Financial

Management for
Enhanced
Performance
Training
Training Goal

Better manage your

USAID-funded project so
that you can improve
your ability to be within
budget and in
compliance of USG
regulations
Learning Objectives

Gain an improved understanding of:

 Costs that are allowable, restricted, and ineligible
under USAID
 How to monitor your burn rate and manage your project budget
within your obligated and total estimated ceiling amount
 How to meet financial reporting requirements

 How to ensure you have a healthy cash flow

 How to improve internal controls, mitigating the risk of fraud

and improving overall efficiency and effectiveness
Overview of Agenda: DAY ONE

 USAID Cost Principles

 Budget Structure
 Burn Rates and Budget
Management AGENDA
Overview of Agenda: DAY TWO

 Cash Flow
 Cost Share
 Financial Reporting and Invoicing
AGENDA
 Value Added Tax (VAT)
Overview of Agenda: DAY THREE

 Timekeeping and Allocating

Labor Costs
 Internal Controls and Fraud
Prevention
AGENDA
 Financial Audits
 Financial Considerations at
Project Close-out
Logistics

 Breaks
 Lunch
 Restrooms
 Time
Requests
 Participate actively!
 Ask questions throughout
 Contribute to discussions
 Brainstorm with colleagues

 No cell phone or laptop usage

 No interruption of colleagues
 No criticism of opinions or ideas
 No sharing of confidential information outside
this training
Financial
Management
Under USAID

Photo credited to USAID/RDMA

Financial Management Under USAID

Topics covered:
 Aspects of financial
management unique to USAID
 Key USAID regulations on
financial management
 Assistance vs. acquisition
 Types of assistance awards
Rigorous Standards for Financial Compliance

Finance is a key focus of

compliance because
USAID is accountable to
the U.S. Congress for
how American tax funds
are spent
Financial Management
• Prepare budgets
• Plan activities
Plan • Forecast
• Spend according to USG regulations and
institutional internal policies
• Spend in line with funding and budgeted costs
• Book expenditures
Spend • Review financial reports and documentation
• Enforce internal controls
• Internal and external audits
• Report expenditures according to donor
Monitor requirements
• Report cost share
• Report any program income or VAT paid

 Financial Planning
FINANCIAL MANAGEMENT
Essential Resources for Successful Financial Management
Consider whether your
institution has sufficient
resources to successfully
and efficiently manage
your project’s finances
and, if not, what you need
to change to ensure that
you do
Key Resources for
Financial Management
1. Highly qualified finance staff
2. Accounting system that is
reliable and capable of
producing reports that meet
donor standards
3. Written policies and
procedures that are uniformly
understood and followed by
staff
 USAID Assistance vs. Acquisition

 Assistance = SUPPORT
– Government is a sponsor Grants and
– Solicitation: Request for Application Cooperative
(RFA) or Annual Program Statement Agreements
(APS)

 Acquisition = BUY or PROCURE

– Government is a buyer Contracts and
– Solicitation: Request for Proposal Purchase Orders
(RFP) or Request for Quotation
(RFQ)
Types of Subgrants

Type Limitations Funding

Fixed Amount Award • Up to $150,000 Fixed payment made upon
• 3 years achievement of milestones. No need
to verify costs. Advances can be
provided.

Simplified Cost • Up to $150,000 Payment of actual costs incurred.

Reimbursement Grant • 3 years Advances can be provided.

Standard Cost • No limitation Actual costs incurred. Can provide

Reimbursement Grant advances to those that demonstrate
need.
Key USAID Regulations for Assistance

 Automated Directives System (ADS)

 Mandatory Standard Provisions and

Required as Applicable Standard
Provisions
 Code of Federal Regulations (CFR)

 Office of Management and Budget

(OMB) Circulars Note that regulations for
non-U.S. organizations
differ slightly from those
for U.S. organizations
Automated Directive System (ADS)
 Automated Directives System (ADS)
contains policies and procedures that
guide USAID’s programs and
operations
 The ADS is consists of over 200 Chapters
organized in six functional series:
– Series 100: Agency Organization & Legal Affairs
– Series 200: Programming
– Series 300: Acquisition & Assistance
– Series 400: Human Resources
– Series 500: Management Services
– Series 600: Budget & Finance
Key ADS Chapters
• ADS 101: Agency Programs and
Functions
• ADS 201: Planning
• ADS 203: Assessing and Learning
• ADS 204: Environmental Procedures
• ADS 205: Integrating Gender Equality
• ADS 303: Standard Provisions for
Grants & Cooperative Agreements
• ADS 310: Source, Origin & Nationality
• ADS 312: Eligibility of Commodities
• ADS 320: Branding & Marking
• ADS 591: Financial Audits of USAID
Recipients
Automated Directive System (Cont’d)

 Mandatory Standard Provisions Key to Referencing

are applicable to all projects Mandatory vs.
Required as Applicable
Provisions for ADS
Chapter 303
 Required as Applicable Standard
Provisions may be included if
they apply to your award Mandatory: “M”

Required as Applicable: “RAA”

?
Office of Management and Budget (OMB) Circulars
 The Office of Management and
Budget issues circulars that
provide guidelines for all
awards issued by the U.S.
Federal Government
 OMB Circulars are not specific
to any particular U.S. federal
agency
Key OMB Circulars
• OMB A-110: Administrative
requirements for educational
institutions, hospitals, and
other non-profit organizations
• OMB A-122: Cost Principles
for non-profit organizations
• OMB A-133: Audit
requirements for States, local
governments, and non-profit
organizations
Code of Federal Regulations (CFR)
 The Code of Federal Regulations
(CFRs) is USAID's interpretation of
the OMB’s administrative rules for
agreements under assistance and
acquisition
 You will see overlap in regulations
between OMB A-122 and the CFRs
Key CFRs
• 2 CFR 200.0 – 200.521:
Uniform Administrative
Requirements, Cost Principles,
and Audit Requirements for
Federal Awards
• 2 CFR 700 – USAID’s
augmentation of 2 CFR 200
• 22 CFR 226 – Administration of
Assistance Awards
• 22 CRF 228 – Rules on Source
and Origin
New Administrative Regulations—the “Super Circular”

 In December 2014, the U.S.

