Financial Management Workshop for CILs…Regulations and Beyond
IL-NET presentation on May 25-27, 2016
Module 7: Developing a Financial Management Manual

PAULA MCELWEE: The next thing we're going to talk about is the update of your financial policies and procedures to comply with federal requirements.

I want you to pull out the spiral bound book for this.

So we're going to want to look at some of this there and a word about this, this is posted electronically on the site for this training, as will some of the documents will be posted, this PowerPoint will be posted there and eventually the videos as soon as they are captioned, will be posted there as well.

So you'll have a resource for all of these financial things, and this is a particularly important resource, because as we said, as we opened things up today, you need to have the written policies and procedures that accurately describe what you are going to do so that you can consistently do the things you need to do related to managing these dollars, so get your book out and let's take a look.

JOHN HEVERON: Exactly right, Paula.

The policy manual helps you achieve consistency in accounting and reporting, addresses the nature and frequency of reports, reconciliation, separation of responsibilities, and other internal controls and addresses procedures for receipts, disbursements, payroll, receivables, including follow- up collections.

But also, because it's required, as we said earlier you must have procedures for internal controls over administration of Federal awards, and you must have a procurement policy, and there's a lot of shoulds in here as well.

I'm not going to go through every page of this, but I'll tell you what pages I'm looking at.

PAULA MCELWEE: Right now we have about an hour.

A little less than an hour.

JOHN HEVERON: Okay.

So as Paula said, we can go grab electronic copy of that.

Unless your policies are just fantastic, go grab an electronic copy of that.

You'll see in the preface what it is based on.

It has received a lot of our time and scrutiny.

It's perfect.

(Laughter.) 

And when I say our time and scrutiny, actually we had some help from our former federal funder, because they looked at it in quite a bit of detail as well and gave us some input.

So really, an awful lot of thought has gone into this, and also, I've got to tell you, at least as far as I have seen so far, there's nowhere else you can go to get a policy for internal controls over administrative, I'm sorry, over administration of Federal awards or a procurement policy that's fully compliant with Uniform Guidance.

It's all right here.

So use this to create your policies or upgrade your policies.

But on page Roman numeral VIII, where it says how to use this guide it points out don't just duplicate this.

I mean if you just copy this and say, this is my policy, you'll be pretty well covered, but you won't even know what you have probably and you certainly won't be doing what you say, and as we said from those audits, a couple years ago, when you don't do something your policy says you're supposed to do, you're going to have you're going to be cited for a violation, even if you didn't violate federal law.

So make sure that this is something that you're familiar with and your staff is familiar with, that you're willing to do.

And it certainly is going to require some modification.

PAULA MCELWEE: Titles are probably the most obvious modification you're going to do.

Names of forms is another obvious modification.

Length of fiscal year, when it starts and stops.

Those at a minimum need to be fixed as you go through and adopt those policies and procedures and you'll probably see other things too.

But for sure you need to do those things because the titles are going to be different.

The names of your policies are going to be different.

JOHN HEVERON: Also, on that same page, it says, determine a process for review and approval including final approval by the full board.

The expectation with Uniform Guidance is that your board is going to approve this.

So you can do the leg work internally, but this needs to be a board approved document.

The board minutes should reflect their approval of it, because you may be asked, when were these approved by the board?

What was the board's involvement with this?

So make sure that's documented in the minutes.

PAULA MCELWEE: Of course if you have a Finance Committee, they should see this and it should be coming from them to the board as part of your recommendation for approval.

Just makes sense they get involved, if you have such a committee.

JOHN HEVERON: On the next page, a couple other words of wisdom is to establish a time period in which it will be reviewed.

For example, an annual review might be appropriate, once a year, every third year.

But some sort of a schedule established that and get that on to the board agenda.

And then, schedule initial and periodic training for all staff whose job responsibilities will be affected by these policies.

It would probably be very smart to schedule this for every single year.

Easier to cancel it than to remember to reschedule it.

So if you get it into the schedule right away, you're going to be better off.

