Developing and Managing Your Budget

1. Financial and Grants Management Institute - March 18-20, 2008 1 Developing and Managing Your Budget

2. Financial and Grants Management Institute - March 18-20, 2008 2 Session Objectives 

3. Financial and Grants Management Institute - March 18-20, 2008 3 Cost Principles Used to determine the allowable costs incurred by organizations under grants or contracts. Principles are designed so that federal awards bear their fair share of the cost. Information about factors that affect allowability and information about reasonable, necessary, and allocable costs. There is a list of selected costs that are specifically addressed.

4. Financial and Grants Management Institute - March 18-20, 2008 4 Cost Principles Provide guidance about reimbursement requirements Provide uniform standards of allowability and allocation Encourage consistent treatment of costs Define reasonable costs

5. Financial and Grants Management Institute - March 18-20, 2008 5 Reasonable Costs A cost is reasonable if it does not exceed that which would be incurred by a “prudent person” under the circumstances prevailing at the time the decision was made to incur the costs. The question of the reasonableness of specific costs must be scrutinized with particular care in connection with organizations or divisions which receive the preponderance of their support from awards made by Federal agencies.

6. Financial and Grants Management Institute - March 18-20, 2008 6 Cost Principles Examples of costs described in Circular: Advertising and public relations costs Compensation for personal services Memberships, subscriptions, and professional activity costs Recruiting costs Rental costs Training and education costs Travel costs

7. Financial and Grants Management Institute - March 18-20, 2008 7 Factors Affecting Allowability of Costs To be allowable under an award, costs must meet the following general criteria: Be reasonable, ordinary, necessary and allocable under OMB principles. Conform to any limitations set forth in OMB principles and in the award as to types or amount of cost items. Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the organization. Be accorded consistent treatment. Be determined in accordance with Generally Accepted Accounting Principles (GAAP). Not be included as a cost or used to meet cost sharing or matching requirements of any other Federally-financed program. Be adequately documented.

8. Financial and Grants Management Institute - March 18-20, 2008 8 Key Elements of Costs Allowable Conform to any limitation or exclusion set forth in the OMB Cost Principle Circulars/Code of Federal Regulations or in the award as to types or amount of cost items. Be determined in accordance with Generally Accepted Accounting Principles (GAAP) Allocable A cost is allocable to a particular cost objective, such as a grant, contract, project, service, or other activity, in accordance with the relative benefits received. A cost is allocable to a Federal award if it is treated consistently with other costs incurred for the same purpose in like circumstances

9. Financial and Grants Management Institute - March 18-20, 2008 9 Key Elements of Costs Reasonable A cost is reasonable if, in its nature or amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the costs Necessary The cost is of a type generally recognized as ordinary and necessary for the operation of the organization or the performance of the award

10. Financial and Grants Management Institute - March 18-20, 2008 10 Revised Grant Guidelines

11. Financial and Grants Management Institute - March 18-20, 2008 11 Budgeting – The BIG Picture

12. Financial and Grants Management Institute - March 18-20, 2008 12 Managing The Budget Process What is a Budget? A financial blueprint projecting expenditures for the grant award period, e.g. six months; one year; three years; etc. Uses: Management oversight Fundraising Accountability Forecasting

13. Financial and Grants Management Institute - March 18-20, 2008 13 Summary: How Budgets Fit into the Big Picture Budgets impact every stage of the grant lifecycle Budgets can not be an afterthought Budget formulation is a known challenge to applicants Knowing how to form a quality budget is a critical skill

14. Financial and Grants Management Institute - March 18-20, 2008 14 Budget Design Has Impactat Every Stage of the Grant Lifecycle To plan what is necessary for success To establish realistic scope To ensure you’ve covered the details To compete for funds To keep your partners compliant To reflect on how you’ve complied with rules To guide your staff as they execute the program To define what’s expected and approved To reflect upon your performance

15. Financial and Grants Management Institute - March 18-20, 2008 15 Good budget planning makes things happening the way they are supposed to happen…

16. Financial and Grants Management Institute - March 18-20, 2008 16 What are some of the impacts of a poorly planned budget? Open Discussion – with flip chart What are some of the ways that things go wrong with the budget that you submit to the Corporation? Looking for – stimulate: Lots of negotiation questions Missing information Frequent budget amendments Revision for unallowable costs Open Discussion – with flip chart What are some of the ways that things go wrong with the budget that you submit to the Corporation? Looking for – stimulate: Lots of negotiation questions Missing information Frequent budget amendments Revision for unallowable costs

17. Financial and Grants Management Institute - March 18-20, 2008 17 As an applicant/grantee, what is on your mind when you are faced with submitting a grant budget? STIMULATORS Who will review my budget? What do they expect from me? How much detail? What will go wrong? What’s the right amount to ask for? Who will review this budget? Accountability If something does not “add up” I am the one it reflects upon If this grant needs changes later, I am the one questions go to Documentation How much documentation does the government want? Standards My work is evaluated based on how closely my budget supports our project Communication I must inform the agency of all costs I must communicate in a manner that everyone knows exactly what is needed to fund this projectSTIMULATORS Who will review my budget? What do they expect from me? How much detail? What will go wrong? What’s the right amount to ask for? Who will review this budget? Accountability If something does not “add up” I am the one it reflects upon If this grant needs changes later, I am the one questions go to Documentation How much documentation does the government want? Standards My work is evaluated based on how closely my budget supports our project Communication I must inform the agency of all costs I must communicate in a manner that everyone knows exactly what is needed to fund this project