Government issued new administrative
regulations (2 CFR 200) called the
Super Circular; USAID issued 2 CFR
700 as its supplement, and Standard
Provisions were updated
 New Super Circular regulations
apply only to new awards unless your
existing award has been modified to
include them
USAID Rules & Regulations Map
ASSISTANCE

Cooperative Agreement or Grant

 Schedule
Funding Mechanism  Program Description
 Standard Provisions (US, Non-US)

 2CFR 200, 2 CFR 700 (US-based)

Key Federal Regulations
Automated Directives System
 Standard Provisions (Non-US)
 Administrative Requirements
 2 CFR 200 Subpart E Cost Principles (US, Non-US)
 Guidelines for financial audits contracted by foreign recipients (Non-
US)
 22 CFR 228 Source, Nationality Requirements
 ADS Series 300, Chapter 303, Grants & Cooperative Agreements

 Certifications & Assurances

Other References
 Acquisition and Assistance Policy Directives (AAPD)
 Mission Orders
 Organization’s Written Policies
 Standardized Regulations (Per Diems/Allowances, etc.)
Key Points of Contact at USAID

Technical
Agreement Contracting
Officer’s Officer’s
Representative Representative

Acquisition
Assistance

(AOR) (COR)

Agreement Officer Contracting Officer

(AO) (CO)

Contractual
QUESTIONS?
Resources: Financial Management Under USAID

 Fixed Amount Subawards:

– 2 CFR 200.332
– ADS 303

 Financial Management:
– 2 CFR 200.302
– 22 CFR 226.21

 Internal Controls:
– 2 CFR 200.303
Cost
Principles
Cost Principles

Topics covered:
 Levels of regulations that
determine cost allowability
 Allowable vs. unallowable
costs
 Costs that are allowable with
prior approvals
Levels of Regulations that Determine Allowability of Costs

Several levels of
regulations will
1 Your Country’s Laws

determine what costs

2 USAID Rules and Regulations
are allowable on your
USAID-funded project Your Institution’s Own Policies and
3 Procedures
Understanding Allowability Through Cost Principles

What are USAID’s

Cost Principles,
and why are they
important?
How Do You Know if A Cost Is Allowable?

 The U.S. Government’s Cost

Principles determine allowability
of costs and what charges you
can incur on your project
• Allowable
 USAID’s Cost Principles are • Reasonable
defined in 2 CFR 230 (OMB A- • Allocable
122) and 2 CFR 200 Subpart E
Cost Principles (Cont’d)

1 Allowable (2 CFR 200.403)

Necessary for the project
In line with USAID’s regulations as well as your own institution’s policies
Properly documented
2 Reasonable (2 CFR 200.404)
In line with market prices and considered a ‘prudent’ purchase
Best value

3 Allocable (2 CFR 200.405)

Incurred specifically for the award
Beneficial to the award
Percentage of cost attributed to the award fairly determined
Types of Costs

Allowable
Per your country’s laws, USAID regulations,
and your institution’s policies. Some
allowable costs are not restricted but still
require USAID’s prior approval
Restricted
Allowable but only with prior USAID
approval
Unallowable
Not allowable under any circumstance using
any portion of USG funds
Costs That Require Prior Approvals

Some goods and services require USAID approval before

they can be procured, or the cost may be considered
unallowable
Restricted commodities or services
Approvals
Always
Required Equipment with a Geo Code different from your requirement

Approval Equipment over $5,000 per unit with a useful life of >1 year
Depends upon
Award International Travel
Agreement Subawards / subgrants
Restricted Commodities and Services

Restricted commodities and services

can be purchased, but only with prior
USAID approval and include:
 Agricultural commodities (e.g., fertilizers,
pesticides, seeds)
 Motor vehicles (e.g., vehicles,
motorbikes)
 Pharmaceutical items (e.g., drugs)
 Used equipment
 USG-owned excess property
 Construction
22 CFR 228.19 and .01
Allowable Costs that Require USAID’s Approval

 Equipment that has acquisition

cost of $5,000 or more per unit
 Purchase of goods that have a
geo code other than the one
you are authorized, per your
award agreement
Acquisition Cost

The cost of a good or service is often

more than the price tag and includes:
 The cost of the good/service being
purchased
 The costs to prepare it for use (e.g.,
modifications, attachments, accessories)
 Taxes, duty, transit insurance, freight,
and installation (per your institution’s ALWAYS document why
policies) a cost is allowable,
allocable and reasonable
2 CFR 200.2 as well as the overall
procurement process
Unallowable Costs

 Do not directly benefit the project

 Are estimates, as opposed to actual
costs
 Are not in accordance with USG
regulations, host country laws, or your
own institutional policies
 Are incurred before or after the period
of performance of the award
 Do not have documentation or proper
USAID approvals
Specific Unallowable or Ineligible Goods and Services

 Military equipment
 Surveillance equipment
 Support of police or law enforcement
activities
 Abortion equipment or services
 Luxury goods or gambling equipment
 Weather modification equipment
 Services procured from debarred or
suspended vendors
Specific Unallowable Costs (Cont’d)

 Entertainment costs and alcohol

 Gratuities, tips, or donations
 Bad debts, fines, and penalty fees
 Interest on borrowed capital
 Ineligible commodities
 Fundraising costs
 Costs incurred outside of the
project’s period of performance
Verifying Ineligible Suppliers / Vendors
You are responsible for
verifying that all vendors and
individuals from whom you
purchase goods or services
are not debarred or
suspended by the USG
Sites to Verify Vendor
Status
• System for Award
Management (www.sam.gov
)
• U.S. Department of
Treasury’s Designated
Nationals List
• UN Consolidated List
Costs that are Potentially Unallowable
Some costs may be
considered
unallowable if they are
not necessary or directly
beneficial to the project
Potentially
Unallowable Costs
• Training costs for staff
• Audit costs, if the audit is
not required by USAID
• Promotional or publicity
costs
How and When You Seek USAID Approval

 In Writing – Restricted commodities

require the approval of the AO/CO, but
make sure your AOR/COR is also
aware and supportive of the request
Verbal approvals are not valid!

 In Advance – Submit approval

requests at least 2 weeks in advance
but preferably sooner

 Keep records of all approvals!

EXERCISE: Allowable or Not Allowable?

Are these
costs
allowable?
QUESTIONS?
Resources: Cost Principles

 OMB Circular A-122:

https://www.whitehouse.gov/omb/circulars_a122_2004/
 Systems for verifying vendors or individuals debarred or
suspended from the USG:
 System for Award Management (SAM): www.sam.gov
 U.S. Department of Treasury: http://
www.treasury.gov/resource-center/sanctions/SDN-List/Pages/default.as
px
 United Nations Security designation list: http://
www.un.org/sc/committees/1267/aq_sanctions_list.shtml
 2 CFR 200 Subpart E: http://
www.ecfr.gov/cgi-bin/text-idx?SID=64bfcae53e8119be9a48deb6dcf70b0b&
mc=true&node=sp2.1.200.e&rgn=div6
Managing Your
USAID Budget
Part 1: Budget Structure

Photo credited to USAID/Indonesia

Managing Your USAID Budget

Topics covered:
 Major cost categories and
budget line items
 Shared costs and
determining allocations
 Indirect costs and
budgeting them
 Detailed budgets vs.
award agreement budgets
 Budget realignments
Key Elements of Successful Budget Management

1) The structure of your

budget and how it is
incorporated into your award
Managing your agreement

USAID award
2) USAID funding for your
budget involves project
understanding
three main areas 3) USAID regulations and
how they apply to your
project
Major USAID Cost Categories for Budgets

