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III. Financial Requirements

  1. STANDARDS FOR FINANCIAL MANAGEMENT SYSTEMS

    All grant subrecipients are required to establish and maintain grant accounting systems and financial records to accurately account for funds awarded to them. As a recipient, you must have a financial management system in place that is able to record and report on the receipt, obligation, and expenditure of grant funds.

    1. Accounting Systems: These records shall include both Federal funds and all matching funds when applicable. Subrecipients shall expend and account for grant funds in accordance with State and local laws and procedures for expending and accounting for their own funds. State and local procedures must ensure compliance with the financial management standards found at the following:

      Additional accounting system requirements are as follows:

      1. Each subrecipient is responsible for establishing and maintaining an adequate system of accounting and internal controls. Each subrecipient is also responsible for ensuring that an adequate system exists for any subcontractors, when applicable.
      2. An acceptable and adequate accounting system:
        1. Presents and classifies projected historical cost of the grant as required for budgetary evaluation purposes
        2. Provides cost and property control to ensure optimal use of funds
        3. Controls funds and other resources to assure that the expenditure of funds and use of property are in conformance with any general or special conditions that apply to the subrecipient
        4. Meets the prescribed requirements for periodic financial reporting of operations; and
        5. Provides financial data for planning, control, measurement, and evaluation of direct and indirect costs.
      3. For Local Governments and Nonprofit Organizations, the Tennessee Comptroller of the Treasury has several publications available on-line for assistance with meeting the Financial Management Systems standards:​
        1. Internal Control and Compliance Manual for Tennessee Municipalities the City Manual
        2. Confidential Drug Funds Manual
      4. Local Governments and Nonprofit Organizations should be familiar with the applicable manuals to assure adherence to the financial requirements contained for managing grant funds. In addition to the OCJP Administrative Manual, and the subrecipient grant contracts, the OCJP staff will use these manuals in the monitoring process.
    2. Accounting Systems Criteria: The subrecipient is free to use any accounting system that the subrecipient has established if the system meets the following minimum criteria:
      1. Receipts should be classified by the source of funding, i.e. – the name and number of the grant to which the costs will be charged. As a matter of convenience, subrecipients are encouraged to use the grant award number assigned to the project by the Office of Criminal Justice Programs, unless currently existing agency coding structures prevents this. If costs attributable to the grant program will include those from sources other than the federal grant, such as match, donations, income earned by the project, or funds from other sources, this should be clearly noted on receipts.
      2. Expenditures should be classified by the budget categories included in the grant application. All expenditure documents, regardless of type, must include the assigned subgrant number. Non-federal matching funds required at the project level must be classified in these same categories.
      3. Entries in the accounting records should refer to subsidiary records and/or documentation that supports the entry and which can be readily located.
      4. Each grant should be accounted for separately. Each year of a continuation grant is regarded as coming from a separate fund source and should be accounted for as such. All project records should reflect the grant number listed on the award document. Subrecipients are prohibited from commingling funds on either a program-by-program basis or a project-by-project basis.
      5. The accounting system must be such as to provide adequate information for the prompt and proper submission of semi-annual and annual financial reports.
      6. The accounting system should be integrated with an adequate system of internal controls to safeguard the funds and assets covered, check the accuracy and reliability of accounting data, promote operational efficiency and encourage adherence to prescribed management policies.
      7. The accounting system should include a system of property records for all equipment (see equipment section).
      8. All required financial records shall be maintained for five (5) years from the date of the final financial report or until all questions arising from an audit have been resolved, whichever is later.
    3. Reporting Irregularities: The recipient is responsible for promptly notifying OCJP and the State of Tennessee Comptroller of any illegal acts or irregularities and or proposed actual actions. Please notify the State of Tennessee Comptroller Hotline at 1-800-232-5454 of any irregularities that occur. Illegal acts include: conflicts of interest, falsification of records or reports, misappropriation of funds or other assets, and/or fraud, waste or abuse. See also Chapter XXI. Sanctions and Termination of Funding.