PAULA MCELWEE: I like to see it right after you've done your budget approval, kind of refreshing everybody on your purchasing processes, and the other things that affect implementing that budget, it makes good sense as a timing for staff training on this particular issue.

JOHN HEVERON: Page 1, is sort of an introduction an overview of your agency, and really your mission and process here.

Obviously you need to make that yours.

Going on to page 2, we start with responsibilities.

First for boards and committees.

And this you really need to go through item by item.

And in fact, you know, the board needs to go through this board list and say we don't or are not going to do this, we are going to do those things.

But a couple of examples set oversee and clearly articulate the organization's vision, mission, and values.

I would think the board would do that.

And provide leadership and strategic direction for the mission, budget and development initiatives, that sustain the CIL.

Again, I would expect that as well.

Ensure that all federal funds spent by your agency and change that name too, to be you.

PAULA MCELWEE: Make sure your name is in there.

JOHN HEVERON: Are adequately documented and allowable, that those expenditures are allowable and reasonable according to federal cost principles and that the organization meets all applicable federal requirements.

Let me pick on my directors again.

Is that an unreasonable ask of you to say, to ensure all expenditures of federal funds are adequately documented and allowable?

To me, it does seem a little unreasonable to ask of a board member.

What isn't unreasonable is for the board member to approve a policy saying that this is going to happen, that there is going to be a process, there is going to be some training.

There is going to be some checking.

I think that's how you fulfill your responsibilities.

Again, you might want to tweak this to be a little clearer on exactly how you're going to do that.

Not by your own efforts probably, but by the implementation and the periodic review of policies and the establishing of process for training people periodically, and new people as they come on board.

PAULA MCELWEE: We are bringing the microphone over.

AUDIENCE MEMBER: [ Indiscernible ] 

JOHN HEVERON:  Couple other things, that really are directors, board responsibilities, you may want to word this differently, but select qualified Executive Director, communicate this to funders in the community, higher established salary and benefits, based on responsibilities and on comparability information, review performance annually, establish salary increases and review and improve internal controls and accounting procedures.

But really those few for the Executive Director, that's really more a responsibility, I mean it's an expectation of best practice when it comes to Federal awards but it's really a requirement of the IRS, your federal rules there.

So your federal rules expect that there is going to be a process to review the Executive Director's compensation.

Some organizations will do that, just by approving the budget, if there are, you know, either no salary increases or uniform salary increases, then you would probably state that, but there's still an expectation that you are going to review the executive director's salary and performance.

PAULA MCELWEE: There is also an expectation by your Independent Living Program Manager if you have a Title 7 grant, that you would run the decision past them and show them how the person is qualified to run your center.

A lot of us were surprised by that, it got very tense when we were over at the Department of Education.

They haven't really lifted that requirement, now that we are under the Independent Living Administration, HHS, and Health and Human Services.

But you may want to check with your person from the office, from the Independent Living Administration, and ask the question what is required to make sure that your policies match that requirement when it comes to hiring new executive directors.

It surprised quite a few of us, and they haven't backed down off of it yet.

We kind of hear rumblings that they might.

So we'll let you know if we hear.

JOHN HEVERON: Next page, next thing for the board is assess periodically, determine the adequacy of internal controls and determine the types and amounts of insurance coverage required for the organization.

Now, again, that might be a task for a subcommittee.

For your Finance Committee, or maybe even an ad hoc committee.

But it is important.

It's very important.

In fact, when we talk about internal controls, we're going to focus more on this, but there needs to be not just procedures and training but there needs to be follow- up, needs to be checking back, so this sort of thing needs to happen at the guidance of the board or one of its committees.

A couple of the Executive Director's responsibilities, provide continuous leadership and the implementation of the mission strategic direction, budget and objectives set by the board and review key monthly financial reports such as the balance sheet, income and expense report and the budget comparison.

The Executive Director's responsibilities are going to vary a lot, depending on the size of the organization.

In a much smaller organization, the Executive Director is going to be much more hands on rather than leadership, guidance, oversight.

PAULA MCELWEE: You know how it is.

