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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

Federal Pass-Throughs

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Federal Grant Pass-Through Funds Overview [+]

To facilitate the reporting of federal grant pass-throughs, the Comptroller’s office established the following policies:

  1. Agencies must coordinate federal grant pass-through transactions with other agencies.
  2. Agencies should apply the following general rules:
    • The disbursing agency is responsible for determining the classification of funds.
      • Pass-through vs. vendor
      • Federal vs. state
      • The portions of federal and state
    • The disbursing agency must confirm these decisions in writing to the receiving agency and the receiving agency must record the transactions as determined by the disbursing agency.
    • The receiving agency determines the amount of accruals.
    • The receiving agency determines the amount of accruals based upon the expenditures to be covered by federal funding. For example, at fiscal year-end:
      • Agency B determines to have $10,000 expenditures to be covered by federal funding and has only received $8,000 from Agency A. Agency A initiates an ITV with an RTI to record a $2,000 federal revenue accrual.
      • Agency B did not spend all federal funds received from Agency A. Agency B initiates an ITV with an RTI to record a federal expenditure accrual refund in the prior year. Agency B must return the excess to Agency A in the following fiscal year.
  3. The pass-through agency reports the amounts awarded to other agencies or non-state entities in the PASS-THROUGH TO field.
    • Funds awarded to agencies are identified in the PASS-THROUGH TO AGENCIES OR UNIVERSITIES field. These are interagency federal pass-through relationships.
    • Funds awarded to a non-state entity are identified in the PASS-THROUGH TO NON-STATE ENTITIES field. In order for the funds to be reported in this field, the non-state entity must be a subrecipient per the federal definition.

    According to GASB 24, the receipt of pass-through funds are accounted for as revenues in a governmental, proprietary or trust fund by recipients if the recipient government has administrative or direct financial involvement. If no such involvement exists, account for the funds in an agency fund.

    Agencies must include accruals in federal awards passed-through.

    Reminder: Agencies must not list revenue received from other state agencies or federal agencies as Pass-through From Non-State Entities. List revenue received from these entities as either Pass-through From Agencies or Universities or Direct Program, whichever is applicable. For a complete listing of federal agencies, visit the Catalog of Federal Domestic Assistance website.

  4. The USAS RTI process is required in recording pass-through accruals between agencies (including between agencies and universities).
  5. Report pass-through transactions based on USAS data. As a tool for the reconciliation, review balances by using the following FMQuery–SIRS AFR Desk Review and USAS Research Tools and running the reports below located in the SEFA/SPTR and General Ledger Reports (respectively) drop-down menus:
    • PT 101 Federal Pass-through Activity by Agency and General Ledger Account
    • PT 102 Federal Pass-through Activity by AGL
    • Interagency/Interfund Activity
  6. The Comptroller’s office uses the SEFA Agency Pass-through Reconciliation report and the USAS Agency Pass-through Reconciliation report to resolve variances in federal pass-through transactions. These reports are available through the SEFA web application. For instructions on using the SEFA web application, see Instructions for Transmitting SEFA.
    • The SEFA Agency Pass-through Reconciliation report displays both sides of each pass-through relationship. For purposes of reconciling to SEFA, data is presented at the CFDA level. Agencies may access the SEFA Agency Pass-through Reconciliation report at any time during the SEFA preparation process. Users are encouraged to monitor the report for imbalances in the days leading up to the Initial Certification on Sept. 1.
    • The USAS Agency Pass-through Reconciliation report displays the grantor and grantee agency number and USAS D23 fund number for each pass-through relationship as recorded in USAS. Agencies may access the USAS Agency Pass-through Reconciliation report at any time during the SEFA preparation process. Users are encouraged to monitor the report for imbalances in the days leading up to the Initial Certification on Sept. 1.
  7. After the Initial Certification on Sept. 1, agencies must coordinate with each other to resolve all remaining pass-through discrepancies at the CFDA/Grant ID level and USAS D23 fund level. All pass-through variances must be resolved in order to complete the Pass-Through Certification on Sept. 28. Grantor agencies are responsible for initiating contact if they disagree with the amount reported as pass-through revenue. The grantor agency should be aware that small variances are most likely due to the accrual process. The Financial Reporting section can assist agencies that are unable to reach an agreement. Contact your financial reporting analyst for assistance.

Deadlines

Sept. 1 – Initial Certification
Sept. 28 – Pass-through Certifications
Nov. 1 – Final SEFA Certification

Quarterly Reconciliation

Agencies are highly encouraged to reconcile pass-through funds on a quarterly basis. As a tool for the reconciliation, review balances by using the following FMQuery–SIRS AFR Desk Review and USAS Research Tools and running the reports below located in the SEFA/SPTR and General Ledger Reports (respectively) drop-down menus:

  • PT 101 Federal Pass-through Activity by Agency and General Ledger Account
  • PT 102 Federal Pass-through Activity by AGL
  • Interagency/Interfund Activity

Refer to RTI Table 11: Pass-Through to Funds Held Outside the Treasury for pass-through transactions between agencies with funds outside the state’s Treasury.

