Dos and Don’ts of Drawing Funds

A fish hook snags a dollar bill.

If your Center for Independent Living receives a direct grant from Health and Human Services through the Administration on Community Living, then someone in your organization draws down funds to be directly deposited in your CIL’s bank account. This process is getting a lot of attention from the Office of Independent Living Programs, and you want to know what you can and cannot do.

Do make sure that you are authorized to draw funds before you need to do so. There is a process for being the identified person, and you don’t want the cash crunch of waiting until the last minute and then discovering you still have to get registered as the person who can draw. (You can assign two people to the task, each with their own registration, so that you don’t run into a situation where no one can draw. Typically the second person is a board member as a back up.)

Don’t draw down using your predecessor’s user ID and password, even if they left it for you or left it memorized on the computer you are using. During the process you certify that you are the person who signed in, so make sure that is true.

Do draw down the amount you will need for the expenses charged to the grant. An easy way to do this is to draw down to cover the expenses for which checks were written, drawing the properly allocated amount for the specific grant. A monthly draw or a draw that coincides with payroll makes sense since payroll is your largest expense. Have your bookkeeper or accountant run a report of the checks written and the total charged to each funding source. If you do this once or twice a month you will keep up with your actual expenses.

Don’t draw down in excess of what you are spending in that period. You cannot use your draw to borrow money to pay other expenses, or to build a reserve. You should draw from your Part C grant only what you are charging to the grant, both direct and indirect expenses. This includes only the appropriate share of the expenses that are shared. If you are having difficulty getting money on time from other funding sources you must resolve those with the entities funding the programs.

Do maintain a clearly labeled PDF of the payroll, payroll overhead calculation, other direct costs and indirect cost allocation be kept to support each draw. These should be retained for three years after the year of the draw.

Do realize that your program officer at ACL is reviewing the information related to your draws. There should not be a pattern, an equal amount drawn each time. You should be drawing based on actual expenses, not based on budgeted expenses or 1/12 every month.

Four key checks for SILCs

Your Statewide Independent Living Council operates under a set of rules found in section 705 of the Rehabilitation Act and in the SILC Indicators and SILC and DSE Assurances. Here are some key items that your SILC must not overlook:

  • The executive director of a Center must be selected by the center directors to serve on the SILC as a CIL representative. This is required in the Rehabilitation Act itself, in Section 705 which states: (2) Composition. – The Council shall include (A) among its voting members, at least 1 director of a center for independent living chosen by the directors of centers for independent living within the State; Note that this is not considered a conflict of interest. This voting member can serve as an officer as well unless your bylaws prevent that. The point is to have meaningful representation from the center(s) on the council.
  • Long-term members of the SILC (more than six consecutive years) are not legitimate because the same section of the Rehabilitation Act, 705 clarifies (6) Terms of Appointment. – (A) Length of term. – Each member of the Council shall serve for a term of 3 years, except that a member appointed to fill a vacancy occurring prior to the expiration of the term for which a predecessor was appointed, shall be appointed for the remainder of such term; and the terms of service of the members initially appointed shall be (as specified by the Governor) for such fewer number of years as will provide for the expiration of terms on a staggered basis. (B) Number of terms. – No member of the Council, other than a representative described in paragraph (2)(A) if there is only one center for independent living within the State, may serve more than two consecutive full terms. The governor’s appointment office needs to be aware of this item and must remove any members of the council who are serving now and have served in excess of 6 total years.
  • The Indicators mentioned above require a number of written and approved policies and procedures for the SILC and a training plan for SILC members. We can work with you on both those items.
  • Not all SILCs fund a full SILC office. The SILC can request staff assistance from the DSE as long as the person who provides the assistance is agreed to by the SILC and the SILC evaluates the work that is done for them. While it is true that the SILC cannot be established as an entity within a state agency, they can supervise and evaluate a person from the DSE assigned to the SILC.

For technical assistance or training regarding requirements for SILCs contact Paula McElwee at paulamcelwee.ilru@gmail.com

What are “Accessible Formats”?

