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Lowell Folk Festival

Council Basics

Managing Funds

Since Local Cultural Councils administer public dollars, they must ensure that all funds are always accounted for. Managing LCC finances is a year-round process. It is important that each LCC establishes a good working relationship with their municipality to guarantee that grantees are paid in a timely manner, money is handled in compliance with Mass Cultural Council guidelines, and all funds are tracked and documented appropriately.

LCC Monies

All funds from Mass Cultural Council, municipal funds, donations to the LCC, and any interest earned thereon must be deposited in a revolving account kept separate and apart from all other monies and administered by the local city or town treasurer.

All funds given to the LCC must be deposited in one revolving account dedicated to the LCC in question. Separate checkbooks and non-municipal accounts are not allowed.

The LCC treasurer or another member should visit the municipal treasurer or accountant regularly to establish or maintain a working relationship. LCCs are entitled to interest on their accounts and to regular account balance reports from their municipalities. Bi-annual or quarterly visits are recommended. During each visit, review reimbursement and/or direct grant procedures and periodic accounting reports to verify balance and interest earned and any other important information that will help the LCC conduct its business.

Documentation

Keep bills and receipts of all administrative expenses to submit to the municipal treasurer when requesting reimbursement for expenses incurred by LCC members. Municipalities determine the process for administrative reimbursement.

It is important for the treasurer to keep a copy of all approval letters to keep track of grantee deadlines for reimbursement and direct grants. Grant recipients have one year from the date on their approval notification to request reimbursement or a direct grant.

Always keep a record of which payments have been processed and when the paperwork was submitted to the town. See the Financial Best Practices section below for good strategies for tracking payments.

Encumbered Money

Encumbered funds are state funds that have been promised to a grantee, but which have not yet been reimbursed or paid as a direct grant. Grant recipients have one calendar year after notification of an award to request reimbursement or payment. Grantees’ funds are considered encumbered until the end of that calendar year. Keep track of which grantees have requested reimbursement or direct grant throughout the year.

An LCC may approve a reasonable extension at its own discretion. If a grantee does not request reimbursement, direct grant, or an extension by the end of the one-year period, then the money becomes unencumbered. Read more about extensions and modifications.

Unencumbered Money

Unencumbered funds are unspent state funds from prior fiscal years. Unencumbered funds accrue for various reasons, typically because previously approved projects were completed for less than the amount awarded, were not completed at all, or simply did not request reimbursement. Administrative funds left over from previous years should also be considered unencumbered money and must be regranted during the following grant cycle. Any unencumbered money must be regranted in the next available funding cycle. The LCC must use Mass Cultural Council’s grant cycle process and timeline for redistributing these funds.

Administrative Funds

LCCs may spend up to five percent of their state allocation each funding cycle for administrative expenses. Any locally-raised money or interest earned from state funds may be used for administrative expenses without being subject to a percentage limit. LCCs may not accumulate unspent administrative funds on the local level from year to year. Any unspent administrative funds from a prior grant cycle should be treated as unencumbered money and should be regranted during the following grant cycle.

LCC members cannot receive compensation but can receive reimbursement for expenses. Together the LCC and the local municipality should determine specific policies and procedures for reimbursing members for expenses. While LCCs may use administrative funds to purchase refreshments for public events, such as grantee receptions, LCCs cannot use administrative funds to purchase food for standard LCC meetings, such as grant cycle voting meetings.

Examples of administrative expenses can include:

  • Printing
  • Postage
  • Telephone
  • Photocopying
  • Publicity
  • Banners
  • Membership fees to cultural associations
  • Stationery
  • Grantee receptions
  • Clerical or staffing assistance
  • Gas/tolls/parking costs to attend Mass Cultural Council events
  • Sign language interpreters
  • Web site creation/maintenance
  • Subscription to email services
  • Subscription to online survey providers
  • Refreshments for public LCC events

Locally-Raised Money and Interest

Locally-raised funds and any interest earned from state funds can be distributed at the discretion of the LCC at any time during the year, if the funds go to support the arts, humanities, or sciences. Mass Cultural Council also recommends that locally-raised funds distributed or spent by the LCC meet the other substantive requirements set forth in the state and local eligibility criteria; however, unlike state funds, prior Mass Cultural Council approval for expenditure of local funds is not required.

Because LCCs are considered government agencies, all monies, including those raised locally, must be deposited in and maintained in the municipal account designated for the LCC. Donated or earned monies should be tracked so the LCC knows the ongoing total of state and locally-raised funds. Separate checkbooks or non-municipal accounts are not permissible.

