Policy and Procedures for Capital Fund Payment Processing ...



Policy and Procedures for Capital Fund Payment Processing and AccountingBACKGROUND INFORMATIONPHAs with Public Housing units receive funding from the Capital Fund Program to assist with capital improvements of their public housing stock. The guidelines for properly administering the Capital Fund grants are found in the Capital Fund Guidebook dated April 1, 2016. However, the PHA should establish a policy and procedures for Capital Fund payment processing and accounting procedures.The Line of Credit Control System (eLOCCS) is HUD’s primary internet-based grant disbursement system. eLOCCs provides for the drawdown of funds and querying and reporting capability for the majority of HUD programs, including the Capital Fund Program.This document provides two (2) samples of a PHA Capital Fund payment processing and accounting policy and procedures.Sample 1 – Small PHAs with a Fee Accountant. This sample provides an example Capital Fund payment processing and accounting policy and procedures for small PHAs who do not have a dedicated CFP coordinator. These PHAs will also typically have a fee accountant who prepares all financial statements.Sample 2 – PHAs with a CFP Coordinator and In-House Accounting. This sample provides an example Capital Fund payment processing and accounting policy and procedures for large PHAs with a dedicated CFP Coordinator. These PHAs will typically perform their own in-house accounting functions.PHAs can simply cut and paste one or both of the samples into their policy and procedures document and modify as needed.OTHER ITEMS FOR CONSIDERATIONThe following provides items that the PHA needs to consider when developing the policy and procedures for the Capital Fund program processing and accounting and the major assumptions that were used to develop the sample policy and procedures.Assumption – The Executive Director will handle the CFP activity. (Small PHAs with a fee accountant)Assumption – CFP grants will be administered correctly and all expenditures are for eligible expenses. (All PHAs)Assumption – CFP grants will be obligated and expended in a timely manner in accordance with grant requirements. (All PHAs)Reminder – This policy assumes the PHA is already familiar with the CFP program, eLOCCS, budget line items (BLIs), CFP planning, CFP annual submission process, spreading of CFP funds in eLOCCS, etc.SAMPLE 1 – SMALL PHAs WITH A FEE ACCOUNTANTCAPITAL FUND PAYMENT PROCESSING AND ACCOUNTING POLICYThe objective of this policy is to ensure the proper payment processing and accounting of Capital Fund Program (CFP) expenditures. It is understood that the CFP funds are limited to be used solely for the development, modernization and operation of Low Rent Housing Program projects as allowed per HUD regulation and the CFP guidebook. Unless specifically allowed by HUD, costs funded by the CFP Program for other programs are strictly prohibited.CAPITAL FUND PAYMENT PROCESSING AND ACCOUNTING PROCEDURESWhen processing payments of CFP expenditures, the following procedures will be followed for: 1) payment of invoices; 2) drawdown of funds; 3) monitoring; and 4) reporting of CFP funds.Payment of InvoicesAll CFP invoices are to be reviewed and clearly marked as approved and documented to show that the source of funds for payment are CFP grant funds by the Executive Director prior to payment.The Executive Director will specify the general ledger code, including the BLI account to be used for payment processing on the invoice before providing the invoice to the accounts payable clerk.Under no circumstances, should a payment be made if the PHA has not drawdown and received the respective CFP funds.With the exception of funds associated with BLI 1406 “Operations”, PHAs have three (3) business days to issue and mail the check once the CFP funds are received.The Executive Director/accounts payable clerk will specify the BLI account and CFP grant year on the check voucher prior to sending the check voucher to the fee accountant for financial statement processing.Drawdown of FundsFor each drawdown, the Executive Director will print the associated eLOCCS Voucher Payment form from the eLOCCS system.The Executive Director will document the check number(s) and vendor(s) associated with each CFP draw (i.e., the eLOCCS Voucher Payment form). In addition, each individual draw shall be numbered for reference purposes.A copy of each draw shall be submitted to the fee accountant to ensure proper reporting of the grant drawdown.With the exception of funds associated with BLI 1406 “Operations”, in no case shall a draw be made without the proper approved invoices.MonitoringThe fee accountant’s monthly financial statements will include a CFP report for each grant which will be reviewed by the Executive Director for proper coding and accuracy.Any difference between funds advanced and expended as reported on the financial statements must be explained in writing by the Executive Director and be part of the next Board Meeting package. Note – Discrepancy between funds advanced and expended may reflect non-compliance as the PHA likely has not drawn the CFP funds prior to making the vendor payment (i.e., the vendor was paid with operating funds) or the PHA has drawn down CFP funds but has not paid the vendor within the required three (3) business days after the funds became available.The CFP reports will be filed by the Executive Director for future audit verification.ReportingThe general ledger balances will be used for the preparation of the final Performance and Evaluation report submitted to HUD as part of the closing process of the CFP grant. As part of the documentation, a copy of the grant report printed from the fee accountant’s general ledger system is to be attached to the PHA’s copy.For the financial statements to be prepared by the fee accountant, costs are required to be tracked by BLI account number and in a systematic manner that also provides a basis for the accounting and preparation of the Financial Data Schedule (FDS) on a GAAP basis.SAMPLE 2 – PHAs WITH A CFP COORDINATOR AND IN-HOUSE ACCOUNTINGCAPITAL FUND PAYMENT PROCESSING AND ACCOUNTING POLICYThe objective of this policy is to ensure the proper payment processing and accounting of Capital Fund Program (CFP) expenditures. It is understood that the CFP funds are limited to be used solely for the development, modernization and operation of Low Rent Housing Program projects as allowed per HUD regulation and the CFP guidebook. Unless specifically allowed by HUD, costs funded by the CFP Program for other programs are strictly prohibited.CAPITAL FUND PAYMENT PROCESSING AND ACCOUNTING PROCEDURESWhen processing payments of CFP expenditures, the following procedures will be followed for: 1) payment of invoices; 2) drawdown of funds; 3) monitoring; and 4) reporting of CFP funds.Payment of InvoicesAll CFP invoices are to be reviewed and clearly marked as approved and documented to show that the source of funds for payment are CFP grant funds by the CFP Coordinator prior to payment.The CFP Coordinator will specify the general ledger code, including the BLI account to be used by the finance department for payment processing on the invoice before providing the invoice to the finance department. If the PHA is using the asset management model, the general ledger code will include the project number for reporting purposes.Under no circumstances, should a payment be made if the PHA has not drawdown and received the respective CFP funds.With the exception of funds associated with BLI 1406 “Operations”, PHAs have three (3) business days to issue and mail the check once the CFP funds are received.The account payable clerk will review the general ledger code upon entering the invoice for payment processing and verify the proper CFP grant year and BLI account.Drawdown of FundsFor each drawdown, the Finance Director will print the associated eLOCCS Voucher Payment form from the eLOCCS system.The Finance Director will document the check number(s), contract number(s) and vendor(s) associated with each CFP draw (i.e., the eLOCCS Voucher Payment form). In addition, each individual draw shall be numbered for reference purposes.A copy of each draw shall be submitted to the Finance Department to ensure proper reporting of the grant drawdown.With the exception of funds associated with BLI 1406 “Operations”, in no case shall a draw be made without the proper approved invoices.MonitoringThe PHA’s monthly financial statements will include a CFP report for each grant which will then be reviewed by the CFP Coordinator to ensure that the accounts payable clerk entered the correct general ledger and BLI codes. The CFP Coordinator will confirm their review by initialing and dating the CFP reports.Any discrepancy between funds advanced and expended as reported on the financial statements must be explained by the CFP Coordinator and Finance Director in a joint memo to the Executive Director. Note – Discrepancy between funds advanced and expended may reflect non-compliance as the PHA likely has not drawn the CFP funds prior to making the vendor payment (i.e., the vendor was paid with operating funds) or the PHA has drawn down CFP funds but has not paid the vendor within the required three (3) business days after the funds became available.The signed CFP reports will be given to the Executive Director for his/her review and filing for future audit verification.ReportingThe general ledger balances will be used for the preparation of the final Performance and Evaluation report submitted to HUD as part of the closing process of the CFP grant. As part of the documentation, a copy of the grant report printed from the general ledger system is to be attached to the PHA’s copy.For the financial statements to be prepared by the finance department, costs are required to be tracked by BLI account number and in a systematic manner that also provides a basis for the accounting and preparation of the Financial Data Schedule (FDS) on a GAAP basis. ................
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