01-a-013 - Processing of Transactions for Federal Grants (February 14, 2001)
|INFORMATIONAL CIRCULAR NO. 01-A-013|
|DATE:||February 14, 2001|
|SUBJECT:||Processing of Transactions for Federal Grants|
|A & R CONTACT:|
|SUMMARY:||Guidance on Federal Grant Procedures|
The State receives over $2 billion in federal grants annually. These grants/awards are received and used by many different state agencies. Each individual grant agreement usually includes certain specific language related to the use or distribution of the grant monies. The general categories of requirements are described in federal Office of Management and Budget (OMB) Circular A-133. We have attached a listing of certain definitions from the OMB Circular A-133 (Attachment 1). It is recommended that those agencies receiving federal grant awards obtain a copy of this circular. A copy of the circular may be obtained from the OMB home page at http://www.whitehouse.gov/omb/ under the caption OMB documents, circulars.
While performing the State of Kansas single audit for fiscal year 2000, the auditors found that some agencies did not fully comply with grant requirements. Noncompliance with grant requirements may result in a refund of grant monies or the loss of funding for grant programs. Each state agency is responsible for identifying the federal awards received and expended and the programs under which they were received. This includes the Catalog of Federal Domestic Assistance (CFDA) number and name, award number and name, name of the federal agency, and applicable compliance requirements. Not only is this a federal requirement but much of this information is also necessary for preparation of the "Schedule of Expenditures of Federal Awards" contained in the "Financial and Compliance Audit Report State of Kansas Single Audit". This schedule lists all federal awards by federal agency, by federal CFDA/contract number, the name of the federal grantor/program/pass-through grantor, the dollar amount of the expenditures, and the amount of the funds passed through to subrecipient entities. The agency is also responsible for monitoring the subrecipient's activities. This is to provide reasonable assurance that the award is administered in compliance with federal requirements, for ensuring required audits are performed and prompt corrective action is taken, and for evaluating the impact of subrecipient activities on the pass-through entity's ability to comply with applicable federal regulations.
Non-federal entities that expend $300,000 or more in a year in federal awards shall have a single audit or program specific audit conducted for that year. Non-federal entities that expend less than $300,000 a year in federal awards are exempt from federal audit requirements for that year, but records must be available for review or audit by appropriate officials of the federal agency, pass-through entity and the General Accounting Office (GAO) of the federal government. Subpart B-Audits_.200 Audit requirements, page 17 of OMB Circular A-133 should be referred to for more specific details.
It is each agency's responsibility to identify each type of grant receipt or payment which includes a recipient deposit, a pass-through deposit, a transfer of federal funds where the pass-through entity and the subrecipient entity are both state agencies, a vendor payment for goods or services, and expenditures to subrecipients outside the state. The CFDA number and name, the name of the federal agency from which the grant is received, and type of grant monies described above should be included on each voucher.
State agency is a recipient
When a state agency is a recipient, it should record the receipt of federal funds as revenue sub-object (RSO) code 40xx. When the agency expends the federal funds to the beneficiary of the program, it should record them as expenditure sub-object (ESO) code 50xx or 55xx. When the agency expends the federal funds as program expenditures to a vendor, it should record them using the appropriate ESO code.
State agency is a pass-through entity
When a state agency is a pass-through entity, it should record the receipt of federal funds as RSO code 40xx. When it passes through (expends) the federal funds to an outside entity, it should record it as ESO code 50xx. When the agency passes through (expends) the federal funds to the subrecipient state agency, it should record them as ESO code 7310.
State agency is a subrecipient
When a state agency is a subrecipient from another state agency, it should record the receipt of federal funds as RSO code 6605. When the agency expends the federal funds as program expenditures to a vendor, the agency should record them using the appropriate ESO code.
Recipient and subrecipient entities may both make payments to vendors with grant monies. Vendors may be other state agencies, other governments, or may be non-governmental entities. Attachment 2 reviews vendor indicators in detail as does paragraph_.210, page 18, of OMB Circular A-133.
A complete discussion of the responsibilities and obligations of recipient, subrecipient, pass-through and vendor entities is contained in OMB Circular A-133. Attachment 2 is a checklist to assist agencies in determining subrecipient, vendor, and pass-through entity. The auditing firm of Allen, Gibbs & Houlik, LLC provided the checklist which should assist state agencies in determining which agency is responsible to meet OMB Circular A-133 requirements. Policy and Procedure Manual Filing Numbers 6,002 and 7,002, OMB Circular A-133, and Characteristics of Subrecipients and Vendors (Attachment 2) will guide agencies in their coding for federal grant transactions.
Agency use of the following expenditure and revenue sub-object codes should be reviewed closely:
|ESO 5010-5080||Federal Aid Payments:federal funds received by the State and disbursed to political subdivisions or qualified organizations as aid to individuals, school aid, and for other aid as defined in the appropriating act.|
|ESO 5520-5530||Direct Federal Welfare Assistance|
|ESO 7310||Inter-Agency Transfers (Federal)|
|ESO 7940||Return of Unexpended Federal Grants to Federal Agencies|
|RSO 4010-4090||Amounts received from the federal government to aid in the support of a specific function of government|
|RSO 6605||Operating Transfers In - Federal Aid from Other State Agencies|
Journal voucher requests should be submitted to the Central Accounting Services Section of the Division of Accounts and Reports to correct any transactions inadvertently processed in error during fiscal year 2001.
Attachment 1: Certain Definitions from OMB Circular No. A-133 (.pdf)
Attachment 2: Characteristics of Subrecipients and Vendors (.pdf)