only two employees are supporting the
grant. Costs for the two additional computers are not allowable, because they are
not allocable to the grant.
*Cost shifting between budgets for different grants is not allowed unless negotiated with EPA.
Allocability is about justification. The project manager is responsible for oversight, keeping cost
allocations accurate. If the project needs it, then document - justify those reasons in writing.
OMB Circular A-133 single audit is required when the total expenditures of
Federal Funds > $500k in your accounting years (calendar or fiscal: just be
consistent).
ฐ You may receive Federal funds from other sources, including State,
County or another NPO - without ever applying for a Federal grant!
ฐ The funding source should notify you that you are a "sub-recipient" of
Federal funds, and that you maybe subject to an audit under OMB
Circular A-133.
ฐ The cost of an OMB Circular A-133 single audit is an allowable cost and
may be expensed to a federal award, prorated between multiple grants,
or covered by indirect costs. The cost of an audit should be charged to
Federal awards in accordance with all cost standards, including a proper
allocation of costs under OMB Circular A-87.
Additional audit procedures, reports and audit fees are required if your
Federal expenditures > $500k in one year.
Accounting and Grants Management U.S. Environmental
Protection Agency
Government Grants
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98
Accounting and Grants Management
U.S. Environmental
Protection Agency
m
Comply with Federal Cost Principles
Written policies
and procedures
are necessary to
ensure that costs
are reasonable,
allocable, and
allowable.
Why do we need to have written policies and procedures?
Written policies and procedures are necessary to ensure that costs are reasonable, allocable, and
allowable. OMB Circular A-87 Cost Principles, and EPA "terms and conditions" require all costs
(including cost share or matching costs) claimed under an award to be reasonable, allocable, and
allowable.
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99
Accounting and Grants Management U.S. Environmental
Protection Agency | xMMj j
Unallowable Costs
EPA Grant
Other Grant
Personnel
Compensation
Direct Costs
Office Manager
Indirect Costs
Office Manager
Liquor
Entertainment
Lobbying
Costs must be given consistent treatment!
Unallowable
Unallowable costs are personnel compensations rather than costs needed to fulfill the terms of the
award. Claims developed under approved cost allocation plans will be based on allowable costs as
identified in OMB Circular 87-A. Where unallowable costs have been claimed and reimbursed, they
will be refunded to the program that reimbursed the unallowable cost using one of the following
methods:
cash refund
offset to a subsequent claim
credits to the amounts charged to individual awards
Unallowable costs include liquor, entertainment, contributions, and donations, costs related to
criminal or civil proceedings, lobbying, items for personal use, and contingencies except for self-
insurance reserves, pension plan reserves, and post-retirement health, and other benefit reserves.
The cost of governing, fundraising, pre-award costs, investment management, idle facilities,
advertising, interest, and bad debts, fines, and penalties have many restrictions.
Also, costs may not be assigned as direct costs if any other cost incurred for the same purpose in like
circumstances has been allocated to an award as an indirect cost. Supplanting and cost-shifting are
unallowable practices.
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lOO
Accounting and Grants Management U.S. Environmental
Protection Agency | Jmy j
Reasonable Costs
A cost is reasonable if it does not exceed
what a prudent person would pay,
under the circumstances prevailing at the time
the decision was made to incur the cost.
Reasonable
A cost is reasonable if it does not exceed what a prudent person would pay, under the
circumstances prevailing at the time the decision was made to incur the cost. In other words, the
most expensive item should not be purchased or used unless there are other compelling reasons
(such as it is more accurate, reliable, or manufactured to be integrated as part of a system) when an
item of equivalent quality is available at lower costs. If the same item can do the job just as well as a
more expensive item, the less expensive item should be purchased.
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Accounting and Grants Management U.S. Environmental
Protection Agency | Jmy j
Tests for Allowable Costs
For costs to be allowable, they must:
Be in accordance with the grant agreement
Comply with cost principles in OMB Circular A-87 including
Attachment A and B
Adhere to Generally Accepted Accounting Principles (GAAP)
Include all applicable credits
Be completely documented
Allowable
Tests of allowability require that the cost:
Conform to any limitations or exclusions set forth in the Cost Principles found in 2 CFR part
225, OMB Circular A-87,or in the "terms and conditions" of the federal award, or other
Tribal regulations.
Be consistent with policies, procedures, and regulations that apply uniformly to both federal
awards and other Tribal government units.
Be given consistent treatment. A cost may not be assigned to a federal award as a direct
cost if any other cost, for the same purpose within the Tribal Nation, under like
circumstances, has been allocated as an indirect cost.
Be determined in accordance with generally accepted accounting principles (GAAP), except
as otherwise provided for in 2 CFR, Part 225 (OMB Circular A-87).
Include all applicable credits, such as discounts given by an equipment manufacturer.
Be adequately documented.
Moving funds from one budget category to another within a single grant is usually acceptable if the
total movement over the life of the grant does not exceed ten percent (10%) of the total budget for
that category.
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102
Accounting and Grants Management U.S. Environmental
Protection Agency (
Allocable Costs
A cost is allocable to a specific cost objective in an
award if the goods or services purchased are
required and budgeted for that project.
In the budget Required for the project
Allocable
A cost is allocable to a specific cost objective in an award if the goods or services purchased are
required and budgeted for that project. Allocation methodologies are the ways in which a Tribal
Nation determines which costs to assign to which objective. Allocation methodologies for costs,
such as space rental, should be in writing and should be revised as they change. Allocation
methodologies must be adequately documented in a Tribal Nation's policies and procedures.
Under the principles of OMB Circular A-87 any cost allocable to a specific EPA award may not be
charged to other federal awards. Using the same charges on different awards is prohibited practice
and is unallowable. Such a practice constitutes unallowable cost shifting.
For instance, cost overruns under an award that has no more funds available may not be
charged to another award or placed in indirect cost pools. The cost overrun would have to be
funded by unrestricted Tribal funds.
Just because an expense is allowable under the OMB cost principles does not mean they are
allocable to the grant award.
For example, you purchase four computers. They are charged to the budget under the supply
line, which is an allowable cost. Only two employees are supporting the grant. Costs for the
two additional computers are not allowable, because they are not allocable to the grant.
Cost shifting between budgets for different grants is not allowed unless negotiated.
Which expenditures do we report?
Tribal Nations must report and provide for comparison of outlays or grant project expenditures,
with budget amounts for each project/award. Timely and accurate "budget versus expenditure"
reports prepared by the Tribal Nation's finance staff are often the basis for program decisions. They
are the source of information for Standard Form 425, Federal Financial Reports, submitted to EPA.
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EPA often asks that financial information be related to performance or productivity information. The
financial department should ask the department that is responsible for a specific project to provide
this information at the time that it is requesting to expend funds. Some environmental programs
require each cost to match an objective in the work plan. Financial information must be monitored
and included in the records.
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104
Communication U.S. Environmental
Protection Agency
ฎ>
Communication
Good internal communication up front and ongoing will
reduce potential problems later on.
Communication
U.S. Environmental
Protection Agency | dHU *|
Internal and External Communication
Internal
Ensure that departmental staff in Accounting, Finance,
Administration, Human Resources, Grants Management and
Project staff are all informed
Accurate information is provided to those who need it so timely
reconciliations and/or reviews can be conducted and appropriate
action taken.
External
Cultivate relationships with EPA staff
Ensure Prime contractors are aware of their responsibilities
Ensure Sub-recipients and Sub-grantees are aware of their
responsibilities
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io6
Communications
U.S. Environmental
Protection Agency
Communication with EPA
Communication takes place:
1 Over the phone:
Write a summary of the
conversation.
" Via email:
Print the conversation.
Save communications in the program
or project files!
Incorporate communication into
written progress reports.
n Through U.S. Mail:
Copy the letter or memo.
Why should we contact EPA representatives when we encounter a problem?
