What does it mean to have an active board?

The board is the right size to operate effectively.

  • Your bylaws require a minimum number of board members, and sometimes also give a maximum. Have you thought about what number works the best?
  • I have seen minimums as low as three — and while this number might help you stay legal if you lose members, it is not a number that seems very efficient for getting the work done. More typically I see five or seven as a minimum number, and personally I like seven because you can share the work a little more effectively if your minimum includes more people to do the work.
  • Sometimes there is a maximum in your bylaws. Boards of twenty and up have lots of people to do the work, but discussion is more difficult to encourage/manage with that many people around the table.
  • If you have an active committee structure — which is where much of the work of an active board takes place — you need enough strong members to chair the committees, and enough other board members to serve on at least one and possibly more committees.
  • I have heard an argument that you must always have an odd number of board members to prevent a tie vote. I don’t feel this is pertinent, because often not everyone attends, and you have a chair to break a tie if it occurs.

The board understands its role and does its work, including

  •  Sets the vision, mission and direction for the organization, with input from the executive director, staff and consumers.
  •  Is diligent in requiring to see financial statements monthly, and the results of any audit as it is completed.
  •  Hires, supervises and evaluates the executive director.
  •  Does not get involved in day to day operations, but goes through the executive director if day to day topics are discussed.
  •  Is committed to developing resources that allow the organization to grow and thrive.

The board is truly consumer controlled.

  • 51% of your members are people with significant disabilities — that is a requirement. A strong CIL board is 51% people with significant disabilities who are active in the disability community. If you recruit someone with a disability who is new to IL, you must make sure they understand the history and philosophy of Independent Living so they can become active in the disability community.
  • The board seeks consumer input into key areas of planning, setting the mission and evaluating the services.

Each board member commits to the organization in concrete ways.

  • Is a donor to the organization. The amount may not be important — not everyone has the same resources — but every board member needs to believe in the CIL enough to donate.
  • Is an ambassador to the community regarding your CIL. Active board members believe in what we are doing and are glad to spread the word to the community.
  • Attends the meetings of the board. Many organizations, in fact, remove board members who miss a certain number of meetings.
  • Believes in Independent Living. Their language and attitude should show their commitment to equal rights for people with disabilities, and for people with disabilities being in control of their own lives and choices.
  • Serves on one or more committees.
  • Seeks out other potential board members and encourages them to apply.

I have the opportunity now and then to assist centers who do not have an active board. Sometimes they have provided a list of board members to the reviewer — the DSE or ACL — as part of a review, and there has been a disturbing trend among centers in trouble. The reviewer reports that when they called, the number to speak with a board member, it was disconnected or, worse, the person answering denied being on the board or didn’t even know what the center was.

Do not continue to carry names on a list to meet your minimum number of board members in a review. If you’ve lost members, own up to it and put strategies in place to recruit new ones who will be active. This is hard work, and should not be left only to the board. The executive director is likely to meet potential board members while doing business, and certainly can encourage those individuals to apply to be on the board as well.

You want to recruit continually. You can’t look at your roster in July and say, “Oh, no, we have three people terming out! We need to elect three new people in September.” You are unlikely to find good members when you need them unless you have been seeking them out continuously.

And then work with your members to encourage them to be active, through training, mentoring, providing them with resources and supporting them to do the work of an active board member on an active board of directors.

Allowable costs: Fines, penalties, damages, legal defense?

45 CFR §75.435 and 75.441 address the costs of these legal issues.  The first is very detailed, so I am only going to touch on highlights. If you are working through this, your attorney will want to review the entire section. Much of this is quoted, but it is not complete. Your main requirement is that, if you are working on any issue of non-compliance with law or regulation, you want your attorney and accountant to help you assure that you are tracking the costs separately and not charging anything to your federal grant that is not allowed.