If you have attended any of the national Independent Living events — and hopefully state and local ones as well — you have heard the term “accessible formats” as in, “you must request accessible formats in advance”. If you are one of the people who uses an accessible format, you probably know what it is, at least to you. “Accessible formats” matter to your CIL or SILC because you are required to provide materials and services that are equally accessible to all, including consumers but also board members and employees. How are you providing equal access to all?

Here is what the Department of Justice says in its overview of effective communication found at https://www.ada.gov/effective-comm.htmPeople who have vision, hearing, or speech disabilities (“communication disabilities”) use different ways to communicate. For example, people who are blind may give and receive information audibly rather than in writing and people who are deaf may give and receive information through writing or sign language rather than through speech.

At its heart, this requirement assures that written and spoken information is available in a format that can be understood by those who cannot access all written or spoken words. A person with a vision impairment may prefer Braille, or may want large print or a document that can be read aloud through a computer. A person who is deaf may need a captioner or a sign language interpreter to understand the presentation and to ask questions during a presentation.

The ADA calls these “auxiliary aids and services,” a wide variety of technologies including: 1) assistive listening systems and devices; 2) open captioning, closed captioning, real-time captioning, and closed caption decoders and devices; 3) telephone handset amplifiers, hearing-aid compatible telephones, text telephones (TTYs) , videophones, captioned telephones, and other voice, text, and video-based telecommunications products; 4) videotext displays; 5) screen reader software, magnification software, and optical readers; 6) video description and secondary auditory programming (SAP) devices that pick up video-described audio feeds for television programs; 7) accessibility features in electronic documents and other electronic and information technology that is accessible (either independently or through assistive technology such as screen readers) .

The key to communicating effectively is to consider the nature, length, complexity, and context of the communication and the person’s normal method(s) of communication. There is not one method of communication, but many. Take time to read the full bulletin on effective communication.

– Paula McElwee

Simplifying your record-keeping would be a good New Year’s resolution!

Happy New Year!

Sticky notes in various colors say "simplify" "keep it simple" "less is more" "spend less" "unclutter", and "become minimalist" <!-- HTML Credit Code for Can Stock Photo --> <a href="https://www.canstockphoto.com">(c) Can Stock Photo / PixelsAway</a>

How many expense accounts should I have per department? And if we simplify our chart of accounts to make recordkeeping easier, will that make our books inconsistent?

There is no right answer to how many accounts you should have but there are some principles and guidelines that will help.

First, don’t be afraid of losing detail. Most accounting systems allow you to “drill down” and get all the detail you want.

Secondly, don’t be concerned that the board will want additional detail. The board is responsible for the strategic direction of the organization and they need the big picture. When they receive too much detail it can distract them from their primary responsibilities.

The American National Red Cross, in their published financial statements, lists salaries and wages, employees benefits, and 6 other categories of management and general expenses. They have 24 categories of expenses in their form 990. That is with a breakout of their grants between local and domestic organizations, and a breakout of their payroll for officers and directors separate from other employees as well as a breakout of retirement costs from other employee benefits. They have only 19 categories other than payroll and benefits for more than $3 billion of annual expenditures.

So, if you organization has more than 15 categories, that’s a lot. If it is well over 15, you are probably doing unnecessary work and adding complexity without benefit.

Start by looking at any expense category that doesn’t have more than 1%-2% of your total expenses and determine whether it can be combined into miscellaneous or some other like category.

John F Heveron, Jr. Principal, Heveron and Company CPAs, Rochester, NY

Is your center ready for review?

The Office of Independent Living Programs, our funder, has begun its required reviews of Subchapter C Centers. They first tested the desk or document review process with volunteer centers. Last week they conducted several on-site reviews in Michigan — the first on-site reviews since 2014. They intend to move forward with additional reviews throughout the year, and have released their review process and tools for all to see.

So are you ready for this review? What tools do you need to get ready?

