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Small Business

Your Small Business



Office of Small Business Development Centers

Friends and Foes

While it’s uncommon to have a struggle with our partners in the
SBDC program, it does happen on occasion, and for a variety of
reasons. A surefire way to find these people is to come in with
guns blazing, or to come in to their offices and their facilities
assuming that they don't know how to run their program or
manage their finances. One of the most powerful tools you have,
is your humility and ability to ask for their help in understanding
their systems. Over the course of time you will find that out of
multitude of different schools and colleges, there will be at least
just as many different ways of doing the same task in
documenting the same activities. Based on this fact, it is
important to remember that part of your task is to try and figure
out what our partner is doing to manage their finances and
activities in a reasonable and auditable manner. If we can figure
it out, and they can help us figure it out, then the chances are
that we’ll successfully meet our objectives.

Office of Small Business Development Centers

Financial Branch
September 2007
Prepared by: Office of Small Business Development Centers /Financial Branch
Edition: September 2007


Office of Small Business Development Centers

Section I

As the SBA’s Financial Examiner (FE), you will be responsible for the financial
management of the program. The key criteria governing this arena is 13 CFR §
130.350 (b), which states that the "SBDC Director shall direct and monitor
program activities and financial affairs of the SBDC network to deliver effective
services to the small business community, comply with applicable laws,
regulations, OMB Circulars and Executive Orders, and implement the Cooperative
Agreement." It is your responsibility to ensure that the SBDC director
understands and complies with this critical criteria. This function is known as
financial control
financial control. The criteria listed under Section XX of this guide will be your
primary tools, in addition to:
Notice of award;
Program announcement;
Related memoranda;
Common business practice; and
the attached checklists.

conflict You will apply conflict management techniques and sound business judgment in
management this arena, which includes problem solving, negotiating, and disputes resolution.
Conflict management is most often applied to deal with the conflict arising from
the program's terms and conditions and the recipient’s application of them in
their financial management policies and systems. An understanding of the
recipient's financial policies and the SBDC network's guidelines are important
concepts to apply to achieve a win-win situation. You should approach financial
management from the following perspective/goal: any financial management
system can be adapted to support the implementation of the SBDC
program's financial requirements. It is your job to ensure that you provide
the recommendations to assist the SBDC network to achieve this goal, through
you financial analysis.

Before we begin Before we begin, let's define some key concepts that are unique to the financial
management arena: financial control and the difference between "accounting
management" and "financial management."

Definition Financial control involves the use of financial measures to assess organization
financial control and management performance. The focus of attention is on financial results,
provides a counter-point to the balanced scorecard view that links financial
results to the SBA's designated drivers. Financial measures do not identify what

Prepared by: Office of Small Business Development Centers /Financial Branch
Edition: September 2007

is wrong, but they do provide a signal, or at the very least that expectations were
not met, and that attention, explanation, and possibly even action are needed.

When the SBA applies financial control tools to evaluate SBDC networks, the
resulting information is usually used internally; and is not usually distributed to
outsiders. The following table will help in understanding the difference between
financial accounting and managerial accounting:


financial vs. Audience External: involves the SBA, Internal: involves the SBA, SBDC
and other external network and other internal
managerial stakeholders stakeholders
Purpose Report on past performance Inform internal decisions made by the
to external parties; provides employees and managers: feedback
a basis for SBA and the and control on operating
recipient to contract. performance.

Timeliness Delayed: historical Current: future oriented

Restriction Regulated: rules driven by No regulations: systems and

s generally accepted information determined by
accounting principles and management to meet strategic and
government authorities. operational needs.