Your project’s budget

cost categories help
guide you in
monitoring and
reporting on your
expenditures
Budget Cost Categories
Major Budget Categories and Line Items
Salaries
Labor
Fringe benefits
Training
Travel
Directly
Equipment
attributable to
Other Direct Costs Materials and Supplies the project
Communication
Consultants
Subawards
Indirect Overhead rate or NICRA Not directly
attributable
Labor and Fringe Benefits

 Labor – Salaries are typically

Examples of Fringe
budgeted at a daily rate Benefits

 Fringe Benefits – You may budget a  Allowances or stipends

fringe benefit rate or budget
individual benefits you provide, as
per your institutional policy
 Vacation, sick leave, holidays
 Special leave (maternity,
bereavement)

 At times, fringe benefits are  Health insurance

grouped with labor in the  Social Security
consolidated budget of your award  Severance or gratuity
agreement
Other Direct Costs (ODCs)
Common ODC Budget Line Items
Workshops / All activity costs not already accounted for in other ODC line
Training / Activities items
Services Includes expenses paid to vendors not under a subaward

Travel Includes international and domestic travel

Equipment is defined as any item that has a per unit cost of
Equipment
$5,000 or more and has a useful life of at least 1 year
Materials /
Office or project supplies, can include laptops
Supplies
Anyone who is not on an employment agreement or hired
Consultants
under a subaward
Subawardees Subawards and subgrants may be different line items
Direct vs. Indirect Costs
Some costs are incurred for multiple projects or activities, such as office
rent, labor, or repairs. These costs may be considered direct or indirect
costs but you need to carefully consider each cost and your own
institutional policy.

Direct Costs Indirect Costs

• Costs that are directly linked to • Costs cannot be directly

project implementation attributed to a specific project,
but benefit more than one
project or institutional objective
• Example: Organizational office
(not project office) management
labor
Options for Recovering Indirect Costs

1. Obtain approval of an official

indirect rate through a Negotiated
Indirect Rate Agreement ( and )
2. Charge a 10% flat indirect rate—
no justification necessary
3. Charge indirect costs as a fixed
amount

2 CFR 200.414(f), RAA3, and RAA4

Establishing a NICRA Rate

 You will need to hire an audit firm

to determine your NICRA

 Establishing a NICRA rate takes

time and must be approved by
USAID

 Your NICRA rate will need to be

determined and re-approved
based on audits

RAA3
 Using the 10% De Minimis Rate
If you choose to use the 10% de minimis rate, the rate is calculated on a
Modified Total Direct Costs (MTDC) Method. The rate must be used
uniformly on all USG awards and can be used indefinitely.

Indirect Calculations Indirect Calculations

Include
• Salaries, wages and fringe benefits
• Materials & Supplies
• Services
• Travel
• First $25,000 of subcontracts
2 CFR 200.68 and 2 CFR 200.414(f)
Exclude
• Equipment & Capital expenditures
• Rental costs
• Charges for patient care
• Scholarships, fellowships, tuition
remission, and participant support
• Any portion of subcontract above
$25,000
Indirect Costs Charged as a Fixed Amount

If your institution uses the Fixed

Amount, you must: Fixed Amount
 Incorporate a schedule of ________________
payments into your budget
 Charge the scheduled amount
regardless of the actual cost of the
items covered by your indirects

2 CFR 200.414(f), RAA4

Your Award Budget and Your Award Agreement

How your budget is

incorporated into your
award agreement
determines your
flexibility for shifting
resources among cost
categories
Consolidation of Your Budget in Your Award Agreement

 Your award agreement will often

collapse budget line items from
your original budget
 Review your budget closely to
ensure you understand how budget
lines have been consolidated
 The major cost categories reflected
in your agreement will determine
how you track and report on your
budget to USAID
Your Approved Budget: Detailed Budget vs. Award Budget

Your Approved Budget in Proposal

Line Items Budget
Your Budget in Your Award Agreement
Salaries $200,000
Line Items Budget
Fringe benefits $25,000
Salaries $200,000
Workshops $400,000
Other Direct Costs
Travel $50,000 $490,000
(ODCs)
Equipment $105,000 Equipment $105,000
Supplies $45,000 Supplies $45,000
Subcontractor $15,000 Overhead $50,000
Overhead $50,000 TOTAL $890,000
TOTAL $890,000
Budgeting by Project Components or Objectives

 Projects may be financed by different

sources from USAID budgets (e.g., Health Education

health, education)
 Projects may be required to track
budgets by project component or
objective
 Requirements to track expenditures by
project component are in addition to
requirements to track major cost
categories as incorporated into your
award agreement
Budgeting by Activity Component
A budget that contains project components may require that you
allocate labor costs to associated activities. Indirect expenses will need
to be prorated accordingly.
Example Budget by Project Component
Project Component Total Budget Budget by Component
Component 1
Labor $200,000
$500,000
ODCs $300,000
Component 2
Labor $150,000
$350,000
ODCs $200,000
TOTAL $850,000 $850,000
When Do You Need to Realign Your Project Budget?

 Generally, you have the flexibility

to shift costs between major
cost categories up to a
cumulative 10%
 Refer to your agreement for
specific guidelines about
budget flexibility

2 CFR 200.308(e)
When You Realign Your Project Budget…

 Explore why some expenditures are

over or under budget for particular
line items

 Look for potential errors in how

costs may have been booked or
budgeted

 Conduct a forecast to project

future costs and how this will affect
your budget
Requesting A Budget Realignment

 Explain what the deviations were

(%) that created shifts in your
budget
 Explain the new proposed budget
and describe the changes
 Describe how your proposed
changes affect implementation
 Provide a detailed projection that
shows the full amount of your
budget (expended + projected)
EXERCISE: Direct and Indirect Costs

What do
you think?
QUESTIONS?
Resources: Managing Your USAID Budget Part I
 Indirect rates
– 2 CFR 200.56, http://www.ecfr.gov/cgi-bin/text-idx?node=pt2.1.200&rgn=div5#se2.1.200_156
– 2 CFR 200.57, http://www.ecfr.gov/cgi-bin/text-idx?node=pt2.1.200&rgn=div5#se2.1.200_157
– 2 CFR 200.412 – 415, https://
www.gpo.gov/fdsys/granule/CFR-2014-title2-vol1/CFR-2014-title2-vol1-sec200-412
– ADS Chapter 303, 303mab_122414, Standard Provisions for Non-U.S.
Nongovernmental Organizations, RAA3 & RAA4
 Budget realignment/revision
– 2 CFR 200.308, http://www.ecfr.gov/cgi-bin/text-idx?node=pt2.1.200&rgn=div5#se2.1.200_308
– ADS Chapter 303, 303mab_122414, Standard Provisions for Non-U.S.
Nongovernmental Organizations, M3
 USAID NICRA Resource Guide
– https://
www.usaid.gov/work-usaid/resources-for-partners/indirect-cost-rate-guide-non-pr
Managing Your
USAID Budget
Part 2: Managing Costs
within Budget
Limitations
Managing Your USAID Budget, Part 2

