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Fiscal Management

Accounting System Requirements

• Nonprofits must maintain an accounting system which records revenues and expenditures using generally accepted accounting principles.
• All nonprofits should have a chart of accounts.
• Accounting records include the general ledger and all subsidiary ledgers. Supporting documentation for all revenues and expenditures must be maintained for all expenditures charged to any contract. Supporting documentation includes, but not limited to:
  receipts or vouchers for revenue;
  bank statements;
  cancelled checks;
  deposit slips;
  approved invoices;
  receipts;
  leases;
  contracts;
  time sheets;
  inventory; and
  cost allocation worksheets.
  
• Financial records must identify all funding sources and expenditures by separate fund type.
• Nonprofits should use a double entry accounting system. It can be cash, accrual, or modified accrual.
• Nonprofits should have a fidelity bond.

Budget

The Board of Directors must approve an annual operating budget for the nonprofit's fiscal year. An annual operating budget includes all monetary and in-kind revenue and expenditures necessary to provide service.

This annual budget serves two important purposes. First, the budget is the monetary expression of the nonprofit Board of Director's annual service goals. Second, it is the nonprofit's operating guide for measuring the actual costs of service to estimated costs. In addition, the annual budget should be reviewed to ensure that the percentage of nonprofit administrative costs to direct service costs is reasonable. Direct service costs may include, but are not limited to, such costs as rent, utilities, and staff salaries.

Administrative Costs are functional costs that relate to the specific management of the program, such as secretarial costs and the portion of the executive director's salary related to time spent managing the nonprofit.

Contributions

• In-kind contributions. Each nonprofit must establish and follow written internal policies for the consistent and reasonable treatment of in-kind contributions. These policies must include:
• A method of establishing the reasonable value of donated goods and services.
• Rates for volunteer services which should be consistent with those paid for similar work in other activities of the community; and
• Requirements for documenting in-kind contributions.
• Cash contributions. Each nonprofit must establish and follow written internal policies for the consistent treatment of cash contributions. These policies must include:
• A method of recording all such contributions;
• Assurances that eligible homeless persons will receive basic services whether or not they contribute or donate to the nonprofit.

Cash/In-Kind Match

Nonprofits must have written internal policies to accurately document the cash/in-kind match required by funding sources.

It is important to understand that some contracts require local matching funds (either cash, in-kind, or a combination). When matching funds are required, it is necessary to keep track of these funds in such a way that they are not used for another matching fund requirement.

General Management and Overhead Costs

General management and overhead costs such as salaries, rent, and electricity, can be allocated between programs.

Reporting and Billing

Only those costs allowable under Uniform Grants and Contract Management Standards, and any revision thereto, plus any applicable federal cost principles are eligible for reimbursement.

Audit Requirements

1. Nonprofits should arrange for an agency-wide financial and compliance audit by an independent certified public accountant (CPA). Copies of this audit should be provided to all contractors and be included in all grant applications.
2. The audit should be completed within 13 months after the end of the fiscal year.

General Grant Fiscal and Organizational Documentation

It is recommended that one copy of fiscal documents (budgets, bank balances, funding sources, etc.) and organization documents (IRS determination letter, Articles of Incorporation, By-laws, organizational charts, current list of board members, staff resumes, etc.) be stored in a notebook kept by the Development Director and/or the Executive Director. These documents should be maintained in such a manner so as to simplify grant writing. It also functions to eliminate clerical error in grant submissions.

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