Closing in on year-end — what you should do now

Image of financial report, calculator and pencil

Your current federal Part C grants are winding down for the year. By September 29 you will have encumbered any remaining funds, or they will be absorbed back into the U.S. Treasury. (You won’t see them disappear from your account right away, but you can’t use them.) Some of you have spent less than usual of your Part C federal dollars because some staff have not been working or have transferred to CARES Act funded work, vacant positions have taken longer to fill, travel is reduced, utilities in the office have been reduced, etc. If you haven’t already, you need to figure out NOW what funds are unencumbered, and if you have a need for items that will support the purposes of the grant, you should purchase them now. A few caveats:

  • You cannot save or carry over Part C dollars except to pay for expenses encumbered during the current year.
  • You cannot use these funds to pay down your debt.
  • Any expense of $5,000 or more for equipment or building improvement requires prior approval from your Program Officer at ACL.
  • Your financial statements are kept on an accrual basis. This means you cannot pre-pay expenses but must charge them when they are utilized. They will be accrued to when the funds are used.
  • You can encumber funds during the current fiscal year and pay them from this year’s funds even if the bill doesn’t come until after September 29, the last day on your grant.
  • If items are backordered but you charged them during this fiscal year, the expense is typically allowable even though the item doesn’t arrive until next fiscal year. (Does anyone else feel like backorders are much more common than they used to be?)

Can volunteer board members be paid?

An older woman stands at the head of a table in a business setting. Around the table are a professional woman in a red wheelchair, a black man in a suit, a blond woman and a dark haired woman, and an older white man in a suit.

Question: Is it possible to pay board members a $100.00 per meeting stipend as a means of encouraging board membership?

A board member typically is not paid by a non-profit as a provision of serving on the board without a conflict of interest. You would have to check your secretary of state’s office to see if that is true in your state. You will also want to check your bylaws, which typically prohibit this. It is considered best practice by the IRS not to compensate your board members and if you do, you have to report that on your annual 990 filing. If they are paid more than $600 a year you would need to file a 1099 form for them. The IRS does consider “reasonable” compensation to be allowed, although they do not define what is reasonable.

There are some things you can pay board members for. You can provide them with mileage or other reimbursement for costs of attending the meeting or representing your organization in the community. You can provide them with memberships to professional organizations like NCIL and APRIL. You can provide them with materials related to representing your center in outreach, like business cards or a notebook or portfolio of information, and with polo shirts from the organization so they can represent you in the community.

Probably the area of greatest concern is that board members that receive compensation for their services as board members can lose immunity in lawsuits if your state protects volunteer board members in its Good Samaritan Act or similar law.

In the case of the SILC, board/council member compensation is addressed in Section 705 of the Rehabilitation Act as amended:

(f) COMPENSATION AND EXPENSES.—The Council may use available resources to reimburse members of the Council for reasonable and necessary expenses of attending Council meetings and performing Council duties (such as personal assistance services), and to pay reasonable compensation to a member of the Council, if such member is not employed or must forfeit wages from other employment, for each day the member is engaged in performing Council duties. 29 U.S.C. 796d

What about prior approval for equipment or upgrades?

The Uniform Administrative Requirements found in the Code of Regulations (45 CFR 75) are the reference for questions related to how you handle things financially with federal grants. With the influx of CARES Act funds, some of you are considering capital improvements in order to have the phone system or server necessary for remote work, or other upgrades such as cables and wiring that might be required for these things. My understanding — based on what is below — is that if these costs exceed $5,000 you must secure prior approval from ACL/OILP. Be sure to contact your Program Officer about these expenses.

45 CFR § 75.439 Equipment and other capital expenditures.

(a) See § 75.2 for the definitions of Capital expenditures, Equipment, Special purpose equipment, General purpose equipment, Acquisition cost, and Capital assets.

(b) The following rules of allowability must apply to equipment and other capital expenditures:

(1) Capital expenditures for general purpose equipment, buildings, and land are unallowable as direct charges, except with the prior written approval of the HHS awarding agency or pass-through entity.

(2) Capital expenditures for special purpose equipment are allowable as direct costs, provided that items with a unit cost of $5,000 or more have the prior written approval of the HHS awarding agency or pass-through entity.

