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DAY3AFTERNOONSESSION.MOV

10/04/2020

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>> All right. Welcome back. Thanks for joining us again. We are going to start as promised with these few questions we didn't get to in the morning session. If we can remember that we were talking then about tax rules and audits and what not. Paul was wondering when we talked about sales tax exemptions, he was wondering for a little more clarity on where the line is drawn. I know this is common for nonprofits where you ask for donations and then you have a free gift.
Paul's wondering if they were to have a fundraising event and they had suggested donations and then there was a free gift given as part of that, would that keep them from having to do sales tax? I think it would, but what other rules would they need to keep in mind for things like that, and is that allowable, John?
>> Again, these rules vary state by state and I can really only capably address New York State. You're absolutely right, Tim, that's not a sale. At least by New York State rules, it's not something that goes on on a regular continuing basis and it is a fundraising event to support the organization. For all of those reasons, there'd be no sales tax involved with that. The sales tax really pops in potentially when the organization is paying something in behalf of individuals who aren't tax-exempt.
Again, those rules will vary from state to state. You need to get a grasp on it. One thing we didn't mention earlier which is really important is that the exemptions again as we said are generally on your purchases. They are on your purchases for yourself not for staff or board members. Those exempt privileges have to be limited to the organization or they can be lost altogether.
>> Most of the time there's a process with your vendor where you present them with tax-exempt information, typically acts as state letter that comes that says that you're exempt from your sales tax.
>> That's right. Myra's got a popular question. John, how much does an audit cost?
>> It ranges all over the place. In our firm, we're probably in the $6000 and up range. We have a huge organization, $75,000,000 annual income nonprofit, believe it or not, a conglomerative of nonprofits. There's just way more than that without getting into detail. It used to be we were down in the $4000 range. The regulations, the documentation that we need to have just really drives that up to be probably not less than $6000 for most organizations big enough to need an audit.
>> I'm not sure where you are, Myra. I know in DC when Nico goes up for audits and we did that every year, even the bids that we get back, just a variation is over $10,000. We'll have companies really, auditors in the DC area which is an expensive market on the low end between $8500 and $10,000. They'll go well north of 20,000 and that's just for our financial statement only. Get bids too because if your area is large enough, you can get a few auditors to compete. You'll have more information and be able to make a better decision.
>> One thing related to that too is that you can do a multi-year contract with an audit firm as long as you don't do it forever. It's very reasonable to do a two or three year or four-year contract. We see that quite a bit. John, is that common?
>> Yes. In fact, we don't like to be involved in an audit where it's not going to be a few years because we always observe a learning cost which occur in the first year, learning and set up cost. We really need to have a fairly comprehensive understanding of an organization, and then we need to set up the types of work papers we'll use, the financial statements. We'll get a benefit out of that for a few years, so one year audit. We have an organization that comes to us, actually a review, not an audit, but they want it just every three years. Is probably half again as much as it would be if it was every year.
>> If you're concerned about costs or if you don't know where to go for bids, [inaudible] centers in your state too. After years with the same auditorand varying levels of quality, we're actually using an audit firm right now that we've found from the Maryland SILC. It's great to have that one-on-one referral from them and be able to find out what their experience was like, and it's gone well.
Last question is from Paul who just wants to check one more time. Paul, I want you to address this because I'm curious about this. He said, "Just to clarify, we can use federal funds to pay for a regular financial statement audit." He said, "My executive director, our outside CPA, and another center director have all told me that that's not allowed." I know this is qualified. Was there something in the past where this was not allowed under RSA?
[crosstalk]
>> No, it was actually a change they came in with uniform guidance. The change says that that single audit can only be paid for if they have $750,000 in federal expenditures during that year, which is why we recommend a different audit. It's a specific audit that's not allowed, and that is conditional. You're required to do it if you have those expenditure, you're not allowed to use the federal funds if you don't have that level expenses, but you can put a regular financial statement audit in place. We don't require but we suggest that you do. That you keep up with your auditing on a regular basis and do that financial statement audit.
>> It sounds like Paul misunderstood. You cannot use federal funds for a regular financial statement audit if you're not-
>> No, you can.
>> -[crosstalk] to the signal audit.
>> You can as part of your indirect.
>> Thank you. Got it. As part of your indirect. Got it. Great. Those are the questions I had from before. In the new Q&A so to speak, for this session, Denise says earlier, I thought I heard it was acceptable to use Part C funds for direct service to individuals. I don't think we quite said that. She said this is something that I found confusing. I've had others ask if I heard the same thing. Would you please clarify?
Maybe you said CARES fund. I think that's exactly the distinction that you made earlier, Paula, is that it doesn't normally fit well even if it's not totally disallowed to use Part C funds for direct support for consumers, but the CARES Act funding is different in that regard, and that is part of its intent. Would you agree?
>> Correct.
>> Okay. Denise, let us know if you have any other questions about that, but I think you've got that distinction right on. Those are the questions I see. Let's go ahead and start with the content, and we can check in about questions later.
>> I know some of you aren't tracking the chat, several people have posted how much they're paying for their audit. You might find it interesting. [chuckles]
>> Oh, good tip. Thanks.
>> Okay. A couple of topics that we said we take a look at during the break. One is, what about the indirect cost that you're doing a drawdown for. I found the regulation on that, shame on me, I copied the language but not the exact area that it was from. Here's what it says, I'm going to read the last sentence first because this is really where is clear. The timing and amount of advance payments must be as close as administratively feasible to the actual disbursements by the non-federal entity for direct program, or project costs, and the proportionate share of any allowable indirect cost.
I read that to say it needs to be actual when you're talking about direct costs, and you can use your rate when you're talking about indirect costs. You don't have to have actual items or the federal share of actual items. When it comes indirect, you can use whatever percentage. So many have a federal indirect cost percentage or are using the de minimis 10% rate.
>> As you do that, you'll want your policy to be clear, and you want to be consistent in how you do that, how you figure it out, and how you do it. Several [inaudible] said, "I did this, is that okay?" Or "I do that?" As long as you have a method for applying that indirect and making sure you recoup those costs, your method is probably as good as anyone. Just be consistent and it should be okay.
>> You would support that by some a worksheet, we talked about a spreadsheet where you would list payroll overhead. Again, payroll overhead could be done on a percentage. Keep in mind some months you're going to pay unemployment, some months you own it all. That can bounce things up and down quite a bit but your payroll, your payroll overhead, your supplies, your rent, utilities, other occupancy costs, you've got a total of those direct items for the grant, and then you would add on your rate. If it's 21.3%, you'd add on 21.3%. As I read this, that appears to be allowable. I will make a point of giving you the exact reference section for that tomorrow.
One more answer that I have also without the reference section, but it'll be easy to go back and get it. It's the use of program income that we talked about before. It says, if the HHS awarding agency does not specify in its regulations or the terms and conditions of the federal award, I'll skip the blah, blah, blah, blah, blah, but what it says after that, program and income must be deducted from total allowable costs to determine the net allowable costs.
If you don't have another deal, if you don't have another arrangement and you have program income, you need to reduce the federal share. With prior approval of the HHS awarding agency, the income may be added to the federal award and the program income must be used for the same purposes, basically. You're expanding the federal program with your program income, then that is only with permission. Also, with permission, Paula, we don't have any cost-sharing requirements, do we with any of these grants?
>> I don't know if some of the states have for some of their other funding but not for the [inaudible].
>> That wouldn't apply here anyway. The final thing is income after the period of performance. I alluded to this earlier but they are very clear to say that there are no federal requirements governing the disposition of income earned after the end of the period of performance for the federal award unless the HHS awarding agency regulates the terms and conditions and provides otherwise. There's nothing in your grant agreement about it. There's nothing in the law that governs your use of program income after the term of that federal award.
>> Our understanding of that is that it's no longer restricted in the same way as the funds that generated it, but now it's free and clear. Now, it's discretionary and not tied to your Title VII grant. Does that sound right?