If you are a smaller organization do you have a director of human resources or does someone else take that responsibility?

Do you have directors of all the different administrative functions or does one or two people assume all those duties as part of their job description?

So you want to make sure that this agrees with what you do at your organization.

Somebody has to do these responsibilities, but it may not all be divided in the same way as what we did here.

JOHN HEVERON: On the next page, a few more things for the Executive Director.

Review and sign, co- sign checks, review written support documentation for drawdowns and approve drawdowns prior to initiation.

We're going to talk more about that.

That's a pretty important area where there's a lot of concern.

We certainly heard an awful lot of that with the Department of ED with taking advances, so we'll be talking about that later, but don't just leave that, Executive Directors, don't just leave that for an accountant or bookkeeper to do.

Make sure you know what's going on, and as a board member, you might say to the Executive Director, do you verify that the drawdowns are proper?

Because the rules are very clear.

Penalties for noncompliance can be pretty serious.

We have seen some very serious ones.

PAULA McELWEE: If your center draws down one 12th each month, you probably are not meeting these regulations.

Hopefully none of you are doing that.

If you are, come and talk to us during break and we'll arrange some training for you.

JOHN HEVERON: For the accountant or bookkeeper couple of their responsibilities.

Prepare monthly financial reports, balance sheet income and expense report, budget comparison and other key financial reports.

Reconcile the bank account, classify money in and money out, you know income and expenses and payroll by account and by object of expenditure or cost objective.

Your outside CPA, on the next page, page 5, would normally prepare annual filings, perform audits or reviews of your financial statements, and a compliance audit in accordance with Uniform Guidance, if it is required.

PAULA McELWEE: I always remember 750,000 or more federal funds that you are required to have a compliance on.

JOHN HEVERON: So that can be the start of your procedures manual.

I think it's a good idea to have those responsibilities clearly laid out.

Particularly if you have a change, possibly in the accounting position, then you've got their responsibilities all laid out.

You can match that with their skills and determine where they need training or other support and get up to speed much more quickly, and have much less risk of things going wrong because you had a change of personnel.

So starting right after that is financial procedures and controls.

And one of the first things that we recommend you say here is that financial records, electronic and printed, access to them should be restricted to people whose job responsibilities require access.

I don't think we've generally done a good job of that.

PAULA MCELWEE: This is true of all of your records.

This has to do what you can access on the computer.

What the passwords are.

How your accounting software is set up.

You may also look at your bank reconciliation, your process of looking at your checks and also going to include the entire scope of what you're doing.

Do you do a financial statement that's public?

Of course, you do.

All the details of payroll and pay rates and everything else doesn't need to be accessible where other people can get in there and mess with it.

JOHN HEVERON: Next section, consumer records, donor records and personnel records should be kept in a locked area.

Again, some risk of identity theft there, so you need to keep them secure.

And you need to destroy them at the proper time frame.

Some of these things you can do quite quickly.

For example, if somebody pays for something, even a contribution with a credit card, you probably need to keep the documentation, they sent it in to you for 30 days, not beyond that.

Other things.

Well we got a record retention schedule at the end of this, so we'll show that to you.

But you know, do delete things when you can't.

Next section is just a general statement on separation of responsibilities.

Generally speaking, you want accounting and custody separate.

So the person who physically gets the checks isn't the person who is recording them.

Again, I understand, if you have a very small agency it becomes more difficult to do that.

We'll talk about compensating controls when we get into internal controls later.

Then we talk about the process for cash receipts, just a couple things about that on page 6.

Stamping the back of any checks For Deposit Only right away.

Make a photocopy of the checks received.

That's an optional procedure, not a requirement, but something to consider.

Federal Drawdowns.

We did talk about this a minute ago, but it does say draw downs from the Federal government or other funders will be made to cover amounts that have been expended and not previously vouchered.

Other amounts will be paid shortly after the draws are received.

Reimbursement of federal funds is preferred.

In other words, they want you to spend the money and then request reimbursement.

Of course, that doesn't always work for your cash flow.