Contacting the appropriate EPA representative shows the Tribal Nation is effectively monitoring the
award and managing its programs. It also demonstrates that the Tribal Nation has identified a
problem and is willing to address it or wants EPA to make the necessary changes.
During work on the award, both the Tribal Nation and EPA will encounter issues that need to be
resolved. Working together they can address these issues and ensure progress is made according to
the project, budget, and work plan.
To eliminate confusion or misunderstandings, here are a few tips:
If communication takes place over the telephone, summarize what was said in writing and
save it in your project files.
If communication occurs through email, print the conversation and save it in your project
files.
If you receive correspondence via U.S. Mail, save it in your project files.
Information transmitted between EPA and the Tribal Nation should be documented in writing and
incorporated into written progress reports. It is important that a recipient begin organizing
documents and records from the very beginning of the project.
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1Q7
**********" ฐiฃSS5 (Jง|)
How often should we communicate
with our EPA Project Officer?
A. Daily
B. Weekly
C. Monthly, or more frequently if needed
D. Semi-annually
E. Annually
0
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Accounting and Grants
Managment
Common Reasons for Compliance Problems:
Lack of internal controls, including:
Rules and responsibilities of organizational staff not clearly defined
or understood
Outdated or nonexistent policies and procedures
Inadequate staff training and education
Inadequate management systems in place
Inadequate resources
Ineffective internal communication
Absence of a strategy for transition consistency
Little or no understanding of internal accounting policies and
procedures
A Tribe may have Accounting Policies and Procedures that do not adequately reach the program
staff that initiate and manage the grant funds. This can and does result in audit findings.
Internal Controls
Accounting and Grants U.S. Environmental
Management Protection Agency [ dHU *|
Ensure funds are:
ฐ Protected from:
Waste
Fraud
Abuse
Mismanagement
ฐ Managed by accurate and reliable accounting practices
and personnel
ฐ Managed in a way that complies with all applicable
laws and regulations
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H3
Accounting and Grants
Management
U.S. Environmental
Protection Agency
Examples of Internal Controls
Signatures
Duplication of services
Audits
Training
Oversight
Authorization
Trip reports
Copies of Invoices
Monthly reconciliation of program
records
Inventory
Follow-up emails
Tagging of equipment and supplies
Regular meetings
Date and initial stamps
Checks and balances
Monthly review of general ledger
Establish a policy for effective communication and transition consistency!
Internal Controls
What should an internal control policy include?
Internal control policies should be written for all financial functions performed by and for the Tribal
Nation. For example, a general policy statement controlling internal communications might read:
Policy
To promote a professional working environment for staff and the Tribal Council, it is the
policy of the Tribal Nation to maintain and respect proper "chain-of-command" in terms
of staff to staff and staff to Tribal Council communications.
Procedure
This means that all direct communications with the Tribal Council should generally be
made by staff through the General Manager (GM), Chief of Staff, or Administrator.
The exception to this may be those communications between the Financial Officer (FO)
and the Tribal Council Chair, Chief, Governor, or the Tribal Council as a whole sitting in
an official meeting, where the FO has been delegated certain duties and responsibilities
that require such direct communications, or where the Tribal Council has asked to speak
with, or receive reports from other particular staff at official meetings.
Individual Tribal Council members other than the Chair, Chief, or Governor should
refrain from direct communications with staff. Where the Tribal Council members other
than the Chair, Chief, or Governor has a need to communicate to staff directly such
communications should be made through the General Manager, Chief of Staff, or
Administrator where possible, or where not possible or practical, the General Manager
or Chief of Staff should be informed of such communications after the fact. This policy is
intended to apply to substantive, business related communications and not merely
incidental conversations or communications on a personal level.
Internal controls ensure consistency, continuity during transitions, and training of new staff. These
benefits to the system are known as "desk procedures".
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114
Accounting and Grants
Management
U.S. Environmental
Protection Agency
Accounting Training for Project Directors &
Key staff is an Effective Internal Control
Don't assume your project
director understands the
accounting process
Some project directors have
excellent subject matter
expertise but are often
unfamiliar with the accounting
process
Training project directors can
help to reduce your
organizations risk of audit
findings!
Accounting and Grants
Management
D.S. Environmental
Protection Agency
(#)
Accounting Training for Project Directors & Key
Staff Should Consist of:
An overview of the grants management process
A review of the organization's accounting policies and procedures
An explanation of the difference between a direct and indirect cost
If your organization has one, an explanation of the Indirect Cost
Rate, including what it is and what the purpose of is
ฆ Stressing the importance of ensuring that all grant expenditures
they approve are allocable, allowable and reasonable
Stressing the importance that all grant expenditures and back-up
documentation are "audit ready"
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n6
Accounting and Grants
Management
U.S. Environmental
Protection Agency
Benefits of Monthly Meetings between Accounting
Staff and Project Directors & Key Staff
Allows for a frequent in-depth review of actual expenses versus the budget
Provides for an analysis of the balances in the Object Class Categories
Allows you to determine earlier on in the project if funds need to be moved
from one object class category to another
Will help to identify expenses that are coded to the wrong budget
Will help to avoid excess expenditures
Will help to ensure you are "audit ready"
Provides checks and balances for the accounting process and is an effective
internal control
117
Accounting and Grants Management U.S. Environmental
Protection Agency
Budget vs. Actual
BUDGET vs. ACTUAL
November 31, 2012
Budget
Actual
Remaining
Income
Income
45.000.00
40,000.00
5,000.00
Total Income
45.000.00
40.000.00
5,000.00
Expense
Personnel
22,000.00
20,500.00
1,500.00
Fringe Benefits
3,700.00
3,500.00
200.00
Travel
7,000.00
5,000.00
2,000.00
Equipment
5,000.00
4,800.00
200.00
Supplies
1,200.00
1,200.00
0.00
Contractual
600.00
400.00
200.00
Construction
900.00
800.00
100.00
Other
1,900.00
1,300.00
600.00
Indirect
2.700.00
2.500.00
200.00
Total Expense
45.000.00
40.000.00
5,000.00
Net Income
nn nn
nn.nn
nn nn
Sample Comparison of Budget and Actual Expenses
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118
Accounting and Grants U.S. Environmental
Management Protection Agency ฃ Vwy
Encourage Monthly Meetings between the
Project Director and Key Project Staff
Review the percentage of time each staff person is assigned to the grant
project and how much time they are actually spending on the grant
Review the deliverables and timetable for accomplishing tasks for each staff
person and is the budget still accurate for each task
If there is any travel under the grant project, ensure staff are familiar with
your Tribal Nation's travel policies
Come prepared! Have an Agenda and encourage questions!
119
What is the value of providing accounting
training to grant project directors & Key Staff?
A. Training ensures that project directors & key staff
understand the accounting process
B. Training helps in avoiding excess or inappropriate
expenditures
C. Training helps in reducing possible audit findings
D. Training is an effective internal control
E. All of the above
What is the value of having regular meetings of
the grant project director and project staff?
A. Ensures project staff know they are written
into the project and what percentage of time
B. Provides staff with a comprehensive
understanding of the entire project
C. Helps to ensure a more seamless transition of
staff should staff turnover occur during the
project
D. Training is an effective internal control
E. All of the above
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Bs,
Internal Controls U.S. Environmental
Protection Agency
Effective Communication is an
Important Internal Control
Internal Communication
Keeps the Tribal Council and staff informed
Helps to assess progress
Ensures stewardship of resources
External Communication
Keeps funding agencies, stakeholders and the
general public informed
Who is responsible for implementing internal
controls to safeguard resources ensuring accuracy,
reliability, and compliance?
A. EPA headquarters
B. EPA regional officials
C. The Tribal Nation / Recipient
D. The award project manager
E. All of the above
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130
Documentation and Recordkeeping U.S. Environmental
Protection Agency I v\Sy J
Documentation and Recordkeeping
Each grant must have its
own file(s).