Costs incurred in connection with any criminal, civil or administrative proceeding (including filing of a false certification) commenced by the Federal Government, a state, local government, or foreign government, or joined by the Federal Government (including a proceeding under the False Claims Act), against the non-Federal entity, (or commenced by third parties or a current or former employee of the non-Federal entity who submits a whistleblower complaint of reprisal in accordance with 10 U.S.C. 2409 or 41 U.S.C. 4712), are not allowable.

Costs include the services of in-house or private counsel, accountants, consultants, or others engaged to assist the non-Federal entity before (including investigation expense), during, and after commencement of a judicial or administrative proceeding, that bear a direct relationship to the proceeding.

If a proceeding referred to above is commenced by the Federal Government and is resolved by consent or compromise pursuant to an agreement by the non-Federal entity and the Federal Government, then the costs incurred may be allowed to the extent specifically provided in that agreement.

Costs related to wrongdoing of anyone within your organization cannot be paid for through federal funds.

An authorized Federal official must determine the percentage of costs allowed considering the complexity of litigation, generally accepted principles governing the award of legal fees in civil actions involving the United States, and such other factors as may be appropriate. Such percentage typically must not exceed 80 percent.

Costs which may be unallowable under this section, including directly associated costs, must be segregated and accounted for separately. During the pendency of any proceeding covered by paragraphs (b) and (f) of this section, the Federal Government must generally withhold payment of such costs. However, if in its best interests, the Federal Government may provide for conditional payment upon provision of adequate security, or other adequate assurance, and agreement to repay all unallowable costs, plus interest, if the costs are subsequently determined to be unallowable.

Costs resulting from non-Federal entity violations of, alleged violations of, or failure to comply with, Federal, state, tribal, local or foreign laws and regulations are unallowable, except when incurred as a result of compliance with specific provisions of the Federal award, or with prior written approval of the HHS awarding agency.

Bottom line — if you or someone in your organization failed to uphold the requirements (law and regulation), then you cannot expect your federal grant to pay for the costs of investigation, defense, or any resulting fines or penalties. If you are able to settle, the settlement may include these costs.

There are a number of other costs addressed in the regulations. Ask about any of them here or contact my at paulamcelwee.ilru@gmail.com

Are fund raising costs allowed? How is fund raising different from resource development?

In the Code of Federal Regulations, 45 CFR §75.442, fund raising as a cost line item is defined as  the costs of organized fund raising, including financial campaigns, endowment drives, solicitation of gifts and bequests, and similar expenses incurred to raise capital or obtain contributions are unallowable. However, fund raising costs for the purposes of meeting the Federal program objectives are allowable with prior written approval from the Federal awarding agency. To get prior approval you need to contact your Project Officer. We keep a current list of project officers from ACL/ILA at http://www.ilru.org/ila-state-assignments-ila-project-officers-il-specialists

There is, however, an interesting requirement in the rehabilitation act that centers conduct “resource development activities”. That reference is found in the Rehabilitation Act, Title VII, Section 725(b)(7) “RESOURCE DEVELOPMENT ACTIVITIES.—The center shall conduct resource development activities to obtain funding from sources other than this chapter.”

This makes it clear that resource development — which is not defined — is not just allowed. It is required. You need to keep your costs for this separate so that you can properly allocate your indirect costs against this activity.

Take the time in your organization to define resource development, and to approach your project officer for approval of any expenses that could be questioned.

Both allowable and unallowable fund raising activities must be allocated an appropriate share of indirect costs under the conditions described in §75.413.

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Are advertising and public relations allowed? Conferences?

My typical answer to whether a cost is allowed is “It depends”. Remember we are talking about whether you are allowed to use federal grant funds (usually Part B and Part C funds) to pay for these things.

45 CFR §75.421 addresses advertising and public relations. It defines the term advertising costs means the costs of advertising media and corollary administrative costs. Advertising media include magazines, newspapers, radio and television, direct mail, exhibits, electronic or computer transmittals, and the like.