However, if advances are required, they will be supported by documented allowable and reimbursable costs and will be expended as soon as administratively possible after they are received.

The accountant will calculate and document the draw to cover these amounts.

And the organization will seek advances limited to the minimum amounts needed and advances will be timed to be in accordance with its actual and immediate cash requirements in carrying out the purpose of the approved program or project.

It is the policy of this organization consistent with federal regulations to not draw down federal funds in advance of costs to manage cash flow.

Any federal advances received must be deposited into an interest bearing account and you will minimize the time that elapses between transfer of funds from the U.S.

Treasury and the payment- related expense.

Paula and I are hearing our spiritual guide here, who had a lot input here.

This isn't exactly something we authored.

But what it is, you know, it is right out of Uniform Guidance, and really the individual from Department of Ed who was reviewing this wanted to see some of this in here.

Well, this is what the law says.

I mean, the law that governs your draw downs, so knowing this and adhering to it is really key.

PAULA MCELWEE: Part of why we're handing you a sample of policies and procedures.

You want your written policies and procedures to match the requirements of the law.

These have been vetted to help you make sure that's the case.

JOHN HEVERON: So again, on the next page, it says the accountant will prepare a list of payroll and other expenses to be reimbursed and if we didn't say it, let me say it now.

Prepare it and keep it, because if a federal auditor comes in two years later and says, where's the documentation for this draw down, then you should have an electronic file that says we had this payroll taxes coming up the following Friday and this list of bills to pay.

Simple, done, easy, stored electronically.

Have it well organized so you can find it easily, and you'll be done with that.

If you can't do that, then things just get worse.

They just go downhill.

PAULA MCELWEE: Of course, you have to continually follow that mantra which is reasonable, necessary, which we didn't say in this place, but we did other places.

Allowable and properly allocated.

Everything you spend in federal money has to meet that test of four.

Reasonable, necessary, allowable, I guess necessary is allowable and properly allocated.

JOHN HEVERON: The next section is expense allocations, and you can put some text in here or you can just refer to your Indirect Cost Rate Proposal, because really that does the total job.

And what you don't want to have is inconsistency, so sometimes it can be better to refer to another document there.

So check preparation or signatures.

We have some guidance on that.

Over on page 8, all disbursements will be supported by adequate documentation, such as timesheets for time worked, invoices and or check requests for other disbursements and reimbursements.

In no case expenditures will be made without supporting documentation being reviewed or approved.

We address bank reconciliations.

We address payroll, time and effort, reporting procedures.

Again, because that's in your indirect cost rate proposal, you might simply refer to that.

It does make updating easier when you do that too.

You know, if you've got the same guidance in two different places, and you implement a change, it's easier to miss one of these.

So we suggest you refer to this.

PAULA MCELWEE: We'll be going over the PAR process a little bit more tomorrow afternoon.

So you may find some other advice that you may want to leave in here, to help you stay on task with your PAR forms, Personnel Activity Report.

JOHN HEVERON: Further down on that page, use of credit cards by the Executive Director, followed by use of credit cards by others.

This is a section you're really going to have to make yours.

You should have a section like this.

You may not have different standards for different positions, but you really need to address the use of credit card documentation.

It is an area that will be looked at you can be sure, even if it is not huge dollars.

It is an area with a potential for abuse, so you want to have a policy and you want to be able to show that your policy has been enforced.

But this is not an area to simply copy and paste.

And it goes for everything on page 10 as well.

Debit cards.

Changing credit card passwords.

And the sanctions for misuse of funds.

Again, page 11, a lot of these areas you may already have policies for.

This is the policy on travel, and again, this may be different from what you do.

You need to have a process, you need to have a policy.

It doesn't have to be exactly this.

This is an area where you have some flexibility.

Over on page 12, we talk about accounting for donated services.

That's a bigger deal if you have matching responsibilities.

In fact the organizations that we see doing the best job with accounting for donated services, are the ones that have matching requirements.

If not, then the accounting for donated services can be very general, and you're supposed to put a note in your financial statements that says, approximately 30 volunteers provided 800 hours of service during the prior year.