Consider color-coded paper
folders.
Keep electronic copies.
File must be safe from theft,
fire, and water damage.
What kinds of documentation should you have in your files?
Files should include:
a. A copy of the assistance agreement and the award letter
b. The grants management calendar and tracking chart
c. Work plan and budget detail
d. Notes and communications
Keep all documentation in a separate file. Though grant documentation is legally the property of the
Tribal Nation, it should be kept in its own file - preferably in the same labeled and color coded
folders as the files kept at the regional office - so records are easily available to project auditors for
review.
EPA regional directors highly recommend files match the files held at the regional office. Files should
be:
Color coded
Kept in both paper and electronic format
Safely secured
Files should be kept in a fire-proof cabinet. Grant recipients are held accountable even when files
are lost due to natural phenomenon like fire, flood, and human error.
It is a good idea to backup electronic files regularly to store them in an out-of-office location, just in
case something happens to the originals. Paper files should be copied and kept in two different
locations, just in case.
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i.'SL
Documentation and Recordkeeping U.S. Environmental
Protection Agency
(ง>
Save all
Records
Write policies
and procedures
on records
management and
retention.
Records Management and Retention
Do we need policies and procedures on records management and retention?
Tribal Nations need written policies and procedures that address the types of files and
documentation required for records management. A good filing system ensures adequate
documentation. Each assistance agreement award must have its own documentation kept separate
from other awards and grants.
Thorough documentation describes the activities conducted under an assistance agreement.
Documentation shows how activities are properly carried out, in accordance with a Tribal Nation's
leadership and EPA/federal requirements.
Basic files needed for managing EPA assistance agreement awards include:
The original application and certifications including the work plan and budget
Initial award and amendment documents
Request and/or approvals for scope/budget changes
Financial status reports (FSR) Standard Form 269 (SF 269), if applicable
General ledger detailing revenues, expenditures, assets, and liabilities
Support documents for expenditures
Basic files needed for managing EPA assistance agreement awards also include:
Equipment files and usage logs
Payment requests
Progress reports
Contracts/subawards
Correspondence (letters, emails, and notes taken during phone conversations)
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The following Records Management guidelines are provided in the Appendix:
40 CFR 31.30(a)(b)(c) address request for and approvals of scope and/or budget changes.
40 CFR 31.41(b) address financial status reports and reimbursement requests.
40 CFR 31.20(a)(2) address payment requests backed up by financial records.
40 CFR 31.40(b) address progress reports.
40 CFR 31.37 refer to contracts and subgrants.
132
Documentation and Recordkeeping U.S. Environmental
Protection Agency f JHU |
Documentation
Keep all documents
Folders in the grants management file include anything with a signature, such as:
Narrative
Budget
Budget modifications
Communications with EPA officials
Partnerships with sub-awardees and contractors
Progress reports
Financial status reports
Closeout
Keep records safe. Don't rely on forensic accounting to recreate files. Backup all paper copies with
electronic versions and store backup files in an off-site location. In the eyes of federal agencies, "If
you don't have documentation, then it never happened."
EPA recommends you email a summary of your understanding after a face-to-face or phone
conversation. This way both parties have a record of what was discussed and any decisions that
were made. If there is any misunderstanding, it can be remedied immediately. It won't have time to
become a bigger problem.
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Remember!
Every expenditure approved should have
appropriate back-up documentation
Every expenditure approved should be
"audit-ready"
Documentation and Recordkeeping
U.S. Environmental
Protection Agency I j
Document All Expenditures
How should we document expenditures?
Expenses to programs must be properly documented, which includes justification that the expense
is allowable. The following check list may be attached to purchase orders or check requests to
explain why the purchase was made. Auditors and regulators look for the following justification.
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Sample Checklist
~ Reasonable: Is the use of program dollars reasonable?
~ Necessary: Is it necessary in performing the requirements of the program?
~ Allowable: Is the use of program dollars allowable?
~ Allowable within the scope of the project proposed: Is it within the scope of the program
project as proposed to EPA?
~ Clear business purpose: Is there a clear business purpose? It is evident to a third party that
the purchase is not for personal use.
~ Budgeted: Is the purchase properly budgeted for?
~ Funding available: Is there funding still available in the budget? If a budget revision needs to
be done in accordance with the program regulations, the Project Officer has been contacted.
~ Coded: Is the purchase order or check request properly coded with the correct fund, program,
year, and account codes?
~ Approved: Has the purchase order or check request been properly approved by supervisors?
~ Conflict of interest: Do any of the supervisors have a conflict of interest in making this
purchase? Do any of the supervisors have a personal relationship or stand to gain personally
by making this purchase?
~ Allowable under CFR Part 255 (OMB A-87): Is the purchase allowable under OMB A-87?
~ Processed within deadlines: Have you followed policy and allowed enough time for the
paperwork to be processed within established deadlines?
~ Policy followed: Each check request and purchase order must be documented to stand on its
own as to what, where, why, when, and how the funding was used.
~ Documented: If you do not think it would be clear to an outside third party, such as an
auditor, then please take a moment and document the reasons for the purchase. Remember,
at the end of the year or two years from now, you might not be here to explain the purchase.
~ Comfortable: Would you be comfortable with making this purchase if it was reported on the
front page of the daily newspaper with photos of you?
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135
Documentation and Recordkeeping U.S. Environmental
Protection Agency | xMMj j
Source Documentation
Examples include:
Describe the basic facts of a
transaction such as:
n Date
n Justification of the Purpose
n Amount
n Budget code
n Justification of the cost
allocation
Cancelled checks
Paid bills
Payroll
Time and attendance records
Contracts
Subaward documents
Purchase Orders
Payable Vouchers
Critical Components of Allowable Costs
Which documents do we need?
Source documents provide the basic evidence needed to support accounting transactions. Examples
of source documents include cancelled checks, paid bills, payroll, time and attendance records,
contracts, and subaward documents. Accounting records, journal entries and financial records must
all be supported by source documentation. They describe the basic facts of a transaction such as its
date, purpose, and amount.
The reason why source documentation is so important for a Tribal Nation is that if a Nation cannot
provide source documentation (e.g., journal, ledger, receipts, purchase orders, etc.) for all
expenditures under their assistance agreements, costs may be deemed unallowable.
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136
Accounting
Fundamentals
U.S. Environmental
Protection Agency
Source Documentation Required for:
Travel:
= Authorizations
n Vouchers
= Trip Reports
Cost Sharing
Evidence that proper
procurement steps were taken
Valuation of donated:
= Services
= Supplies
= Equipment (or equipment
Procurement of services
Purchase of materials
use)
Conferences
Remember: In the eyes of the federal government,
if you don't have the documentation, it never happened.
A Tribal Nation should keep source documentation to support claims costs on the following:
Payroll
Travel authorizations
Travel vouchers
Purchases for material and services
Cost sharing
Valuation of donated services
Valuation of donated supplies and equipment (or equipment use)
Conferences
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Remember!
Read award before signing it
Document.. .Document... Document.
Make sure costs are reasonable, allowable and allocated
properly.
Follow proper procurement procedures.
Important Things To Remember
Read your award document before signing it!
S Your award document outlines all the activities and requirements that you will be
held responsible for. When you sign the award document, you are agreeing to ALL
of the terms and conditions in the document.
Always Document!
S When auditors look through your file and do not see any form of documentation,
they will assume that EPA has not approved any of the actions you have taken.
S Documentation includes all communications, memos, e-mails, etc.
Make sure that the costs are allowable!
S EPA will not pay for any type of cost. If an auditor finds unallowable costs were paid
through this grant, vou will have to return the money. Examples of unallowable
costs include alcohol, lobbying, and paying off bad debts.
S You can check to see if costs are unallowable at:
http://www.whitehouse.gov/omb/circulars/a087/a087-all.html.
