3 Accounting
3.7 Awards (Formerly Grants)
3.7.1 Federal Awards – Accounting (Formerly Grants – Accounting)
3.7.1.10 NOTE: Revisions to the Uniform Guidance were issued on August 13, 2020. Revisions are effective to new awards issued by a federal agency on or after November 12, 2020, except for amendments to sections 200.216 and 200.340, which were effective August 13, 2020. Click here for Final Rule. One change to be aware of is that “CFDA Number” was changed to “Assistance Listing Number” (ALN).
The requirements described below apply to all local governments who expend federal funds or pass funds through federal funds to subrecipients. Federal financial assistance can be provided to state and local governments in many forms including project grants, block grants, formula grants, cost reimbursement contracts, cooperative agreements, loans, loan guarantees, insurance contracts, interest subsidies, food commodities, real property, personal property, and other financial assistance.
3.7.1.20 Excerpts from the Uniform Guidance, 2 CFR 200 are provided in this section. Please note that there are many additional federal laws and regulations that may apply to your federal financial assistance which can generally be found in the awarding documents and/or awarding agency guidance.
3.7.1.30 Identification of COVID-19 related awards
As described in 2 CFR section 200.510(b), non-federal entities must complete the Schedule of Expenditures of Federal Awards (SEFA) and include ALNs of federal awards and subawards. To maximize transparency and accountability of COVID-19 related award expenditures, non-federal entities must separately identify COVID-19 expenditures on the SEFA. This includes the new COVID-19 only programs. Municipalities will need to have a system that enables them to separately identify how it spent its COVID-19 awards.
3.7.1.40 The Uniform Guidance – Administrative Requirements
Subpart C – Pre-Federal Award Requirements and Contents of Federal Awards and Subpart D – Post-Federal Award Requirements of the Uniform Guidance, 2 CFR 200, (§§.200-.216 and §§.300-.346, respectively) contain the Administrative Requirements for federal financial assistance to state and local governments and are effective for new awards and additional funding increments to existing awards issued by the federal government on or after December 26, 2014. The financial management systems of local governments and subawards to subrecipients must meet the following standards of 2 CFR §200.302:
“…(b) The financial management system of each non-Federal entity must provide for the following (see also §§200.334 Retention requirements for records, 200.335 Requests for transfer of records, 200.336 Methods for collection, transmission and storage of information and 200.337 Access to records):
"(1) Identification, in its accounts, of all Federal awards received and expended and the Federal programs under which they were received. Federal program and Federal award identification must include, as applicable, the Assistance Listings (formerly CFDA) title and number, Federal award identification number and year, name of the Federal agency, and name of the pass-through entity, if any.
"(2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in §§200.328 Financial reporting and 200.329 Monitoring and reporting program performance…
If a Federal awarding agency requires reporting on an accrual basis from a recipient that maintains its records on other than an accrual basis, the recipient must not be required to establish an accrual accounting system. This recipient may develop accrual data for its reports on the basis of an analysis of the documentation on hand. Similarly, a pass-through entity must not require a subrecipient to establish an accrual accounting system and must allow the subrecipient to develop accrual data for its reports on the basis of an analysis of the documentation on hand.
"(3) Records that identify adequately the source and application of funds for federally-funded activities. These records must contain information pertaining to Federal awards, authorizations, obligations, unobligated balances, assets, expenditures, income and interest and be supported by source documentation.
"(4) Effective control over, and accountability for, all funds, property, and other assets. The non-Federal entity must adequately safeguard all assets and assure that they are used solely for authorized purposes. See §200.303 Internal controls.
"(5) Comparison of expenditures with budget amounts for each Federal award.
"(6) Written procedures to implement the requirements of §200.305 Payment.
"(7) Written procedures for determining the allowability of costs in accordance with Subpart E – Cost Principles of this Part and the terms and conditions of the Federal award.”
3.7.1.50 Uniform Guidance – Cost Principles
For new awards and additional funding increments to existing awards issued by the federal government on or after December 26, 2014, expenditures of federal funds and costs claimed for reimbursement or used for matching must be determined in accordance with Subpart E – Cost Principles of the Uniform Guidance: 2 CFR 200 (§§.400-.476).
3.7.1.60 Uniform Guidance – Audit Requirements
Subpart F – Audit Requirements (§§.500-.521) set forth the uniform requirements for audits of federal financial assistance provided to state and local governments and is effective based upon the entity fiscal year and not the date of the award. Uniform Guidance audit requirements are effective for audits of fiscal years beginning on or after December 26, 2014.
A non-Federal entity that expends $750,000 or more during the non-Federal entity's fiscal year in Federal awards must have a single or program-specific audit conducted for that year in accordance with the provisions of this part.
3.7.1.70 Uniform Guidance outlines specific auditee responsibilities. In short, the auditee must perform the following:
1. Identify, in the accounting records, all federal awards received and expended (§200.302);
2. Establish and maintain internal control over federal programs that provides reasonable assurance that the non-federal entity is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of federal awards (§200.303);
3. Comply with laws and regulations and the terms and conditions of its federal awards (§§200.300 and .303);
4. Prepare appropriate financial statements, including the Schedule of Expenditures of Federal Awards (SEFA aka Schedule 16) (§§200.508 and .510). See SEFA requirements here.