Types of Financial measurements Financial plus operational and

informatio only. physical measurements on processes,
n technologies, suppliers, customers,

Nature of Objective, auditable, reliable, More subjective and judgmental:

informatio consistent, precise valid, relevant, accurate

Scope Highly aggregate: report on Disaggregate: inform local decisions

entire network and actions that may be consolidated
as one report, but are separate
actions under separate operational

Source: Atkinson, A. A., Kaplan, R. S., Young, S. M., (2004). Management

Accounting, 2nd Ed. Pearson Prentice Hall Upper Saddle River, NJ

Prepared by: Office of Small Business Development Centers /Financial Branch
Edition: September 2007

What’s reasonable?
In its simplest form, a reasonable cost has a rational
basis of value and a bona fide purpose. A rational basis
in value may be established through competitive
purchasing, institutional experience, and local market
conditions. A bona fide purpose is one that is
traditionally accepted as necessary for the successful
implementation of the program in accordance with its
guidelines. Some examples of unreasonable
expenditures might include costs of items or services
solely for the benefit of an individual and not the
program; purchase of items which showed no particular
usefulness to the program; or the charge of a lump
sum payout to a retiring employee which reflects an
accrued benefit well exceeding the term appointment
to the SBDC program.

The FE performs the tasks of financial management for the OSBDC; the SBDC
director, on the other hand, performs the tasks of accounting management.
This can be the cause of conflict, because the FE responds to regulated
restrictions; while the SBDC director responds to the management and strategic
operational needs of the recipient. Interpersonal and negotiation skills are used
to bring both parties together for the integrity and benefit of the SBDC program.
When does the The FE begins the implementation of financial management upon receipt of the
FE begin the
assigned networks from the Director of Financial Analysis, OSBDC. This occurs at
of financial the end or beginning of the Fiscal Year. The FE starts by reviewing past reports,
management? event planning, and preparation of the notification letter.

Prepared by: Office of Small Business Development Centers /Financial Branch
Edition: September 2007

This guide will provide guidance for the following financial management
In this guide processes:


Introduction I 2
Available Tools II
The Assessment Tool and Levels III
Examination Preparation IV
The financial management objectives and processes V
Previous corrective actions
Service center monitoring
Cash disbursements
Reported separately as:
Federal outlay, and
Cash match outlay
In-kind outlays (also known as third-party
contributions, a form of non-cash match)
Indirect cost (may include a form of non-cash match)
Program income receipts and disbursements
Other management objectives
Report preparation VI
Financial examination feedback VII
Changes in scope VIII
Closeout IX


1. Notification Package
2. SF 269 package
3. Lead Center Work Program
4. Service Center Work Program
5. Summary of findings
6. Worksheet
7. File Index
8. Follow-up Validation Report

Prepared by: Office of Small Business Development Centers /Financial Branch
Edition: September 2007

Section II

Available Tools
The tools that are used for the SBDC financial examination are as follows:
• grant file
o proposal
o notice of award
o SF 269 package
o Associated SF 270
o Letters between the SBA grants manager and SBDC director
pertaining to financial issues and requirements
o Carry-over documentation to include the same as above.
• Applicable program announcement
• 13 CFR 130 and 143
• OMB Circulars A21, A87, A102, A110, and A122
• SBDC network’s complete notification package
• Laptop containing Word and Excel
The tools needed for each objective will be provided for each of their processes
as they are presented.
An additional tool; that you may wish to invest in, is a financial management
reference guide. There are many that can be found in the business section of a
good book store; or by accessing or

annotate report “annotate report” is a term used through-out to express the process that the FE
uses to take notes and then later transfer those notes to the draft and final
financial examination report.

summary sheet A summary sheet should be prepared for each examination to accumulate,
consolidate, and analyze conclusions made as a result of the segmented
examination procedures. Work-paper conclusions should be used to consolidate
the work performed linking the examination steps performed during the review
process. To the extent practical, summary sheets should be developed as the
exam progresses. The summary sheet should contain at least one entry for each
specific examination area.
• Follow-up on Prior examinations
• Service Center Monitoring
• Cash Disbursements (Federal and Cash Match)
• In-Kind Contributions
• Indirect Costs
• Program Income

Prepared by: Office of Small Business Development Centers /Financial Branch
Edition: September 2007