We advise all CILs to evaluate for themselves whether they are in compliance with the law and regulations that apply. A great way to conduct this self-evaluation is to use the review tools and apply them for yourself. You can find a description of the process and the forms that reviewers are using at https://acl.gov/programs/il-comp

There is a right way and a wrong way to conduct this self-evaluation. Don’t sit everyone down around a table and go through the instrument asking, “Are we doing this?” while you check things off the list. If you are reviewed, the reviewers won’t just ask you questions. They will ask you to show, not tell, how you are in compliance. They will follow up with others to see what is actually being done.

Take the time to review the instrument but also to thoroughly review your policies and procedures and the evidence that you are following them. I suggest you write all over that checklist. Write down the policy number that applies. Identify who is most in charge of the process so that they can document what you do to meet the requirements. Write down what documents or processes should be reviewed to show your conformance with the law, the regulations, and your own policies and procedures. If these include minutes of board meetings or staff meetings, write down the date of the meeting in your review instrument. THEN your team can sit down at a table and review what you still need to do to be fully in compliance.

Here is what ACL/OILP says about the purpose of the review process:

The purpose of the COMP is to improve program performance. The OILP relies on the COMP to provide consistent federal oversight of CIL grantees. Grantees may use the COMP to understand program and fiscal requirements and to conduct self-evaluations.  Non-federal reviewers will use the COMP as a resource to ensure consistency during onsite reviews. 

The objectives of CIL oversight and monitoring include:

  • Assess compliance with the assurances and evaluation standards in Sections 725(b) and 725(c)(3) of the Act;
  • Study the program operation, organizational structure and administration of the CIL, under Section 725(c)(1), (2), (5), and (6) of the Act;
  • Review documentation sufficient to verify the accuracy of the information submitted in the most recent annual program performance report (PPR);
  • Verify that the CIL is managed in accordance with federal program and fiscal requirements;
  • Assess CIL conformance with its work plan, developed in accordance with Section 725(c)(4) of the Act, conditions of the CIL’s approved application, and consistency with the State Plan for Independent Living (SPIL);
  • Identify areas of suggested or necessary improvements in the CIL’s programmatic and fiscal operation and provide TA resources available on the local, state, regional and national level; and
  • Identify areas of exemplary work, projects and coordination efforts and make this information available to the larger CIL community.

We selected the 10% indirect rate…

Question: What expenses can we directly charge to programs? Also, can we charge that de minimus 10% to all direct costs?

Magnifying glass over red percentage sign.

John Heveron: The 10% indirect cost rate does not apply that to all direct costs. You apply the rate to Modified Total Direct Cost which includes all direct salaries and wages, along with payroll taxes and fringe benefits, and to materials and supplies, services, travel, and up to $25,000 of each sub award. It excludes equipment purchases rental costs, participant support costs and some other categories that generally apply to educational organizations.

You cannot directly charge facilities used for administrative purposes or other administration.

Uniform Guidance and the related HHS regulations (45 CFR 75.414) say that facilities costs include depreciation on buildings and equipment, interest on facilities debt, and building operations and maintenance. Administration is defined as management of the organization (usually a large part of the executive director’s responsibility, accounting, human resources, general office costs and any other costs that benefit all programs uniformly.

Uniform Guidance (2 CFR 20) and HHS (45 CFR 75) regulations both have an appendix IV with additional information and clarification about indirect cost identification and assignment, and rate determination for nonprofit organizations.

Exciting News and an Introduction

I am pleased to announce that John Heveron is joining us as an expert contributor to this blog. John has worked with us in providing financial training and technical assistance to CILs and SILCs for a number of years. He is a principal of Heveron & Company CPAs and has been serving not-for-profit organizations since 1969 with the training and implementation of proper controls and procedures, financial reporting systems, entity planning, planning and reviewing audits, compliance audits and other audit services, assistance with indirect cost rates, as well as assisting with planning.

John keeps his technical skills sharp through writing and teaching.  He has authored Nonprofit GPS, a quarterly newsletter with current information for nonprofits for over 20 years.

Photo of John Heveron, a smiling man in a suit and tie, with auburn hair and mustache with a little gray.