Advertising costs are allowed for recruiting staff, for seeking out needed goods or services, for getting rid of property acquired through the grant that is no longer of use to the grant, and most important for centers, for outreach.

Sometimes you are asked to sponsor an event — to have an add in a program for example. Ask yourself, how does this help with outreach to consumers who are unserved or underserved? If you expect the individuals reading the program to be potential consumers, then you may be able to justify the expense. Any time you have this kind of expense, it is well worth it to write out your justification and include it with the expense information. Tell why you feel this is allowable advertising rather than non-allowable.

In the same section of the regulations, the term “public relations” is defined to include community relations and any activities dedicated to maintaining the image of the non-Federal entity or maintaining or promoting understanding and favorable relations with the community or public at large or any segment of the public.

The only allowable public relations costs are costs that your grant specifically requires, costs to communicate with the public and press about the accomplishments of the grant, and public relations to keep the public informed around “matters of public concern, such as notices of funding opportunities, financial matters, etc.”

Ok, all the above may be allowable, as long as you justify how it fits into the allowed areas. Unallowable advertising and public relations costs include a list of things that federal funds specifically cannot be used for, including:

  • Costs of promotional items and memorabilia, including models, gifts, and souvenirs;
  • Costs of advertising and public relations designed solely to promote the non-Federal entity.Costs of meetings, conventions, convocations, or other events related to other activities of the entity (see also §75.432), including:
  • Costs of conferences including the costs of displays, demonstrations, and exhibits; of meeting rooms, hospitality suites, and other special facilities used in conjunction with shows and other special events; and salaries and wages of employees engaged in setting up and displaying exhibits, making demonstrations, and providing briefings.

Before you panic about whether you can attend that national conference, note that training and education costs are allowed, and that travel costs related to that training and education may be allowed if you can justify that the attendance is necessary to the one attending. Travel costs are the expenses for transportation, lodging, subsistence, and related items incurred by employees who are in travel status on official business of the non-Federal entity. Specific to lodging and subsistence, the hotel expense is allowed if it is considered reasonable. If you tend to book a room that is more expensive than most, that cost may be questioned. In that case you have to explain why it was necessary in your financial documentation of the costs. You also must follow you own written policies around travel.

There is an expectation that you use commercial (not charter) air travel and that your cost is for not more than the least expensive unrestricted accommodations class they offer. It would not typically be allowed for you to fly first class, for example.

If you are involved in sponsoring a conference, look at 45 CFR 75.432 on conferences. A conference is defined as a meeting, retreat, seminar, symposium, workshop or event whose primary purpose is the dissemination of technical information beyond the non-Federal entity and is necessary and reasonable for successful performance under the Federal award. Allowable conference costs paid by the non-Federal entity as a sponsor or host of the conference may include rental of facilities, speakers’ fees, costs of meals and refreshments, local transportation, and other items incidental to such conferences unless further restricted by the terms and conditions of the Federal award. As needed, the costs of identifying, but not providing, locally available dependent-care resources are allowable. Conference hosts/sponsors must exercise discretion and judgment in ensuring that conference costs are appropriate, necessary and managed in a manner that minimizes costs to the Federal award.

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Even though you have already submitted your SF 425…you need to know

word indirect on a paper torn between in and direct

We received a little more information on the SF-425 – direct from the grants management team at ACL/ILA – that may be useful for financial personnel who complete these things. TImelines, reconciliation, indirect costs and project periods are addressed.

Annual vs Final SF-425:

Annual reports are due 30 days after the end of the budget period or by October 31 for Subchapter C grants.

Final reports are due 90 days after the end of the budget period or by December 31 for Subchapter C grants.

Annual reports can include unliquidated obligations but final reports cannot as all liquidations are made prior to submission and the report reflects final expenditures.

Reconciliation between PMS and ACL submitted financial report:

As a term and condition of award, ACL grantees must submit quarterly Federal Cash Transaction Reports through Payment Management System (PMS).  As ACL requires the submission of an annual SF-425 and a final SF-425, PMS and the final SF-425 should reconcile by reflecting the same expenditure total.