There should be a purpose for each examination function. It should normally be

tied to a specific objective. Without a purpose there are normally no useful
results. Know your purpose. Know your objective, only include in your write-ups
what is necessary to clarify or make your point. Include what will be necessary
for the Program Manager to pull from your summary write-up.
For each examination step, ask yourself; how the results contribute to the
accomplishment of the examination objectives? Will the results be usable in your
Where deficiencies were found, the entries should summarize the facts, causes
and effects, and the action recommended. As appropriate, comments on weak or
strong internal control features and other important points should be included.
Summary sheets should be cross-referenced to other working papers and the
draft report.

summary of A summary of findings, includes but is not limited to, can be found under
findings Attachment 5.

what is a A finding is defined as a:

• Condition
• Criteria(i)
• Cause
• Effect
• Recommendation(s)
As the examination is conducted, the FE sets up a work-file to record all of
processes that were applied. As these processes are recorded, the FE may
encounter a finding.

Prepared by: Office of Small Business Development Centers /Financial Branch
Edition: September 2007

elements of a finding
definition A finding develops a concise statement of the condition and resultant effects. The
statement of condition should be clear, the significance or degree of the problem
should be shown.

Condition the problem or finding itself

What is it?
What is defective?
What is deficient?
What is in error?
What is the situation that exists?
Is the problem isolated or systemic?

Criteria(i) the measuring standard applied

What standard are you measuring against? i.e.,
laws, regulations, directives, circulars, notice of
award,good management practice, etc.
What are the requirements or expectations?

Cause the fundamental reason why the condition

Answer: who, what, when, where, why, and
how the condition came to be?
For example: Who is responsible for the

Effect what was the result?

Expresses the significance of the deficiency in
terms of cost, performance, etc, (so what, is it

Recommendation possible corrective action

Actions needed to correct the immediate
problem and to improve procedures and
controls to avoid recurrence of the problem in
the future.
Keep in mind you cannot have a finding
without a recommendation and you cannot
make a recommendation without a finding to
support it.
Each part of the recommendation should relate
to the finding paragraph. The relation should
be evident. A recommendation should be given
for every cause in the details of the condition.

Prepared by: Office of Small Business Development Centers /Financial Branch
Edition: September 2007

The first recommendation should normally be

to correct the condition. The second condition
should be preventive. Each part of the
recommendation should be arranged in a
logical sequence. The sequence should be
consistent with the order of discussion of the
exam results.

Know your purpose. Know your objective.
For each exam step, ask yourself how the results contribute to the
accomplishment of the exam objective. Will the results be usable
in your write-up?
There should be a purpose for each exam function, and should be
tied to a specific objective. Without a purpose there are normally
no useful results.
Plan the development effort as soon as a condition is identified so
that the cause and effect is fully developed. The significance here
is that the condition should be developed. Try to identify tangible
savings or major impact to program goals or day to-day operations.
Provide examples of where the condition caused increased cost,
show how the major functions/goals (SBA Funds) were adversely
influenced or exposed to risk. Provide specific examples rather
than theory.

the work-sheet The worksheet that is used for the SBDC financial examinations can be found
under Attachment 6. Now we will introduce the elements of a worksheet.

Purpose A clear statement of the work performed,

reason for comparison, analysis,
validation or the recordation of data.

Source This should include a listing of the records

utilized for the review process. Where
was the data extracted? This should
include when applicable reports, general
ledgers, subsidiary ledgers, etc. by
specific name and date.

Scope The volume of transactions involved

(universe), the number of transactions
selected for the review, and the method
used to select the transactions. The
method of selection should include a
detailed explanation as to what was used
and the reason used, i.e. statistical

Prepared by: Office of Small Business Development Centers /Financial Branch
Edition: September 2007

sampling methods, judgment, etc.

Work The actual procedures (s) or steps the

Performed examiner conducted in developing and/or
analyzing the data should be listed here.
Where applicable, reference may be made
to the particular steps in the audit
program which were performed.

