Are Advertising and Public Relations costs allowed?

How can I distinguish between unallowable advertising and outreach? Can I call promotional giveaways outreach?

While advertising is one of those categories that is on the list of those not allowed with federal funds, not all advertising is unallowable. Uniform Guidance section 200.421 (HHS regulation section 75.421) confirms that advertising costs are allowable for:

  • recruiting personnel necessary for the performance of a Federal award,
  • procurement of goods and services for performing a Federal award,
  • program, outreach, as well as
  • other specific purposes necessary to meet the requirements of the Federal award.

Also, certain public relations that include communicating with the public and the press pertaining to specific activities or accomplishments resulting from performance of the Federal award are allowable.

Other public relations costs are not allowed, nor is the cost of displays, demonstrations or exhibits, or the costs of promotional items or memorabilia.

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

Board Recruitment tips for CILs

Does your board of directors have the expertise needed to oversee your organization? Are all your board positions full? Are you planning for the day when members rotate off your board? You should always be on the lookout for good board members. Because the staff, especially the Executive Director, are often out in the community, they might run into potential board members. At the same time, they should not be in charge of the board membership.

We suggest that you utilize a board member application process. Your application can ask about the prospective board member’s disability, since you must maintain at least 51% members who have a significant disability. Then a nominating committee can review the applications, interview the candidates, and invite candidates to observe a meeting and meet the full board before a vote is taken. What are some characteristics you look for in your board?

  • Consumer control is first. Make sure that more than 50% (51% or more) of your board members state that they have a significant disability.
  • Look around at your service area and compare the community makeup with the board makeup. Is your board representative of ethnic diversity, at least to the same degree as your community? What about other aspects of diversity?
  • Are your board members representative of gender, age, or other aspects of community? While board members typically need to be of legal age, you can still have younger and older members in the mix.
  • What kinds of expertise is useful on the board? Legal? Financial? Business? Contacts? Determine what is missing from your board makeup and seek out members to fill the gaps.
  • Check your bylaws. You may have other requirements, such as requiring the person to live or work in your service area. This is not required by your grantor. If you feel someone outside the area will benefit the organization, you can suggest them to your board as long as it is allowed by your bylaws and policies.
  • Typically the executive director is not a member of the board, although again, your bylaws would determine that. Some boards have found it useful to include current or past members of their board or the board or director of another center.

One last thought. If you don’t have term limits for board members, consider it. While board recruitment is a lot of work, there are many advantages to members rotating off after a period of time so that you can expand those who know you in the community and can tap the expertise of new folks in the process.

Are we required to have an independent audit?

While your small center is not required by your federal funder to conduct an annual audit, typically you are by other funding sources (check your contracts) and it is best practice for all.

a word diagram including FISCAL YEAR in large print, then strategy, planning, success, project, etc.

The only federally required audit kicks in when you spend at least $750,000 in federal funds in a year. Then you are required to have the more expensive single audit of all federal funds which includes allowable and non-allowable costs.

Most centers have an independent firm conduct what is called a financial statement audit, which assures your funders that your financial statements are an accurate portrayal of your finances. This is what I recommend for you, but typically the auditor is secured by the board and they may want something more detailed when the Executive Director or Finance Director are replaced. You can collect a few bids, then give to the board for their decision. Then the auditor should report any findings directly to the board when the audit is complete.

The audit should occur as soon as possible after the close of your fiscal year. The auditor will also typically file your IRS Form 990 on your behalf. You should have done it annually, and it is required for you to keep your 501(c)3 status with the IRS. If you lose that status you lose eligibility to receive Title VII funds.

Does the Hatch Act apply to CILs or SILCs?

A man, arms crossed, looks into the camera. In the background is a capital building.

The Hatch Act typically applies to federal employees, and may apply to state and local elected officials. It forbids intimidation or bribery of voters and restricts political campaign activities by federal employees. It does not apply to Title VII funded grantees such as the centers and SILCs.

When you are a 723 state (where the state provides more funding than the federal grants), you will want to ask your DSE if that is the case in their view. That is who provides oversite in 723 states.  

There are other prohibitions regarding partisan political activity in the IRS code because of your 501(c)3 status, which is required for all centers and optional for SILCs. Here is an article regarding those prohibitions: https://www.irs.gov/pub/irs-tege/eotopici02.pdf

Related to lobbying, specifically, we do provide guidance as those prohibitions do apply to centers. 45 CFR 93 says in §93.100:

Conditions on use of funds.

(a) No appropriated funds may be expended by the recipient of a Federal contract, grant, loan, or cooperative agreement to pay any person for influencing or attempting to influence an officer or employee of any agency, a Member of Congress, an officer or employee of Congress, or an employee of a Member of Congress in connection with any of the following covered Federal actions: the awarding of any Federal contract, the making of any Federal grant, the making of any Federal loan, the entering into of any cooperative agreement, and the extension, continuation, renewal, amendment, or modification of any Federal contract, grant, loan, or cooperative agreement.

And this definition may help:

(o) Recipient includes all contractors, subcontractors at any tier, and subgrantees at any tier of the recipient of funds received in connection with a Federal contract, grant, loan, or cooperative agreement. The term excludes an Indian tribe, tribal organization, or any other Indian organization with respect to expenditures specifically permitted by other Federal law.

A proper statement for your policies might be this from the certification regarding lobbying:

No Federal appropriated funds can be paid or will be paid, by or on behalf of (name of center), to any person for influencing or attempting to influence an officer or employee of an agency, a Member of Congress, an officer or employee of Congress, or an employee of a Member of Congress in connection with the awarding of any Federal contract, the making of any Federal grant, the making of any Federal loan, the entering into of any cooperative agreement, and the extension, continuation, renewal, amendment, or modification of any Federal contract, grant, loan, or cooperative agreement. As an employee or board member of (name of center) you cannot lobby on behalf of the center without the approval of the Executive Director. If you participate in lobbying, all related costs such as travel, lodging, or meals and indirect costs cannot be paid with federal funds.

You might add that the Center cannot and will not support a specific candidate for office, and cannot act in a partisan manner related to elections. Political materials supporting a candidate cannot be displayed on Center property.

Is indirect cost the same as management and general in our financial statements?

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Indirect costs that are used in the calculation of your indirect cost rate aren’t always the same as management and general costs in your financial statements. 

Sometimes a specific program will require administrative costs for that program only.  So those administrative costs would be directly assigned to that program. 

In other cases costs, that are potentially direct,  may be combined with indirect costs for convenience.  For example costs like copies and supplies, which could be tracked directly to programs are generally combined with indirect costs because it is inefficient to track them for  direct assignment .

BUT, in many cases indirect and general & administrative will be the same, especially for smaller and medium-sized organizations.

Using management and general as your indirect costs makes your annual reporting of actual indirect costs very easy, and also simplifies tracking your indirect costs percentage to make sure you are not billing significantly more or less indirect cost than you are incurring.

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

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?

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Here is what the Department of Justice says in its overview of effective communication found at https://www.ada.gov/effective-comm.html “People 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!

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.