Topics covered:
 Obligated funding vs.
ceiling funding
 Accrued and committed costs
 Preparing a funding request
 Burn rate and pipeline
 Overspending and
underspending
Obligated Funding and Your Award

What is obligated
funding, and why is
it important?
Obligated Funding vs. Total Estimated Cost
ESTIMATED FUNDS
 Obligated, or incremental, funding
represents the amount of
available funds that you are
authorized to spend
$15,000,000
AVAILABLE
FUNDS nt os
t
 Total Estimated Cost, or the total ou C
m e d
award amount of your budget, is A at
ed
$3,000,000
the estimated (or ceiling) g a t
s ti m
i E
amount of the award, but it is bl a l
O o t
not guaranteed 20% funded
T
Obligated Funding

 You may not spend beyond your

obligated funding
 If you spend beyond obligated
funding, you risk not being
reimbursed by USAID for this
amount
 Failure to track your spending vis-à-
vis your obligated funding may mean
you have to halt project activities
Limitations of Funds Notice

 You must notify USAID in writing

when you are close to reaching your
limit of obligated funding and
request additional obligated funds

 Factor in your obligations and

accrued costs when calculating
your “expended” funds

 Do not wait until the last minute to

request additional obligated
funds!
How Do I Track Spending Against My Obligated Funding?

Tracking utilization of obligated funds should consider three types of costs:

Types of Costs That Utilize Your Obligated Funds

1) Actual Costs (Booked) Costs that have been incurred and booked

2) Accrued Costs Costs you have incurred but not yet booked

Costs you have formally committed to via written

agreements (e.g., purchase orders, grants,
contracts) and are contractually obligated to
3) Committed Costs provide but that have not yet been incurred.
Accrued vs. Committed Costs
Examples of Accrued Costs
• Costs for services of consultants,
subcontractors or vendors
already performed, but where
they have not yet submitted an
invoice
• Staff vacation that is accrued but
not yet taken
• Pro-rated 13th month or accrued
severance for staff
Example of Committed Costs
• The balance of obligated funds
committed to subcontractors or
grantees through signed
agreements already in place
Example of Subcontract
Ceiling Amount = $3,000,000
Obligated Amount = $1,000,000
Expended (Booked) = $400,000
Remaining Balance = $600,000
Requesting Additional Obligated Funding

 When you notify your AOR/COR of your

limitation of funds, you will simultaneously
submit a request for additional funding
 You determine the amount of the
funding request based off of a detailed
forecast
 It is a best practice to request additional
obligated funds just prior to the end of
the fiscal year so that USAID can
anticipate the funds for the coming fiscal
year
Your Submission for Additional Obligated Funding
Your request for additional obligated funding should include:
A communication letter or e-mail that clearly states:
• Your request for additional obligated funds
1 • The amount of obligated funding which you currently have remaining
• The period which your request for additional funds will be expended

A summary chart that shows your:

• Current obligated funding amount
• Expenditures and accrued and committed costs to date
2
• Projected costs for the period for which you are requesting funds
• Total request for additional obligated funds and the new obligated
amount

3 A detailed pipeline (budget) of projected costs

Example Showing Need for Additional Obligated Funds
A B C D E F G
Total Obligated Remaining Forecast Total Projected Request for
Utilized as
Estimated Funded Obligated (01/07/15 – Spend thru Additional
of 30/06/15*
Cost Amount Funds 30/09/16) 30/09/16** Obligated Funds
=B-C = C+ E =E-D

$2,000,000 $500,000 $375,000 $125,000 $379,000 $754,000 $254,000

The total amount booked and accrued and the outstanding balance on committed
Column C
costs through June 30, 2015.
The amount of remaining obligated funds (75% of obligated funds remain in this
Column D
example).
Column E The projected amount of expenditures from July 1, 2015 – September 30, 2016.

The total estimated amount of expenditures on the award through September 30,
Column F
2016. This also represents the total amount of obligated funds that are needed.
The amount of obligated funds that are needed in addition to your current funded
Column G
amount of $500,000.
Calculating Your Need For Additional Obligated Funding

A B C D E F G
Total
Utilized Remaining Forecast Request for
Budget Total Funded Projected
as of Obligated (01/07/15 – Additional
Budget Value Spend thru
Line 30/06/15 Funds 30/09/16)
30/9/16
Funds
Items
=B-C = C+ E =E-D

Labor $500,000 $125,000 $50,000 $75,000 $80,000 $130,000 $5,000

Grants $520,000 $130,000 $96,000 $34,000 $60,000 $156,000 $26,000

ODCs $800,000 $200,000 $200,000 $0 $200,000 $400,000 $200,000

Indirects $180,000 $45,000 $29,000 $16,000 $39,000 $68,000 $23,000

Total $2,000,000 $500,000 $375,000 $125,000 $379,000 $754,000 $254,000

Burn Rates

What is a burn rate

and why is it important?
Understanding Burn Rates

Example Burn Rate

 A burn rate represents your
Expenditures per Actual
average monthly spending on Month Expenditures
the project June $50,000
July $60,000
August $45,000
 Your burn rate impacts your:
September $80,000
– Obligated funding October $70,000
– Overall award ceiling December $30,000
Total $335,000
Burn Rate $55,833
Burn Rates and Implementation

 A high burn rate could be due to

strong implementation, OR it could
indicate that you are overspending
 A low burn rate could indicate slow
implementation of activities OR signal
that you are maximizing costs
 USAID will scrutinize your burn rate
and may become concerned with burn
rates that are much higher or lower
than you anticipated as per your
annual budget
What is a “Healthy” Burn Rate?

Your burn rate is

considered healthy when
you are implementing on
schedule and your
expenditures are in line
with budgeted costs
Monitoring Your Burn Rate
 Monitor your burn rate vis-à-vis:
1. Your obligated funding
2. Your overall award amount

 Will your burn rate cause you to $15,000,000

exceed either the obligated funding

t
nt

os
or the total estimated cost of your

ou

C
m

ed
award?

at
ed

im
$3,000,000

at

st
ig
 Will your burn rate cause you to

lE
bl

ta
O
underspend your award amount?