Results The actual results of the examination


Conclusion The interpretation or explanation of the

examination results. When a conclusion is
cited in one working paper or is based in
part on work performed or results
recorded in other work papers, this should
be clearly shown and referenced.
This is a good place to develop a finding,
if one is found; which can be dropped into
the report, later.

Workpaper file organization

Examination The material placed in the current files should consist of information primarily
workpaper relating to the current phase of the assignment and not considered of continuing
(W/P) file use for succeeding reviews. Types of material to be included in these files are:
The following should be established for each and every SBDC under review:
a. Announcement Letter
• Announcement Letter
b. Work Program
• Examination Work Program
c. Analyses and other papers in support of detailed examination work and
current findings
• Prior Examination report
• SF-269 W/worksheet analysis,
• Workpaper conclusion
• Summary write-up to include accounts analyzed and
supporting documentation.
d. Report Disposition
• Final Report with cover letter
• Project Officer Follow-up letter
• Lead Center comments/response to the Draft report

Prepared by: Office of Small Business Development Centers /Financial Branch
Edition: September 2007

• Variance analysis
• Electronic data maintained on CDs (or equivalent)
e. Memorandums of discussions with agency, contractor, or other officials
f. Audit Leads resulting from the review to share w/Examiners or to
include as a review step in the work program
g. Examination notes pertaining to exceptions and extraordinary matters.
h. Misc documentation, current correspondence e-mail, etc.
All data above, might be found on the CD, or equivalent. A file index can be found
Attachment 7.

Prepared by: Office of Small Business Development Centers /Financial Branch
Edition: September 2007

Section III


Prepared by: Office of Small Business Development Centers /Financial Branch
Edition: September 2007

Section IV

Examination Preparation
Start The examination process starts with the assignment of examinations for the
Federal fiscal year. The assignments are usually the result of a team meeting
and approval from the Director of Financial Analysis, OSBDC. The current
process is now being redesigned; therefore a solid process is pending.

After receiving the assignments, the FE’s prepare a tentative schedule and
notifies the applicable SBDC director for confirmation. After the confirmation
has been confirmed, the FE prepares a notification package which is enclosed
as Attachment 1 to this guide.

caution After receiving the notification package, the FE should review the package for
completeness, expedite the reconciliation process for the SF 269, as indicated
below, use the general ledgers to identify a sample list of expenses. This
should be done as early as possible to facilitate the examination processes.

Section IV

The Financial Management Objectives

The financial • Previous corrective actions
management • Service center monitoring
objectives are:
• Federal outlays
• Cash match outlays
• In-kind contributions
• Indirect cost
• Program income and disbursements
• Other
objective Previous corrective actions

This objective determines whether corrective actions have been taken on

your last examination report finding. This process is applied by the PO for
your site visits (which is an examination from the DO). This process is as

process Input Process Output

Obtain previous Identify the list ofr If recommendation have

examination report or ecommendation. been implement they are
site visit report
Document the status of the prior If recommendation has
report recommendations. NOT been implemented,
they are UNRESOLVED.
In next report identify
resolved and unresolved

Prepared by: Office of Small Business Development Centers /Financial Branch
Edition: September 2007

start document in
previous report if current report


This concludes the objective for previous corrective actions. Next we will
consider the objective for service center monitoring.

objective Service center monitoring

criteria 13 CFR 130.350(b), which suggests that the SBDC Director shall direct and
monitor program activities and financial affairs of the SBDC network to deliver
effective services to the small business community, comply with applicable
laws, regulations, OMB Circulars and Executive Orders, and implement the
Cooperative Agreement. The SBDC Director has authority to control
expenditures under the Lead Center’s budget.