John has been a presenter on not-for-profit issues for the Foundation for Accounting Education, United Way of Greater Rochester, The Ad Council, the National Training and Technical Assistance Center for Independent Living (IL-Net), New York State Literacy Volunteers, and other organizations.

John is a past president of the Rochester Chapter of the New York State Society of CPAs and was inducted into their CPA Hall of Fame in October 2004, and a past director of the NY State Foundation for Accounting Education.  He is program committee chair, nonprofit group leader, and past president of INPACT, a national association of CPA firms.

John also serves on the accounting advisory board of St. John Fisher College where he was recognized as the 2003 Outstanding Accounting Alumnus.

Stay tuned for new posts on this inportant area of technical assistance.

Is your SILC keeping up?

There are urgent things that every SILC must do in the next few months.

Get final approval for the current plan. For some of you, your current State Plan for Independent Living (SPIL), which was updated or amended, hasn’t been approved. You must submit the changes required and secure that approval before you can proceed with submitting the new one.

How are you doing on submitting the Program Progress Report (what was formerly called the 704 report)? For the SILC, this is done with the DSE which is the grantee. You also need the statistics from any centers that are funded solely with Subchapter B funds. (If they also have Subchapter C funds they combine their Subchapter B report with the Subchapter C.) You received instructions from ACL/OILP for this process in September.

And then — the HUGE one — how are you doing on your 2020-2022 SPIL? Here is a timeline developed by Ann McDaniel to give you a glimpse at where you should be in the process.

  • May 2019 – Form SPIL Team and set meeting dates
  • June 2019 – Identify methods to gather public input
  • Aug-Sept 2019 – Gather public input (Hold public forums, focus groups, surveys, etc.)
  • September 2019 – Review Consumer Satisfaction Report(s)
  • October 2019 – Begin SPIL drafting process
  • February 2020 – Finalize Draft SPIL & send to SILC, CILs & DSE for review/comment
  • March 2020 – Make Draft SPIL available for public comment
  • April 2020 – Hold public meetings to gather comments/feedback on draft
  • May 2020 – SPIL Team reviews comments & makes revisions
  • May 16, 2020 – Send revised Draft SPIL to SILC, CILs & DSE
  • June 1, 2020 – SILC & CIL approval of SPIL secured
  • June 12, 2020 – secure signatures of SILC Chair, CIL Directors, & DSE Director
  • June 20, 2020 – submit signed SPIL to ILA/ACL
  • June 30, 2020 – Signed SPIL due to ILA/ACL

If you are behind, jump in and get things rolling. We suggest, with all of your reports, you complete your data entry prior to the due date. You don’t want to be entering at the last minute and have the system go down.

What are your risks related to staff?

The majority of your CIL budget is spent on staff. This is where you invest the most money, year after year. Let’s think about some of the risks related to staff.

  • Are your employees serving “at  will?” (This varies state to state.) What are your policies addressing this?
  • Can a CIL or SILC be sued for discrimination because of disability or any other protected class? (The answer is yes!) What are your policies and procedures for addressing these areas?
  • Are you following your policies and procedures consistently? No exceptions?
  • Are your staff working in risky or unsafe neighborhoods?
  • Do staff know how to report work-related injuries?

Once you have thought about the risks, identify things you can do to reduce your risks of each area identified. For example regarding work-related injuries, some insurance companies recommend immediate drug testing after an accident to determine if the person was under the influence. This is a mitigating measure, or a measure that reduces your risk. What policies, procedures and training do you have in place for staff and for managers related to the risks you’ve identified? Are there new things you need to put in place to reduce risks?

Don’t forget the important final piece – what do you plan to put into place to monitor that your risk management plan is in place going forward?

New IL staff? Include these in their orientation.

We have a number of courses on line that your new staff can access. Here are several from our RapidCourse curriculum. They take 60-90 minutes to complete and are done at your own pace. The is no cost and the staff can learn about:

We also have on-demand webinars for each of the core services, too many for a beginner. The “Get to the Core of it” series is especially good for new staff. If they specialize they (or you) can pick out which ones are the best fit. https://www.ilru.org/search/node/Get%20to%20the%20core