For more detailed information on managing locally-raised funds, review the LCC Program Guidelines.

Financial Reporting

Because LCCs are responsible for granting out state funds, it is extremely important that LCC funds are tracked and managed correctly. Every year, Mass Cultural Council requires that each municipality and LCC submit a summary financial report which must be completed before the LCC’s grant cycle voting meeting to fulfill the annual reporting requirement stated in M.G.L. Chapter 10 Section 58.

Completion ensures that all LCCs have a clear and current accounting from their municipality before any local grant decisions are made. It also ensures that unencumbered balances from previous years are used in each community. Mass Cultural Council has also engaged the services of an accountant with expertise in municipal finances to make periodic site visits to LCCs. The goal of these site visits is to provide practical, on-the-ground support and technical assistance when and where it is needed.

Timeline

  • Mass Cultural Council sends the LCC Account Form to municipal fiscal officer via email in September.
  • LCC prepares account information and meets with municipal fiscal officer to sign off on LCC Account Form.
  • LCC and municipality use the meeting to work out any discrepancies between their accounting and sign off on the LCC Account Form.
  • LCC inputs LCC Account Form information via the online Annual Report to Mass Cultural Council by October 15.
  • LCC makes decisions at grant cycle voting meeting regarding administrative funds and any locally-raised money or interest for the grant cycle.
  • LCC calculates remaining amount available for granting and grants out the total amount.
  • LCC submits remaining financial information and grant decisions to Mass Cultural Council by the statewide reporting deadline on January 18.

Process

September
Mass Cultural Council forwards the LCC Account Form to municipal fiscal officer (this may be the city/town treasurer, auditor, or accountant) via email.

  • The municipal fiscal officer will report on one year of the LCC’s account activity based on the state fiscal year (from July 1 of the previous year through June 30 of the current year).

October
The LCC should meet with their municipal fiscal officer by October 31.

  • LCC should prepare financial records for the meeting:
    • Determine what grant reimbursement requests are outstanding (encumbered funds), and which grants did not or will not submit reimbursement requests (unencumbered funds).
    • Determine total expenditures from the past fiscal year.
    • Determine the amount of locally-raised funds and/or interest remaining in the LCC account (if applicable).
    • Determine what the account balance should have been at the end of the fiscal year (June 30).
    • LCCs may find the Grant Tracking WorksheetLedger Template, and Municipal Meeting Prep Sheet useful when making these determinations.
  • LCC and municipality use the meeting to work out any discrepancies between their accounting and sign off on the LCC Account Form.
  • LCC keeps the signed LCC Account Form for use in the Annual Report to Mass Cultural Council and for their records.

November – February

Before the grant cycle voting meeting, the LCC should determine their available remaining balance. Using the Voting Meeting Calculation Sheet, the LCC should account for any changes since receiving the LCC Account Form as well as any funds that are still being held for grantees (encumbered funds) and submit it to Mass Cultural Council via “Financial Report” section of the annual reporting.

At the voting meeting, the LCC should also make decisions regarding administrative funds, council programs, and any locally-raised money or interest for the grant cycle that it wishes to set aside. Once these decisions have been made, the LCC should determine their amount available for granting. The amount available for granting must equal the total amount of grants awarded during the voting meeting.

Resources

The following resources are available to help LCCs complete the financial reporting process and manage their funds successfully throughout the year.

Financial Best Practices

Every LCC and municipality will potentially face a unique set of challenges in managing their LCC funds.

LCCs that practice good financial management tend to use the following practices:

  • Receive regular reports about account activity from their municipality.
  • Establish clear processes with the municipality for reimbursements and tracking and spending different types of funds.
  • Track all account expenditures and revenue throughout the year.
  • Track all approved grants, reimbursement requests, and unencumbered funds effectively.

Receiving Regular Reports on Account Activity

Local Cultural Councils are entitled to regular financial reports from their municipality. Municipalities will provide the LCC with the LCC Account Form annually as part of the financial reporting process. In addition, Mass Cultural Council encourages municipalities to provide account statements to LCCs monthly, quarterly, or as needed. If an LCC would like more regular reports on their account activity, they should schedule a meeting with their municipal fiscal officer to discuss the information the LCC would like and how frequently the LCC should receive reports. Once a schedule is in place, the municipal officer can mail or email the reports directly to the LCC’s treasurer.

