Posted by Christina Bell, CPA
With recent and upcoming changes in Delaware grant-in-aid, it may be helpful for nonprofits to re-familiarize themselves with House Bill No. 230, commonly referred to as the Fiscal Year Ending June 30, 2016 Grant-in-Aid Bill, and begin learning about anticipated changes to subsequent grant-in-aid bills.
Nonprofit organizations are eligible to apply for grant-in-aid appropriation once they have been incorporated and operating for a two-year period prior to June 30 of the fiscal year in which they are applying. For example, agencies who applied for fiscal year 2016 grant-in-aid must have been incorporated and in operation for at least two years prior to July 1, 2015. For fiscal year 2016, as in prior fiscal years, funding is paid in 4 equal installments beginning on July 1. Installment payments may be delayed or withheld for several reasons including, but not limited to, utilizing the funds for purposes not intended by the General Assembly and seizing operations. Additionally, as in prior fiscal years, it is the intent of the General Assembly that no grant-in-aid funds appropriated in fiscal years 2016 and 2017 be utilized by agencies to purchase capital equipment, relocate, rehabilitate, renovate, or purchase buildings.
Two significant sections of House Bill No. 230 are as follows and meant to increase agency accountability.
- Section 7 – This section states that during fiscal year 2016, the Joint Finance Chairs and the Office of the Controller General will conduct random in-depth assessments of certain agencies awarded grant-in-aid. Assessments will include, but are not limited to, a review of the agency’s performance measures, program evaluation metrics, site visits, and meetings with Executive Directors and Board of Directors.
- Section 31 – This section states that all grant-in-aid funding shall be maintained in a separate bank account and not co-mingled with any other funding. Upon request of the Controller General, agencies must provide bank statements showing all transactions using grant-in-aid funds.
John Baker of Delaware Alliance for Nonprofit Advancement (DANA) received clarification from the Controller’s office regarding these two items. The first clarification received was that if an agency receives grant-in-aid funds directly deposited electronically by ACH, the agency should transfer the funds to a separate account in a reasonable timeframe. In cases where the funds are combined with other sources to cover payroll or other program expenses, the agency simply needs to be able to show the transfers from the grant-in-aid account. So an accounting journal entry may be: “Payroll transfer out of GIA Account to General Account for portion of payroll expense as described/approved in GIA Budget Application and Award.” Additionally, agencies must follow Generally Accepted Auditing Standards of the American Institute of CPAs (GAAS) for restricted grant accounting. The Controller General’s office also clarified with John Baker that the random assessment will be focused on the performance measures and program evaluation proposed in the recipient agency’s application, not agency-wide performance measures and program evaluations; however, the random assessment will have the authority to look at all aspects of the agency’s operations. The full article written by John Baker describing grant-in-aid clarification can be found here
Fiscal year 2017 grant-in-aid applications were due November 2, 2015. It is the intent of the Joint Finance Committee (Committee) to review these applications and give consideration to the diversity of the agency’s revenues, including the percentage of revenues that are from the State via pass through, agency grants, or contracts. The Committee will also consider the percentage of an agency’s budget allocated to salaries and benefits.
It is further the intent of the Committee that all fiscal year 2018 applications require an audit prepared by a certified public accountant and issued within the past three years of the date the application is due. Currently, if an agency is unable to submit an audit they may provide a copy of their most recent financial statements and the reason(s) why they have chosen not to have them audited.
Understanding and familiarizing yourself with grant-in-aid changes can assist in ensuring all application criteria is met and reduce the risk for installment payments being delayed or withheld. Therefore, it is our recommendation that agencies take the time to thoroughly read House Bill No. 230 and all subsequent bills as they are signed into law.