>> Absolutely does.
>> Because we're required to do resource development, I think that ACL, the Office of Independent Living programs has been very encouraged when you are doing this thing and adding it to what you're using for your core services. The way the language is in the law and the expectation is almost that you spend the first. [chuckles] You got to make sure that you are extending that program income. Supposed to be in the same year, sometimes John? If it's generated very late in the year, it gets hard to do that.
>> Yes. I'm not positive about that, but even if it wasn't spent in the same year, it would be restricted in the ways we talked about. The other takeaway from this is you need to have that conversation. If you want the program income to expand the federal program, that's not the default. It should be an easy change. As Paula said, sounds like they're fairly liberal with this, but this is not something you can do on your You need to have that conversation hopefully as part of the budget process here but if not, as soon as you can do that yeah.
>> Your program officer will give you that consent that you can count that as money that you can expand as part of your grant instead of before your grant.
>> I think we're ready to move on. Tim, unless you're going to throw any more questions at us right now.
>> Let me just clear this one from Mary Ellen since she asked. When we were talking about drawdowns earlier in the last session, is that the same thing as submitting a cost-reimbursement invoice? She says, "We have a 7C contract that requires submission of a monthly cost reimbursement invoice."
>> I would say the guidelines would be exactly the same. In other words, whether you're doing this in advance or whether you're doing this after the fact, it's going to be based on costs you have incurred or will pay very shortly. It would still be based on your actual direct costs for this program, plus your administrative add-on.
>> I'm wondering if you're from a 723 state because typically what the centers do is go into the payment management system, PMs, and enter the amount that they want to drawdown based on the paperwork. We mentioned that you now have your backup list of what those expenses are and you draw down that amount and it's directly deposited into your account. I'm not at all sure what this question even means.
>> Paula, you won the quiz. I can tell from her email address that she's from Massachusetts, which is a 723 state. Nice detective work.
>> Just so you know, the state oversees the regulations for them and the federal regulations may or may not be their default.
>> All right. Thanks. That was it. Why don't we go ahead?
>> Thanks, Tim. We're going to talk about employees versus subcontractors and versus volunteers. IRS and many state tax departments are very concerned about proper classification of employees. We've had organizations that have said everybody is a subcontractor, even the executive director. A subcontractor is also called an independent. How can you be executive director and be independent? That's an oxymoron. This happens and it happens because it appears to be a cost-saving to the organization paying it. It becomes problematic oftentimes to the person receiving it.
Even if that's not the issue, what's being avoided is some of the additional payroll costs, unemployment, workers' compensation, disability payments. If the independent contractor is classified properly, if they should have been an employee, IRS, and the state, all are concerned about that. In fact, I mentioned that you could look at IRS audit manual. IRS also annually puts out what they call their nonprofit work program. The things that they are going to focus their attention on for the coming year. It's not a lengthy list. Focus means a couple of things. Part of it is education. That's good. They're going to get communications out. They have emails that they send out with periodic updates.
It also means these letters of inquiry that we talked about and actual audits. Independent contractor versus employee is an issue that has been on there year after year after year just because there continues to be abuse. There's incentive for abuse because of the potential savings here, but it can really create problems here. IRS provides guidelines. We'll talk about some of them. They have a form called an SS-8. You can google SS-8 or Google IRS SS8 or form SS-8. It's got a list of criteria. It's actually used to get a ruling about whether somebody is an independent contractor or an employee. Then we have another class of volunteers. Is this reasonably common, Paula?
>> Really common to have interns for sure that are unpaid interns and sometimes other volunteers as well.
>> Volunteers, when they're truly a volunteer, it means they're not getting paid, they're not getting perks, they're not getting gifts or token payroll payments. I think New York is as tough as any but basically, if you meet all of those criteria, a volunteer is a volunteer, not an employee, no reporting required. Where a problem comes in is when you pay these folks something, sort of a thank you. We'll give you a stipend of $500. Not only does that change them from an absolute volunteer to a potential employee. Therefore you've got a classification violation, possibly you don't have the proper insurances.
I will tell you in New York, not having workers' comp insurance is horribly expensive, the penalties for that. On top of that, there are federal and state wage and hour rules. I assure you, you're probably violating the federal and your state's wage and hour laws if you're giving stipends rather than a salary to volunteers. Volunteers are good but they really need to be volunteers. You can reimburse them for any out-of-pocket costs they have including their travel but you cannot pay them a thank you gift in money or in kind. We had an organization that was sending their volunteers on European tourists here, they don't exist anymore.
>> How nice that would have been, huh?
>> Yes.
>> Often, what a volunteer can do is restricted. You also want to look at that issue if the volunteer is taking the place, volunteering as the receptionist is what I hear quite a bit. They're volunteering as a receptionist because the position is vacant. You can't have them doing a paid task and still call them a volunteer just because they're not being paid. That is a paid position, you intend to fill it. They're not a volunteer, then they should be paid as a temp not paid as a volunteer.
>> Again, that will vary by state, Paula. I know in New York, it is exactly as you describe it. You can't replace a paid position with a volunteer. That would violate again, the wage and hour rules. The task that volunteers perform should be tasks that are normally performed by volunteers. What you call a worker really doesn't carry too much weight. It's good to have an agreement with an independent contractor, an independent contractor agreement. Again, that won't carry all that much weight if, in fact, the person is working as an employee would work. It's really a matter of what they do.
Independent contractors usually work for a number of employers, shorter time services. I'm a prime example. I come and go not only with this organization but with our clients, so many different organizations. I mentioned that there is a form you can look at, and it will have more things than this on it. These are the standout things that you want to look at. These are characteristics of a subcontractor, the ability to make a profit. If they work faster, or use some sort of efficiency or have the right equipment and can do better as a result of that, that's an indicator of an independent contractor.
That would include maybe incurring a loss because sometimes when you are a business person, things don't go just as planned. When any of those things can happen, that's an indicator of an independent contractor. If you hire me but I have the ability to substitute somebody, not to this conference, I wouldn't do that, but maybe to mow your lawn.
If I can bring my brother in because I'm not feeling too well today and have him do a capable job and you're okay with that, then that's another indicator of an independent contractor. If I need to have my own training, if I need to have my own tools for the job, and not just have them but pay for them. I'm responsible for getting those tools and maintaining those tools.
>> Also any licensing or other requirements around the work that they do, they might need to be a licensed contractor of some sort.
>> Yes. Often time, the payment is by the job rather than hourly, weekly like an employee would be paid. Those are the things you want to think about.
>> I'm a little curious if anybody's getting nervous out there. I guess their questions will tell us a little bit. [chuckles]
>> You should be a little nervous if you've got a classification problem because it's a high-profile thing. We talked about IRS auditing nonprofits. It's well less than 1 in 100, at least in our shop. Probably like 1 in 300, so it's really not that common. There are a lot of ways that there can actually be an audit of an independent contractor versus an employee. There are IRS audits of your retirement plan and there are very strict rules there. There are audits of individual tax returns as well looking at their income benefits, subcontractor income that the net audit can lead to an audit of the organization that's potentially paying it improperly.
It's way more common to be audited on this issue than just generally as a nonprofit. Those aren't very common. Now, we're going to talk about subrecipients and contractors. A subrecipient is, again, a totally different animal here. Their responsibilities are very different. Agencies need to follow procurement policies when dealing with contractors but they have monitoring responsibilities when dealing with subrecipients. A contractor is somebody you hire to perform a task and a subrecipient is someone who you pass grant income through to. Again, Paula, I think you said that wasn't too common here, right?
>> It's not too common, but what is common is that the centers themselves are subrecipients of the designated state entity if they receive Part B funds. When we talk about oversight of subrecipients, sometimes it's someone looking over your shoulder because you are the subrecipient. This applies, you just have to think about then the designated state entity has the right to make these determinations and decisions and overseeing your performance. When you received that Part B money you are a subrecipient.