18. Financial and Grants Management Institute - March 18-20, 2008 18 What are some typical budget development problems you have run into? STIMULATORS Unclear directions No one to call Doubt that you’ve caught all the costs STIMULATORS Unclear directions No one to call Doubt that you’ve caught all the costs

19. Financial and Grants Management Institute - March 18-20, 2008 19 AmeriCorps Budgeting – What Do I Need to Know?

20. Financial and Grants Management Institute - March 18-20, 2008 20 Grant Specific Functions of an AmeriCorps Budget Becomes part of the grantee’s contractual obligation Serves as a blueprint for the activities supported under the grant Helps ensure conformance to provisions and regulatory restrictions Used to monitor and measure progress towards meeting matching requirements Used to monitor and compare to budget to actual expenses

21. Financial and Grants Management Institute - March 18-20, 2008 21 Costs Types Why know the difference between the two kinds of costs? Cost characteristics to properly classify expenses Cost Types: Direct costs that correlate with the program and its objectives, such as: Member support Training Indirect costs, also known as administrative costs, are costs to operate the organization, not directly or easily attributable to the program/project ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ______________________________________________________________________________________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________

22. Financial and Grants Management Institute - March 18-20, 2008 22 Direct Costs Costs that are directly attributable to meeting the goals and objectives of the programs. They include: Allowable, direct charges for members Costs for staff who train, recruit or supervise members Member gear Costs for independent program evaluations Costs for travel ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ______________________________________________________________________________________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________

23. Financial and Grants Management Institute - March 18-20, 2008 23 Administrative Costs Administrative costs are general or centralized expenses of overall administration of an organization that receives assistance from CNCS. Include items such as: Accounting, auditing, general legal service Costs for internal evaluation General liability insurance Salaries & benefits related to general organizational management and support

24. Financial and Grants Management Institute - March 18-20, 2008 24 CNCS Budgets Overall Budget Checks Are matching requirements being met Graduated matching requirement based on number of years program has operated Cost per member service year Consistent numbers of members, slots

25. Financial and Grants Management Institute - March 18-20, 2008 25 Match Requirements As part of the Corporation’s 2008 appropriations, Congress changed the requirements for matching AmeriCorps grants. In general, the new requirements will apply to the grants that were submitted in January of 2008. In most cases, programs funded in 2007 or earlier (and which do not receive 2008 funding) must continue to meet the 15% and 33% match requirements.

26. Financial and Grants Management Institute - March 18-20, 2008 26 Essence of an AmeriCorps Budget Budget is broken down by three sections Section I: Program Operating Costs Section II: Member Costs Section III: Administrative Costs Multiple funding sources: Federal funds (CNCS) and matching funds (state, local and private) (subgrantees)

27. Financial and Grants Management Institute - March 18-20, 2008 27 AmeriCorps Budget Structure Section I: Program Operating Costs Personnel Personnel Fringe Benefits Staff Travel Member Travel Equipment Supplies Member Training Evaluation Other

28. Financial and Grants Management Institute - March 18-20, 2008 28 AmeriCorps Budget Structure Section II: Member Costs Living Allowance Member Support Costs FICA Worker’s Compensation Health Care Subgrantee’s matching contributions for member costs, excluding health care, must be in non-federal monies, unless otherwise authorized

29. Financial and Grants Management Institute - March 18-20, 2008 29 AmeriCorps Budget Structure Section III: Indirect or Administrative Costs Two methods to recover administrative costs: Organization has an approved federally negotiated indirect cost rate Requires approval from Federal Government Grantee share is limited to 5% of Corporation’s share of actual expenses and the difference is allowable as match Organization uses fixed five percent rule Requires approval by Corporation Grantee match for administrative funds may not exceed 10% of all direct expenditures

30. Financial and Grants Management Institute - March 18-20, 2008 30 Budget Monitoring

31. Financial and Grants Management Institute - March 18-20, 2008 31 What Are Budget Controls Reviews of budget to actual expenses regularly to avoid cost overruns Identification of expenditures that many not be budgeted to ensure they can be claimed Identification of expenditures that may need approval before being claimed ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ______________________________________________________________________________________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________

32. Financial and Grants Management Institute - March 18-20, 2008 32 Key Budgetary Controls Budgetary controls include: Regular monitoring of budgets to actual year-to-date and current period expenditures or outlays Explaining any budget variations that are unexpected or unusual and determining necessary adjustments Ensuring compliance with laws, regulations, and CNCS provisions, particularly matching percentage requirements Requesting prior approvals for modification, if necessary Assure budget changes are properly approved ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ______________________________________________________________________________________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________

33. Financial and Grants Management Institute - March 18-20, 2008 33 AmeriCorps programs must obtain prior approval for: Changes to increase or reallocate funds for the member support category Purchase of equipment over $5,000 that was not included in the original budget Cumulative reallocation exceeding 10% of total budget Substantial changes in level of participant supervision Sub-grants or contracts not included in original budget Budget Management ________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ ________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

34. Financial and Grants Management Institute - March 18-20, 2008 34 Exercise

35. Financial and Grants Management Institute - March 18-20, 2008 35 Taking it Home! Have a clear understanding of the budget process and allowability of costs to include in the budget. Create a process to monitor the budget to ensure compliance. Be sure your budget supports your program design.