Indirect Costs:

Line 11 on the SF-425 should only be completed when grant recipients have used awarded funds for indirect costs that are approved by a federal agency through an indirect cost rate agreement OR the use of the de minimis rate which is 10% of modified total direct costs, if the grantee has never received an approved indirect cost rate agreement.

Project/Budget Period:

ACL awards Subchapter C grants on a September 30 to September 29 period of performance.  This probably is not the same as your October 1 to September 30 fiscal year.  Therefore, allowed obligations are only for this defined period.  Any obligations made on September 30, should be made to the applicable grant. Therefore, all grantees should adjust their accounting procedures to align with the approved project/budget period dates.

How do I report Indirect Costs on my Form 425 (which is DUE December 31).

word indirect on a paper torn between in and direct

The most important thing about how you report on this form is to remember that the amount must match what you drew down from your funder. The Form 425 numbers need to match your drawdowns. If this is your end of year report, it is due no later than the end of December, covering the period of October 1, 2016 through September 30, 2017. If you need an extension or have specific questions unique to your situation,  you must request that from your project officer at ACL. They will work with the Office of Grans Management fiscal specialist to answer fiscal management questions.  You can find their contact information at http://www.ilru.org/ila-state-assignments-ila-project-officers-il-specialists

The instructions for SF425 state, related to line 11 Indirect Expense, that you are to complete this information only if required by the awarding agency. The fact that ACL/ILA required us to develop an indirect rate indicates to me that we are expected to fill out line 11. If you report it, you are to enter the cumulative amounts from the date of the inception of the award through the end date of the reporting period, which in this case was September 30. To me, that is an indication that we are to enter the actual indirect amount drawn against the grant for the past year. What portion of your draw down was applied to indirect costs? That is the amount that would go into that line on the form. If for some reason you did not establish and use an indirect rate, you would leave the line blank. The other sections — type of rate, base, etc. — should be found in your indirect cost rate proposal.

If your center only has one funding source and you decided not to do an indirect rate, leave it blank.
If your center opted to take the 10% you still need to report this 10% (and back out those costs from your direct costs) as your indirect expense.
Sometimes when I get questions about this I wonder — are you keeping track of actual expenses and drawing down for those actual costs, rather than an estimate or a set amount each month? You are required to draw down actual costs and spend within a few days, but I run across centers that have not understood that. If yours is one of those centers we need to talk further about how to bring your center into conformance with the expectation that you are drawing down to cover your actual expenses. Most centers figure out their actual costs — the accounts payable for the period — and draw down to pay those specific expenses, then send the checks out.  The form itself and instructions for the Form 425 for ACL are found at:

SF 425 FormACL Administration for Community Living

Allowable costs for federal grants – can we buy a building?

In that list of costs that are not allowable (found in 45 CFR 75) Interest is sometimes allowable and sometimes not. Generally, interest on loans to manage your cash flow are not deductible whether they are line of credit loans, credit card charges, short term loans, or internal charges for borrowing from your own funds including temporary or permanently restricted funds. .

I think we all agree that interest is a substantial part of the costs for buying a building. Here is what IS allowed:  Financing costs (including interest) to acquire, construct, or replace capital assets are usually allowed. An asset cost includes (as applicable) acquisition costs, construction costs, and other costs capitalized. Typically this means that the purchase costs for a building are allowed, assuming it is where you provide services and not as an investment or for another purpose. You must use the capital assets — including a purchased building — to support your Federal grant award.

Some organizations put their building into a separate entity for legal protection or other reasons. However, that entity can’t charge you — and you can’t charge any more to federal awards — than you would if you owned the building.

You may want to look at a lease-purchase arrangement. You can do so if you can substantiate that the the reimbursement costs, including interest, are less costly than another alternative such as a standard lease or an outright purchase. (It seems likely that a lease purchase would include some additional costs that would always be in excess of a lease amount.)