      Or contact the U.S. Department of Justice, Office of the Inspector General Hotline concerning DOJ contracts or subcontracts. Submit a report online at justice.gov/oig/hotline/contact-contracts.htm or mail complaint with supporting documentation to:

      U.S. Department of Justice Office of the Inspector General
      Fraud Detection Office
      Attention Grantee Reporting
      1300 North 17th Street, Suite 3200
      Arlington, VA 2220
    4. Commingling of Funds: The accounting systems of all subrecipients must ensure that:
      1. Agency funds are not commingled with funds from other Federal agencies.
      2. Commingling funds on either a program-by-program basis or project-by-project basis are prohibited.
      3. Funds specifically budgeted and/or received for one project may not be used to support another. The subrecipient must establish a system to provide adequate fund accountability for each project.
    5. Supplanting of Funds: Federal funds must be used to supplement existing funds for program activities and not replace those funds, which have been appropriated for the same purpose. Potential supplanting will be the subject of application review, as well as pre-award review, post-award monitoring, and audit. If there is a potential presence of supplanting, the subrecipient will be required to supply documentation demonstrating that the reduction in non-Federal resources occurred for reasons other than the receipt or expected receipt of Federal funds.
  1. MATCH REQUIREMENTS
    1. Match Requirements: Federal Grant funds may be used to pay the pre- set percentage of the cost of a project. (see chart below) The remaining non-federal share must be in cash or in-kind from non-federal funds. Match is restricted to the same use of funds as allowed for the Federal funds. Match must be directly related to the project goals and objectives and must be documented in the same manner as grant funded activities.

FUND

TYPE

FEDERAL REIMBURSEMENT RATE

MATCH PERCENTAGE

JAG

Cash

75%

25%

FVPSA

Cash or in-kind

80%

20%

STOP

Cash or in-kind

75%

25%

VOCA

Cash or in-kind

80%

20%

RSAT

Cash

75%

25%

    1. The formula to be used in calculating match and total cost requirements is:

      Federal Funds divided by Federal Reimbursement Rate = TOTAL Cost

      TOTAL Cost multiplied by Match Percentage =TOTAL Match Amount

      1. Match is the grantee's share of the project costs.
      2. Match funds must meet the same criteria as grant dollars:
        1. Restricted to the same use of funds as allowed for the Federal funds
        2. Applicable to the program, allocable, allowable, reasonable and necessary
        3. Allowable according to applicable OMB Guidance
        4. Be in accordance with Generally Accepted Accounting Principles (GAAP)
        5. Cannot be used to match another Federal grant
        6. Cannot be from a Federal source
        7. Conform to special grant limitations and restrictions (for example, some grants require cash match)
        8. Be shown in the approved budget
      3. Funds required to pay the non-federal portion of the cost of each project must be in addition to funds that would otherwise be available for the project.
    2. Cash Match: Cash match (hard) includes actual cash spent by the subrecipient for project-related costs. Accounting records should be verifiable and trace back to source documentation including cash receipts journal, general ledgers, deposity tickets, bank statements, copies of checks/donations, and documentation that the cash match is not from a Federal source, and is not being used to match any other grants.

      Cash match should NOT BE show on line 24, "In-Kind Expense" but should be shown on the line item budget and Monthly Invoice for Reimbursement on the expense line where the cash was expended. For example, if cash match was used to pay salaries and supplies, show how the match on the salaries and supplies line item.

      Cash match may be applied from the following sources:

      1. Funds from State and local units of government that have a binding commitment of matching funds for programs or projects.
      2. Funds contributed from private sources.
      3. Program income and the related interest earned on that program income generated from projects may be used as match provided it is identified and approved prior to making an award.
      4. Funds appropriated by Congress for the activities of any agency of a Tribal government or the Bureau of Indian Affairs performing law enforcement functions of Tribal lands may be used as matching funds.
      5. Otherwise authorized by law.
    3. In-kind Match: In-kind match does not involve cash. "In-kind" is the value of something received or provided, which is beneficial to the program, but for which no cash exchanges hands. Since it is much easier to raise in-kind match than it is cash match, Federal and State guidelines regarding in-kind are strict and require careful documentation. In-kind contributions must be verifiable from grantee records, necessary and reasonable, allowable and not included as a contribution under any other federal award. Examples of allowable in-kind contributions include, but are not limited to:
      1. Donations of expendable equipment
      2. Office supplies
      3. Workshop or classroom materials
      4. Work space
      5. Monetary value of time contributed by volunteer professional and technical personnel and other skilled and unskilled labor if the services they provide are an integral and necessary part of a funded project.
        1. The value placed on donated services must be consistent with the rate of compensation paid for similar work in the organization or the labor market.
        2. Fringe benefits may be included in the valuation.
        3. Volunteer services must be documented, and supported by the same methods used by the recipient organization for its own employees. Grantees using volunteers as in-kind match must ensure the volunteers are performing allowable activities.