This process determines whether the lead center has an adequate service
center financial monitoring program. When dealing with the service centers it
is important to remember that SBA does not have a contractual relationship
with the service centers. The recipient (represented by the lead center
director) has an agreement with the service centers, in most cases (there
may be exceptions); ergo, the service centers are generally known as sub-
recipients. Your oversight of the program is to determine whether recipient is
properly managing the program. One of the barometers that can be used to
make this determination is to identify whether the recipient is conducting
service center monitoring. Service center monitoring is a similar process but
which is conducted by the recipient. You may participate in discussions with
the sub-recipients, but only with the concurrence of the recipient (this can be
accomplished via telecon or email).

In some cases, the sub-recipient may have an agreement with another entity
to implement the program. Under these conditions the lead center director
should ensure that such recipients conduct service center

How service center monitoring is performed by the lead center can be

variable within the standards of the SBDC program . However, there are
elements that are prescribed by the OMB Circulars. The process for service
center monitoring is as follows:

Prepared by: Office of Small Business Development Centers /Financial Branch
Edition: September 2007

process Input Process Output

obtain your copy of analyze the monitoring IF the monitoring work

applicable OMB Circulars. program for adequacy by program is adequate and well
ensuring that it includes a documented and annual
obtain SBDC financial process for: reports are available, THEN
monitoring work program. there is no finding.
• service center
monitoring IF there is a deficiency in the
• federal outlays monitoring program, THEN
• cash match outlay, document the finding and
including sources of provide a recommendation to
funds resolve.
• in-kind match
• indirect cost, and
• program income receipts
and disbursement.

review of invoices submitted

for reimbursement to the
lead center with adequate
procedures under each

determine whether the lead

center is using this program
during annual visits to each
center; if not why?

OMB Circulars
SBDC work anal if
program yze

adequate not adequate

document in
end current report

This concludes the process for service center monitoring. Next we will determine
the process for cash disbursements. Cash disbursements include the Federal and
the cash match outlays. These outlays should be reported separately because
they do have separate sub-processes and criteria; however, what you look at and
what you consider support are most likely the same, except for additional support
documents, as prescribed in the program announcement, for cash match outlays.
We will identify process deviations for both, as we proceed.

Prepared by: Office of Small Business Development Centers /Financial Branch
Edition: September 2007

before you Before we begin we need to answer the question: "What is the difference between
begin Federal and cash match outlays?"

difference Federal outlays include funds that come from the Federal government. They are
funds that come from taxpayers nationwide. Cash match outlays, on the other
hand, tend to come from the State, and/or local governments, and/or the entity,
and or external donations.

caution State funds can come from what is known as “community block grant funds."
These are funds that come from the Federal government and are routed through
the State government to other entities (i.e. local governments, county government,
etc). Block grants are the only Federal funds that can be used for cash match. No
other federal funds can be used. Funds that are donated from reputable firms can
also be used as cash match. However, it is best to let the OSBDC examiners
determine the allowability of these. It is sufficient to know that under some
conditions, donated funds cannot be used as cash match, these donated funds can
be used as a form of program income.

to determine Claimed in-kind contributions should be based on actual contributions, and not
if in-kind budgeted, estimated or proposed amounts. Claimed in-kind contributions should
contributions be supported by adequate documentation.
An in-kind contribution certification form should be prepared by individuals
providing in-kind contributions. This form should include: name of donor, phone
number of donor, donor’s signature, date of donation, hours donated (i.e.
presentation and preparation time), labor rate with justification for the rate, total
donated amount, narrative description of service provided or item donated with
justification of cost of the item donated.
We request as part of the examination process, a detailed list of the in-kind
reported by each Service Center. The detailed support will be reviewed by the
examiner at the Lead Center or Service Center. In-kind contributions should not
include expenses already included in the Facilities and Administration (F&A) indirect
cost rate.

criteria The various versions of the program announcement address what constitutes cash
match outlays. The program year 2007 program announcement is provided as

Prepared by: Office of Small Business Development Centers /Financial Branch
Edition: September 2007
I Saw The Match And It
“C. Cash Match
There is a tale of an occasion
Applicant must provide
match of at least equal to the
federal dollars provided.
Cash match in an amount not
less than 50 percent of the
federal funding is required.
The remainder may be taken
in the form of indirect and/or
in-kind match. No portion of
the match may be from
federal sources (except
applicable Community
Development Block Grant
funds). Program income (i.e.
fees collected from clients
and/or attendees for training)
are also excluded from