One of the conditions is that you expense or capitalize allowable interest costs in accordance with Generally Accepted Accounting Procedures (GAAP).

If your plans include incurring a debt of over $1 million to purchase or construct your building, unless you can contribute 25% of the purchase cost outright (an “initial equity contribution”), there are some conditions. First, you cannot be reimbursed for all the interest if the building is being used for multiple projects. You have to make sure only the part actually used for a project is charged to that project. Secondly, you have to complete a somewhat complicated monthly report of cash inflows and outflows related to the building and allocate costs and cash flows properly. If you have money coming in (inflows), you will need to adjust the amount you request from the grant to take that into consideration.

Most centers that are buying a building calculate what they can be reimbursed for through depreciation. Details are found in 45 CFR 75.436.

Depreciation is the method for allocating the cost of fixed assets to periods benefiting from its use. You may be compensated for the use of your building, provided that it is needed in the activities of your grant, and properly allocated to Federal awards. Such compensation must be made by computing depreciation and allocating it properly.  To the extent your building is also used for administration, you can also include some of the cost in indirect.

The computation of depreciation must be based on the acquisition cost of the assets involved. If you are lucky enough to receive a donated building or property, you can either use the value for match, or may depreciate based on the property’s fair market value at the time of the donation . That fair market value is treated as though it was your acquisition cost. You will want to have an accountant assist you with this — the regulations are thorough and you must meet all the requirements. There are costs that you can’t depreciate, like the cost of the land. You will need to establish the useful service or useful life of the building. Then you will compute it’s monthly value over its lifetime and that is your monthly depreciation that can be charged to your grant as a direct or indirect cost.

You can consider the entire building, including all its components, or you can break it into multiple components and depreciate each separately. The entire building, including the shell and all components, may be treated as a single asset and depreciated over a single useful life. A building may also be divided into multiple components. Each component item may then be depreciated over its estimated useful life. The building components must be grouped into three general components of a building: building shell (including construction and design costs), building services systems (e.g., elevators, HVAC, plumbing system and heating and air-conditioning system) and fixed equipment (which a CIL would not typically have, but includes things like sterilizers, casework, fume hoods, cold rooms and glassware/washers).

If you choose the depreciation method of identifying and being reimbursed for your costs, make sure you support your depreciation calculations with property records and document how you came up with the figure you are using. Again, this is complex so you should consult with someone before selecting this method.

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Allowable costs for federal grants — about lobbying

Over the next few weeks we are going to address the costs that are NOT allowed with federal money, or that are allowed in some cases and not others. The first topic we should discuss is lobbying.
  •  First, a CIL or SILC is allowed to lobby for specific legislation — you just can’t do it with federal money. Any staff time spent lobbying is tracked, and the staff time and both direct and indirect expenses have to be paid for with non-federal, discretionary funds. This would include any legislative contact when you request a specific action on a specific piece of legislation.
  • Second, lobbying also includes grass roots lobbying — anything you do to get the individuals in the disability community to vote in a certain way. It is also considered lobbying if you go to anyone in the chain of authority over services, from federal legislators to the staff of the offices funding you, in an attempt to sway them concerning your funding.
  • I’m sure you can see where a CIL may at times want to take their advocacy further, and when they lobby, they need to keep accurate records of the costs and make sure they can show that the lobbying costs were not paid for with federal money. Most centers set aside donations and other discretionary money so that they can lobby when needed. Our role as advocates may take us into lobbying territory, and clear records of the costs will serve you well.
  • Finally, lobbying does not include other contact with legislators to inform them of the status and purpose of your organization, or even to provide testimony related to legislation, right up to the point that you might want to suggest how they vote. At that point you’ve crossed back into lobbying territory.
  • To keep your 501(c)(3) status with the IRS, you cannot spend a significant amount of money on lobbying, and you cannot give money to or have signs in your offices (or any other support from your organization) for any specific candidate or party. You can hold a voter education workshop as long as you don’t suggest how people vote. You can hold a candidate forum, for consumers/voters to ask questions as long as you invite ALL the candidates for that seat. They don’t all have to show up, but you have to invite them all.
These are the items related to how federal money can or must not be spent. More is found at the HHS website. Much of the information is from the Code of Federal Regulations, at 45 CFR Part 93.
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More about Asset-Based Community Development