Now, the interesting thing about that is some states are treating you not as a subrecipient, but as a subcontractor, and there is a difference. We're going to talk a little bit about the difference between a subrecipient and a contractor because sometimes your state will treat it differently and you need to back up and say, "No, we're a subrecipient in these funds." That's where we usually apply it.
>> I think you're right, Paula. Then maybe because it adds quite a bit of baggage to have a subrecipient compared to a contractor. A contractor you've already got your procurement policy in place. We already talked about that. You've got your procurement policy, you're going to follow that with a contractor. With a subrecipient, there are a host of responsibilities. We'll talk about them. First, we've got a slide up here that tells us how to distinguish one from the other. If you're a subrecipient, you determine who's going to receive the federal assistance or the benefits. Really it's your program services that we're talking about here.
A subrecipient is responsible for programmatic decision-making responsible for federal program objectives, and then for adhering to federal award requirements and carrying out the problem. A contractor provides goods and services based on a contractual relationship with you and based on your procurement policies. They normally do this as a vendor to other organizations. They operate in a competitive environment. They may submit proposals. They may go through any process you stipulate before they're hired and they're not subject to compliance requirements of the federal award. I'm not.
>> Exactly. You can see it, can't you? Those of you who received Part B money, you fit this subrecipient list. You can go right down through and say, "Yes, we have to adhere to the federal requirements. Yes, we're subrecipients and not contractors."
>> When that's the case, the non-federal entity, the pass-through agency is going to have to provide you with some simple things but then some more complex things. The federal award, the name of the program, and the CFDA number, everybody knows what that is? The catalog of federal domestic assistance. It assigns a number to each program, so they need to provide you with that because if you have a single audit, you're going to need to put that in your single audit report.
They need to give that to you. They need to tell you who the federal awarding agency is that's usually not to talk, it's probably HHS. The current federal award amount being passed through and the cumulative amounts being passed through.
>> There's the rub right there. Some of you are Part B centers or the SILC, and you've been trying to get this current federal award amount. Sometimes the designated state entity said you don't get that. Well, you do get that. As you're working within your state, the designated state entity who receives the Part B money has to let you know what that amount is and both current and cumulative amounts. For the SILCs, that's been really perk your ears up I'm sure. For the Part B centers, you also have the right to that information. Now, it's also true that you must provide that information to any subrecipients that do work for you that you sub out to. Interesting one.
>> They need to provide you with the date of the award. Again, you may need that for your reporting. The timeframe for reporting services, we've talked about how important that is because any dollars spent before or after that may not be allowable. Then your agency's contact number, your ID number, the indirect cost rate, their rate if they have an improved indirect cost rate. That's the subrecipient so I should say your rate if you have an indirect cost rate or the 10% de minimis.
>> Do you have risks related to this subrecipient relationship? The answer is yes. What the DSE may do for you and what you may do if you have subrecipients to your center is that if there are issues, they can withhold funding. The DSE is required to know whether or not there are issues. They probably do some kind of a review. You shouldn't be surprised about that if it's the SILC that they review, or if it's the Part B centers that they review. They will review if whether or not you're meeting federal requirements and then if you're not, they can withhold the funds, they can require you to do reimbursement rather than advances which they might have had in place.
They might add monitoring, add reporting that you have to do. When the DSE assesses its risk related to your performance, they can look at these specific issues, if that makes sense. Then if there are issues identified, of course, there needs to be worked towards a solution to that which typically is training and reporting and agreed-upon monitoring of whatever it is that you do. If you're receiving those Part B funds, you're subrecipienting the DSE and they can consider onsite reviews or other audits of your organization, whether you're the SILC or the Part B center or another Part B recipient.
>> Paula, we didn't put it in the slides here but you mentioned risks. Probably a very, very significant risk of misclassification here is that if someone calls you a contractor, not a subrecipient, then the money you're receiving isn't included in federal awards. If that makes the difference between whether you are required to have a single audit or not, then you could have a huge non-compliance problem.
I agree with what Paula said, that if you meet these criteria, then it seems to me that you do, then you're a subrecipient, that is a federal award that needs to be included in the calculation of whether you spent $750,000 or more, and therefore, whether you need a federal compliance audit. That classification is really a big deal for you and something will probably continue to advocate for you.
>> Make sense. What can go wrong? [chuckles] There's a risk assessment involved. Yes?
>> One of the things that you may do is to look at your history. Again, this is the pass-through entity, look at the history with the subrecipient based on the results of previous audits or compliance audits, or any federal monitoring that you are aware of. A pass-through entity probably would be wise to ask for these. If there were any funder audits, if you had a compliance audit, these are going to be a great indicator that you've got proper procedures here.
>> Brenda just raised a question in the chat that I think is very pertinent here, and that is, if the centers are using CARES Act funds to partner with other entities, could those entities be subrecipients of the CARES Act funds? I think you would need to go back to that original slide where we talked about the difference between a contractor and a subrecipient, and use that checklist to determine the answer to that question because you may have partners that fall in one category and other partners that fall in the other category.
Be sure that you apply this test to determine. If they are subrecipients, you have quite a bit more responsibility than you would otherwise. It's a good thing to distinguish. I think some of them may very well be sub-recipients to be passing on funding that is related to that program specifically.
>> Just a couple of examples of things that might be done if the organization is monitoring, look at the per-unit costs, see if they are in line with expectations, obtain information about costs that are higher than expected or failures to meet goals, delays in completing tasks, things like that, those would be typical monitoring. Again, if you are the subrecipient and you have a federal compliance audit, these really should all be done. You may just say we've gone through a process. Of course, not everything is looked at but everything is up for evaluation when a single audit is being done.
We talked about what the pass-through entity has to provide, the subrecipient entity has to provide, confirmation of their indirect rate. That's what you would give to the pass-through entity or confirmation of the fact that you've elected the 10% rate. You have to provide access to your records and financial statements. As I said, you probably want to provide access to other things audit results.
The extent of procedures performed will depend on the subrecipient. As we said if you have a federal compliance audit, that should be significantly less. A smaller organization with limited federal funding experience, limited compliance experience may not have everything in place that we've been talking about such as procurement policies and controls over federal awards. You would definitely ramp things up in a case like that.
>> I have a feeling we need questions and answers now because I'm seeing some in the chat and I bet Tim's seen some as well.
>> Thanks for checking in, we do have a few. Let's get through these. I'm going to start just with the ones that have been waiting the longest, and then we'll get back to some of these that we're talking about right now with subrecipients. Just quickly, we had some questions about the volunteer issue. John, [inaudible] thought they were doing a great thing in providing their interns with a $25 gift card as a small gift, as a thanks. Is that something that could potentially get them in trouble?
>> Tim, in theory, it could. A practical matter, that amount of money probably would not. They might want to simplify and just say, "Hey, here's a little gift of thank you and cover some of the costs that you've incurred," because presumably, they've had some costs when they've provided these volunteer services. Maybe meals while they're on the job, maybe traveling, something like that. As a practical matter, I think it wouldn't be very nice to disqualify a volunteer for getting a $25 gift card.
>> Okay, thanks. Cheryl, and Cheryl's organizing a new center that hasn't started yet, says, "I'm planning to make this work by using volunteers until we get funding that will cover payroll, et cetera, should I not do that? Basically, is that not a good idea?"
>> I'm sorry. Go ahead, Paula.
>> I was just going to say because they have not hired anybody and don't have any history as a new nonprofit, I think that many of them start with 100% volunteers and that wouldn't be a problem until they start paying somebody. As soon as they start paying somebody, they're going to have to reassess this whole balance. I don't know, John, what you think?