To
85
Monitoring Your Burn Rate

 Review your expenditures every

month to understand your burn rate
and budget vs. actual costs

 Review costs to check for any

potential errors

 Forecast cash flow needs on a

monthly basis, and update your
forecast periodically to review
spending
86
Reporting Your Burn Rate

How does USAID

monitor your burn rate?
1. Invoices
2. Quarterly Accruals
3. Financial Reports
(SF-425 reports)
Financial Oversight Reduces the Risk of a Budget Overrun

Regular monitoring of your

burn rate will help you to
predict a financial
overrun beyond your
budget ceiling and enable
you to make corrections
before it is too late
Forecasting a Budget Overrun at Project Completion

If you are at risk of overspending your

budget, immediately:
 Check the accuracy of your forecasts
 Determine what costs can be reduced
or shifted to keep your project within
budget and still implement activities to
achieve targets
 Discuss with USAID your options for
realigning your budget or reducing the
scope of work
Forecasting a Budget Overrun at Project Completion (Cont’d)

 Determine what costs can be

reduced or shifted to keep
your project within budget and
still implement activities to
achieve targets

 Discuss with USAID options

for realigning your budget, such
as reducing the scope of work
Underspending Your Award Budget
 Underspending your award can
mean that you did not achieve optimal
outcomes for your project
 Underspending can also place
pressure on USAID, whose budgets
are allocated according to project
forecasts
 Large amounts of unspent or returned
money can disrupt budget planning
and will indicate poor budget
management
Underspending & No Cost Extensions (NCEs)

 If you have underspent your project

budget because activities were
delayed for legitimate reasons, you
may be able to request a No Cost
Extension (NCE)

 A NCE will extend the period of

performance of your project with NO
additional funding

 USAID will not grant you a NCE

simply because you did not expend
the full amount of your award
Handling No Cost Extensions and Stretching Your Budget

 If you have legitimate reasons for

requesting a NCE, engage your
AOR/COR early! Do not wait until you are
already far advanced in project close-out
before you request one.

 An NCE will require a modification to

your award agreement and assume that
it will take some time to process

 Make sure that you properly estimate

how long your remaining expenses will
allow you to operate under an NCE
Hitting the Mark with Your Budget
 You want to maximize your
award by spending it in full

 Many institutions try to spend

“to the dollar,” which carries
the risk of overspending if your
projections are inaccurate

 Be cautious in your financial

projections!
EXERCISE: Burn Rates and Budgets

What do
you think?
QUESTIONS?
The Recap
The Top 10 Takeaways

What do you think are

the top highlights for
the day?
Cash Flow:
Advances and
Invoicing
Cash Flow: Advances and Invoicing

Topics covered:
 Understanding your needs
for cash inflows

 Requesting advances
from USAID
 Tracking and liquidating
advances
What is Cash Flow and Why Is it Important?

Cash flow is the net

amount of cash that you
have to implement project
activities and takes into
account cash inflows and
outflows
Factors Affecting Cash Flow and Associated Risks
Factors Risks

1) Inaccurate projections of
1) Timing of activities and timing of activities may mean

SHORTAGE OF CASH
payments to vendors you spend more cash than
anticipated

2) It takes longer than anticipated

2) Time it takes to receive or to receive an advance and/or
liquidate an advance liquidate one (preventing the
next advance request)

3) Time it takes to receive a 3) It takes longer than anticipated

reimbursement to receive a reimbursement
Advances from USAID

 The nature of your award will

determine whether you are eligible
to receive advances from USAID
 Frequency of advances may vary
and be monthly or quarterly
 In general, you will need to liquidate
a significant portion of your
advance before USAID will provide
you with an additional one
Forecasting

 Forecasting should be a
monthly exercise where staff
and management assess
activities to be completed, their
cost, and what will be paid to
vendors or individuals

 Do not use an average

monthly burn rate as the
basis of your forecast
Forecasting for Your Advance Request
 In order to request an advance from
USAID, you will have to prepare a
forecast of expenditures for a
specified period of time and submit
a SF-270 form
 Accurate forecasting is important
and helps to:
– Increase USAID’s confidence in your
ability to accurately estimate spending
– Prevent cash flow problems
Forecasting Tips
• Do not inflate expenses
• Do not request funds for activities
where the approvals have not
been provided
• Consider subcontract or grants
payments that will be invoiced
• Consider indirect expenses
• Consider payments that may be
due on a quarterly basis
Requesting an Advance OR Reimbursement of Funds

In the SF-270, You Will:

• Indicate your total advances

You generally submit a SF- to date
270 form to request an • Reconcile expenditures
advance OR to request against advances

reimbursement of funds • Estimate cash on hand at

the beginning of the period
from USAID • Estimate expenditures
during the advance period
Liquidating an Advance

 Failure to regularly liquidate

advances can lead to a delay in
your next advance and a shortage
of cash
 Even if you receive quarterly
invoices, it is a best practice to
liquidate your advances monthly
 Establish a monthly process for
collecting receipts and booking
expenditures so you can submit
an invoice
Advances and their Liquidation

Tracking the reconciliation of your advances is critical!

Advances Invoices
Advance # Date Amount Invoice # Date Amount
#1 21/09/15 $75,000 #1 02/11/15 $60,000
#2 04/11/15 $100,000 #2 15/12/15 $40,000
TOTAL $175,000 TOTAL $100,000

Reconciliation
Total advances $175,000
Liquidation of advances $100,000
Outstanding advance $75,000
Invoices for Cost Reimbursable or Fixed Award Amounts

 If your award is a Cost Reimbursable

or Fixed Award Amount, you will
submit invoices or SF-1034 forms to
USAID as per your award agreement
 For Cost Reimbursable agreements, it
is advisable to submit invoices on a
monthly basis
 For fixed-price agreements, invoices
will be based on the satisfactory
submission of deliverables
Monthly Close and Reconciliation Process
Monthly Close Process

Establishing a monthly Verify costs and documentation

close and reconciliation Record journal entries

process is critical for
Reconcile balance sheet account
producing timely and
accurate financial Review revenue and expense accounts

statements Prepare financial statement

Management review of statement

Close accounting system for month

QUESTIONS?
Resources: Advances and Invoicing

 SF 270 form: https://www.usaid.gov/forms/sf-270

 Advances and Reporting:

 Advance Payment, Liquidation/ Reimbursement, and Reporting
for Assistance Agreements, A Mandatory Reference
for ADS Chapter 636 https://
www.usaid.gov/sites/default/files/documents/1868/636maa.pdf
Cost Share

Photo credited to USAID/RDMA

Cost Share

Topics covered:
 Eligible vs. non-eligible cost
share
 Common sources of cost share
 Developing a cost share policy
 Best practices for documenting
and reporting cost share
Definition and Role of Cost Share

