All levels of government are taking more care to ensure that grant money is spent as intended. If your organization finds itself with unspent money at the end of a grant program there is a good chance you will have to return it. In this article we will look at strategies you can use to ensure your organization appropriately spends all grants received and, consequently, is not in the position of having to return unspent funds at the end of the grant period.
Different rules and regulations for reporting on funds spent apply for the various levels of government. These rules range from the very detailed annual reports required by the Ministry of Community and Social Services (the Annual Program Reconciliation Reports) to no financial reporting requirements at all (many of the municipal grants). You need an internal grant monitoring system that will work for a wide variety of grants.
We recommend that for each grant program you prepare a summary including:
- The fiscal period covered by the grant.
- Expected amounts to be received and the date these payments are to be received.
- Reporting requirements at the end of the grant program and the date the reports are due.
- Situations that will result in repayment of grant monies.
The grant summaries should be reviewed periodically throughout the year. A month or so before the end of each grant program you should take necessary steps to ensure all money that should be spent has been spent. Action before the expiry date of a grant program is essential.
Allocation of administrative expenses
Organizations with a multitude of funding sources should appropriately allocate administrative (i.e. non-specific) expenses across their various grant programs. Expenses such as the Executive Director’s salary, telephone and bookkeeping are all necessary for your organization to function. Consequently, you are justified in allocating a portion of these costs to your program unless doing so is expressly prohibited by grant regulations. Remember that all allocations are arbitrary. There is no correct amount or percentage to allocate. Consequently, make an allocation that is both reasonable in the circumstances and results in the desired result in your organization’s funding reports.
Following are some planning ideas to help you manage grants received from some of the more common funding sources. We would appreciate hearing your experiences with grant programs not listed as well as additional suggestions for programs discussed below. We will share suggestions and tips with our readers.
Municipal government salary grants
Direct Operating And Wage Enhancement Grants
Salary grants for childcare workers are issued on an April to March basis. By May of each year all organizations must complete a Grant Utilization Form (“GUF”). On that form organizations must list amounts received and amounts paid out. Any unspent funds will be deducted by the Ministry commencing in the fourth quarter (i.e. January to March) of the following calendar year.
Many childcare organizations pay out less grant money than they receive as a result of temporary reductions in the size of their childcare programs. To minimize these shortfalls consider the following:
- Ensure you have at least 10% of the grant allocated to statutory benefits and administrative costs. We are aware of some cases where the Ministry allows 15% on an annual basis.
- Consider giving existing staff a one-time bonus to use undistributed amounts resulting from temporary staff reductions. Note that salary grants, exclusive of pay equity, to any one staff person cannot exceed approximately $9,000 per year.
- Starting in 1997, the Ministry is allowing centres to allocate undistributed amounts resulting from temporary staff reductions as “non-mandatory” benefits. Amounts on the non-mandatory benefit line in the GUF cannot exceed actual non-mandatory benefits paid (e.g. payments for the medical, dental and RRSP plans). Please note that claiming an amount on this line could have repercussions for preparation of your Metro Children’s Services budget.
Ontario Ministry of Children and Youth Services and Ministry of Community and Children’s Services
Grants Requiring An Annual Program Expenditure Report
Many programs funded by the Ministry of Children and Youth Services require a Transfer Payment Annual Reconciliation (“TPAR”) to be filed and in some cases audited. The report must generally be filed no later fourth months after your organization’s year end. The TPAR essentially requires listing of grant money received and related expenditures made during the funding period. The funding period generally follows an April to March fiscal year. Be careful not to factor in inadmissible expenses when calculating allowable expenses paid under Ministry grants. Inadmissible expenses include, among other things:
- Vacation pay accruals
- Accruals for retroactive collective bargaining provisions
- Amortization and other non-cash expenses
See the technical notes attached to the TPAR for details.
We strongly recommend that all organizations required to file an APER carefully review actual receipts and disbursements related to their grants in February of each year. Relevant program expenditures should then be made in March if there are unspent funds available.
The Ministry is currently requiring a refund of any surplus on a dollar-for-dollar basis. The Ministry’s request for repayment of unspent amounts is delayed until the TPARs are analysed. Currently Ministry analysis is running up ot a full year after submission of the reports. This delay in the timing can have very unfortunate repercussions, especially where organizations have fallen on lean times making repayment of past surpluses in the current year difficult or next to impossible.
Ministry of Housing
Ministry of Housing reporting requirements and forms are complex. The fiscal period is generally April to March. Amounts under spent are currently recovered by the Ministry on a dollar-for-dollar basis. In addition, if under-expenditures are thought to result from a permanent downsizing in a project then the Ministry will permanently reduce ongoing funding.
Advanced planning in February of each year is essential to ensure that actual expenditures are at least as great or greater than planned.
Ministry of Health
Program funding for non-institutional care generally requires completion of a reporting form similar to the TPAR (see above) on an annual basis. The funding year is also generally April through March. Expenditures reported must correspond with those reported in the audited financial statements except for inadmissible expenses, which include reserves for items ordered but not yet received, vacation pay accruals, amortization and other non-cash expenses. Organizations should ensure the appropriate HST percentages are included in the expense accounts as reimbursement rates vary.
For many years organizations were not permitted to move expenditures between lines. For example, overspending in salaries was not permitted to be offset by under spending in the office and administration category. Recoveries were a regular occurrence. The Ministry appears to have relaxed their requirements and is now more focused on the excess or deficiency of expenses over revenues for the entire program. Recoveries of any total excess of revenues over expenses are generally required on a dollar-for-dollar basis. Any deficit, of course, must be covered by the organization.
Toronto Children’s Services
Most childcare centres are familiar with the circumstances that will result in a reduction in per diem rates or a recovery of amounts previously received. Unlike the province, Toronto ‘s fiscal period is based on the calendar year. Following is a brief summary of events that could lead to a recovery or reduction in amounts received:
- Centres reporting expenditures less than 90% of those budgeted will automatically trigger a complete retroactive reworking of their annual budget by Toronto Children’s Services. Toronto will recalculate per diem rates using actual expenditures and, as importantly, actual enrolment levels. If the revised per diem rate based on actual expenditures and enrolment is lower than that actually paid, the excess will be clawed back.
- If your organization’s accumulated surplus exceeds three months of operating expenses then a recalculation of per diem subsidy rates will be done and could result in a recovery. In our experience Toronto bends over backwards to avoid a recovery in these circumstances. Centres are able to carry forward a surplus to the following year if a loss was subsequently incurred. In addition, in some cases recoveries can be forestalled where a centre provides Toronto with a plan for spending the excess.
- In certain circumstances a reduction in fees charged by a centre to its full-fee paying parents can result in a claw back by Toronto Children’s Services even if subsidized rates are well below the full fee rates. Be sure to review any planned fee reductions with your Toronto consultant prior to implementation.