Grant Accounting and Budgeting

1. Grant Accounting and Budgeting Edward B. Peacock, CPA, CGFO

2. Centralizing grant financial management into the finance department • Designate a position in the Finance Department responsible for: • Grant financial records management (a file for each grant) containing copies of: • Grant award • Grant budget • Grant designated officials • Quarterly expenditure reports • Reimbursement requests • Completing and submitting timely grant expenditure reports and reimbursement requests • Assigning general ledger account numbers for new grants • Preparing budget amendments for new grants • Adjusting grants receivable at fiscal year-end • Distributing grant budgetary reports to departments • Meets regularly with grant administrators

3. Advantages of setting up a special revenue grant fund • GAAP provide that special revenue funds may be used “to account for the proceeds of specific revenue sources that are legally restricted to expenditure for specified purposes.” • Legal restrictions on grant proceeds often require that they be spent only for specified purposes. • Use of special revenue funds avoids including restricted revenues within the general fund • Provides a separate fund for reporting information on sources and applications of restricted resources. • Facilitates allocation of interest earnings to grants

4. Integrating grant programs into the annual budgeting process • As part of an annual adopted budget • Designate the Special Revenue Grant Fund as part of the annual adopted budget • Appropriate an annual budget for each active grant program • Works well if there are matching funds (operating transfer from the general fund) • Appropriate grants on a project basis • Special Revenue Grant Fund appropriated on a project basis • Submit appropriations to the City Council as the grants are awarded • Requires a budget amendment for matching funds

5. GRANT NOTES – SPECIAL REVENUE FUNDS Budgetary Disclosure GAAFR, p 302 Basic Financial Statements (BFS) • Budgetary comparisons must be presented in connection with the BFS for the GF and any individual major special revenue funds with annual (or biennial) appropriated budgets. • BFS • Functional level of detail • CAFR • Level of detail sufficient to demonstrate legal compliance with the legal level of budgetary control

7. GRANT NOTES – SPECIAL REVENUE FUNDS Receivables and Liabilities Receivables, GAAFR p 86 • Recognize receivable as soon as all eligibility requirements have been met Liabilities, GAAFR, p 95 • Grantor • Government should recognize liability as soon as recipient meets all eligibility requirements • Grantee • Recognize liability as soon as it is probable that the recipient has lost its claim to the assets

9. Multi-year grant appropriations, capital grants, etc. • Use capital projects funds for capital grant expenditures • Centralizes all capital expenditures in the capital projects funds • Grant proceeds are accounted for as a revenue source to the capital projects fund • Requires tracking of multi-year appropriations in the financial system

10. GRANT NOTES – ENTERPRISE FUNDS Interest capitalization on capital projects GAAFR, p 102 • Grant financed portion of a construction project – • Externally restricted to the acquisition of specified qualifying assets - interest capitalization prohibited • Not externally restricted – capitalize interest on any portion of capital asset financed with grants