>> I agree with that. You were talking earlier about this very topic and talking about volunteers doing work that's normally done by paid people. I think the New York State statute talks about displacing workers. That's just not the case here and I agree. I've seen a lot of nonprofits, including churches by the way, where everything's done by volunteers for a period of time until they have enough interest to carry themselves with revenue.
>> Let's get a little deeper into that example because the next question is from Paul, who describes exactly that situation. He says he has always hired volunteers to serve as a receptionist, to sit at the reception desk, answer phones, greet visitors. We not have a paid receptionist, we don't intend to hire one. Occasionally if we don't have a volunteer, a staff person will fill in to perform those duties. Could we be running afoul of state labor laws and how would we know for sure?
>> I would think not in New York. Again, you probably want to talk to somebody right in your state because as I said, our statute talks about displacing a worker. This is a regular volunteer position for you. It seems like they've been able to get volunteers for a period of time. I would wipe the word hire volunteers [chuckles] out of your vocabulary right off the bat and use volunteers, find volunteers, or something like that. Again, I'll check your state laws. Paula?
>> I was just going to say if you've never hired anybody in that position, it's probably okay because displacement is the issue like John said. I think in most States, that's the case. There may be some exceptions that I'm not aware of them.
>> Several people have mentioned in the chat and the Q&A that they were able to audit this. Beth mentioned they actually had a state employment audit to check employment status among their staff. Gloria mentioned their yearly payroll audit actually looks at that issue. Might have some resources there as well.
>> Yes, for monitoring yourselves, those are good processes.
>> Derek wants to know if a contractor can receive employee benefits.
>> I would say generally not. If you're providing a contractor with employee benefits, then there's going to be a huge question about whether you've got an improper classification. You can provide them with money to get those benefits, whether it'll be health insurance. You can up their rate to cover their social security self-employment tax because you're not paying that. You can't really provide typical employee benefits and have your state agencies or IRS consider them an independent contractor.
>> Yes. When you think about things like worker's compensation and a volunteer is covered under your liability policy, not under your worker's compensation policy. Even that benefit, I don't think typically would be available to volunteers, I may be wrong, there may be some states where they do it.
>> In New York, you need to have worker's comp for any independent contractor who doesn't have their own.
>> Do you? Okay.
>> Yes, we have a horrible archaic worker's comp system that is extraordinarily expensive by comparison to most others. Of course, people do their best to reduce their costs there but the state is going in the other direction and saying, "Let's get everybody covered here, and then our claims wage will be proportionally more reasonable."
>> This is interesting from Craig. What would you recommend if you know that you're SILC receiving federal funds that has passed through three or four or five entities before it reaches you, and the agency that pay them directly doesn't even know what the CFDA number is?
[laughter]
>> I've seen that. It's not too hard to find those. You will need it if you're going to have a compliance audit. You can just go right to the catalog of federal domestic assistance, the programs that have CFDA numbers. Not all do but by far most do. They're all listed with their numbers. Google the catalog of federal domestic assistance programs, and then do a word search for your program, put in a couple of words from your program. It'll be as easy as that, you will be able to find that CFDA number.
>> If the question is, does that still count as federal dollars when it passes? Is that maybe the question when it passes through that many steps?
>> I don't know. I think maybe that's part of it. Why don't you go ahead and answer it, Paula?
>> [laughs] I think that you can't see the federal connection, then they wouldn't count it as federal expenses. If you can see the federal connection, you'd have a responsibility to include it. I don't know. John, am I off base there?
>> I would think that if it's a federal award, it's always a federal award. It's got that mark on it and it. never loses it. You're absolutely right. If we don't know whether it's federal monies, then how can you assume that it is. Having said that, there is a rule that says if money comes through another agency, even a state agency as an example, and it's a combination of federal and state awards, and you don't know what percentage is federal, let's say you're getting $100,000, some of its federal, some of the state, you don't know whether it's $10,000 from one or $10,000 from the other, it's treated as all federal.
>> That's really interesting. I was not aware of that. That's really interesting. When you look at your $750,000 threshold, you may be looking at it a little differently now.
>> Yes, it's possible. Again, that's only where you've got a blend of federal and state or other funder money. If you know it's partially federal and you can't distinguish how much, you have to treat it as a federal award.
>> Paul wants to know if we wrote a check to a school system to reimburse them for costs of providing software or equipment to students with disabilities or their teachers or support staff for remote learning, presumably CARES' funding during the COVID pandemic, is that a subrecipient relationship with the school system?
>> No. You're not passing through a grant that's going to be administered. A sub-recipient administers the grant. We're talking about a final recipient here, final beneficiary of this program.
>> Sean wants to know what rule we were talking about when you talked about that rule of state and federal funds being counted as federal?
>> A reference for it, you mean?
>> Yes.
>> I don't have that. I will-
>> Put it on the list.
>> -put it on the list.
>> In our discussion about the volunteers performing reception duties, if they had a part-time receptionist, could they be in trouble for using volunteers to fill that role the rest of the time?
>> They're covered certain hours by a paid person, but the other hours are consistently covered by a volunteer. Again, I'll address that in the one where you periodically bring in a staff person when there's no volunteers available. I think in both of those cases, it's still not displacing a person. Again, it will be still somewhat dependent on your state's rules. It sounds like Paula's experience and my experience are both that when you're not displacing a worker when it is the policy to have volunteer staff after these core hours, that could still be a true volunteer.
>> Last question. Cathy is wondering, can contractors still submit expense reports just like the staff do?
>> Sure, and so can volunteers. I do. [laughs] There you go.
>> All right, good. Thanks for checking in. Those are the questions we had through right now.
>> I think one of them that showed up in the chat that we might want to repeat some of the hallmarks of whether it's a subrecipient or a contractor has to do with those CARES Act partnerships. One of the examples that you just addressed was the school situation, but there are other partnerships I know with two banks. There've been some partnerships where there weren't sufficient funds to do something, so the CARES Act funds are supplementing and getting more food out to the consumers of the centers. Sometimes it's a merge situation where they had to provide a merge in order to get the resources for their consumers.
I think in both of those, those would not be sub-recipients. Those would be contractual relationship of some kind or even a memorandum of understanding rather than a contract where you're partnering with another nonprofit and each of you has distinct roles in that but you're not typically just handing over cash. There's some identified role that you're contributing to that's not paying them that they can use that money for other things. The question was, even if it's a merge or a partnership, would it be a subrecipient. I don't think typically. What do you think, John?
>> You're right typically. I didn't say anything because I'm not sure of exactly what the situation is. Generally, when there's a joint venture, a partnership arrangement, that's not a subrecipient. We have that a lot in the affordable housing world. As a general rule, I absolutely agree with that.
>> A subrecipient relationship, there may be one where you're granting funds out to somebody to perform a specific program but not automatic. It's not necessarily the case.
>> Before we go on, I would just like to remind everybody unbelievably tomorrow morning is the end of our program. I think it's gone fast. Some of you may think it's gone horribly slow. At any rate, no matter what your perspective is, we've got one more shot at answering your questions and making the time you've invested worthwhile as a conceived by our ages, Paula and I have been doing this for a few years and like the insurance, it says, what is it state's farm, we've seen a thing or two. 
We learned a thing or two, because we've seen a thing or two. We'd just like to tell you that nothing is off bounds. Any questions you have any concerns I assume they've got to be at least somehow in the financial or compliance arena, but anything that you would like to know before you're done with this program, please share those questions today. If we need to do a little bit of homework before our last session tomorrow, we can do that.
>> Yes, because you may have noticed sometimes we have to look stuff up too. Did that in garner any other questions? No. Just keep typing them in, keep them coming and make sure that you let us know anything you want to know.
>> I've just got to my mute button. We did get one more.
>> Okay.
>> Denise is asking if you offer funds to a food bank, how do you guarantee it's going to go to individuals with disabilities?