5. Ensure audits are performed when required (§200.508);
6. Promptly follow up and take corrective action on audit findings, including preparation of a Summary Schedule of Prior Audit Findings and a Corrective Action Plan (§200.511); and
7. Ensure a reporting package and a Data Collection Form are submitted to the Federal Audit Clearinghouse by the applicable deadline (§200.512).
3.7.1.80 Governments that expend less than $750,000 in 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 General Accounting Office (GAO).
3.7.1.90 The Single Audit Act provides that an audit made in accordance with the Uniform Guidance should be in lieu of any financial or financial compliance audit required under individual federal assistance programs. To the extent that a single audit provides federal agencies with information and assurances they need to carry out their overall responsibilities, they should rely upon and use such information. However, a federal agency should make additional audits which are necessary to carry out its responsibilities under federal law and regulation. Any additional federal audit effort should be planned and carried out in such a way as to avoid duplication.
3.7.1.100 To satisfy the requirements of the Single Audit Act and generally accepted accounting principles, the following accounting for awards is prescribed.
1. Use of separate award funds
Awards may be accounted for in the same funds as other operations of a municipality or in one or more separate “award funds,” depending upon award terms. The Governmental Accounting Standards Board (GASB) recommends that governments establish and maintain the minimum number of funds consistent with legal specifications and operational requirements. Award transactions coded within the same fund as other operations may be distinguished by using the BARS local option codes.
2. Fund types
Awards must be accounted for in the type of fund appropriate for the activities being financed. If an award is to be used for general governmental purposes, it should be accounted for in the general (current expense) or a special revenue fund. If an award is received for the payment of principal and/or interest on general long-term debt, it should be accounted for in a debt service fund. If an award is received to support operations of, or acquire capital assets for, a proprietary fund, the award should be accounted for in a proprietary fund. Other capital grants should be accounted for in capital projects funds. See separate discussion in Pass-Through Grants.
3. Project coding
At the inception of an award (award notification), one or more project codes should be assigned locally to identify the particular award. This coding must be incorporated into the basic coding structure the municipality uses to identify all its transactions. Any available field or fields may be used, so long as the results do not interfere with the prescribed seven-digit BARS code.
The use of multiple codes may be necessary when there is more than one source of funds for a particular award. For example, when some expenditures must be charged to particular revenue sources or are not allowed under some agencies' terms, separate budgets for such sources must be established. In addition, it may be desirable or necessary to account for the local share of costs (match) or program income in separate projects. The value of separate projects is that they immediately segregate budgets, revenues, expenditures, cash accounts, receivables, and payables for each award and for the related non-award resources used to accomplish the project or operate the program.
4. Local funding of award projects
Within this project or set of projects, the municipality should account not only for award resources and expenditures but also for the municipality’s own contributions to the project or program and for related program income. This is necessary to ensure uniform accounting for the entire project or program, not merely that portion supported by award money.
5. Award (project) budgets
As soon as the terms of the award are known, the award budget entries are to be made. If the exact terms of an award agreement are not known when expenditures begin to be incurred, approximate budgets must be entered. These entries are not the municipality’s own appropriation entries, which are still required.
To distinguish the award budget from the municipality’s own appropriated budget, municipalities may use the separate budgetary control accounts and the separate nominal control accounts. This results in tracking two budgets for the same expenditures because the award fiscal period often will not coincide with the municipality’s fiscal period. In these cases, continuing appropriations will be necessary.
These accounts are used to keep track of the resources/uses for the award projects from inception of the award through the current date. Comparison of these accounts to the control accounts will yield budget analysis on a project basis as opposed to current year transactions.
If a separate award fund is used, the municipality’s own legislated appropriation should be limited to the fund total, and the detail budget should be the terms contained in the award and related agreements. If the award is accounted for within a fund that accounts for other operations of the municipality, either the award terms or the municipal appropriation may be used for the detail budget. Using the municipal appropriation for the detail budget has the disadvantage that, although award revenues and expenditures will be identified as they are incurred, they will not be compared to the detailed award budget and therefore the municipality may have to absorb some award related costs that turn out not to dovetail with the award budget restrictions.
6. Award schedules
A set of award schedules is prepared as shown in the Expenditures of Federal Awards (Schedule 16). These schedules meet federal requirements for the Single Audit. After these schedules are complete, the life-to-date control accounts are closed to allow the preparation of a balance sheet. The life-to-date control accounts are reopened as the first journal entry of the succeeding fiscal year.
7. Noncash awards
The value of noncash awards (e.g., food stamps, food commodities, vaccines, supplies and equipment, etc.) should be accounted for and reported on the Schedule of Expenditures of Federal Awards (Schedule 16) as the fair market value of non-cash awards received during the year, as determined by the awarding agency. The notes to the schedule should disclose the nature of the amounts reported. See BARS guidance on COVID-19 vaccines and Donated Personal Protective Equipment (PPE).