[ACFR-contacts-news] Transfer of federal awards threshold

[HAMILTON Robert W * DAS]

Hello ACFR Contacts,

A financial reporting item that arose from the unprecedented federal awards that state and local governments received in response to the COVID pandemic is that when federal awards are moved between agencies, or between GAAP Funds if within an agency, and the amounts are material, the federal revenue should be reported by the agency and/or GAAP Fund that expends the federal award rather than the agency that received the federal award. State agency practice has been to record the movement of federal awards between agencies, or GAAP funds if within an agency, as a transfer or a distribution to state agencies, depending upon how it was budgeted. This treatment is consistent with paragraph 116 of OAM 15.42.00<https://www.oregon.gov/das/Financial/Acctng/Documents/15.42.00.pdf> Accounting and Financial Reporting: Federal Grants. For those items that are material (more below), agencies must make additional entries using GAAP Offsets to accommodate financial reporting requirements. In developing this approach, I consulted with the Secretary of State Audits Division and they agreed with the necessity of making the entries and the materiality threshold. SARS will update the OAM to reflect these changes after the issuance of the FY 2022 ACFR.

Process:

Steps 1 - 3 are current practice, Step 4 is the new step necessary to report the ACFR in accordance with GAAP.


  1.  The agency that receives the federal award ("Prime Agency") would record the receipt of the grant as federal revenue for budget purposes.
  2.  Upon sending all or a portion of the grant to another agency, the Prime Agency would record a transfer out or distribution to state agencies, depending upon how the transaction was budgeted.
  3.  The agency receiving all or a portion of the federal award from the Prime Agency ("Secondary Agency") would record a transfer-in budgetarily to offset the transfer-out / distribution to state agencies recorded by the Prime Agency as noted in Step 2.
  4.  If the amount in Steps 2 and 3 exceed the materiality threshold (defined below), using GAAP Offsets, the Prime Agency would debit federal revenue and credit transfer-out / distribution to state agencies. The Secondary Agency would debit transfer-in and credit federal revenue. Utilizing G38 codes, we have assurance the transfer transactions between the Prime Agency and Secondary Agency are in balance. The Prime Agency would have responsibility for initiating Step 4.
     *   Recommended Tcodes for Prime Agency:
        *   TC 113 with CO 0300 and GL 3060.
        *   If actual movement of federal awards was recorded as a distribution to state agencies:
           *   TC 119 with CO 6XXX (unique for agency) and GL 3060. Requires G38 code.
        *   If actual movement of federal awards was recorded as transfer out:
           *   TC 125 with CO 1XXX (unique for agency / operating transfer) and GL 3060. Requires G38 code.
     *   Recommend Tcodes for Secondary Agency:
        *   TC 124 with CO 1XXX (unique for agency / operating transfer) and GL 3060. Requires G38 code.
        *   TC 113R with CO 0300 or 0370 (applicable for governmental funds and proprietary funds, respectively) and GL 3060

When moving applicable federal awards within an agency but amongst GAAP Funds, terminology for the above process would be "Prime GAAP Fund" and Secondary GAAP Fund", replacing "Prime Agency" and "Secondary Agency", respectively, but the process would be the same.

This process would apply even if the actual cash had not yet been moved at year-end but resulted in an accrual (due to/from).

Materiality Threshold:

$20 million. Applied to the amount sent and at the Assistance Listing Number level. If the Assistance Listing is part of a program cluster, the threshold would apply to the entire cluster. Even if the amount initially received by the Prime Agency exceeds $20 million but the amount sent to another agency, or to another GAAP Fund if within an agency, is less than $20 million, Step 4 outlined in the process above would not occur.

Note: If there are multiple transactions sending the same Assistance Listing to the same Secondary Agency / Secondary GAAP Fund, the materiality threshold should be applied for the entire fiscal year, not each individual transaction.

Illustrative Examples (Step 4 only):

Example 1: DAS received State Fiscal Recovery Fund (Assistance Listing number 21.027) in GAAP Fund 0054 and the Legislature directs DAS to send $50 million of this federal award to OHCS, budgeted as a distribution to state agencies. OHCS recorded the $50 million from DAS as a transfer-in within GAAP Fund 1112.


  1.  DAS initiates Step 4 communicating with OHCS about the pending entry, then records TC 113 with CO 0300 and GL 3060 for $50 million and next entering a corresponding TC 119 with CO 6196 and GL 3060 for $50 million, with a G38 code of 914XXXX0.
  2.  OHCS enters TC 124 with CO 1306 and GL 3060 for $50 million, with a G38 code of 107XXXX0. Then it records TC 113R with CO 0300 and GL 3060 for $50 million.

Example 2: Similar scenario as Example 1 but the Legislature directs DAS to send $15 million to ODHS, budgeted as a distribution to state agencies. ODHS records the $15 million from DAS as a transfer-in within GAAP Fund 1108.


  1.  Step 4 is not required because the materiality threshold has not been exceeded.

SEFA Impacts

None. Regardless of the amount, this movement of funds can continue to be reported as a transfer for the SEFA. No SEFA Corrections will be needed related to Step 4.


Thank you for your efforts to make these entries in order for the ACFR to be reported in compliance with GAAP. By employing this materiality threshold, we believe it will reduce the affected federal awards and agencies.

If you have any questions, please reach out to your SARS analyst.

Rob

Robert W. Hamilton, CPA
Statewide Accounting and Reporting Services Manager
Chief Financial Office
Department of Administrative Services
Cell: (971) 719-3031
http://www.oregon.gov/DAS/financial/acctng

Data Classification: Level 1 - Published

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