Establishing Clear Financial Processes

To avoid delays and frustration, it is important for LCCs to work with their municipality to establish clear processes for paying grantees, depositing, and spending locally-raised funds, and reimbursing LCC members for administrative expenses. LCC funds may be spent as the LCC directs but may be accessed only by the process used by the municipal treasurer and/or accountant’s office for the expenditure of public funds.

The LCC’s treasurer or another member can meet with the municipal fiscal officer to decide on processes that work best for both the municipality and the LCC. It may be helpful to provide them a copy of the Municipal Guide to Local Cultural Councils (PDF) in advance of the meeting so they can learn about the program and their role in it. At the meeting, the municipal officer should help the LCC understand the city or town’s process and time frame for financial disbursements. Other issues to discuss may include:

  • When and how often the municipality can cut checks.
  • When and how often the LCC should submit completed reimbursement forms.
  • How to track and spend administrative funds.
  • If the LCC has locally-raised money or plans to raise funds, discuss what the LCC plans to use them for and if they are to be spent on a project, when and how LCC members will be reimbursed for project expenses.

Tracking Revenues and Expenditures

An LCC’s revenues and expenditures should be tracked by both the municipal officer and the LCC itself. The LCC should review any municipal accounting reports to compare revenue and expenditure records, verify account balance and interest earned, and any other important information that will help all parties carry out financial activities effectively.

Municipal Tracking

If an LCC raises local funds or wishes to use interest earned towards a council program, it is especially important for the LCC and the municipality to establish a way to track different kinds of funds within the LCC’s account. The LCC Program statute (M.G.L. c.10, s.58) states that municipalities shall establish “a revolving account which shall be kept separate and apart from all other monies” for the LCC “in which shall be deposited all receipts from the state arts lottery fund…and any other receipts or donations to the local or regional cultural council authorized by law” and that “all such funds, including interest earned thereon, may be expended at the direction of the local or regional cultural council, without further appropriation.”

Municipal treasurers and accountants should follow their normal procedures for setting up and tracking revolving fund activity and are encouraged to call Mass Cultural Council or their Department of Revenue (DOR) Bureau of Accounts field representative if they have questions. According to DOR, the statute directs that all revenue be credited to the LCC account, including gifts and interest, which would otherwise be segregated. Expenditures from the LCC revolving fund must be approved through the local warrant process.

Ultimately, a system must be in place that allows the municipal treasurers, accountants and the LCC to track the revolving fund account balance and activity, allocate interest, and to track the receipt and expenditure of different types of LCC funds separately (state funds, locally-raised funds, and interest). This does not mean that the treasurer is obligated to establish an entirely separate bank account, but they are responsible for tracking the LCC’s revolving fund balance and activity separately from other funds. To satisfy Mass Cultural Council reporting requirements, we encourage the LCC to meet with the treasurer and accountant or auditor to determine how, working together, these recordkeeping goals might best be accomplished.

Council Tracking

One of the best strategies for managing LCC funds correctly is for the LCC to keep an ongoing ledger of all incoming revenue and outgoing expenditures throughout the year. Having a good system in place ensures that the LCC can easily monitor their account activity.

Many LCCs find that Microsoft Excel is a great tool for tracking funds. If you have a good template set up, inputting and calculating information can be streamlined and user-friendly. In addition, Excel spreadsheets can easily be sent electronically to the town treasurer, other LCC members, or even to the LCC’s Mass Cultural Council staff contact if you have questions.

If your LCC distributes all available funds (state, local, and interest) through the state grant cycle, you can use a basic ledger to track all revenue and expenditures throughout the year:

  • View a Sample Ledger
  • Download the Ledger Template to start your own: this template is already set up to do basic revenue/expenditure calculations for you!

If your LCC uses locally-raised funds and interest for LCC activities outside of the state grant cycle, you might consider tracking state and local funds through separate ledgers or one ledger that tracks the funds separately:

Tracking grants, reimbursements, and unencumbered funds

It is primarily the LCC’s responsibility to keep track of approved grants, the amount awarded, the amount reimbursed, and ultimately the amount that becomes unencumbered if a project does not request payment or does not use the full grant award. There is no way for a municipal fiscal officer to know if funds have become unencumbered unless the LCC keeps them informed. To do this, the LCC should send them a list of their approved grants each year, and then either update the municipal fiscal officer regularly, or at least once a year at the required meeting each September.

To track grants an LCC should keep track of:

  • The date the funds will become unencumbered (one calendar year from the date on the approval letter)
  • The original grant amount vs. the amount requested for reimbursement.
  • Projects that are canceled.
  • Projects that receive extensions.

To track this information the LCC can use an Excel spreadsheet.

 

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