Prepared by: Office of Small Business Development Centers /Financial Branch
Edition: September 2007

before you Figure 1; below, is a pyramid that illustrates the hierarchy of supporting
begin documentation for financial reviews:

Figure 1
hierarchy of
documentati SF
on for 269

SF 269 spreadsheet
indirect cost

reimbursement invoices

Federal general ledger, cashledgers

general match general ledger(s), or
combined Federal/cash match general ledger(s):
includes the labor distribution report from HR, and year-
end summary with budget comparison.
sample support documents
canceled checks or equivalent, travel requests and vouchers, vendor
contracts/purchase orders/agreements, payment vouchers, purchase
requests, internal notes per transaction, internal transfers and journal entry

caution All amounts claimed in the higher levels of the pyramid MUST equal the next lower
level. In short, all amounts reported should be equal as you move up the pyramid
from supporting documents, to the general ledgers ,to the reimbursement invoice
,to the SF 269 spread sheet, and finally to the SF 269, without exception.
Exceptions require an explanation.

Additionally, the FE should request samples to minimize the time and effort for the
following processes.

Prepared by: Office of Small Business Development Centers /Financial Branch
Edition: September 2007

How Far Is Too Far?

While there is no rule of thumb for this, one can assume that a
summary report is supported by a worksheet which is in turn
supported by one or many ledgers, which in turn are supported by
one or more layers of source documentation. Source
documentation is that paper which causes the expenditure of
funds from one entity to other individual or entity. The end result
is money changing hands, not typically by cash but commonly
through a check, draft, state warrant, or a credit card.
Summary reports and worksheets are very flexible and should be
readily reconcilable. Connecting the worksheet to one or many
underlying ledgers may be more complicated due to overlapping
budget years, such as a school year versus fiscal year, but a key
internal control is to ensure that those records readily
demonstrate that reconciliation. Each ledger should connect to
specific transactions and demonstrate a fund account
nomenclature (such as SBDC or SBA funds), cost category,
transaction date, amount of funds, and a brief description. From
here the reviewer should be able to connect supporting
documentation (i.e. contracts, invoices, vouchers, pay journals and
allocation reports, appointment letters, cancelled checks) to the
actual disbursement of funds from the institution.

objective Federal and cash match outlays

To determine whether the SBDC has complied with financial reporting

requirements, the following indicates the input that you will need to conduct your

a. Obtain and document an understanding of the internal control structure (SBDC

internal controls) and identify the significant internal controls and management
controls to ensure compliance with laws and regulations in the reporting

b. Obtain copies of financial reports (SF 269 financial reporting package, see
sample under Attachment 1) and determine if they were submitted on a timely
basis (13 CFR 130.820). The SF 269 (Financial Status Report) and the SF 272
(Report of Federal Cash Transactions), and the SBA form 2113 (Program
Income, to be discussed in a later section) should be submitted semiannually.

c. Verify that the first reports (SF269 – Financial Status Report) and the SF 272 –
Report of Federal Cash Transactions) were submitted to the SBA Project Officer
no later than 30 days after completion of six months of operation. Reconcile
the SF 269 to the attached spreadsheet, SF 272, and the related Oracle
transaction reports.

Prepared by: Office of Small Business Development Centers /Financial Branch
Edition: September 2007

process Input Process Output

SBDC intern control Identify controls for IF in compliance THEN move to

compliance with next process to analyze SF 269
program’s terms and and SF 272.
IF not in compliance THEN
document condition in report and
then to analyze the SF 269 and
SF 272.

How Do I Know That It Is Match?

There is no real secret to knowing what comprises good
matching resources. Of course the easy question is, “are all
the calculations correct?” If we assume that this is the case,
then we really have only had to answer the question “what
were these resources doing and where they under our
control?” The first question of what activities were supported
with the resources should comport with the scope of activity
both in the cooperative agreement and more fundamentally
is authorized in the statute 15 USC 648.

