Certain Grants and Other Financial Assistance (Formerly Pass-Through Grants)

3 Accounting

3.7 Awards (Formerly Grants)

3.7.2 Certain Grants and Other Financial Assistance (Formerly Pass-Through Grants)

3.7.2.10 The Governmental Accounting Standards Board (GASB) Statement 24, Accounting and Financial Reporting for Certain Grants and Other Financial Assistance, defines pass-through grants as those grants and other financial assistance received by a governmental entity (recipient government) to transfer to or spend on behalf of a secondary recipient. All pass-through awards received by a governmental entity should be reported in its financial statements. To determine the proper accounting for pass-through grants and other financial assistance, the recipient government has to evaluate its administrative and direct financial involvement.

3.7.2.20 Administrative involvement may include:

(a) Monitoring secondary recipients for compliance with program-specific requirements,

(b) Determining eligible secondary recipients or projects, even if using grantor-established criteria, or

(c) Having the ability to exercise discretion in how the funds are allocated.

3.7.2.30 Direct financial involvement may include:

(a) Recipient government financing some direct program costs because of a grantor-imposed matching requirement, and

(b) Recipient government liability for disallowed costs.

3.7.2.40 If a recipient government has administrative involvement or direct financial involvement in a pass-through grant or other financial assistance, its responsibility in relation to the resources is more than custodial.

3.7.2.50 The recipient government essentially exercises operational responsibility or discretion over whether the grant or other financial assistance will be awarded.

3.7.2.60 GASB Statement 84, Fiduciary Activities states that custodial funds are purely custodial. In those cases in which a recipient government serves only as a cash conduit, the grant or other financial assistance should be reported in a custodial fund. Pass-through grants with administrative or direct financial involvement should be recognized as revenue and expenditures or expenses in governmental, or proprietary funds of the recipient government.

3.7.2.70 The GASB Statement 24 does not require that a recipient government’s payment of administrative costs (indirect financial involvement) be separately evaluated in determining the reporting of pass-through grants. If a recipient government serves only as a cash conduit, it may incur some incidental administrative costs. If a recipient government’s administrative costs are more than incidental that would be the result of administrative involvement.