Always follow proper procurement procedures!
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139
Records Retention
U.S. Environmental
Protection Agency
The Onset of Records Retention
Records retention begins
when the final Federal
Financial Report (FFR) SF-
425 is submitted to the Las
Vegas Finance Center.
Maintain all records
When does retention begin?
For most programs, the records retention requirement begins after the Tribal Nation submits to EPA
the Final Expenditure Report (EPA Form SF 268) and the Financial Status Report (EPA Form SF 269)
and receives a closeout letter from EPA. The EPA regional office sends the closeout letter after the
regional EPA project officer determines the closeout process is complete.
The date on the EPA regional office closeout letter is the official award end date.
For reimbursement programs, records retention requirements start with the final payment request,
either the Request for Advance of Reimbursement (EPA Form SF 270) or the Outlay Report and
Request for Reimbursement for Construction Programs (EPA Form SF 271).
If litigation, claim, negotiation, audit, or other action involving the record stated before the end of
the retention period is still in progress, Tribal Nations must keep records until either the completion
of the action and resolution of all issues which arose from the action, or until the end of the
established retention period, whichever is later. If an audit is underway prior to closeout, ail issues
must be resolved before closeout can take place.
Formal closeout can occur only when both the Tribal Nation and EPA are satisfied:
With the final product
That all eligible costs have been accepted
That all repayments have been received
That all "terms and conditions" contained in the assistance agreement have been met
The timing of closeout depends primarily on the type of agreement. Closeout of most assistance
agreement awards begin when the project period has expired and final paperwork is submitted and
approved by EPA. Ninety days prior to the project expiration date, the EPA partner may send a
"reminder letter" to the Tribal Nation regarding closeout requirements.
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14Q
Records Retention
U.S. Environmental
Protection Agency
Access to Records
Timely and reasonable access for:
ฐ Documents
ฐ Personnel
Must be granted to:
ฐ U.S. Government
ฐ Tribal Nation
Throughout the grant period and the records
retention period
147}o has the right to access our Tribal Nation's award records?
EPA, the Inspector General, the Comptroller of the United States, or any other duly authorized
representative has the right to timely and unrestricted access to any books, documents, papers, or
other records of the Tribal Nation that are pertinent to the awards. They have the right to conduct
audits, examinations, and take excerpts, transcripts, and copies of such documents. This right also
includes timely and reasonable access to Tribal personnel for the purposes of interviews and
discussions related to such documents. The rights of access in this paragraph are not limited to the
required retention period but shall last as long as records are retained.
Likewise, the grant recipient has the right to access EPA records and personnel regarding the award.
Post award reviews may be done at any time during the three-year post-award period. Post award
reviews may include accessing records, interviews with personnel, and other tasks performed during
the award period.
Do NOT dispose of records until the full post award phase has passed.
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Records Retention
Records are retained for at least three years.
Retention may be required for up to ten years.
How long should assistance agreement award records be kept on file?
Records should be retained for at least three years. Check the "terms and conditions" of your award
document for the records retention period that applies to your grant.
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142
.agg ^
How long must EPA assistance
agreement records be kept on file?
A. 1-2 years
15. 3-5 years
C. Indefinitely
D. It varies, usually 3-10 years. Check with your Project
Officer
E. As long as you think it is necessary
'<0
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146
Audits
U.S. Environmental
Protection Agency
What types of Audits are there?
EPA programs and projects
Grantee programs and projects
n Administrative systems
= Financial systems
n Personnel
n Accounting records
= Internal Controls
n Financial Statements
n Compliance
Auditing Assistance Agreements
EPA Audits
How does EPA monitor assistance agreement awards?
EPA is authorized to audit EPA financially-assisted activities of any recipient organization, including
Tribal Nations. However, it is federal policy to place maximum reliance on a recipient's own audits
like the OMB A-133 single audit (discussed below in this section), if it is carried out in accordance
with applicable federal audit standards.
Auditing is described in detail here so that you will be prepared should your Tribal Nation be
selected for EPA auditing. EPA audits both internal and external programs. Audits ensure compliance
with regulations and keep systems operating efficiently. Audits are required by law; they should not
be viewed as a form of punishment or discipline.
Everyone gets audited at one time or another; it is part of the system.
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ML
Audits U.S. Environmental
Protection Agency | |
Internal Audits
Audits help to ensure
compliance with
regulations and keep
systems operating
efficiently.
Internal Audits
The EPA Office of Inspector General (OIG) audits EPA programs and their award recipients to assure
that EPA follows all the required rules and regulations in carrying out awards.
Internal audits are evaluations that examine the programs or operations of federal agencies. Tribal
Nations may be expected as part of an internal audit to provide information about the performance
of a federal agency that is not already included in the annual financial reports. Internal audits are a
good business practice but only provide limited assurance of compliance, not total assurance.
The Office of the Inspector General Hotline number is 1.888.546.8740 for all non-government
locations outside the Washington, D.C. metropolitan local calling area and 202.260.4977 for those
inside the area.
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Audits
0-.S. Environmental
Protection Agency
External Audits
Audits help to ensure proper
use of taxpayer money.
External audits are conducted
by:
m The award recipient's
independent auditor
- EPA Office of Inspector
General (OIG)
ป EPA Administrative Reviews
" Government Accountability
Office (GAO)
External Audits
EPA Program Offices require external audits of assistance agreements because grantees must
demonstrate that they are properly monitoring taxpayer money. External, in this instance, means
not directly controlled by EPA. These are the audits that a grantee performs on its own financial
systems.
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M9
Audits
U.S. Environmental
Protection Agency
Grantee Audits
Preaward Interim Indirect
Audit Audit Cost
Audit
Examples of grantee (external) audits include:
Pre-award audits are reviews conducted to evaluate prospective cost or pricing data.
OMB Circular A-133 single audits are financial and compliance audits that conform to OMB
Circular A-133 requirements.
o The OMB Circular A-133 single audit is mandated by statutory law. It must be
complete and cannot be waived,
o The cost of an OMB A-133 single audit is an allowable cost. Applicants should
generally include audit costs in their indirect cost rate (or financial and
administrative cost pool).
Indirect cost audits the assignment of indirect costs to funding sources. The same rate
should apply to each source. They ensure only allowable costs are included in the indirect
costs allocated to federal agencies.
Interim and final cost audits are reviews conducted to assess the allowability of costs
claimed under the assistance agreement or contract. They ensure compliance with the
applicable requirements and award conditions.
Requests for an audit are made by EPA on Form 5700-29 the Assistance Audit Request form. The
project officer submits the form directly to the appropriate Divisional Office of the Assistant
Inspector General of Audits (DIGA), but to the extent possible the project officer should coordinate
requests for audits with the grants management official.
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(ฃ)
External audits are used to test the
effectiveness of a grant recipient's:
A. Financial operations
B. Operating procedures
C. Program results
D. Resource management
E. All of the above
Who may conduct audits of EPA award
programs?
A. EPA's Inspector General's Office (OIG)
B. Government Accountability Office (GAO)
C. The Tribal Nation receiving the award
D. EPA Audit Contractors
E. All of the above
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Required Audits
An OMB A-133 single audit is required when the
recipient spends:
ฐ $500,000 or more
ฐ In federal funds
ฐ Per accounting year
(calendar or fiscal, just be consistent)
What audit is absolutely required of all recipients with a total of $500,000 or more
annually in federal awards?
The Office of Management and Budget establishes consistent and uniform audit requirements and
defines federal responsibilities for implementing and monitoring such requirements for states, local
governments, Tribes, and other non-profit organizations receiving federal funds.
An OMB A-133 single audit is required whenever a Tribal Nation expends $500,000 or more of
federal funds per accounting year. The accounting year can be either a calendar or fiscal year,
whichever a Nation has chosen as their accounting year.