Those are approximations.

They're really just for informational purposes.

You're not held to a very high standard on that, but you should have some sort of a process for gathering that.

PAULA MCELWEE: The footnote on that session kind of goes into a little more detail too, which you might find interesting, for when you're using it for in kind or for match.

That is where you want to keep the best records.

JOHN HEVERON: On the next section, talks about financial reports, balance sheet.

It shows your assets, liabilities, and your net assets for equity, and income statement and then possibly a budget comparison.

Most of you do a budget comparison, correct?

Possibly a cash flow report, don't see quite as many of those.

How many do a dashboard report?

One?

About three.

You know, that probably should be a topic for another day.

But would you mind sharing kinds things that you put into your dashboard report?

Mic.

AUDIENCE MEMBER: Look at cash on hand as really the primary.

We are looking at expenditures.

We are looking at, we do claims to the state so we look at the timeliness of both the process of sending it out receiving dollars back.

It's pretty small dashboard, it is not very big.

PAULA MCELWEE: Those are real important to keep track of where you are with things.

We also suggested here, that if you have an aging accounts receivable, moneys that you're supposed to get or accounts payable, moneys you're supposed to pay, you probably want to know the status of that, if it's not keeping up, because your board wants to know.

AUDIENCE MEMBER: I forget one other thing.

We do watch 10% over, under.

If there's something 10% under budget or 10% over budget, then we have to provide the detail for that for the board.

PAULA MCELWEE: You can explain that in your statement comparing budget to actual, you might say, we specifically review anything that's 10% over or under as part of your policy.

JOHN HEVERON: I think a dashboard is a great idea.

Sort of like your car dashboard, where you glance down and say, I'm speeding, I'm almost out of gas.

Those are both important things to know that you see at a glance and how much cash we have on hand can be a really big deal if cash is tight for your organization.

There's a lot on the internet on boardsource.org, has a small book on preparing dashboards.

But I'll also just comment that some, you know, some board members really like the details, some absolutely hate the details, despise the minutia.

The dashboard is very good for them.

Even the people that like detail, gives them a context to say very quickly, this is what is going on right now.

So something to consider.

Cash flow forecast.

Those generally just happen when cash is really tight.

And then I think you already mentioned the aging of receivables and maybe even your payables.

We talk about information technology controls.

We have a segment on internal controls.

I'm going to sort of save that.

And also save the purchasing policy, because we've got a session on that tomorrow.

We're really going to get into this a little more depth and that actually gets us through several pages here.

All the way to page 19.

Page 19, we talk about program income.

It says program income is generated when the CIL receives payments for training services provided or other similar income.

If the CIL receives any program income for programs that are federally funded, the source and application of the program income will be tracked to ensure that it is expended only on allowable costs, specifically it will be added to the funds committed to the project by the Federal awarding agency to further eligible project or program objectives or deduct it from the total project or program allowable costs in determining the net allowable cost in which the federal share is based.

That reads a little difficult.

But somebody approached me just a little while ago with a scenario that might apply to a few of you.

They get a small amount of supplemental state funding and really isn't designated for any specific cost, and wondered how that should be allocated.

And the money really was directed to a program that was primarily federally funded.

So we talked about one possibility with that money.

It wasn't a huge amount of money, I think we're talking $20,000 range or something like that.

At any rate, what could be done with that assuming it wasn't designated for anything in particular, is to, where we had that list of indirect costs.

We could subtotal that, and then we could say, less state funding for this amount.

Less state supplemental funding of $20,000, bring our net from whatever it was, 188,000 to 168,000.

And then we calculate our indirect.

So that's something you can do with those different funding sources.

PAULA MCELWEE: The requirement for program generated income, the requirement is that if you raise the money with time and effort and other expenses related to your grant, then the money has the same restrictions as that grant.

Has to be used in the same period of time.

Has to be used for the same purposes that are allowable under that grant.

There are quite a few things, other than the five core services that are allowed for our grants, so there's a whole, like other things that are permitted for us to do with that money.