          NOTE: The Fair Labor Standards Act defines volunteer as “an individual who performs hours of service for a public agency for civic, charitable, or humanitarian reasons without promise, expectation, or receipt of compensation for services rendered…” 29 CFR 553.101(a). “The 1985 Amendments provide that employees may volunteer hours of service to their public employer or agency provided ‘such services are not the same type of services which the individual is employed to perform for such public agency.’ The phrase ‘same type of services’ means similar or identical services.” 29 CFR 553.103.

        4. The value of donated space may not exceed the fair rental value of comparable space as established by an independent appraisal of comparable space and facilities in a privately owned building in the same locality.
      6. The reasonable value of other donated tangible goods may be used as match. For example, a program may receive donations of used clothing, the reasonable value of which may be used. A funded shelter may also receive donations both from individuals and from companies of food, items such as shampoo and toothpaste for use by victims, toys, supplies such as diapers or formula for victims’ children, and supplies for the program itself such as furniture or computers.
    4. In-kind Match Documentation: Must meet the same standards as documentation for other expenditures. Generally speaking, the documentation should be of the same type as that used if the expense were to be paid directly from agency funds (i.e., original receipts). Clarification: The in-kind donation cannot be recognized as match (in-kind expense) until it is used in the project.  ​
      1. All in-kind matching contributions must be supported by documentation that shows how the value of the contribution was derived. The agency must be able to provide supporting documentation to substantiate the amount shown as in-kind expense.
      2. To document the value of a new item, staple the store receipt to the in-kind donation receipt. If the store receipt is not available, include as much information on the in-kind receipt as possible so that the ‘new’ value can be documented. Suggestions include: the brand name, size, model number and computer print out from store to establish the price of the item.
      3. To document the value of a used item, use a basis for valuation such as IRS Publication 561 Determining the Value of Donated Property http://www.irs.gov/pub/irs-pdf/p561.pdf or the Valuation Guide for Goodwill Donors Goodwill.orgSpecific itemized information about the donated item will need to be included so that the value can be verified. For example, ‘table’ is not sufficient. Include information to distinguish different types of donations: kitchen table, coffee table, or end table. Another example is ‘clothing.’ Itemize and describe the clothing on the in-kind receipt: a woman’s shirt, man’s dress pants, child’s coat, etc.
      4. Subrecipient organizations must utilize a tracking system which clearly shows the source, the amount, the use of these matching funds, as well as the period during which the funds were utilizd in direct support of the project.
      5. The grantee must keep in their grant file an In-kind Receipt which should list, at a minimum, the following items:
        1. Agency Name
        2. Donor name
        3. Donor address
        4. Date of donation
        5. Location of donation
        6. Detailed description of item/service
        7. Purpose for which contribution was made
        8. Value of contribution
        9. Basis for valuation (how value was determined)
        10. Who made the determination
        11. Signature of donor if possible
        12. Name of employee accepting the donation
        13. Signature of employee accepting the donation​
      6. It should be noted that in-kind match can only be charged in relation to direct expenses charged to the grant.  For example, you cannot spend 85% of the direct funds and draw down 100% of the in kind.  The in kind charged must be in proportion to the amount needed to match the cash expenses.  In addition, the in-kind test at the bottom of the invoice must NOT be negative on the last invoice of the grant period.  However, it is preferred that this test is not negative on a monthly basis. 

    The basis for determining the value of personal services, materials, equipment and space must be documented.

    Each subrecipient organization must utilize a tracking system which clearly shows the source, the amount, the use of these matching funds, as well as the period during which the funds were utilized in direct support of the project.