Audits made in accordance with OMB Circular A-133 can replace any financial audit required under
individual federal awards. To the extent OMB A-133 single audits meet a federal agency's needs; the
agency should rely upon and use these audits.
OMB A-133 single audit do not limit the authority of federal agencies, including the EPA Inspector
General or the Government Accountability Office, to conduct or arrange for additional audits. Any
additional audits are to be planned and performed in such a way as to build upon work performed
by other auditors.
To have a successful OMB A-133 single audit, a Tribal Nation must have all the financial and
administrative systems in place to produce the required financial statements to be submitted to
personnel performing the audit.
Auditors can examine all records related to expenditures, such as:
Source documents
Payroll
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Time and effort sheets
Auditors may interview employees.
Make sure the budget matches the list of expenditures.
OMB Circular A-133 is provided in the Appendix.
157
When is an OMB A-133 single audit
required?
A. Every accounting year regardless of how much your
organization spends
B. When a grant recipient has spent $iooK or more in
federal funds per accounting year
C. When a grant recipient has spent $25oK or more in
federal funds per accounting year
D. When a grant recipient has spent $sooK or more in
federal funds per accounting year
E. OMB A-133 Single Audits are never required
A Successful Audit
For a successful audit, you MUST:
ฐ Have a financial management system that tracks
all costs expended.
ฐ Compete all procurement transactions,
or have on file a sole-source justification.
ฐ Perform a cost or price analysis on every
procurement transaction and keep in your file.
ฐ Have the following internal policies on file:
U.S. Environmental
Protection Agency
Time Sheets
Personnel Policy
Travel Policy
Procurement Policy
Codes of Conduct
DBE Utilization
w'
How should we prepare for an audit?
To have a successful OMB A-133 single audit, a Tribal Nation must have all the financial and
administrative systems in place to produce the required financial statements to be submitted to
personnel performing the audit.
Audits may be performed before, during, or after the completion of a project. The project file
should be maintained in audit ready status at all times.
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Audits made in accordance with OMB Circular A-133 can replace any financial audit required under
individual federal awards. To the extent OMB A-133 single audits meet a federal agency's needs; the
agency should rely upon and use these audits.
Auditors can examine all records related to expenditures, such as:
Source documents
Payroll
Time and effort sheets
Interviews with employees
Make sure the budget matches the list of expenditures.
Up-to-Date Audits
Tribal Nations must
have a current audit.
Ensure "internal
controls" are in place
and operating.
Play it safe; hire a
professional auditor.
How current must our audit be?
Tribal Nations must have a current audit. Audits should be conducted on a yearly basis. Methods
that a Tribal Nation may use to make sure their internal controls are in place and operating:
Employ someone within the Tribal Nation to perform a cursory audit function and report
directly to Tribal leaders.
Employ an external auditor to perform review functions that are more extensive than just a
review of the books and records.
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162
Audits
U.S. Environmental
Protection Agency
Preparing for an Audit
Compliance with federal regulations is reviewed by
auditors.
EPA auditors may use the Agency Administrative and
Financial Onsite Review Questionnaires.
ฐ Recipients should be able to implement each of the
processes listed on the questionnaire, or explain why
they are not necessary.
Preparing for an Audit continued..
Before an external auditor ever contacts you:
Don't expect much advance notice.
Maintain complete and accurate records.
Perform internal audits and reviews as part of your internal
controls system
Conduct internal performance and fiscal reviews.
Make sure any sub-recipients understand they are subject to an
audit also.
Check out the Federal Audit Clearinghouse website at:
http: / /harvester.census.gov/sac for additional audit information
and resources.
Check out the OMB website at www.omb.gov/circulars and scroll
down to OMB Circular A-133 and its compliance supplements
Audits
U.S. Environmental
Protection Agency
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164
Audits U.S. Environmental
Protection Agency i VwV |
The Audit
Stay calm
Your goal: a clean audit report with minimal findings.
Clarify what the auditor needs ahead of time - be
responsive and accurate to what is requested
Call counsel if needed.
Designate one person to serve as the audit team leader
165
Audits U.S. Environmental ^4%
Protection Agency I j
Audit Team Leader Responsibilities
Coordinates all communication and paper flow
Oversees copying production
Coordinates all interviews
Coordinates entrance and exit conferences
Assigns appropriate space to the auditor(s)
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i66
When are audits conducted?
A. Before the award period begins
B. During the award period
C. After the award period
D. After closeout but before retention ends
E. All of the above
U.S. Environmental
Protection Agency / v^Ty ^
Audit Expenses
The cost of an OMB Circular A-133 single audit
is an allowable cost.
The cost should be allocated in accordance with
the guidelines in OMB Circular A-8 7. All
activities/programs that benefit from the audit
should be allocated a proper share of the audit
costs.
Are audit expenses reimbursable?
The cost of a single audit is an allowable cost; however, an EPA grant cannot cover the full cost of an
audit, unless the project is 100% funded by EPA funds. If the Tribal Nation receives other sources of
funding, then the cost of audit must be allocated fairly and equitably between funding sources. The
cost of an audit should be prorated to all federal funds, not just EPA funds. Applicants should either
include audit costs in their indirect cost rate or, if the cost is not included in the indirect cost rate, as
a direct cost to the assistance agreement.
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170
Audits U.S. Environmental
Protection Agency i VwV |
Allocation of Audit Expense
Determine the percentage
of money received by the
Tribal Nation from each
federal agency.
Allocate the cost of an
audit fairly and equitably
between funding sources.
ฐ Include in the
negotiated Indirect Cost
Rate
EPA is not the only federal agency granting money; therefore, the GAP grant, for example, should
not be paying for the total cost of the audit. The GAP grant should only pay for a portion of the cost.
One way to allocate this cost is to determine the percentage of money received from each federal
agency and to share the costs proportionally.
Include the cost of a yearly OMB Circular A-133 single audit in your calculated indirect cost rate.
This method insures the money is available when you need it.
View the OMB Circular A-133 at http://www.whitehouse.gov/omb/circulars/al33/al33.html. or
download a copy at http://www.whitehouse.gov/omb/circulars/al33/al33.pdf. This document is
also provided in the Appendix.
171
Protection Agency i
How do we pay for auditing?
A. EPA award funds
B. Other grant funds
C. In-kind donations
D. Tribal Nation's general budget
E. All of the above
'ZJ
ฆ EPA 5996
ฆ General
Fund 23%
ฆ DOL10%
USDA896
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/
Audit Reports
w ^
Provide a copy of the findings section
\
Prepare a corrective action plan
Explain corrective actions
Fix any problems
What needs to be reported after an OMB A-133 single audit?
You need to explain corrective actions and provide a copy of the findings section of an OMB A-133
single audit if there were any findings, material weaknesses, or reportable conditions identified. The
Tribal Nation is responsible for follow-up and corrective action on all audit findings. The Tribal
Nation needs to prepare a corrective action plan for all current year audit findings. If you have any
questions, please contact your EPA regional audit coordinator.
Following is the current standard headquarters' administrative condition for grant awards:
In accordance with OMB Circular A-133, which implements the single Audit Act, the
recipient hereby agrees to obtain a single audit from an independent auditor if it
expends $500,000 or more in total Federal funds in any fiscal year. Within nine months
after the end of a recipient's fiscal year or 30 days after receiving the report from the
auditor, the recipient shall submit a copy of the SF-SAC and a Single Audit Report
Package,
For fiscal periods 2008 and beyond the recipient MUST submit a copy of the SF-SAC and
a Single Audit Report Package, using the Federal Audit Clearinghouse's Internet Data
Entry System. Complete information on how to accomplish the 2008 and beyond Single
Audit Submissions you will need to visit the Federal Audit Clearinghouse Web site:
htto://harvester. census, aov/fac/
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References
U.S. Environmental .**'/"*.