>> Well, I have questioned that whenever people tell me that that's part of what they're doing because the food bank typically serves everybody and when there's a service that serves everyone, why should you be paying for it? It's a free service to anyone in the community, including people with disabilities, and our advocacy role would put us in that role where we would say to the food bank or anybody else that provides a service, "Hey, this person also deserves that service." It's the same reason that other people do.
The answer that I've gotten, which may fly in an audit, I don't really know yet how they're going to look at all these funds but the answer I've gotten is that it's an additional service, so they are doing additional food distribution, they're doing it twice a month, it's been once a month or whatever and they're actually contributing money per person and they know that that money, sometimes they're doing the deliveries themselves, but sometimes they know that those have been picked up because they're consumers who are getting additional services above and beyond what would typically be available in the community.
The food bank is actually making purchases because they're able to do that in bulk and they're actually making purchases and then distributing this additional food. Otherwise, it wouldn't be okay. It's like, no, we get the same services everybody else does. That's one of our important things. Unless it's something new or different, it probably is not appropriate.
>> Well, this is temp food bank, or otherwise I would assume that the center would want to put the onus on the recipient of those funds and develop some subcontract that would say, you have to know that this is going towards people with disabilities and then tracking and reporting on that to the CIL, is that essentially what you're describing?
>> Yes, most of the time they're doing it by the center being the entity that refers the individual to the food bank. All the new people that they're referring are getting that benefit.
>> Sure.
>> It's a special benefit that comes through the food bank that is specific to consumers of that center but something like that has to be in place, or it wouldn't be appropriate. You can't just support every Covid response in your community in general, really has to benefit people with disabilities who are consumers of your center.
>> Okay, thanks. Just checking quickly if you want to enter questions in the Q&A tab, you can, if you prefer to email me, I haven't seen a lot of activity on the stream text link, so, and we might move away from that. If you're only on the phone, you can press star nine to raise your hand. Kathy says, our example that we just gave is true for free medical clinics and day shelters for folks who are, homeless. I would think so, Paula, any distinction there?
>> I can't think what it would be. Again, it's people that are benefiting that anything you do with CARES Act, you have to enroll the individual as a consumer. Now, I had some centers who asked me, can we call it information and referral? Then we won't need to plan, then we won't need to go, then we don't need to enroll the person. Are we allowed to do that. ACL's response was, "No, these funds are for consumers at your center or of your center." You can enroll new people, but you don't get to call it INR, and just make it generally known, you need to actually report who is benefiting. I don't know if that answered that question exactly.
>> I think so.
>> Okay. [chuckles] Good.
>> Okay. All right. That's it. I'll let you all take it away. I'll keep you all posted if anything else comes up.
>> Okay. We'll check that.
>> Thanks, Tim. There are a few special topics. We wanted to make sure you didn't miss some rule changes that affect your organization's potentially and maybe you in this group or your fellow employee is here. One is with retirement plans. As a part of the Coronavirus relief, there were changes to the retirement plans. One of those allows individuals to delay required minimum distributions. Hopefully, your organization unlike my organization doesn't employ people this late, [chuckles] but at any rate, you normally would have to have made required minimum distributions as soon as somebody reached age 70 and a half, that got pushed off to 72.
Individuals over age 70 and a half can still contribute to retirement plans, that wasn't allowed. These are a couple of the rules that are going to help people preserve their retirement benefits. Of course, this was done at the time that the market just plummeted. It's gone up quite a bit since then, but I still think there are some uncertainties, stock markets don't like uncertainties. Between elections and Coronavirus, I think we've got a couple biggies here. We'll see what happens, but this may mean, if you've got a retirement plan, you need to amend your retirement plan.
I'll just take this as an opportunity to remind you how important it is to have somebody in your organization responsible for your retirement plan and communicating it to everybody.
We had an organization that had a voluntary deferral, sorry, I couldn't remember the word. Voluntary deferral only 403(b) plan. In other words, the organization wasn't paying anything, but employees could voluntarily put some of their payroll into a 403(b) plan. That's a plan that's allowed only to charitable organizations like yourselves.
The auditors came in, by the way, this isn't your federal auditors, this is an IRS. This is a Federal Department of Labor. Well, we just don't have a bad connotation of those audits. At any rate, this organization that only had this plan was cited, and there was a question about whether they were going to be penalized, there were proposed penalties, they did ultimately get forgiven because they had a responsibility to tell all new employees and all employees on an annual basis about the existence of this plan and the options under this plan.
Even with that plan, which is the least in terms of requirements of any plan, you need to make sure that somebody is keeping employees up-to-date, providing them with annual reports, reminding them of their eligibility, reminding them, or at least hiring somebody to remind them of their investment opportunities. Non-compliance with retirement plan requirements is a serious matter. As I said, you may need to amend your plan for these changes that were put in place. Just double-check with whoever is responsible for that.
Also, at the beginning of this calendar year, there were some new overtime pay rules that went into effect.
It's complicated legislation, but basically, it used to say that anybody who was receiving more than $23,660 annually could be categorized as executive administrative, or professional employees and weren't subject to the time and a half rules. That threshold got increased to $35,568. Keep in mind, this a wage-an-hour requirement, and so it's a pretty serious matter if you're not in compliance with it. Another reason too, to make sure that your personnel manual is up to date. I don't think there's a lot with bonuses or incentive [crosstalk].
>> I have someone out there though. Some of you I know are trying to make sure you spend your patsy money before the end of this fiscal year. You can't carry it over, hopefully you know that. You can't prepay most things. One of the things that I get a lot of questions about is, whether or not we can give bonuses or incentive compensation. To some extent we're getting a similar question that the Cares Act, about hazard pay, and whether of not you can pay people if they're doing something that's above and beyond that's related to putting them at risk related to the virus. Just to go through the basics, bonus as an incentive compensation may be allowable, this is my favorite, it depends.
If your policy and procedure is in place in advance, and if everybody's being treated equally based on whatever the criteria are for receiving that bonus, most of the time it is not possible to give a bonus in September, for leftover part-see dollars, just because you want to. I know your staff probably will deserve more than they're getting anyway, but you can't do it unless you're already had in place a policy and procedure that addresses this. Make sure that you're above board in handling this properly because that's the kind of thing that can back later and bite you because you're not allowed to do that.
With the incentive compensation, sometimes you'll see the policy bases it on the performance appraisal, and maybe there's a goal or two that specific employee is required to do before they can receive the incentive compensation. Then you can describe that you'll do it from remaining funds at the end of the year in some way, but you have to plan it ahead of time. With the Hazard Pay, what ACL has said to us is, "Where's the hazard?" It's not that they're opposed to you looking at that, but it's not-- Working from home does not merit hazard pay.
Delivering things to consumers who can't come out and do a contactless delivery, and you have to actually take things into their home as an accommodation, you may be putting staff at risk if they have a lot of contact with the public in that way. Then you could maybe take a look at it, but living through this time of a pandemic, is not in and of itself a reason for hazard pay. That's not included, but I just wanted to mention it. Those question come up quite a bit, so I'm guessing some of you have wondered about them. Now, John, this is my favorite part, I can't wait to hear you talk about Uber and Lyft.
>> [chuckles] You probably have no clue why I'm going to talk about Uber and Lyft, or even the how. You've heard me say this a couple of times, I'm such a proponent of simplifying the accounting system here, and I thought this might be a good example. What I'm going to do is, is I need a ride from my home to an airport. I'm going to assume I live in Tim's town, so I'll actually be talking about his home, to his airport. I'm going to talk to an Uber and a Lyft driver.
By the way, this doesn't imply any bias for one or the other, we could flip-flop them and get to the same point here. I'm going to try to decide, I'm a little concerned about getting to the airport on time. I'm going to reach out to Tim and say, "Uber driver Tim, how would you get me to the airport? If I hire you, how would you get me to the airport?"
>> Do you want me to literally describe how I'm going to drive you there, John?
>> Yes, yes, in all the detail.