    Clarification: The in-kind donation cannot be recognized as match (in-kind expense) until it is used in the project.  OCJP will be strictly enforcing this clarification as of July 1, 2016.

  1. PAYMENT METHODS

    Currently OCJP utilizes either Interunit Journals (IUJs) or the Invoice for Reimbursement process as methods of payment:

    1. Interunit Journals (IUJs): This method of payment is used for grants funded to State agencies. This payment method reimburses the subrecipient based upon actual costs incurred by the subrecipient in carrying out the activity of the grant. As the subrecipient incurs costs, those costs are conveyed to the funding source (OCJP) following the State of Tennessee Interunit Journal process described below. Following the IUJ processing, deposits (reimbursement) via the recognition of revenue are made to the account of the state subrecipient.

      The Department of Finance and Administration Policy Statement Number 18 establishes the policy for the submission of Interunit Journals (IUJs). In accordance with Policy 18, “no IUJs shall be processed for $1,000.00 or less, unless it is necessary for a department’s fiscal year-end budgetary closing. IUJs of the same nature and between the same departments for less than $1,000.00 may be accumulated and may be processed quarterly once the cumulative amount exceeds $1,000.00”. “Exceptions to this Policy Statement should be submitted in writing to the Director of Statewide Accounting, Division of Accounts, for review and approval.”

      IUJs should be submitted to Department of Finance and Administration, Office of Business and Finance, 20th Floor William R. Snodgrass Tennessee Tower, 312 Rosa L. Parks Avenue, Nashville, TN 37243-1102. Once received, the IUJ is then processed for payment through the Department of Finance & Administration Office of Business and Finance.

      For additional information please see: Policy 18
    2. Invoice for Reimbursement: The invoice is used by non-state agencies to request monthly reimbursement for expenditures incurred by the subrecipient. Subrecipient agencies should invoice monthly, based on expenditures incurred but all subrecipient agencies must request reimbursement at least once per quarter. Funds will be distributed to subrecipients upon receipt of a properly prepared and electronically certified invoice. Funds cannot be disbursed based on budgeted amounts. The expense must have actually occurred before the line item reimbursement can be made. (PLEASE CONTACT YOUR OCJP PROGRAM MANAGER FOR THE PROPER INVOICE FOR REIMBURSEMENT FORM.) Non-state agencies must submit the monthly Invoice for Reimbursement Form electronically by e-mail. Faxed invoices will no longer be accepted.  For Questions and Inquiries, E-mail Maher.MWasef@tn.gov; For Invoicing, E-Mail OBF.Grants@tn.gov. 
  1. YEAR END
    1. Accrued Liability: A State of Tennessee accrued liability process occurs at the end of each state fiscal year (June 30th) and allows non-state agencies an opportunity to receive payment for documented, reimbursable expenses that have not been reimbursed by the State of Tennessee by the time the State's annual conversion period to the new fiscal year occurs. The state’s annual conversion period begins early July (approximately the first week) and continues approximately three weeks. During the conversion period, no payments can be made to state grant subrecipients. In preparation for this conversion period, all non-state agencies will receive a notification letter on/or before June 5th of each fiscal year detailing the proper procedures for fiscal year-end processing and payment of invoices. These procedures will include instructions to establish an accrued liability, if needed, by grant subrecipients. The accrued liability process must be followed, if needed, to ensure reimbursement for subrecipient expenses that are non-reimbursed prior to the year-end conversion period.
    2. Obligation of Funds: An obligation is a legal liability for which funds are committed and disbursement is expected to occur during a specified time period. For example, if you place an order for a piece of equipment to be purchased with grant contract funds, the order is an obligation. Obligations must occur during the grant contract budget period. An obligation occurs when funds are committed, such as in a valid purchase order or requisition to cover the cost of purchasing an authorized item on or after the begin date and up to the last day of the budget period in the award. Any funds not obligated by the subrecipient by the end of the budget period will lapse and revert back to OCJP. The obligation deadline is the last day of the budget period unless otherwise stipulated. (Example: If the budget period is 7/01/15 to 6/30/16, the obligation deadline is 6/30/16.)