Protection Agency
Financial Accounting Standards Board
www.fasb.org
Select "pronouncements" on the homepage
No. 116, No. 117, No. 124 and No. 136
Internal Revenue Service
www.irs.gov - www.irs.gov/ec - www.stavexempt.org
- Pub 557 - Tax-Exempt Status For Your Organization
1 Form 1023 and Instructions - Application for Recognition of Exemption
1 Forms 990, 990EZ, 990T and Instructions - Annual Information Returns
ฐ Form 990 Schedules A and B and instructions
- Pub 15/Circular E - Employers Tax Guide
Office of Management and Budget
www.whitehouse.gov/omb /circulars fReference supplements contain useful information')
- A-87 - Cost Principles for Governments (including Tribes)
ฐ A - 122 - Cost Principles for Non-Profits
1 A-133 - Audits of Governments and Non-Profits
Questions? Contact:
Laurice Jones
U.S. Environmental Protection
Agency
Office of Grants and Debarment
1200 Pennsylvania Avenue, N.W.
Mail Code: 3903R
Washington, DC 20460
202-564-0223
Jones.laurice@epa.gov
Elizabeth January
Program Analyst
U.S. Environmental Protection
Agency
11 Technology Drive
Mail Code: EQA
N. Chelmsford, MA 01863
617-918-8655
ianuary.elizabeth@epa.gov
Forms available for download at http: / / www.epa.gov/ogd /forms /forms.htm
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EPA Administrative and Financial Onsite Review Questionnaire
I. Organization Policies and Procedures
A. General Information /Policies and Procedures.
Many of these questions have "Yes" or "No" answers. For "Yes" answers, please provide the specific
reference to your policies and procedures. Please explain all "No" and "Not Applicable" answers.
Thank you in advance for completing this questionnaire.
Note: 40 CFR 31 and OMB Circular A-87 (codified as Title 2 CFR 225) references apply to States, Local
Governments, and Indian Tribes.
1. Who or which office(s) in your organization is/are responsible for reviewing, approving, and signing
applications, awards, and amendments?
2. Who or which office(s) in your organization is/are responsible for monitoring and overseeing
assistance agreements once received from EPA?
3. Do you have a current Organizational Chart? Show or explain any non- ~ Yes ~ No ~ N/A
profit or for profit organization and/or entities your affiliated with.
How does your organization keep up-to-date on federal regulations, legal decisions, OMB Circulars,
etc.?
5. Does your organization have provisions for seeking written prior ~ Yes ~ No ~ N/A
approvals for specific revisions, from the awarding agency under certain
conditions?
(40 CFR 31.30)
The Code of Federal Regulations (40) and OMB Circulars require organizations receiving federal
assistance agreements to have written policies and procedures for the following areas. (40 CFR
31.20 and 31.21) Do your policies and procedures address the items described below?
Personnel, including qualifications for each position, duties and ~ Yes ~ No ~ N/A
responsibilities, salary ranges, EEO, annual performance appraisals,
types and levels of fringe benefits, and standards of conduct governing
duties and responsibilities including disciplinary actions for not
adhering to the standards, for employees engaged in the award and
administration of contracts. (OMB A 87 / 2 CFR Part 225, Appendix
B. section 8)
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b. Time reporting, tracked to each project; (OMB A 87 / 2 CFR Part 225, ~ Yes ~ No ~ N/A
Appendix B. Section 8.h)
c. Redistributions (Chargeback's); (i.e., other organizational department ~ Yes ~ No ~ N/A
costs; written, established rates required)
d. Payroll processing and internal controls; (OMB A 87 / 2CFR Part 225, ~ Yes ~ No ~ N/A
Appendix B. Section 8.h)
e. Overtime (if allowed); (OMB A-87 / 2CFR Part 225, Appendix B, ~ Yes ~ No ~ N/A
section 8)
f. Vacation and Sick Leave (if offered by your organization); (OMB A ~ Yes ~ No ~ N/A
87/2 CFR Part 225. Appendix B. section 8.d)
g. Compensatory time (if allowed). ~ Yes ~ No ~ N/A
h. Equipment and property purchases including cost and price analysis, ~ Yes ~ No ~ N/A
purchase, use of, inventory and disposition of at the end of the project;
(40 CFR 31.31, 31.32 & 31.36(f))
(A cost analysis is the review and evaluation of each element of cost to determine reasonableness, allocability,
and allowability when you do not have other proposals to compare costs against. A price analysis may be
accomplished in various ways, including the comparison of price quotations submitted, market prices, and
similar indicators, together with discounts.)
i. Electronic Funds Transfers (EFT) drawdowns from EPA's accounts. ~ Yes ~ No ~ N/A
Does your policy address who is authorized to request payment from
the federal government, what procedures are used to verify that the
request are accurate, and when drawdown of funds will occur etc.; (40
CFR31.20(b)(7) and 31.21)
j. Receipt and deposit of advanced payments (40 CFR 31.21 ~ Yes ~ No ~ N/A
(c)&(e))
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k. Records retention. (40 CFR 31.42) ~ Yes ~ No ~ N/A
1. Travel, authorizations, vouchering after the trip and, if required, trip ~ Yes ~ No ~ N/A
reporting; (OMB A 87 / 2CFR Part 225. Appendix B. section 43)
m. Procurement Standards for supplies, expendable property, equipment, ~ Yes ~ No ~ N/A
real property, and services. Standards for contracting, purchasing,
consultant agreements, sub-awards or grants (if applicable, especially
for monitoring sub grantees) and other types of awards that transfer
federal funds outside of your organization; (40 CFR 31.36, 40 CFR
31.37 and 31.40(a))
n. Provisions for utilizing Small Businesses, Minority Owned Finns, ~ Yes ~ No ~ N/A
Women's Business Enterprises, and Labor Surplus Area Finns (where
possible) (40 CFR Part 33)
o. Program income. Is it identified, authorized, accounted for, and are ~ Yes ~ No ~ N/A
limitations placed on its use; (40 CFR 31.25)
p. Cost sharing, matching, and In-Kind contributions. Is it identified, ~ Yes ~ No ~ N/A
accounted for and reported; (40 CFR 31.24 and OMB A 87 / 2CFR
Part 225. Appendix B. section 12)
7. Do you have the following documents for each grant award:
a. Original application and certifications; (SF 424. 424A. et al.) ~ Yes ~ No ~ N/A
b. Work plans and/or statement of work; ~ Yes ~ No ~ N/A
c. Initial award and all amendment documents; ~ Yes ~ No ~ N/A
d. Request for and approvals of scope and/or budget changes; (40 CFR ~ Yes ~ No ~ N/A
31.30 (a).(b)&(c))
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e. Financial Status Reports and reimbursement requests, if applicable; (40 ~ Yes ~ No ~ N/A
CFR 31.41(b))
f. Payment requests backed up by financial records to support the ~ Yes ~ No ~ N/A
request; (40 CFR 31.20(a)(2))"
g. Progress reports; (40 CFR 31.40(b)) ~ Yes ~ No ~ N/A
h. Contracts / Subgrants; (40 CFR 31.37) ~ Yes ~ No ~ N/A
i. Purchases; (40 CFR 31.32 for equipment. 40 CFR 31.33 for supplies) ~ Yes ~ No ~ N/A
j. Consultant agreements; (40 CFR 31.36(j)) ~ Yes ~ No ~ N/A
k. Correspondence and approvals, including emails to and from EPA ~ Yes ~ No ~ N/A
officials.
II. Accounting and Financial Management
Many of these questions have 'Yes" and "No" answers. For 'Yes" answers, please provide the specific
reference to your policies and procedures. Please explain all "No" and "Not Applicable" answers.
A. Accounting
1. Does your organization have an accounting manual? (40 CFR 31.20) ~ Yes ~ No ~ N/A
The CFR requires certain accounting practices / procedures addressed
in the questions below to be written.
2. Does your organization's accounting and financial management ~ Yes ~ No ~ N/A
system(s) follow Generally Accepted Accounting Principles (GAAP)?