>> I'm going to take you down the parkway. I'm going to take you across Memorial Bridge, and then down the GW Parkway to the airport, we'll be there in no time.
>> Actually, you gave me the simple version of it, and the Lyft driver may get into an awful lot more detail and say, "I'm going to take you down this road, but I often catch red lights there. I know I can make a right turn and scoot around that." I think scoot maybe letting out and there could be school buses down this road, and get me into an awful lot of detail. After that, I realized this guy really knows the route to the airport. He's really thoughtful about the route to the airport, but the question I had was a question that Tim answered capably, and as completely as I needed.
Will you get me to the airport on time? He told me a little bit about the route, but he told me that he's going to get me to the airport by the time I need to catch my plane, and that's really all I'm interested in. Sometimes that additional information, while it may seem to come from an area of competence, it really is unnecessary information. In fact, actually, it can impair my decision making capability. That's really true of your board too when you get into too much detail. Do you ever have people asking questions about silly little things, Paula, you been on the front lines?
>> Yes. You'll get depending on what information you give your board, but I know of a board that has a member who is always picking out some specific thing and asking what the detail is related to that. Well, what did you spend contract him? What did you spend these contracts on? Who is that? The information's there, but it's not typically something the board gets involved in. They approve the contract when it was written. They don't need to revisit every month that this contract is for the accountant, that contract is for janitorial. That detail is not necessary, but sometimes you have somebody who wants to repeat that information frequently. [chuckles] You got both going on, right?
>> Yes. I know you've heard this Paula, I don't know whether anybody else has but my dad came home one night, he was on the Finance Committee for a church in our neighborhood, our church. He was just shaking his head, and he said, "We've approved building a new church." He said, "I'm good with that. I think it'll be a wonderful church. I think it's time to do it," but I have to tell you, that these folks spent more time in a meeting discussing whether the ushers should start up at the front and in the center with their collections to let people know that it was coming and get their money ready, or whether they should start at the back and on the outside to be less disruptive here.
They spend more time talking about that than they talked about whether we were going to build a $14 million church. We see this sometimes with boards, if you provide a lot of minutiae, they get very focused on the minutiae. They'll go ask questions about, did you talk to this vendor or that vendor for your paper supplies, and really spend a lot of time on that when their responsibility is the direction of the organization. They need to know whether we're going to be to the airport on time, whether we're going to catch our plane, that's their responsibility. Not only isn't useful and helpful, it can sometimes truly be a significant distraction to them.
I know I sound like a preacher on this, but I will tell you, anybody who has done this, will be really happy. In fact, I'm going to just throw out a question that people can answer on the chat because I've said some of this before. If anybody simplified their accounting system recently, for purposes of doing their indirect cost rate proposal, or for other purposes. If you can share your experience with the results of that, especially if you have a little bit of time because I'm sure whenever you take something away from people, they're going to feel like something has been taken away from them, but probably get very used to it very quickly.
If anybody's done that, please reach out and share your experiences with that, but I will tell you, you will like it. How do you tell if you have too many accounts. I'm sorry, I guess I jumped ahead one here.
>> Oh, I did, I was trying to figure [inaudible].
>> No, well, I've got another version of it up here and I did as well. Most accounting systems, we look at have built into them a tremendous amount of flexibility. It's like our computer systems. Most of us don't know what a Word and Excel can do. It's so thorough and in-depth and the same is true with the accounting system, so when you buy Quickbooks off the shelf, QuickBooks for nonprofits, or just regular QuickBooks pro or QuickBooks online, you're going to have a choice of accounts that is overwhelming and if you don't customize that down to just the accounts you need, you will be confused for the rest of your existence here.
Not that you can't stop and redo things, you can, it's a little easier to do it right up front than it is down the line, but getting things down to the level you need them is really beneficial and we've talked about your financial statements, looking at your statement of functional expenses, the categories you need and then from your balance sheets, the assets and liabilities, that's really a good starting point. You don't want your starting point to be all of the potential accounts that QuickBooks or any system allows you to have.
>> In fact, if you want to divide something within one of those accounts, you have a way to do that. It's not that you can't get the detail you want it's that, that level doesn't need to have that kind of detail. You mentioned, what was it, I don't remember 14 or 15 categories?
>> Yes, because you're right. Virtually all accounting systems now with a mouse click allow you to drill down and see the details. Rather than have building repairs and office repairs and five different categories of repairs, you can combine them. If anybody wants more details, it's there in a click. Start with a more concise system.
>> We're not getting any responses yet. Maybe nobody's done the simplifying. Tracy did tell a story though, about a board member who was reviewing the budget and ask why the payroll was lower in February. [laughs]
>> One month. Next slide. You need a group of accounts for each of your programs and for your management in general, and for your resource development or fundraising. We talked about maybe getting that down somewhere between 15 and a maximum of 20 keep in mind, I guess we talked about the board being responsible for strategic direction. Then I mentioned the other day, the American Red Cross. On their published financial statements, they list salary wages, employee benefits, and six other categories. They have 3.6 billion of expenses and other than the payroll and benefits, they have six categories of expenses. You shouldn't need a lot more than they do.
>> Yes, 3.6 billion I don't think we have any senators paid that one.
>> [laughs] I don't imagine. You're right at the end of the year, so this is a perfect opportunity to do this, at least for a lot of you, I think is everybody's September 30th. There's just a lot of them.
>> A lot of them, but some still do a calendar year and some still do the June 30, but a lot of them are September.
>> Okay, we're right around the corner from that. When you get your year on financial statements, if you have any category of expense that doesn't exceed 1% or 2% of your total, then it just does not deserve, it has not earned its right to have its own account and should be combined and into another category.
>> Annetta said that they simplified when they changed accountants and what used to be travel, mileage, food became traveled expense and that's a good example of certainly you don't need to have each of those separate now, because the software will let you, sometimes we fall into that trap. It'll also lets you add accounts and so if you're looking at something and you're thinking, "Oh, maybe I need another category." Don't do it. [laughs] Resist the urge.
>> 1% or 2% is a good guideline. One or $2,000 is also a good guideline. If you go a whole year and you haven't spent a thousand dollars on something, I would say it's inappropriate for your entire board to give consideration to that expense category. Just don't even [crosstalk]
>> Yes. Well, I'm curious. Are there any questions about this simplification topic? Tell me about [inaudible] not yet.
>> Not simplification per se.
>> You have some others though.
>> Yes, we do. Everybody wants to talk about CARES Act, you know that.
>> Oh, all right.
>> Doris is wondering about a CARE'S Act reporting. Is that going to be reported through the PPR, the program performance report or is there going to be another system in place?
>> There is another report for cares act. It is very similar and will be handled the same way as the PPR. They've given us some of that information and you'll find it on our website. There's a COVID-19 tab right to the left of the website as you open that homepage and it has a lot of resources, including any of the ACL guidance on it. Yes, there will be reporting and it will include the numbers of people served, what kind of services they received so that you can report it the same way that you report related to your regular [inaudible]
>> Okay, great. Can we use CARE'S Act money for reimbursement to staff for working at home, like extra utility expenses or equipment they need?
>> Yes. A lot of centers have looked at things like how much they're requiring that people use their own technology resources and whether or not they were sufficiently needed to be upgraded. You have to work this through yourself. It's going to be a little different geographically depending on carriers and everything else, but whether or not-- I'm sorry, my cat thinks it needs something, but I'm talking right now Pepper [chuckles]
Anyway, yes, some of them are giving the staff a stipend to help offset the cost of their current technology. Some are requiring that there'll be an upgrade in technology or because of where people live, they needed something that's Wi-Fi enabled, and not using [inaudible] phone signals. Just depends on your area, but those are expenses that people are considering to be legitimate. I don't get to tell you yes or no. I can just help you walk through reasoning out, but reasoning out that yes, people are working from home and we need to give them the tools that they need to accomplish the program goals from home.