What is cost share and

why does USAID require
it on some projects?
Cost Share Is…

 Cash or in-kind resources The U.S. Government’s

donated to the project by a third Definition
party to help achieve award “The portion of the
objectives project or program
costs not borne by the
 A mandatory obligation, when it U.S. Federal
is incorporated into your award Government.”
agreement
Sometimes known as
2 CFR 200.29, ADS 303.3.10 “match”
How Will I Know if Cost Share Is Required?
 Cost share is only required
on projects funded under
assistance
 Your award letter will
outline your required amount
of cost share
 Your cost share requirement
should be pro-rated
according to your obligated
funding
Award Agreement Example
Total Estimated USAID Amount $18,000,000
Total Obligated USAID Amount $3,000,000
Cost Sharing Amount
$1,440,000
(Non-Federal)
“The Recipient agrees to expend an
amount of non‐Federal funds as cost share
equivalent to 8% of the total obligated
amount or $3,000,000 should the funding
obligation reach the total Federal share.”
Who Can Provide Cost Share?
Cost share can be
provided by any third-party
where the funding is NOT
from another U.S.
Government agency
Examples of Third
Parties that May
Provide Cost Share
• Implementing institution
• Commercial companies
• Other (non-USG) donor
agencies
• Communities
• Private foundations
• Host country government
Common Sources of Cost Share on a Project

 Donated equipment or materials

 Volunteer labor

 Free radio airtime/newspaper

coverage
 Donated space for project use

 Cash donations
Determining the Value of Cost Share
Determining the value of
in-kind goods or services
must be done by
estimating their current
fair market value
Determining the Value of
Cost Share
• Labor – Estimate the
salaries for similar
services provided by
someone of the same level
of experience
• Used Goods- Estimate the
value of similar items in a
similar condition
Why Should You Care About Cost Share?

 Cost share is a liability, and if

you do not meet your full
obligation, you may be subject to
penalties

 Cost share is subject to audit,

so verify that it is accurate and
eligible per USAID requirements

 Cost share must meet USAID

rules and regulations!
What Is Eligible Cost Share?
To be considered eligible cost share, a cost must be:
 Paid by funds that are NOT provided by a U.S. Government
agency
 Considered as cost-share on only one project and cannot be
double-counted
 Verifiable through documentation which describes the date,
source, amount, and purpose
 Necessary and reasonable, as per USAID guidelines
 Allowable as per USAID’s Cost Principles
 Directly contribute to the objectives of the project
2 CFR 200.306
Tracking Cost Share

 You should track and record cost

share in the financial software that
your institution uses OR record it
separately in an Microsoft Excel
spreadsheet or other database
 Supporting documentation should
be linked to each cost share record
with a system that allows easy
verification of cost share
documentation
Supporting Documentation of Cost Share

Supporting documentation for each

cost share record could include:
 Timesheets to verify hours of labor
provided
 CVs and biodata sheets to verify labor
rates
 Bids of used equipment/materials
similar to those received
 Bank statements or copies of checks
that show receipt of any cash
donations
Best Practices on Documenting Cost Share

What the cost share is

A cover sheet to
Who provided it
contain all of the
pertinent When it was provided

information for How the value was estimated

each cost share
transaction How it advances project goals

Signatures of individuals providing or verifying it

Institutional Cost Share Policy
If your institution has any
cost share requirements,
you should develop a cost
share policy to ensure
consistent practices
Your Policy Should
Outline How You:
• Determine eligibility
• Estimate value
• Collect and document cost
share (process, frequency,
and forms)
• Verify and sign cost share
forms
• Book or track cost share
• Report it to USAID via the
SF-425 Form
Collecting and Reporting Cost Share

 It is a best practice to collect and

document cost share each month so it
is not forgotten
 Cost share should be reported to USAID
each quarter on the SF-425 financial
form
 Collecting cost share is a function of
both technical and finance field staff
 Accurate reporting often requires the
involvement of staff implementing
activities in the field
Meeting Your Cost Share Obligation

What happens if
you do not meet
your cost share
requirement?
Meeting Your Cost Share Obligation

 If you suspect you may not meet

your cost share requirement by
the end of the award, discuss
this with your AOR well in
advance of the end of your project

 If you have legitimate reasons for

not meeting these requirements,
USAID may choose to reduce
the obligation (upon request) and
modify your award
EXERCISE: Determining and Documenting Eligible Cost Share

What do

you think?
QUESTIONS?
Resources: Cost Share

Definitions
 2 CFR 200.29
 2 CFR 200.306
 22 CFR 226.23
 USAID ADS 303.3.10.4
 http://www.usaid.gov/sites/default/files/documents/1868/303.pdf
 USAID Mandatory Standard Provision
 http://www.usaid.gov/sites/default/files/documents/1864/303maa.pdf
 AAPD 02-10
Financial
Reporting

Photo credited to RTI International

Financial Reporting

Topics covered:
 Quarterly financial
reports
 Quarterly accruals
reports
 Custom financial reports
Financial Reporting

USAID Financial Reports

Financial reporting helps
USAID understand the
• Standard form (SF-425)
health of project’s burn rate
• Custom financial reports
and allows them to better
• Accruals reports
plan their own funding
allocations

2 CFR 200.327
Standard Form (SF) 425

 The “SF-425” financial report is

required of every project and is
typically due 30 days after the end
of each quarter

 The SF-425 is the official financial

report of your expenditures

 The SF-425 is the only form where

you will report your cost share
Standard Form (SF-425)
Standard Form (SF-425)
Standard Form (SF 425)

 E-mail a scanned copy of the completed SF-425 form to your

AOR/COR as well as the Financial Management Office at:
ei@usaid.gov. Follow any other instructions in your award
agreement for submission.

 Keep a copy of this report and the submission for your records!
EXERCISE: SF-425

How would you

complete the
form?
Custom Financial Reports

Custom financial reports:

 May be required based on your
award agreement or requested
from your AOR/COR
 Provide a snapshot of your burn
rate vis-à-vis your approved budget
each quarter
 Report format should outline your
spending according to the line
items in your approved budget
Example of a Custom Financial Report

A B C D E
Cumulative Total Cumulative
Budget Total Remaining
Expended as Expended in Expended as
Line Items Budget Budget
of Q3 Q4 of Q4
(Previous (Expenditures
Expenditures) for Quarter)
=B+C =A-D

Labor $150,000 $60,000 $70,000 $130,000 $20,000

Equipment $90,000 $80,000 $10,000 $90,000 $0
Grants $300,000 $100,000 $20,000 $120,000 $180,000
ODCs $400,000 $410,000 $10,000 $420,000 ($20,000)
Indirects $95,000 $70,000 $10,000 $80,000 $15,000
Total $1,035,000 $720,000 $120,000 $840,000 $195,000
Accruals Reports
 Accruals reports provide USAID Accruals Summary
with an estimate of your expenses
Obligated Amount $2,000,000
for the quarter and gives them an
Total Vouchered
understanding of your pipeline, or $1,025,000
(Invoiced)
remaining obligated funds
Accrued Costs (Not
$425,000
 Accruals reports are due 10 to 15 Yet Invoiced)
days before the close of each Estimated Pipeline $550,000
quarter

 Include your remaining projected Estimated Pipeline =

costs for the month, in addition to Obligated Amount - (Vouchered
your accrued and committed costs Amount + Accrued Amount)
EXERCISE: Booked, Accrued, or Committed?