(OMB A 87 / 2CFR Part 225. Appendix B. section 8)
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3.
Does your organization's accounting and financial management
system(s) provide accurate, current and complete disclosure of the
financial results of each federally-sponsored project or program (i.e.
each award is accounted for separately) (40 CFR 31.20(b)(1)), and
produce financial reports in accordance with the requirements of 40
CFR 31.41?
~ Yes ~ No DN/A
4. Does your organization's financial management system(s) provide ~ Yes ~ No ~ N/A
records that adequately identify the source and application of funds for
federally-sponsored activities, such as authorizations, obligations,
unliquidated obligations, assets, outlays, income, and interest? (40
CFR 31.20..21 &.22)
5.
Does your organization's accounting and financial management
system(s) provide accurate, current and complete disclosure of the
financial results of each federally-sponsored project or program (i.e.
each award is accounted for separately) (40 CFR 31.20(b)(1)), and
produce financial reports in accordance with the requirements of 40
CFR 31.41?
~ Yes ~ No DN/A
6. Does your organization have written policies and procedures to ensure ~ Yes ~ No ~ N/A
that costs are reasonable, allocable, and allowable? (40 CFR 31.20
(b)(5); OMB Circular A-87 / 2CFR Part 225. Appendix A. Section C)
7. Does your organization monitor allowable costs to ensure they are ~ Yes ~ No ~ N/A
charged to the grant within the specified period? (40 CFR 31.23)
8. Does your financial management system(s) report and provide for a ~ Yes ~ No ~ N/A
comparison of outlays or grant project expenditures, with budget
amounts for each grant project/award or have the capability to do so?
(40 CFR 31.20(b)(4))
9. Does your organization have budgetary controls to preclude incurring ~ Yes ~ No ~ N/A
excess expenditures? (40 CFR 31.20(b)(4))
10. Does your accounting system have provisions for reviewing and ~ Yes ~ No ~ N/A
monitoring project budgets and program plans, and reporting and
rectifying deviations that may occur in them? (40 CFR 31.20(b)(4) and
31.30)
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11. Do you have a current audit? (40 CFR 31.26) ~ Yes ~ No ~ N/A
12. If your organization expended more than $500,000 of Federal funds in ~ Yes ~ No ~ N/A
the most recent fiscal year, did you obtain an audit in accordance with
OMB Circular A-133? (40 CFR 31.26(a))
13. If your organization had an OMB A-133 Single Audit performed, were ~ Yes ~ No ~ N/A
there any findings, material weaknesses, or reportable conditions
identified? If there were, briefly explain or provide a copy of the
findings section and your corrective actions taken.
14. If your organization requests reimbursement for indirect costs under ~ Yes ~ No ~ N/A
the grant award, does your organization have an approved indirect cost
rate? (OMB Circular A-87 / 2CFR Part 225. Appendix E)
15. Does your organization have written procedures for drawing grant ~ Yes ~ No ~ N/A
funds and issuing payments? (40 CFR 31.20(b)(7) and 31.21 (b) and
(c)) Note: Payment requests should be restricted to immediate needs,
i.e. drawing down funds 3 to 5 working days in advance of
disbursements.
16. What type of accounting and financial management system(s) does ~ Yes ~ No ~ N/A
your organization use? Name of automated system(s)?
17. Are accounting records supported by source documentation? (40 CFR ~ Yes ~ No ~ N/A
31.20(b) (6))
B. Personnel / Timekeeping
(Reference: OMB Circular A-97 / 2 CFR Part 225, Appendix B, section 8)
Many of these questions have "Yes" or "No" answers. For "Yes" answers, please provide the specific
reference to your policies and procedures. Please explain all "No" and "Not Applicable" answers.
L Does your organization have written payroll policies and procedures? ~ Yes ~ No ~ N/A
2.
Do your employees record: actual hours worked directly on all
projects, indirect or administrative time not charged directly to a
project, and leave taken?
~ Yes ~ No DN/A
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3. For those employees required to work away from the office, are actual ~ Yes ~ No ~ N/A
hours worked documented?
4. Do payroll registers and reports match up with costs for each employee ~ Yes ~ No ~ N/A
whose compensation is charged to an assistance agreement?
_5. Are timesheets required to be signed by the individual or supervisor? ~ Yes ~ No ~ N/A
C. Personnel / Payroll
Many of these questions have 'Yes" or "No" answers. For 'Yes" answers, please provide the specific
reference to your policies and procedures. Please explain all "No" and "Not Applicable" answers.
Does your organization's written policies and procedures provide for the following controls for the payroll
function?
_L Does the policy provide adequate separation of duties? ~ Yes ~ No ~ N/A
2. Are salaries and wage rates established, authorized, and approved in ~ Yes ~ No ~ N/A
your organization to ensure equity?
3. Does your payroll process ensure that all deductions from employee's ~ Yes ~ No ~ N/A
salaries are authorized by the employee, and proper?
ฆ4. How are payrolls distributed? ~ EFT ~ Manual Checks ~ Both
5. If checks are distributed manually, are there sufficient controls to ~ Yes ~ No ~ N/A
ensure that payroll checks are distributed to the correct employee?
D. Travel (Ref: OMB Circular A-87/ 2 CFR 225, Appendix B, section 43)
Many of these questions have "Yes" or "No" answers. For "Yes" answers, please provide the specific
reference to your policies and procedures. Please explain all "No" and "Not Applicable" answers.
L Does your organization have written travel policies and procedures? ~ Yes ~ No ~ N/A
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2.
Are internal controls in place to ensure that employees follow your
organization's travel policy, i.e. levels of review prior to authorizing
payment and that the travel was associated with the specific grant
project?
~ Yes ~ No DN/A
3. Are internal controls in place to ensure that travel and time reporting ~ Yes ~ No ~ N/A
support the employee's activities while on travel?
4. Do the policies and procedures include provisions to ensure that travel ~ Yes ~ No ~ N/A
costs are allowable, allocable, and reasonable?
E. Matching, Cost Sharing, In-Kind Contributions and Program Income
40 CFR 31.24 (a) to (e) provides criteria on the acceptability, purpose, and types of contributions made in
relation to cost sharing or matching purposes, and the support for such. 40 CFR 30.24 and 31.25 addresses
the accounting for Program Income related to federally funded projects.
Many of the questions below have 'Yes" or "No" answers. For 'Yes" answers, please provide the
specific reference to your policies and procedures. Please explain all "No" and "Not Applicable"
answers.
1. Does your organization currently have any Matching, Cost Sharing ~ Yes ~ No ~ N/A
and/or In-Kind costs included in any active awards or anticipate any of
these types of costs in the foreseeable future?
No (Skip this entire section)
Yes (Please complete the rest of this section.)
2. Do any of the matching costs come from another federal grant(s)? (If ~ Yes ~ No ~ N/A
Yes, it must be authorized in the terms and conditions of the assistance
agreement)
3. Are these costs identified in the approved grant project budget? ~ Yes ~ No ~ N/A
ฆ4. Does your organization track, record, report and verily these costs? ~ Yes ~ No ~ N/A
5. Are all matching costs verifiable from accounting records and valued ~ Yes ~ No ~ N/A
according to applicable OMB Circular cost principles?
OMB Circular A-87 / 2CFR Part 225, Appendix B, paragraphs 8 & 12
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6. Has any program income been used to satisfy the recipient's ~ Yes ~ No ~ N/A
contribution for any current award or added to the funds committed for
the project?
7.
Is there a term and condition in the award that permits the use of
program income for match requirements or for adding it to the funds
committed to the project?
~ Yes ~ No DN/A
8. If there is no term and condition has the program income been ~ Yes ~ No ~ N/A
deducted from the total allowable project cost?