Does that sometimes include a different kind of computer? Yes. Does it sometimes include connectivity? Yes. Does it include connectivity for consumers? It can. Those are all things that are taken into consideration for sure.
>> Great. [crosstalk]
>> [crosstalk] Security. I'm sorry.
>> Oh, go ahead.
>> Go ahead, John.
>> I just said that hopefully security of the home computer.
>> Oh yes, absolutely. I don't want to forget that. Also if you're using files in the Cloud, you're going to want added security for each kind of software that you use, not just for the physical computers. Both of those things need to happen. When you think about your consumers and you're giving tablets out to consumers, did anybody help them set it up? Because unless it's set up with the right information, it's not going to be useful. Hopefully, you're doing all the things it takes for people to have [inaudible] All right now, you guys are what-- Now they're talking about my pets, John. [inaudible] they can hear the bird and they want to see the cat.
>> All right, so-
>> [inaudible]
>> Greg's wondering, last CARE'S Act question and then we have had some comment about simplification so we'll go there next. Greg is wondering about CARE'S Act funding. He says, could we possibly pay our personal attendants that are working in the homes of people that could be COVID positive. He calls it like a hero payment. I think of a more is like a hazard pay. Can CILs cover that for PAs that are willing to work in [crosstalk]
>> I know that they're covering now is that they're covering the PPEs, say the equipment, the gloves, the masks, all of the kinds of things they may need. If that's not always been covered by the entity that originally pays them. In some states, you're doing all of it. In some states, it's a hybrid relationship and there's somebody else who's also overseeing it. Sometimes those folks also had PPEs.
I know a lot of centers spent a lot of money especially in the beginning when it was hard to find, spent a lot of money on getting PPEs and then getting them out to attendance and to consumers. You certainly want reliable attendance, so you want whatever support assist them to be reliable because it's such a necessary part of people's day to day life. Absolutely, you can make that justification I think, because of the seriousness of being without care. It's not an acceptable option. We've got to find some solutions there.
>> Simplification, Paul says, outside CPAs cautioned against eliminating or combining accounts since they're associated with a lot of data from past years. Our QuickBooks company file has over 10 years of data, and it should just be a concern. What do you think john, what if folks are looking to simplify should they worry about the change in history when line items changed and classifications change?
>> Well, it's very easy to make a backup as of a point in time. Here we are approaching September 30, probably make some final journal entries. Then we can make a permanent copy of that QuickBooks backup. In fact, that happens pretty routinely anyways, we're doing continuous backups. That particular one even if it isn't part of the off site process, we'll make sure that one goes off site. We'll still have that if we need additional detail. For earlier years, we can always come back to that QuickBooks backup. I'm fine with that. I know what does happen when you combine things into different accounts, you lose that history and maybe even wonder where a number on a 990 or a financial statement came from, but you'll be able to keep a copy of that.
>> Sarah wants some affirmation. She said, john, should we do it? Should we indeed simplify our travel expenses? Right now we're tracking per diem, lodging, transportation, all of that separately?
>> Well, you you will have all of that separately. That wasn't an area that I raised. That is an area that actually is subject to more third party scrutiny than other areas. That's not the first area that I would try to consolidate. It's really all of your different categories of office expenses. You may have office expenses, office supplies, postage, copy paper, et cetera. That's what you have to get down to one. If there aren't a lot of dollars in the travel expenses absolutely fine. Keep in mind you've still got good procedures, because there's a form that you're probably using for reimbursement. That's not the first thing that I would go to simplify.
>> It does get some scrutiny, especially out of state travel tends to get a lot of scrutiny if there's travel outside your service area. The person who combined those I think that they would find and probably we would all find that the detail is still in there. If you need to go in and get it, it's still in there, you still have the backup documentation scanned in, we still have all the information that you need available, should it be scrutinized. It wouldn't be too scary to combine it I don't think.
>> We have a single travel line item in terms of our budget and reporting, but a tremendous amount of detail and notes in terms of which project it belongs to and all that. It doesn't preclude any of that. With a lot of this, Sara and others the next step isn't to just unilaterally do it. You'll need to discuss it with your own finance committee and staff and board so put on the agenda and see what they think. For the cares act report that you mentioned, Paula, Patricia is wondering if CIL should be planning to report on what they've spent from what they've drawn down so far, or what they've spent from the entire grant amount?
>> Both. Every time you do a drawdown from the payment management system you are expected to be able to document exactly what those expenses were and what portion of the Care's Act and what not. You're already reporting on that there will be reporting after the fact as well for sure. ACL did a nice job of letting us know very quickly about the new report that was going to be happening so that you could keep track of the things that they would want to know about the CARE's Act funds.
Most of the database companies that sell sweets, [inaudible] and companies that you use for your information management most of them came right on board and figured out how you separate out your CARE's Act from your other reporting so that you can do it accurately. Hopefully, that's all being done behind the scenes with the carriers that you've purchased for your information management system.
If you're not sure, you should be talking to them about this because otherwise you're going to be sorting it out, I don't know by another category that you've added or something so they should be doing it for all of their customers. Whatever database program you use whatever information system you, use check with them about the support that they're going to give you on that and that would be really, really useful.
>> Paul you did ask us earlier I'm sorry I must have lost this in the questions that came in. Paul's wondering is it too late to apply for an indirect cost rate for this coming fiscal year federal fiscal 2021 which starts September 30th? What's the deadline? Can we do it at any time? I'll let you answer that first of all.
>> I don't know if John wants to weigh in on this but it's not an instant process and we can't even predict how long it will take to get your approval. I don't know if you've got anything more current than that John but I've known people that has taken seven, eight, 10 months to get their approval back.
>> One of the issues is you want to have some fairly current historic financial information. If you're right at a year on here not quite there and there are going to need to be some adjustments. Generally, these are submitted with your most recently completed fiscal year and financial statements or your 990 financial statements if you have audited or reviewed financial statements though.
Then if there are any significant changes you're going to explain them, those are a couple of components of the indirect cost rate proposal. It wouldn't seem like the ideal time to do it right now. If your September 30th year on if your June yes you've probably got that information or close to having it. Whether when it's approved assuming it is approved, it applies retroactively to the calendar year starting October 1st or September 30th I guess, is really going to be up to the federal agency but that's a possibility I don't think they've told us no it can't be Polly.
>> If you already have a rate on the last page of your letter which I hope you all found your letter, I met somebody send me a copy. On the last page of your letter, it tells you that you had a provisional rate what it was when it was effective and when your next one is due or expires and then when your report on the rate is due. Those dates are all on there and I would check that first if you already have the rate in place because you want to work within the schedule that they presented to you.
If you're able to do that if you don't already have a rate to keep then using the de minimis and you're just now doing it. I agree with John, you want a full year's data to work from to give them a good picture so you want to wait until after that the year is paused.
>> Great. Paula, Craig wants to get a little more specific about his question about the PAs, he said he agrees with your advice on the PPE but he wonders specifically about hazard pay. This is my example not his, but could ACL pay I'm assuming the PA hours are covered by other sources. Could the CIL pay an extra $2 an hour to that PA, in recognition of the fact that they're doing hazardous work?
>> I guess the question would be, what's your criteria and can you justify it as being directly COVID related. It could be that your criteria is that they're working with someone who's tested positive. In that case, I don't think you're going to get any pushback if you do something. If you're thinking all PAs are at risk, therefore, we will pay all PAs. This hazard pay, I don't think that would probably [inaudible]. You really have to connect it back.
>> I agree, I would think you would want to create some emergency program for for consumers who have believed they've been exposed or have tested positive, and then work with PAs that are willing to work in that environment and offer that rate to them. That's a really strong case. Good advice. Thanks. Patricia, in just a little lecture context for her question of the CARE'S Act report. It looks like she's reviewed that she said the money section is very short on the form, it only asked for one or the other the way it is worded.
