3 Accounting
3.7 Awards
3.7.1 Federal Awards - Accounting
3.7.1.10 NOTE: Revisions to the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) at 2 CFR 200 were issued on April 22, 2024. Revisions to the administrative requirements and cost principles are effective for new federal awards executed by a federal agency on or after October 1, 2024. Revisions will not be applicable to federal awards issued prior to October 1, 2024 unless the federal agency early implemented. Look to the terms and conditions of the award or consult the federal awarding agency for questions about the applicability of the revisions. Revisions to the audit requirements, including the increased single audit threshold of $1 million, are applicable to audits of fiscal years beginning on or after October 1, 2024. No early implementation is allowed for the revisions to the audit requirements. Click here for the Federal Register Notice and here for technical corrections made to the revisions.
The requirements described below apply to all local governments who expend federal award funds. Federal financial assistance can be provided to state and local governments in many forms including grants, cooperative agreements, non-cash contributions or donations of property (including donated surplus property), direct appropriations, food commodities, other financial assistance, loans, loan guarantees, interest subsidies, and insurance.
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-.217 and §§.300-.346, respectively) contain the Administrative Requirements for federal financial assistance to state and local governments. The financial management systems of recipients and subrecipients must meet the following standards of 2 CFR §200.302:
“…(b) The recipient’s and subrecipient’s financial management system must provide for the following (see also §§200.334 Record retention requirements, 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 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 title and number, Federal award identification number, year the Federal award was issued, and name of the Federal agency or pass-through entity.
(2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements in §§ 200.328 and 200.329. When a federal agency or pass-through entity requires reporting on an accrual basis from a recipient or subrecipient that maintains its records other than on an accrual basis, the recipient or subrecipient must not be required to establish an accrual accounting system. This recipient or subrecipient may develop accrual data for its reports based on an analysis of the documentation on hand.
(3) Maintaining records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, unobligated balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation.
(4) Effective control over, and accountability for, all funds, property, and other assets. The recipient or subrecipient must safeguard all assets and ensure 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 and the terms and conditions of the Federal award.”
3.7.1.50 Uniform Guidance – Cost Principles
Expenditures of federal awards 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.
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. With the revisions to the Uniform Guidance, the audit threshold will increase to $1 million for fiscal years beginning on or after October 1, 2024. For example, the new threshold will apply to calendar-year governments in fiscal reporting year 2025.
3.7.1.70 Uniform Guidance outlines specific auditee responsibilities in §200.508. In short, the auditee must:
(a) Arrange for the audit and ensure it is properly performed and submitted by the deadline.
(b) Prepare financial statements, including the Schedule of Expenditures of Federal Awards (SEFA/Schedule 16) in accordance with § 200.510.
(c) Promptly follow up and take corrective action on audit findings. This includes preparing a summary schedule of prior audit findings and a corrective action plan in accordance with § 200.511(b) and (c), respectively.
(d) Provide the auditor access to personnel, accounts, books, records, supporting documentation, and any other information needed for the auditor to perform the audit required.
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 Certain Grants and Other Financial Assistance.
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).