And it could be used for any one of those, but it has to be used within that structure.

If the money is raised, not using any of your money, if you're using it separately, you're raising the money because your board is raising it and you're not paying for any of those costs, you can keep those costs separate and apply them against the money that you gained, then it's not restricted as program income.

You need to have policies and procedures that help walk you through that process.

When is it program income, when is it not program income and how do you treat it?

That's kind of an important area that you may, especially as you do fund development, really want to take a look at.

JOHN HEVERON: The next section is property and equipment.

Again, this is something you need to make yours, but updating your policy, in the introduction of Uniform Guidance and also one other thing that really doesn't directly affect you but some really big changes in tax laws, they all mean an opportunity for you to reconsider, when you treat something as a fixed asset.

In other words, what dollar level do you capitalize something, and then how long a time frame do you depreciate it over?

The tax rules I'm talking about are for taxable organizations, but basically, they allow expensing of things that had to be capitalized since the 80s.

They are much more liberal deducting things right away.

Just as one example, if you had a membrane roof, that can be sort of a big deal.

To replace an entire membrane roof.

That's not an entire roof because part of the roof is part of the structure under the membrane.

So the tax rules now say that's not a replacement, that's not a total replacement, that's a repair, you can deduct it right away.

In a taxable world, there's going to be much more of a bias towards deducting things.

And keep in mind, that your reimbursements improve if you can deduct more things.

So having a higher limit for capitalization is going to give you quicker reimbursement.

You need to pay for this stuff right away, so why not get funded for it right away.

The federal standard says that an item that would otherwise be equipment can be created as expense.

If your policy states that it's going to be expensed, and if the dollar amount doesn't exceed $5,000.

So if your capitalization limit now is 500 or a thousand, or 1500, you might want to consider increasing that to speed up your reimbursement.

But at any rate, whatever you do, make sure it's in your policy.

Over on page 20, we talk about personnel files.

When we do first time audits, we find that this is an area of inconsistency.

It's something that not a lot of attention is paid always to, especially by organizations that don't have regular audits and even in some cases by organizations that do.

This is a pretty good list of things.

You may or may not have everything there, but consider having all of these, and consider either with staff or with a personnel committee looking at your personnel files to see if you have all of the documents that you believe should be in those personnel files.

I just wanted to point out, one of the things in there is an employment eligibility form, the I9 form it's called.

It's now use, it used to be a different department.

It's now immigration and naturalization form, but at any rate, Department of Homeland Security now?

PAULA MCELWEE: Used to be immigration and naturalization.

JOHN HEVERON: Yeah, I think it went to the Department of Homeland Security.

At any rate, the recommendation is that you keep these in a separate file.

Sometimes these folks will come in to look at, whether you have your I9 forms.

You're not required to give them everything, so keep them in a separate folder.

PAULA MCELWEE: As you look as these items on this list, most of them came from some other regulation, not necessarily a regulation as part of Title 7 but somebody else's regulation.

So you have got some things that have to do with pay rates and you're going to need to do, some of them have to do with your own policies and procedures, for example, performance evaluations.

Some have to do with your tax, Your responsibility to withhold taxes.

So we have got forms that we know are required for you to do, and so if you want the reference of where it came from, we can give you that.

But it's a list of things that really you do want in place, and that signed acknowledgment piece covers a whole bunch of those requirements.

If you receive federal funding, you're required to have a whistle blower policy, a drug free workplace policy, a statement on lobbying and conflict- of- interest policies.

Let's get those to people and make sure that's also in their record because that's a requirement that you need to meet.

So if you look at any of these and you find one that is unfamiliar to you, follow up, give me a call, we'll kind of explain to you where it came from.

But these are all things that you're required by somebody to do.

So make sure that this is in those personnel records, because they are requirements that you have.

JOHN HEVERON: Okay.

Next page, 22.

This is appendix one.

I know you're going to customize that because we don't have any forms attached to it.

This is an example of the forms that you might have attached.

You know, I think it's good to have quite an array of things.