(3) Capital expenditures for improvements to land, buildings, or equipment which materially increase their value or useful life are unallowable as a direct cost except with the prior written approval of the HHS awarding agency, or pass-through entity. See § 75.436 for rules on the allowability of depreciation on buildings, capital improvements, and equipment. See also § 75.465.

(4) When approved as a direct charge pursuant to paragraphs (b)(1) through (3) of this section, capital expenditures will be charged in the period in which the expenditure is incurred, or as otherwise determined appropriate and negotiated with the HHS awarding agency.

(5) The unamortized portion of any equipment written off as a result of a change in capitalization levels may be recovered by continuing to claim the otherwise allowable depreciation on the equipment, or by amortizing the amount to be written off over a period of years negotiated with the Federal cognizant agency for indirect cost.

(6) Cost of equipment disposal. If the non-Federal entity is instructed by the HHS awarding agency to otherwise dispose of or transfer the equipment the costs of such disposal or transfer are allowable.

(7) Equipment and other capital expenditures are unallowable as indirect costs. See § 75.436. [79 FR 75889, Dec. 19, 2014, as amended at 81 FR 3018, Jan. 20, 2016]

As you purchase with federal funds…

With the influx of the CARES Act funds to Part C centers, you have been purchasing personal protective equipment, food, technology, internet or delivery services and more. Are you following your own procurement policies? And do they fall within the federal requirements? Let’s take a look.

First, why was a purchase COVID-19 related and why was it necessary? For example, did you upgrade your server or other internet or computer resources? Was that necessary for capacity for everyone working from home? Describe what was needed and how the purchase met that need.

Second, all of your costs must be reasonable, and you must document this by capturing similar costs from other venders and/or by making a case for the reason you are making the specific purchase. Often the rationale for “reasonable and necessary” is stated together.

Next, make sure your procurement policies are equal to or less than the limits for each area found in the federal regulations. It may make sense to use the federal terms and definitions in your financial policies and procedures. The first of those categories — the level where you use a simple purchasing process of approval without price comparisons* or bids — is call “micro-purchase” and applies to any purchase of supplies or services, in aggregate, that are under the threshold of $10,000. “In aggregate” means that you would be able to apply this simpler approval method only if all the purchases for that vendor for the year, when added together, are still under this threshold. To the extent practicable, you should distribute micro-purchases equitably among qualified suppliers. Micro-purchases may be awarded without soliciting competitive quotations if you consider the price to be reasonable

The category called “small purchase” applies to purchases over $10,000 and less than $250,000 . Small purchase procedures are those relatively simple and informal procurement methods for securing services, supplies, or other property that do not cost more than the Simplified Acquisition Threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources. Note, however, that theses are not necessarily formal bids. You can check prices by email or phone, or use posted prices on the internet, as long as you document your process assures that purchases are reasonable.

Above the small purchase amount of $250,000 you must secure sealed bids with formal advertising. There are a lot of requirements for that level of purchase, but I doubt the CARES Act funds will be sufficient to make purchases at this level. Refer to 45 CFR 75.329 for more details. Other considerations when purchasing include:

  • Contracting with small and minority businesses, women’s business enterprises and labor surplus area firms.
  • Following the executive order to “Buy American, Hire American”
  • Assure there is no conflict of interest related to the purchasing of goods or services.
  • Getting prior approval from ACL on equipment costs in excess of $5,000.

*I still recommend price comparisons to show reasonableness.

Improve Your Ability to Work Remotely

As many of you have already discovered, working from home requires some upgrades in both hardware and software. Staff used to desktops are moving to laptops or tablets. Working with cloud-based documents or your consumer database may be new to you. Here are some resources for your consideration (brought to you by Tech Soup) through techsoup.org.

Tech Soup is offering charitable nonprofits 10 free licenses to Microsoft 365 Business-$5 monthly for additional users ($12.50 monthly for each license for the business world). Having the same version of Microsoft across all your devices may be useful. Having the latest version of Microsoft Teams and other cloud applications can really help remote workers who need to collaborate regularly.

Microsoft 365 includes the collaboration tool Teams (a bit like Zoom but more secure and more sharing capabilities) and additional cloud and mobile applications.

