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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

Miscellaneous Topics
Disallowed Prior Year Costs

Sometimes the federal government disallows prior year costs, therefore, these cost need to be refunded to the originating federal agency. The federal government should issue instructions to solve the prior year cost refundings. The solution offered may direct the agency to reduce current year draws (netting the current year revenue and current year federal expenditures) — depending upon the circumstances and materiality. If a solution is not offered, the proper accounting treatment is to return the cash to the originating federal government. Additional information may be available in the CFDA program documentation from the federal government.

An accrual associated with the disallowed costs might be the result of revenue and expenditures recorded in the prior year’s activity. The proper accounting treatment is to restate the federal receivable for direct revenues and the due from and due to for federal pass-through in USAS. Since SEFA only reports current year expenditures, do not net the disallowed prior year costs with the current year activity.

Disallowed prior year costs are not a reconciling item for the SEFA Note 2 Reconciliation.

Glenn Hegar
Texas Comptroller of Public Accounts
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