>> I didn't remember that, but then one or the other [chuckles]
>> Then Cheryl is wondering, Part C into fiscal year drawdown has to be spent by September 30. We can't cover any expenses in October with those funds. Rowan actually be careful. It may actually be September 29th.
>> Do check your letter, because it may have given you that other date. If your new grant starts September 30, your old grant doesn't end until the 29th. The issue is you can't carry over funds, and you can only spend funds that were encumbered is the word that they use prior to the last day of your brand. Encumbering funds is not the same thing as pre paying expenses.
Encumbering funds is you've made a decision you've accepted the bed, you put it on your credit card. In some way you made it true that the center was now required to pay that expense. If you've encumbered the funds, John, I don't know if you have some examples of how funds can be encumbered, but if you've encumbered the funds this year, you can pay for them with this year's funds, even though your payment check might not be until next month.
>> I don't think they mean encumbered in the true governmental sense, because that's just a budget commitment. We talked about employment as an example we talked about payroll that's earned in one fiscal year paid in a later fiscal year. That's certainly an example of a cost that is incurred during the fiscal year even if it's paid later. There can be other examples of that.
>> At last payroll of the year is a good one to look at, though, and prorate between your two years so that you made sure you're capturing all your part C funds for this year that are related to them. The days people worked this year. Well, the other things that I've seen people doing are some of the long awaited things that they needed to be doing anyway, some additional improvements in accessibility at their center, sometimes additional technology, although this year, that's less likely because the Cares Act has picked up a lot of that.
You just see things that people have always wished they could get done and now they can, if it's under $5,000, and you don't need prior approval. As we get closer and closer to that September 29th date, it's going to be harder and harder to get prior approval just because of people's work schedules, you might not be able to get ahold of your program officer.
>> A couple other questions have come in Cheryl's asking, this is Cheryl z, but it started a new sentence. She said on the indirect cost rate as a new cell, would we have to or must we use the de minimis rate for our first year course and then she acknowledges that 10% would not cover the actual indirect cost?
>> Well, at the moment, you're not required to do anything at all because you don't have federal funding. There's not a requirement for you to do indirect costs. You can handle everything directly. At the point at which you begin to get federal funding then you apply for a rate based on what information you have available, you're not going to be able to do it based on a year's worth of data, you're going to have to estimate more of it. I think John isn't that-- don't they go ahead and do it or not?
>> I believe that it is what they would do. As you said, the 10% de minimis probably wouldn't cover it so they will have to use estimates, but we always use estimates usually to a very, very small extent. Here it's much bigger because you don't have that history, but you'd probably have a very solid budget and you could use that.
>> Then they'll have you reconcile it. That's a part of the process, so they'll straighten it out as you go along. Other questions? Is that the last one?
>> Yes. Sorry. Just a little delayed in getting my mute feature. I'm not very quick with it. I don't know why. I keep clicking back and forth between the dashboard where my questions are and the video. Denise is wondering about that hazard pay scenario that we described. She says, does hazard pay increase your liability if the staff member gets COVID, and would the center be responsible?
>> Is that a good question.
>> For a lawyer.
>> Yes, [crosstalk]
>> For a lawyer, which we're not.
>> I'm not [crosstalk]
>> Well, I think that's very possible actually. I do want to say that I did not get the feeling that ACL felt very positive about the potential for hazard pay. They really discouraged it sending you didn't really have a sound reason to apply it if you do and so forth. You may be right. People agree that they're in a hazardous situation, then they get extra pay because of it that would probably increase your risk. You could ask your work comp carrier to-- Might be able to tell you something about that.
>> Yes. I would advocate with your payers to just try to get hazard pay included in the state somewhere with whoever's paying for the primary PA services.
>> Yes. Advocate for that way. It makes the most sense of all because with your PAs who are going in-- However that money is being distributed, that's where it ought to come from if possible.
>> Then you could consider this as a last resort, but yes, all of this is pointing to make your case and I would try very carefully and think the answer to Sarah, right. That's not just a unilateral decision it's going to come out of this training. I would have some very, very careful discussions in ACL about this before you move ahead that way. Okay. Another question just rolled in from Paul. Suppose we had an indirect cost rate previously, but we haven't stayed current. The most recent rate expired in March 2019. Do I need to wait until I have new financial statements for this year? They've been audited before I submit another proposal or can just use our most recent audit, which would be from last year?
>> I'm not sure, but I think you would probably be able to go back. If it expired March of 2019, then you've gone well, certainly more than half a year without even a provisional rate. I would go back and submit your actual costs from your last year. I think it would be wise to do that. If you've got the template for it, you've got your done financial statements, the mechanics of it really aren't too difficult and it eliminates a risk that you might otherwise face it not being funded for indirect.
>> Somebody yesterday asked the question about an expired rate. It may have even been you Paul. I don't remember anymore, but there are dates all the way through on this indirect cost rate. They give you a provisional rate, they give you a starting and end date, but when for applying that rate, they tell you when you're going to need to report to them on that rate, they tell you what they're going to need, and all that's in the letter itself.
The thing that would concern me about that expiring in March is, did it have any of the other stuff there? Was the next line, it expired in March and the report is due to them in such and such a date and so on. You all need to really read all of the letter because it's the very end that they put this time. Then you want to make sure that you actually know what those dates are and adhere to them whenever you can.
I don't know that, that answers the question on the table, but I do think that that's an important practice. Anytime you're getting anything regulatory that comes to you in the mail. Somebody needs to read it more than once and make sure you know everything you need to know about what you're supposed to do because they give you dates for that next application to come into them.
>> I know that from certain other clients that HHS isn't always quick to review the final numbers and issue final rates and approve provisional rates going forward, but you don't want to be the ones who are delinquent. You want to have that information into them because it's going to be your finances that will be impacted.
>> Yes.
>> Right. Good advice.
>> How's everybody feeling? Any information overload in the group? We'll keep answering questions until the top of the hour, but I just want to reiterate some of what's been in the chat, and that is, this information is available to you to go over again. On that page that you're viewing the chat in, you can see there that you have all the information you need, all the materials. We'll add some materials at that becomes pertinent as well as the transcripts are there for the transcripts or the videos, or both will be there. Maybe you can tell us a few more details about that, Tim.
>> Yes, I'd be happy to. In fact, we've been working on this during this afternoon session. The transcripts are up through this morning, so you'll see those, excuse me through yesterday, and then we will have today's transcripts up soon, if you hadn't noticed those yet they're on the materials page. Scroll down past the PowerPoint and the fiscal policies manual. Again, there's a bunch of different formats of those two documents. Scroll down to the bottom and you'll see the transcripts.
Then we completed the edit that we made to the day one video, and now we just need to make sure that all the captioning matches up. Our captioning providers helping us with that, and the other video should be ready to roll. Again, it won't be instantaneous, but within a couple of days here we should have those videos added to the site as well.
>> Okay, good. You can revisit this, and so often as you need to you also have our contact information at the end of this tomorrow, and keep that in mind. Did I hear you start asking other questions, Tim?
>> No, you did not, but coincidentally, Gloria just said this is for Paula and John. This is an amazing train with such valuable information. It should be a required training for any new ed or their bookkeeper, and I agree.
>> Thank you.
>> Thank you.
>> That's what we wanted to be as a good resource to you, to really get your teeth into and understand the financial piece. Sometimes when we're in a service provision industry, we don't spend as much time as we should on these, and these are the things that will cause trouble if you don't give them attention. They're the critical issues for sure.
>> Well, that is it. If we want to break just a few minutes early here and reconvene tomorrow morning, then I will make the same offer that I did to please send me any questions in my inbox at timandnicole.org as you process this and think it through, and just let me know, and we'll start with those in our opening tomorrow morning.
>> Perfect. Thank you, everybody.
>> Thanks, everybody. Take care. Have a goodnight.
>> Good night.
>> Goodnight.
>> Bye.