This is going to be a central place for reference here.

You'll probably have this thing electronically when it's all said and done.

It's nice to have a place that you can go to find any of these things.

So it does have travel expense, reimbursement reports, financial reports.

Just samples of all of these.

Appendix two, I think I probably resisted this a little bit, when we were when these recommendations were being made to us, to include all of these things.

My opposition to it was, supposed to be manual what we do, but not what the laws are.

As I look at it again with a fresh mind, this is really good stuff.

I mean, it tells us where these rules are coming from, what the expectations are.

I have think it's helpful for us, I think it's helpful for our employees, helpful for our training to say, this is why we're doing what we're doing.

But again, Paula and I can't take credit for most of the content, and including the next page as well.

PAULA MCELWEE: We talked about, like your indirect cost rate proposal.

That is going to be part of what you are going to want to talk about somewhere.

You can certainly do it as part of this manual.

You can do all of these pieces as part of your manual.

If you decide to do it in a different policy manual or a different section of policy, that's fine.

There are just requirements we know you're required to do and they have some connotation that is fiscal in nature, so it gives you a chance to make sure that you've got a source for all those things.

There are resources involved as well.

We had that record retention policy that John mentioned a little while ago.

We have a suggestion there.

When you're required to do the compliance audit, under Uniform Guidance, that is that 750,000 in income, in federal income.

We have quite a few resources again for you.

Remember, this is an electronic format.

It's easier to open the electronic format and click on the resource than it is to retype it.

So feel free.

It's on the website for this training.

It's a lot easier for you to take a look at, so.

Do we have questions about this manual?

Except for the sections we said we were going to cover later.

Which included procurement and.

What was the other big one?

Oh, internal controls and procurement, specifically.

We are going to give you lots of time on those later.

Questions.

Let me get mics.

JOHN HEVERON: Did we wear you all out?

PAULA MCELWEE: I think maybe.

Someone wanted to figure out the jail cell we are actually in.

Questions about this stuff.

One here.

AUDIENCE MEMBER: Tiny question I think.

Talking about accounting for donated services, we collect donated durable medical equipment and then give it back away.

Does that mean that it doesn't count as a donation to us, because we don't keep track of it after that?

JOHN HEVERON: So it doesn't count for what?

For matching?

I think it probably, I mean, if this was for a program that required matching, I think it would qualify there.

I know how difficult it is, because you have some clients in the same situation.

It's very difficult to value these things and even to track them.

But if you had a matching requirement with a federally funded program and this was for that program, then it would count as a matching item.

I believe it would.

PAULA MCELWEE: And the other part of that question is, does it count for the donor to take it off on their taxes as a donation, and you will acknowledge that they gave it to you.

They will value it and decide whether or not it's a donation for tax purposes.

You don't need to get involved in that.

Just verify the donation.

And the rest of it is kind of up to them.

JOHN HEVERON: Absolutely.

Absolutely.

AUDIENCE MEMBER: It does say here that the stuff needs to be used by or controlled by the CIL.

PAULA MCELWEE: Controlled by, meaning giving it to other people, 

AUDIENCE MEMBER: I don't know, it is your book.

PAULA MCELWEE: I don't remember, I'm trying to think out loud.

If it's passed through the center to a consumer, is that still controlled by the center.

Sufficiently to be deductible.

JOHN HEVERON: Probably.

Probably.

Because donors would normally, if the difference is between an agent and an agency, if you will.

So as an agent, somebody says, I want you to give this to these people, you're an agent.

Same is true with money, if somebody gives you money, and says it's for ILRU training, that's not your money.

You're an agent.

But if you have discretion about how it gets used, then it's under your control.

PAULA MCELWEE: Most of the time when you see that, somebody wants to give money to their kid, take a tax donation, and they come to you, if I give you $5,000, will you give it to my son for me?

And the answer is, no, we can't do that.

JOHN HEVERON: Even though he's a missionary.

PAULA MCELWEE: He needs to form his own group, his own way as a nonprofit.

We can't be an intermediary to pass it on.