What do
you think?
QUESTIONS?
Resources: Financial Reporting

 Financial Reporting
 2 CFR 200.327

 SF-425 Form
 https://www.usaid.gov/forms/sf-425
Value-Added Tax
Value-Added Tax

Topics covered:
 VAT exemptions
 Tracking VAT
 Recovering VAT
 Reporting VAT
Value Added Tax (VAT)

Typically, you are

exempt from paying
VAT for goods
purchased inside the
country of award, as
well as custom duties
for imported goods
Recovering VAT

If you have paid VAT on a

good that is exempt under
your award, you should
seek to recover the VAT
from the appropriate
agency in your country
Tracking VAT Payments

 Track all VAT that you pay, by

transaction, on your USAID-
funded project so that you can
accurately report it to USAID
and recover it as needed
 Make sure subrecipients track
VAT transactions as well!
Reporting VAT
 You are required to submit a
VAT report to USAID every
April 16 for the preceding fiscal
year that documents VAT you
paid
 Do not forget to include any
VAT that subrecipients on your
project may have paid
RAA10
VAT Reporting Exemptions
• $500 or less (excluding VAT
payment)
• Purchased outside the host
country and where VAT was
paid to an entity outside your
country
• NOT exempt from VAT, as per
your award
• Purchase was made using
non-USAID funds
Best Practices for Handling VAT

TRACK – All VAT Payments by Transaction

DOCUMENT – All Attempts to Recover VAT

REPORT – VAT to USAID Annually

FOLLOW – Your Own Institution’s VAT Policies

EXERCISE: VAT Reporting

What do I
report?
QUESTIONS?
Resources: Value-Added Tax (VAT)

 Standard Provision ADS 303

 https://www.usaid.gov/sites/default/files/documents/1864/303mab.pdf

 FAR Part 31.205-41 (2) b

 http://farsite.hill.af.mil/reghtml/regs/far2afmcfars/fardfars/far/31.htm

 2 CFR 200.470
The Recap
The Top 10 Takeaways

What do you think are

the top highlights for
the day?
Timekeeping and
Allocating Labor

Photo credited to USAID/RDMA

Timekeeping and Allocating Labor

Topics covered:
 Requirements for
timekeeping
 Best practices for
timekeeping and timekeeping
policies
 Billing labor based on
timesheets
All Labor Charged to a USAID Project Must be Verifiable
USAID requires that all
labor charged to its
projects are accurate and
verifiable through
timesheets
Timesheets Are
Required for:
• Staff who are part or full-
time on the project
• Contractors or consultants
who work on the project
• Volunteers (if documenting
cost share or paying
stipends)
Requirements for Timesheets

Timesheets must:
 Indicate actual hours worked per project,
or indirect activity, per day
 Reflect paid or unpaid leave – vacation
days, paid holidays, sick leave, or other
 Show any hours where overtime is paid
 Be signed and dated by the employee
 Be reviewed, approved, signed, and
dated by the employee’s supervisor
 Be collected as frequently as staff
are paid
Only Actual Time Worked is Allowable

How you are budgeted on a

project does not determine
how you bill to it – you must
charge actual time worked
on the project and be
substantiated by timesheets
Developing a Timekeeping Policy

Your Policy Should Address:

Ensure that your • How employees should record

hours, and if there is a cap
institution requires • Whether employees record their
lunch breaks
timesheets and that • When employees must record

it has a hours and submit timesheets

• Who reviews and signs
timekeeping policy timesheets
• How labor is booked and
timesheet records are filed
Best Practices in Timekeeping

1 ● Have employees complete timesheets daily for increased accuracy

2 ● Allocate labor wherever possible to projects as opposed to “flat lining” it

3 ● Overtime, if applicable, should be indicated on the timesheet

4 ● Record paid or unpaid leave - holidays, vacation days, and any other leave

5 ● Total hours at the end of each day on the timesheet

6 ● Total hours at the end of each month on the timesheet

7 ● Use timesheets as a management tool for understanding staff performance

EXERCISE: Billable Labor

What do
you think?
Resources: Timekeeping and Allocating Labor

 Compensation – Personal Services: 2 CFR 200.403

Internal Controls
and Fraud
Internal Controls and Fraud Prevention

Topics covered:
 Segregation of duties
 Conflict of interest and
ethics policies
 Areas of fraud and how to
minimize the risk
of fraud
 Identifying and reporting
fraud
Internal Controls

Internal controls are required by

USAID and are necessary to:
 Safeguard assets
 Ensure accuracy and reliability
of accounting data
 Promote operational efficiency
 Maintain compliance with donor
policies
 Take prompt action after
identifying issues
2 CFR 200.303
Areas of Internal Control
• Institutional culture that establishes a positive and
Control Environment supportive attitude for maintaining internal controls

• Assessing possible risks, their significance and

Risk Assessment likelihood, and how to manage or mitigate them

Control Activities • Policies and procedures that help to control risks

Information and • Information systems for making more informed

Communication management decisions

• Monitoring progress, checking for errors, ensuring

Monitoring overall compliance and due diligence
Control Environment: Policies
Policies establish controls
that help to minimize the
risk of inaccurate
reporting and fraud
Key Policies
• Segregation of duties
• Conflict of interest
•
•
Payroll procedures
Timesheets
•
•
Bank accounts and signatories
Financial accounting
• Petty cash and check stock
• Advances
• Approval matrices
• Documentation requirements
• Custody and use of assets
Segregation of Duties

Segregation of duties
Authorization Recordkeeping
is one of the most
effective
internal
controls in combating Reconciliation
Custody of
Assets
employee fraud
174
Petty Cash Safeguards and Procedures

Petty cash policies should outline:

 Appropriate uses of petty cash and
maximum amounts authorized
 Amount of cash to be stored in petty
cash box at any given time
 Who is authorized to provide cash
 How it is secured and stored
 Who reconciles petty cash and when
Check Stock Safeguards and Procedures

 Checks should be:

– Pre-numbered and in sequential order

– Locked in a secure location

– Signed only by authorized signatories

 Blank checks should never be

signed
Cash Advances

What is your policy for

providing cash advances
to employees and third
parties?
Cash Advances (cont.)

Advance Request Form

Advance Approval

Disbursement of Funds

Recording of Advance in Accounting System

Liquidate the Advance

Record the Expense

Best Practices for Managing Advances

 Reconcile advances monthly

 Determine when to write off advances
based on your policy
 Do not issue new advances to the
same entity/individuals until previous
advances are cleared
 Outstanding advances greater than a
predefined number of days may be
deducted from employee pay
Best Practices in Payroll

 It is a best practice to create a

guide to calculate payroll
 Have at least two staff (HR and
Finance) review monthly payroll
to verify expenses
 Always pay employees by check
or direct deposit and never in cash
 Document, document,
document!
Fraud and False Claims

The USG’s False Claims

Act requires you to report
any and all fraud,
allegations of fraud, misuse
of funds, and false claims

31 3729-3733 U.S.C.
False Claims and Fraud (cont.)

