Setting Up Adequate Financial Systems

Setting Up Adequate Financial Systems

As jurisdictions begin to think about designing financial systems for their HOME and CDBG programs, there are some key principles of financial management that should be considered. These key principles of financial management are:

  • Protecting funds, property and other assets against loss or misuse;
  • Recording receipt and use of funds to be able to account for where all funds came from and how all funds were used;
  • Recording assets and liabilities to be able to account for what is owned and what is owed;
  • Retaining source documentation to support receipt and use of funds;
  • Ensuring that fund expenditures are consistent with the budget, as it may have been amended, and are not in violation of any of the restrictions or prohibitions that apply to the Federal assistance;
  • Managing cash effectively to avoid unnecessary borrowing costs and to take proper advantage of opportunities to earn interest;
  • Ensuring that costs are reasonable and properly allocated;
  • Reporting complete and current financial results to permit an accurate assessment of financial results; and
  • Using audits to strengthen financial management systems.

In order to comply with these requirements, seven elements must be present in a jurisdiction’s or subrecipient’s financial management system:

  • Accurate, current, and complete disclosure of the financial results of each Federally-sponsored program, including sources and application of funds.
  • Comparisons of outlays with budgeted amounts for each award.
  • Sound internal controls over purchases, cash disbursements, and cash receipts, including segregation of duties and proper authorization and approvals of transactions.
  • Periodic internal and external audits or evaluations.
  • Record retention policies.
  • Documentation of accounting policies, particularly those pertaining to cost charging, timesheet preparation, and procurement.
  • An accounting system that meets the following requirements:
    • Segregation of unallowable costs from allowable costs;
    • Segregation of direct from indirect costs;
    • Proper assignment and allocation of costs to functional classifications;
    • Matching of income and applicable credits with associated expenditures;
    • Timely reconciliation of accounts and subsidiary ledgers;
    • Time-charging systems that allocate labor costs among program activities and comply with OMB Circular A-87 or A-122, as applicable;
    • Consistency in accounting treatment over time and from one function or award to another;
    • Timely and accurate financial reporting; and
    • Maintenance of proper supporting documentation for all transactions, estimates, and calculations.

Consulting Services We Provide

  • Review public works preconstruction contracts
  • Monitor DIR contractor/subcontractor certified payrolls
  • Audit labor classification for each worker employed
  • Review DIR pre-DAS 140/142 submissions
  • Review CAC training fund contributions form CAC-2
  • Review DIR Fringe Benefits Statement PW-26
  • Monitor DIR wage determinations
  • Audit fringe benefits allowances
  • Review DIR holiday payment requirements
  • Audit DIR travel & subsistence requirements
  • Caltrans Labor Compliance
  • County of Sacramento Labor Compliance
  • City of Los Angeles Labor Compliance
  • Los Angeles Unified School District Labor Compliance
  • Federal Davis-Bacon Project Monitoring
  • Federal DBE Implementation & Review
  • Federal FAA AIP Goal Setting
  • DIR & Davis-Bacon Training
  • DIR Civil Wage Penalty Review
  • Local-Hire Review (e.g., San Francisco)
  • Skilled and Trained Workforce

Give us a call to discuss your labor compliance requirements.

This email is intended for general information purposes only and should not be construed as legal advice
or legal opinions on any specific facts or circumstances.

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