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Glenn Hegar  ·  Texas Comptroller of Public Accounts

Reporting Requirements for Annual Financial Reports of State Agencies and Universities

Pass-Through Activity

Special Conditions
Accounting and Financial Reporting for Non-exchange Transaction (GASB 33) Issues Related to SEFA

SEFA captures federal funds expended by an agency. Federal funds are not earned until expended — therefore, federal revenues equal federal expenditures except for capital purchase transactions in proprietary fund types. According to GAAP, a capital purchase transaction made from proprietary funds is not recorded as an expenditure. Consequently, this type of purchase is not reflected on the operating statement — however, it must be reflected as an expenditure in SEFA.

The GASB 33 issue relates to the recognition of revenue for non-exchange type transactions. A non-exchange transaction occurs when an agency gives (or receives) value without directly receiving (or giving) equal value in exchange. Per GASB 33, paragraph 7c, federal research and development (R&D) grants may be considered non-exchange-type transactions.

The four eligibility requirements identified in GASB 33, paragraph 20, must be taken into consideration when determining how to recognize the receipt of R&D grant dollars. Specifically, the eligibility requirement for reimbursement raised issues on the impact of GASB 33 on SEFA. Although federal grant dollars are usually drawn down on a reimbursement basis, there may be instances when the dollars are received in advance. When advances are received, cash is debited and unearned revenue is credited (GASB 33, paragraph 19). Therefore, this type of transaction does not affect the federal revenue line item on the operating statement or SEFA.

Glenn Hegar
Texas Comptroller of Public Accounts
Questions? Contact statewide.accounting@cpa.texas.gov
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