While I am no expert in the science of Asset-Based Community Development,the ideas ring true to me. I like the concept of leading from our strengths, both individually and in community. All of us have gifts, areas where we are strong. Surely within the disability community, we all can bring those gifts to the work at hand. Our purpose includes equal access in our communities, for example. What gifts do community members bring to achieving change in access?

Of course, to recognize strengths or assets in ourselves or others we need to think about them and share our gifts with each other. One tool is to ask people about their gifts, in three difference categories. First, what are your gifts of the hand? What things can you make, do, fix or create with your hands? Secondly, what are the gifts of the head? What do you know about, or what are you interested in learning. Finally, what are the gifts of your heart? What are your passions, cares and concerns?

Apply these to the work at hand. If you are targeting a specific neighborhood for improving access, the people in that neighborhood very likely already know what some of the local assets are. They know what organizations are already present n that neighborhood. They know their strengths, what streets and buildings and services are physically accessible. Neighbors may know the individuals and associations of their community. They know what cultural concerns are present.

In the ABCD model you:

  • Focus on ASSETS
  • Build from OPPORTUNITIES
  • Emphasize ASSOCITATIONS
  • Focus on COMMUNITY with a goal of EMPOWERMENT
  • Remember power comes from RELATIONSHIPS
  • PEOPLE are the answer.

As you plan, ask these questions:

  • As neighbors, what can we achieve by using our own assets?
  • What can we achieve (leverage) with our own assets if we get some outside help?
  • What can’t we do with our assets that must be done by outsiders?

Most goals can be achieve with the community’s own assets.

“Helping people displaces their power.”

If you like to study social dynamics from interesting sources, you may want to check out Asset Based Community Development. The Center in my home town, Fresno, CA, invited me to a community wide conference on Asset Based Community Development (ABCD for short). This is a well established program taught around the country to all kinds of communities organizing to create change. It isn’t Independent Living, but I found some interesting parallels, and some great quotes, like the title above, used by Ron Dwyer-Voss during the presentation.

I was especially interested in something called the Citizen Power Progression.  This is a ladder or hierarchy, with the labels “victim” and “client” at the bottom. In my mind these correlated with people who receive services, but aren’t involved in the life of the disability community. These are people we might be “helping” – and if they remain those who are “helped”, they may not exercise their voice, their power. Change may happen here, but on a more limited scale than the next levels.

The next rung is “Advisor”. This made me think of the different models for peer support around the country. People with disabilities sharing with each other, mentoring as people come into their own confidence and power. It is on the right track, but doesn’t really acknowledge full power.

“Advocate” is the next, essential level. We must speak out for the things needed in our community, against injustice. As we all know, advocacy can be powerful — but it is not always successful, and not always at the level true consumer control.  If you think about the community you serve, and about the staff and board makeup, don’t look just at the numbers. Look at whether or not people from the disability community are in control or are only clients (consumers), advisors or advocates.

Because real power is in the hands of those who produce the vision, who make the change happen, are the ones with community power.  Real change happens when our people are in positions of power — not just testifying to the Transportation Committee, but serving on the committee. Not only advising but acting.

Another quote – “Institutions (Organizations) can lead by stepping back.”  I challenge you to take a long look at your center and whether your board has become insulated from those you serve. Can the center itself lead by stepping back and urging more people to do what needs to happen? Your center as an organization can convene groups, facilitate action, provide resources for change, partner with others…but if the desired action is something the citizens (consumers) can do for themselves, don’t displace their power.

More next week as we talk about asset mapping.