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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
Earned Federal Funds vs. Federal Funds

Federal funds represent financial assistance received from the federal government. The money received is usually in the form of advances or reimbursements as defined by the individual award involved.

Earned federal funds are moneys received in connection with a federal program and are not required to be spent in the federal program by the governing agreement. They become state funds and lose their federal identity. The authority for expenditure of earned federal funds is subject to state legislation rather than the federal government.

Report earned federal funds in one of the following two ways, depending on the source of funds:

  • Earned federal funds received from the federal government are reported as federal revenue on the operating statement. Include the costs charged to federal programs that originated these federal receipts in SEFA. Examples include:
    • Recoveries of costs previously paid from a non-federal source
    • Indirect cost allocations

    This type of earned federal funds is not considered to be a reconciling item between the operating statement and SEFA.

  • Earned federal funds not received from the federal government are included in interest income or another appropriate revenue category. They are not included in federal revenue on the operating statement. Examples include:
    • Interagency contracts paid from another agency’s federal funds
    • Depository interest earned on federal funds
    • Other sources such as the sale of fixed assets purchased with federal funds

    This type of earned federal funds is not reported in SEFA as it does not represent a cost charged to a federal program. It is also not a reconciling item between the federal revenue category on the operating statement and SEFA. Interagency contract revenue in which the performing agency is not a subrecipient is included in sale of goods and services on the operating statement.

A definition for earned federal funds is included in the General Appropriations Act, Article IX, Section 6.22(a), 83rd Legislature, Regular Session.

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