This will allow you to compose, edit and share documents in the various Microsoft formats such as Word Excel and PowerPoint.

Security updates are automatic, and employee’s devices can be remotely updated.

This version of Microsoft allows up to 300 licenses.  There are costlier enterprise versions but this version will serve most CILs and SILCs.

Each license allows a user to install Microsoft 365 Business on up to 5 devices – PCs, Macs, tablets, and smartphones.

The business version includes 1 TB (a lot) of file storage with Microsoft One Drive for Business.  There are also social and video sites, a scheduling app, a customer manager, Mile IQ-a really neat business versus personal travel calculator, and invoicing.

Techsoup is also providing a “Microsoft Cloud Starter Kit” subscription for $3 per user monthly.  This includes setup of your Microsoft 365 with help from their consultants, training courses and ongoing support including unlimited calls for support, help and questions.

When we get back to normal, it won’t be the normal we knew.  Some changes will be permanent.  This is the time to take advantage of technology and support that is being offered.

How do we count services that happen in groups or electronically?

Note: while your Program Performance Reports (PPRs formerly 704 Reports) were submitted in December, you are continuing to collect data for the year we are in. In fact, you are over a quarter into the next year. Be sure to review the data collection processes for consistency throughout the year so that you don’t have to scramble next December.

Question: Many of our CILs are beginning to offer webinars and podcasts to deliver information and training to people. Questions have been raised on how the CILs will capture service data related to digital touchpoints with individuals, and if they can count these individuals as served on the Program Performance Report. And, if so, where should they be captured. Obviously, most if not all of these are not part of any intake process (waiver or ILP) and will not be counted in that manner. The regulations are not very clear on this, as far as I can tell? Can you provide your opinion on this and/or share any regulatory guidance that may be helpful in answering this question.

Response: Usually with any group event, in person or electronically, the meeting cannot be IL Skills or even peer support because that individual participating isn’t required to have a goal and a CSR. Sometimes the group is made up on current consumers, in which case they might agree on a common goal for the course and could add it to a CSR, and then assess if that goal is met. Sometimes the members of a group have individual goals achieved by their participation. Otherwise that leaves us with only two choices — Information and Referral (I&R) or outreach.

Hits on a website or likes on a Facebook page cannot be I and R because you don’t really know if any specific information was viewed by the individual. Any numbers of people you have reached, therefore, would be outreach, not I & R.

Webinars or other group events that do not require that attenders have a CSR or goal could be considered I and R.

One final note. The area of electronic services is emerging, and the recent COVID19 is causing CILs to consider if use of webinar video and other such options are workable during the crisis — and will be viable options for services in the future. Stay tuned.

How is your planning?

A dial with "See problem" at 9:00, then Make a plan, take action and get results. The needle rests on get results.

Remember the Program Performance Report (PPR) that you submitted the end of December? In one of those sections — Section 6.2.1 — you were required to “establish clear priorities through annual and 3-year program and financial planning objectives for the center, including overall goals or a mission for the center, a work plan for achiving the goals or mission, specific objectives, service priorities, and types of services to be provided, and a description that shall demonstrate how the proposed activities of the applicant are consistent with the most recent 3-year State plan”. Let’s break this down a little.

First, the funder wants to know what you plan to do with the funds you receive. How will they be used? What are your program priorities? Usually this is determined by your board, with input from others. You may or may not publish a three year plan, but you need to have one. The priorities and goals flow from the mission the board establishes. That isn’t enough, though. You need to have specific objectives you plan to achieve (and that you will report on in next year’s report).

Second, you need to address financial goals. One way to do this is to examine what resource development activities you want to conduct. You are required to do resource development, so those are good financial goals. Others might include ways you plan to implement better internal controls, or adding a fee for service option that you expect will increase your funds.

Finally, your goals need to be compatible with your State Plan for Independent Living. How does what your center plans to achieve dovetail with what the network in your state wants to achieve?

Your PPR is reviewed by the Office of Independent Living Programs. (Yes, that has been happening and you may have heard from them.) You may get questions if you didn’t provide a thorough response in this section. Remember that planning for the future, and achieving that plan, are important in your center’s work.

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.