Nonprofit Frequently Asked Questions (FAQ's)





1)  Is accrued vacation a reimbursable cost for purposes of invoicing the City?

In most cases accrued vacation is not a reimbursable cost when invoicing the City.  Even though in most cases an agency cannot compel an employee to take vacation time on specific dates, the City is, in most contracts, reimbursing costs for a term with a specific beginning and specific end date:  if vacation time is earned but not taken within the grant period then accrued vacation cannot be added to the costs billed to the City.  However, while options may be limited (for example, accrued vacation is not an allowed expense under most Federal funding sources) the appropriate treatment for accrued vacation depends on the funding source:  nonprofit agencies should talk to the contract monitor(s) from the City department with which they are contracting and determine the best course of action.

Online research conducted by the Controller’s Office Financial Audits Division indicates that many organizations’ personnel policies require their staff to take their vacations within certain grant cycles. Although not all nonprofit agencies may feel that they want to do this, for most organizations this cost reimbursement method evens out over more than one year because -- in most cases -- there are employees who take less vacation than earned during a fiscal period and those who take more vacation than earned during that same fiscal period.  Because of this, there is a very practical reason that most government agencies do not fund accrued vacation:  in many payroll systems it is very difficult to look at salaries expense in any given year and determine if some of that salaries expense represents a payment for vacation time actually accrued in a prior fiscal period.  Under a strict accrual method, those costs would already have been reimbursed out of prior year contract funds.  This becomes especially difficult to track when staff moves from one program with one funding source to another, and when staff accrue vacation at higher dollar values as earnings increase.   

2)  What are the specific requirements of the City's Sunshine Ordinance for nonprofit contractors?
If you receive more than $250,000 annually in total City funding, you are subject to the Sunshine Ordinance.  Information can be found on the City's website and requirements include two open board meetings a year, public access to records, and striving for community representation on the Board.

3)  What are the City's guidelines for indirect costs?
Indirect costs / cost allocation is a complex subject, and agencies should be familiar with federal and local guidelines.  Only actual indirect costs (as opposed to budgeted indirect costs) should be charged, and there may be caps affecting the City as a pass-through agent stemming from the original funding source.  Federal guidelines exist and include OMB Circular A-122.   The Controller's Office will be providing an information session on cost allocation on June 7, 2005.    For information and to RSVP, please see the Controller’s website and the “resources for nonprofits” link  ).

4)  Does the City have requirements as to the specific types of documents that fiscal agents should collect from sub-grantees?
Each contract or grant agreement spells out the type of cost evidence that must be submitted along with every invoice. Aside from these requirements for reimbursement, a fiscal agent must have a process in place for determining that it is obtaining assurance that the financial information submitted by sub-grantees is reliable. This might include requiring extensive documentation (up to but not necessarily including copies of canceled checks or other proof of payment) for an initial period, followed by site visits by the fiscal agent during which transactions are traced to source documents and cancelled checks on a sample basis.  Audits conducted by the City will include reviews of documentation for goods and services provided by sub-grantees, and sub-grantees should be made aware that the City’s right to audit includes sub-grantees.

5)  Since by California law exempt staff are not paid for hours worked, do exempt staff have to keep timesheets?
The City rarely reimburses for exempt staff on an hourly basis and understands the realities of exempt staffing. Time sheets are required documentation of salaries, exempt or not, and functional time sheets (time sheets broken down by funding source) can be required in cases where direct salaries are allocated to more than one contract.

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