 Corruption (e.g., kick-backs, bribery)

 Collusive behavior between vendors
or suppliers
 Product substitution
 False claims or billing for goods or
services not provided
 Embezzlement or theft
 False statements or representations
made
Reporting Fraud or False Claims

 As soon as you become aware of

false claims, you should report it
to the Office of Inspector
General (OIG) and USAID

 Failure to report false claims can

result in the suspension or
termination of your award, as well
as serious fines
EXERCISE: Segregation of Duties

What do
you think?
Segregation of Duties

Segregating requests from approvals represents a best practice

Segregate
Individuals who request purchases
Individuals who approve purchase
requisitions
Individuals who approve purchase
requisitions
Individuals who authorize purchase orders
Individuals who authorize purchase orders
Individuals who maintain property logs
From
Individuals who obtain bids
Individuals who approve purchase orders
Individuals who obtain bids
Individuals who make payments to vendors
Individuals who receive goods
Individuals who receive goods
QUESTIONS?
Resources: Internal Controls and Fraud

 False Claims Act

 31 U.S.C. 3729-3733

 Standards for Financial Management Systems

 2 CFR 200.303
Financial Audits

Photo credited to USAID/Indonesia

Financial Audits

Topics covered:
 USAID requirements for
an audit
 Common audit findings and
how to avoid them
 Best practices for
successfully navigating
an audit
Audit Requirements

Non-U.S. institutions that

expend a combined $300,000
or more in USG funds
during the fiscal year are
required to undergo an audit,
with the exception of Fixed
Price Awards
Requirements for Financial Audits

 Audits must be conducted in accordance with the Guidelines for

Financial Audits Contracted by Foreign Recipients
 Auditors must be external and by an approved entity
 Audit reports must be completed within 9 months of the period under
review and reports submitted to USAID within 30 days of receipt
 You must include this provision in any subawards to non-U.S.
entities for awards over $10,000 and you must monitor compliance

2 CFR 200.101(b) (1), M2

Why Are Audits So Important?

 Audit findings may lead to:

– Disallowed costs
– Increased restrictions or oversight
– Loss of donor confidence

 Audits can be an opportunity to

better understand your performance
and identify issues that need to be
corrected
Common Audit Findings

What do you think are the

most common findings
that institutions face when
audited?
Common Audit Findings and Disallowed Costs

 Lack of timesheets
 Unreasonable or inconsistent
compensation practices
 Lack of supporting documentation
 Procurement practices inconsistent
with USAID regulations
 Travel practices or policies
inconsistent with USAID regulations
 Internal policies not followed
Annual Financial Audit Review List

 Allowable vs. unallowable activities/costs

 Internal controls
 Cash management
 Asset management
 Indirect rate and costs (as applicable)
 Cost share
 Procurement practices
 Program income
 Reporting
 Subrecipient/grantee monitoring
Tips for a Successful Audit

 Organize your documentation in advance

 Create a clear scope of work for auditors
 Meet with the auditor before and after
the audit
 Provide timely responses to any
questions the auditor may have
 Promptly review and respond to any
findings in the management letter
 Immediately seek to address any issues
to prevent future findings
Coverage of Audit

Does USAID audit my

entire institution’s
finances or only those that
were expended under the
USAID-funded project?
EXERCISE: Audits

What do
you think?
QUESTIONS?
Resources: Financial Audits

 Audit Requirements:
 2 CFR 200.500
 OMB Circular A-133 Subpart B 200
 ADS 303mab, M2
Financial
Considerations at
Project Close-Out
Financial Considerations at Project Close-Out

Topics covered:
 Planning for financial close-
out
 Final payments and
reconciliation of expenditures
 Final financial reports
 Key financial risks during
close-out
 Organizing and retaining
financial records
Financial Close-Out

What does financial

close-out involve and
when does it start?
Key Aspects of Financial Close-Out

 Continuous financial projections

and rigorous monitoring of your
budget
 Final payments to staff, vendors,
and any subrecipients
 Final reconciliation of expenses
and close out of bank account(s)
 Financial reporting to USAID
 Organization and storage of
financial records
Planning for Financial Close-Out

 Planning for a project close-out

should begin 1 year in advance of
the project end date

 Monthly financial projections

during the last 6 months of your
project will help to reduce the risk
of overspending or underspending

 Financial close-out must be

linked to technical close-out and
implementation
Financial Close-Out

 After the last day of your project’s

period of performance, you may not
incur any charges
 Invoices for costs already incurred
may be paid after the last day of
the award, but no expenses
(including labor) can be incurred on
the project after this date
Financial Close-Out Checklist

1 ● Issue invoices and make final payments to vendors

2 ● Reconcile all outstanding advances

3 ● Cancel any subscriptions, insurance policies, or lease agreements

4 ● Book all remaining cost-share to meet your obligation

5 ● Final NICRA rate agreement (if applicable)
6 ● Return any remaining funds to USAID, if obligated

7 ● Close project bank accounts

8 ● Ensure back-up of all financial records (hard and soft)

Records Management

 You must retain records for a

minimum of 3 years following the
submission of the final report for
the project

 Organize and label files so that you

can easily locate them if audited

 Back up all electronic documents

and as much information is digitized

M2
EXERCISE: Close Out Costs

What do
you think?
QUESTIONS?
Resources: Financial Considerations at Project Close-Out

 Close-out:
 2 CFR 200.403 Closeout
 Post-closeout Adjustments & Continuing Responsibilities
 2 CFR 200.344
 Collection of Amounts Due
 2 CFR 200.345
 OMB Circular A-129
The Recap
The Recap

Topics covered:
 Top 10 highlights
 Q&A
The Top 10 Takeaways

 What do you think

are the top 10
takeaways?

 What questions do
you still have?
Top 10 Financial Management Takeaways

1. Good financial management is more than just accurate reporting –

it includes planning, monitoring, and spending
2. To be able to be charged to your award, costs must be allowable,
allocable and reasonable. USAID regulations, local laws as well
as your own organizational policies all play a role in determining
these
3. Know what costs require prior approval, what are restricted
and what are unallowable
4. Make sure you understand what your budget reporting
requirements and budget flexibility is based on how your
budget is incorporated into your award agreement
Top 10 Financial Management Takeaways

5. Choose an indirect cost rate method that makes sense for your
institution
6. Remember the difference between estimated and obligated
funding and monitor your burn rates to stay within them
7. It is important to invoice USAID regularly and track and liquidate
advances
8. Monitor cost share carefully and document it well
9. Make sure your financial reports are accurate and timely
10. Strong internal controls and code of conduct policies minimize
your risk and help to protect you from audit findings
QUESTIONS?
Thank you!!!