The second question about control can be more complex.

Any funding resource and any institution will have a
designated point of control, commonly called a principal
investigator at an educational institution, or program director
at a nonprofit entity. In any event, under our Notice of Award
the authority of the state director as exercised under the host
institution and as delegated through contracts with
subgrantees and their key personnel, should be the
approving official or principal investigator for expenditures
incurred under the SBDC program. If people, supplies,
facilities, utilities, etc. are shared with another program, then
those resources and claims to those resources should be
clearly delineated in the underlying documentation.

Prepared by: Office of Small Business Development Centers /Financial Branch
Edition: September 2007



SBDC Internal

Document condition and

inadequate recommendation in
IF current report

processes in Go to the
effect next process

process Input Process Output

SBDC Internal and Compare outlays reported of IF they match proceed to next
Management controls SF 269 with attached process.
spreadsheet, SF 272, and
SF 269 Oracle. IF they do not match THEN
investigate reason AND annotate
SF 272 Verify that report was findings in report.
Related Oracle transactions submitted 30 days after 6
months into program year.

Prepared by: Office of Small Business Development Centers /Financial Branch
Edition: September 2007


based on the
can be
process that
Note: This is
SBDC Internal and
1a management
SF 269 SF 272
Oracle transactions

submitted 60 days
SF 269 after start of
sub- veri IF applicable program
process fy year

No Yes

annotate current Go to next
report process

d. Verify that the second report, which serves as the annual report was
submitted no later than 90 days after the end of the budget period.

process Input Process Output

SBDC Internal and Compare outlays reported of IF they match proceed to next process.
Management controls SF 269 with attached
spreadsheet, SF 272, and IF they do not match investigate
SF 269 Oracle. reason annotate finding for report,
THEN proceed to the next process.
SF 272 Verify that report was
Related Oracle submitted 90 days after the
transactions final day of the applicable
program year.

Prepared by: Office of Small Business Development Centers /Financial Branch
Edition: September 2007


is made.
exercise of
which the
Note: This

SBDC Internal and
Management controls
SF 269 package
SF 269 sub- SF 272


annotate report

Go to next

The following is the SF 269 package review process and flowchart

(reference Attachment 2, the SF 269 package):

Prepared by: Office of Small Business Development Centers /Financial Branch
Edition: September 2007

process Input Process Output

SF 269 package: Verify the following: IF no, ask why,

SF269 a. Amount of total match on line “i” > the Federal annotate
outlay on line “j” report and
SF 269 proceed to
spreadsheet b. Amount of cash match outlay on line “h” > ½ of next process.
IDC schedule the Federal outlay on line “j”
c. Is in-kind and waived indirect shown on line “e”
and “f?” If yes proceed
to next
d. Does the waived indirect shown on line “f” match process.
the waived indirect on the NOA.
e. Does line “a” = line “d?” If not ask the recipient
why and annotate report.
f. Does line “j” = line “n”, if not determine why.
g. Does line “d” = the sum of lines “i” and “n”?
h. Do lines “e,” “f” and “h” = line “i”?
i. Does line “o” = the amount of Federal outlay
authorized on the NOA?
j. Do the amounts recorded on the SF 269 = the
amounts recorded on the attached spreadsheet
and the indirect cost summary? If not, why? And
annotate report.

remember Indirect cost claimed to the Federal outlay is not readily available. FE must look at
the indirect cost summary to determine how much of the Federal outlay is indirect
All claimed indirect cost must equal, but not exceed, the indirect cost on the NOA.

This process does not constitute verification of the claimed costs on the final SF

Item numbers on SF

Final SF e = in-kind f = waived idc on

i>j h > ½ of j
269 only NOA

(n+i) = f = waived idc

j=n a=d
d only

(e+f+j) = i O = Federal outlay on


no yes

annotate go to the next

Prepared by: Office of Small Business Development Centers /Financial Branch
Edition: September 2007

This concludes the sub-process for reviewing the SF 269. The SF 269 is on the top
of our hierarchy pyramid, the next level down is the SF 269 spreadsheet.