F. Procurement / Contracts / Subagreements
Many of these questions have 'Yes" or "No" answers. For 'Yes" answers, please provide the specific
reference to your policies and procedures. Please explain all "No" and "Not Applicable" answers.
1. Does your organization have written procurement policies and ~ Yes ~ No ~ N/A
procedures?
2- Has your organization awarded contracts or subagreements under any ^ Yes ~ No ~ N/A
of the award agreements being reviewed? (Agreements refer to
subgrant(s). Subgrant(s) mean an award of financial assistance in the
form of money, or property in lieu of money, made under a grant by a
grantee to an eligible subgrantee, subrecipient or by a subrecipient to a
lower tier subrecipient. This includes financial assistance when
provided by contractual legal agreement, but does not include
procurement purchases of goods and services.) (40 CFR 31.3)
3. Were contracts awarded in accordance with your organization's contracting policy and does this
policy comply with 40 CFR Part 30.40 to 30.48 or Part 31.36 & .37, as described below:
a. Contains a written code of conduct that addresses conflict of interests ~ Yes ~ No ~ N/A
and disciplinary actions. (40 CFR 31.36(b)(3))
b. Provides for competing transactions in a free and open manner. (40 ~ Yes ~ No ~ N/A
CFR 31.36(c))
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c. Provides for a review to avoid unnecessary purchases, a review of ~ Yes ~ No ~ N/A
lease vs. purchase alternatives (when appropriate), conducting
solicitations with a clear scope of work and bidder requirements,
conserving natural resources, and utilizing small, MBE and WBE firms
when possible. (40 CFR 31.36(c)(3))
d. Requires performing and documenting a cost analysis for sole source ~ Yes ~ No ~ N/A
procurements. (A cost analysis is the review and evaluation of each
element of cost to determine reasonableness, allocability, and
allowability when you do not have other proposals to compare costs
against.) (40 CFR 31.36(f))
e. Requires performing and documenting a price analysis for competitive ~ Yes ~ No ~ N/A
bidding and small purchase procurement actions. (A price analysis may
be accomplished in various ways, including the comparison of price
quotations submitted, market prices, and similar indicia, together with
discounts.) (40 CFR 31.36(f))
f. Requires documenting the basis for all procurement selections, ~ Yes ~ No ~ N/A
justifying a lack of competition and basis for award cost and price. (40
CFR 31.36 (b)(9))
g. Provides for the Grantor's pre-award review of the procurement when ~ Yes ~ No ~ N/A
the award or contract modification exceeds $100,000, is not competed,
or only one bid is received. (40 CFR 31.36(g)(2))
h. Discusses purchase/agreement /contract cost thresholds (small ~ Yes ~ No ~ N/A
purchases vs. major procurements) and personnel required to approve
procurements.
i. Have provisions that no contract or sub award will be entered into with ~ Yes ~ No ~ N/A
parties that are debarred, suspended, or excluded from Federal
assistance programs. ( 40 CFR 31.35)
4. Do any of your organization's contracts for grant projects exceed the ~ Yes ~ No ~ N/A
Federal Small Purchases threshold. ($100.000)?
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5. If Yes, did EPA request to review the contract prior to award? (40 CFR ~ Yes ~ No ~ N/A
31.36(e)(2))
6. If Yes, did EPA provide written comments? ~ Yes ~ No ~ N/A
7. Does your organization use a pre-qualified list of persons, firms, or ~ Yes ~ No ~ N/A
products to acquire goods and services?
8. Did your organization follow its procurement policies to place and ~ Yes ~ No ~ N/A
update vendors on the list?
9. Has your organization established an affirmative procurement system ~ Yes ~ No ~ N/A
for recycled materials and compliance with enviromnental statutes? (40
CFR 31.13)
10. Does your organization have internal control processes to ensure that ~ Yes ~ No ~ N/A
only required goods and services are acquired in quantities needed? (40
CFR 31.36(b)(4))
11.
Does your organization have internal control processes to ensure that
only acceptable goods and services are paid for by the
accounting/finance department? (40 CFR 31.20(b)(5))
~ Yes ~ No DN/A
12. Does your organization have guidelines for documenting its contract ~ Yes ~ No ~ N/A
files?"
13. Has your organization awarded contracts to consultants under current ~ Yes ~ No ~ N/A
assistance agreements?
14. Are internal controls for consulting agreements in place to ensure that ~ Yes ~ No ~ N/A
your organization does not charge EPA assistance agreements more
than the authorized direct salary cap? (40 CFR 31.36(j))
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15. Do your consulting agreements specify the services to be provided, ~ Yes ~ No ~ N/A
engagement duration, reporting requirements, work location, and pay
rates including base rate, fringe benefits, and overhead?
G. Small Businesses, Minority Owned Firms, Women ' Business Enterprises and Labor Surplus Area
Firms (where applicable). (40 CFRPart 33)
For "Yes" answers, please provide the specific reference to your policies and procedures. Please
explain all "No" and "Not Applicable" answers.
1.
Does your organization submit timely reports
(MBE/WBE Reports) to EPA, on business
activities with these types of firms?
~ Yes, date of the last submittal to EPA
Date
~ No, please explain.
H. Property Management (40 CFR 31.31 & 40 CFR 31.32)
Many of these questions have "Yes" or "No" answers. For "Yes" answers, please provide the specific
reference to your policies and procedures. Please explain all "No" and "Not Applicable" answers.
1. Does your organization have written property management policies ~ Yes ~ No ~ N/A
and procedures?
2. Has your organization purchased capital equipment on any of its active ~ Yes ~ No ~ N/A
assistance agreements?
Yes (Please complete this section.)
No (Go to Section!.)
Equipment, under Federal Guidelines, is equipment that is considered tangible items with a useful life greater
than one year and greater than $5,000 in value. Grantees may have limits that are different than the Federal
Guidelines. That is acceptable as long as the limits are not greater than the Federal Guidelines.
3. Does your organization have an inventory control system? (40 CFR ~ Yes ~ No ~ N/A
31.32)
4. Does your organization maintain property records that identify ~ Yes ~ No ~ N/A
equipment purchased, either entirely or partially, with Federal funds?
(40 CFR 31.32(d))
5. Does your organization perform a property inventory at least every two ~ Yes ~ No ~ N/A
years? Date of last inventory
6. Does your organization maintain records of property dispositions? ~ Yes ~ No ~ N/A
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I. Internal Controls
Many of these questions have "Yes" or "No" answers. For "Yes" answers, please provide the specific
reference to your policies and procedures. Please explain all "No" and "Not Applicable" answers.
1.
Does your organization have policies and procedures to ensure
compliance with the cash management requirements in 40 CFR
31.20((b)(3)?
~ Yes ~ No DN/A
a. Does your organization have an internal auditor, audit staff or someone ~ Yes ~ No ~ N/A
on the Board of Directors that provides for an independent review of
the accounting and financial management process, cash receipts and
payments, and safeguarding of assets?
2.
Does your organization have policies and procedure to ensure
compliance with closing out assistance awards after the performance
and budget periods? (40 CFR 31.50)
~ Yes ~ No DN/A
3. Does your organization have a process in place to ensure compliance with the Programmatic Term
and Conditions in the following areas:
A. Submitting programmatic progress reports; ~ Yes ~ No ~ N/A
B. Establishing and obtaining approval of a Quality Action Plan, if ~ Yes ~ No ~ N/A
required;
C. Establishing a process to track, monitor, and report on Enviromnental ~ Yes ~ No ~ N/A
Results?
The annual public reporting and recordkeeping burden for this collection of information is estimated to average
30 hours per respondent. If you wish to comment on the Agency's need for this information, the accuracy of the
provided burden estimates, and any suggested methods for minimizing respondent burden, including the use of
automated collection techniques, send them to US EPA, Collections Strategies Division (2822T), 1200
Pennsylvania Ave. NW, Washington, DC 20460.
OMB control number 2030-0020 EPA form number 6600-01
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