What is the SF The SF 269 spreadsheet (herein referred to as spreadsheet) is a tool that serves as
269 a bridge between the SF-269 (Financial Status Report), service center
spreadsheet? reimbursement invoices, indirect cost summary sheet, and general ledgers. See
Attachment 2 for a sample of the SF 269 spreadsheet, under what is known as the
“SF 269 package.” The spreadsheet supports lines, "e", "f", "h", and "i" of the SF-
269. When we discuss the processes for in-kind contributions and indirect cost we
will draw your attention back to the SF 269 spreadsheet.

caution Service center reimbursement invoices are not uniform. In fact, some SBDC
networks do not call them "reimbursement invoices." Additionally, some invoices
are automated. It is incumbent upon the FE to become familiar with the network's
program reimbursement system. This reimbursement system and process should
be addressed in the network’s internal control system. The SBDC network's internal
control system is a tool that can be used to assist you to understand the

process Input Process Output

SF 269 package Reconcile SF 269 to spreadsheet; IF the recalculation = the

service center and spreadsheet to spreadsheet go to next
reimbursement invoices reimbursement invoices: process
a. Reconcile SF 269 items “e,” “f,”
“h,” and “I” to spreadsheet; IF the recalculation = the
b. Reconcile spreadsheet to spreadsheet inquire why,
service center reimbursement and annotate your report;
invoices; then go to next process.
Recalculate the amounts shown on
the spreadsheet using the service
center reimbursement invoices as
your tool.

Prepared by: Office of Small Business Development Centers /Financial Branch
Edition: September 2007


SF 269 package reconcile SF 269 reconcile spreadsheet to

items “e,” “f,” “h,” service center
reimbursement and “I” to reimbursement invoices
invoices spreadsheet

annotate no
report IF
yes ate

proceed to
next process

This concludes the process for analyzing the spreadsheet, now we will look at the
processes that are used to verify the spreadsheet to the reimbursement invoices.
This process is known as the "reconciliation process." This is the most time
intensive process because it deals with each individual cost category. To reduce
the intensity of the review, a sample should have been requested from the lead
center director as early as possible. Each cost category is a separate sub-process.
To avoid laborious process tables and flowcharts, these sub-processes will be
discussed. Because different business entities use different accounting
management systems, it is difficult to provide a uniform sub-process that will
meet national needs. However, we will present the applicable tools that may be
used. The terms we use may not be the terms that are used at the service centers
and lead center, that is where you will need to use your financial management
reference book as a guiding tool. Additional tools to use in the reconciliation
process are generally spreadsheet, the service center reimbursement invoices,
and the general ledgers. These processes will be discussed in this handbook,
rather than broken down into process tables and flowcharts as previously given.

before we Before we begin, it now necessary to introduce Attachments 4 and 5, the work
begin program checklists. Respectively, the checklists are entitled the “Lead Center
Work Program” (Attachment 4), and “Service Center Work Program” (Attachment
5). The work programs are similar in structure, with differences unique to the lead
center and service centers.
Before we begin, it is now necessary to introduce the definition of "direct costs."

definition Direct costs is a cost that can be directly traced to producing specific goods and
services. The operative word in this definition is "specific."

Prepared by: Office of Small Business Development Centers /Financial Branch
Edition: September 2007

table 1 The following table lists the general cost categories. Some networks may use
other terms, or additional terms, but the elements tend to fall into these

General Cost Categories

Personal services
Fringe benefits
Other direct costs

where is the From now on a flowchart does not follow the process because they are essentially
flowchart? the same, with few exceptions, as follows:

Apply defined
4 Obtain process per
applicable tools. checklist


not in compliance
annotate if
in compliance

Go to next sub-