Federal Grant Pass-Through Funds Detail [+]

Definition of Federal Pass-Through

  • The term pass-through is used as the column title in SEFA for interagency transactions of federal grants and is also used in general ledger and COBJs in USAS. For AFR and SEFA reporting purposes we use the term pass-through when referring to interagency transactions.
  • Per the federal definition, transactions between state agencies are interagency transactions and are not pass-through or subrecipient relationships. This is because the federal government views the state of Texas as one entity. The terms pass-through and subrecipient are synonymous per the federal government definition. Therefore, when communicating with auditors and/or the federal government, the term pass-through refers to money passed through to non-state entities (for example, money passed to a subrecipient and not to money passed within state agencies or universities).

Recognition of Federal Grant Pass-Through Funds

Recognize and report federal interagency pass-through grants in USAS as federal grant pass-through revenues and expenditures/expenses to allow the elimination of interfund activity. If matching pass-through amounts between agencies were not eliminated, the state as a whole would grossly inflate revenues and expenditures/expenses. For purposes of demonstration, the agency that originally receives the grant from the federal government will be referred to as Agency A and the agency that receives funds from Agency A will be referred to as Agency B. See diagram below.

  • Federal Government
    • Federal Revenue (IN)
  • AGENCY A
    • Federal Grant Pass-Through Expenditure (OUT)
    • Federal Grant Pass-Through Revenue (IN)
  • AGENCY B
    • Direct Expenditure of Federal Funds (OUT)

To determine the proper identification and recording of federal pass-through grants, first identify interfund activity. Once the activity has been identified, the following three decisions must be made to determine the proper financial reporting of the activity:

  1. Source of funding – federal or state?
  2. Vendor or subrecipient? (Refer to Decision Chart – Agency A or Decision Chart – Agency B)
  3. Serving as Cash Conduit?

Pass-Through Activity Between Universities

Each university must report all federal grant pass-through activity that occurs between other agencies and universities on its proprietary operating statements.

Decision Chart – Agency A
Disbursement of Federal Grant Pass-Through Expenditure/Expense [+]

  1. Agency A records federal revenue. Does Agency A disburse federal grant funds to other state agencies? (If yes, proceed to number 2.)
  2. Is the other state agency (Agency B) that received the federal grant funds a pass-through recipient or vendor of this federal grant? See Interagency Federal Pass-Through Relationships.
    • If yes to pass-through recipient — follow the instructions under OPTION A.
    • If yes to vendor — follow the instructions under OPTION B.

Note: Cash Conduit Option as discussed in GASB 24 is purposely omitted due to the infrequency of this situation. Information on this issue is provided at the end of this section, but was omitted from this chart for simplicity.

OPTION A (Interagency Pass-Through Recipient)

  1. Agency A must record these transactions as either:
    • Federal grant pass-through expenditure (non-operating) COBJ 7971
      –OR–
    • Federal grant pass-through expenditure (operating) COBJ 7978

      Note: Agency 537 has exclusive rights to use COBJ 7667 with certain situations.

  2. At the time the contract is written and before payments are made, use one of the following methods to verify with Agency B that these transactions will be treated as federal grant pass-through expenditures:
    • Method 1 (preferred): Contract defines that these transactions are federal grant pass-through expenditures and will be treated as such in USAS.
    • Method 2: Obtain written confirmation from Agency B.
  3. Complete the following steps at fiscal year-end:
    1. Recommended to obtain written confirmation from Agency B of the amounts, COBJs, AGLs and CFDA numbers used to verify that:
      Agency A 7971 + 7978 = Agency B 3971 + 3978
    2. Record this exact amount in SEFA (including dollars and cents).
    3. Verify the following amounts are equal:
      • COBJs 7971 + 7978 per:
        • DAFR 8590 – Operating Statement Governmental
        • DAFR 8600 – Operating Statement Proprietary
        • DAFR 8910 – Interagency/Interfund Activity
          –OR– Review balances by using FMQuery–SIRS USAS Financial Statements and USAS Research Tools and running the reports below:

        • Operating Statement Governmental
          located in the Changes in Fund Balance – Governmental drop-down menu
        • Operating Statement Proprietary
          located in the Changes in Fund Balance – Proprietary drop-down men
        • Interagency/Interfund Activity
          located in the General Ledger Repost drop-down menu
      • Federal Pass-Through Expenditure per AFR operating statement
      • Federal Pass-Through To Amt per SEFA web application

OPTION B (Vendor)

  1. Agency A records these transactions as normal payments for goods and services using non pass-through expenditure COBJs.
  2. At the time the contract is written and before payments are made, use one of the following methods to verify with Agency B that these transactions will be treated as vendor payments:
    • Method 1 (preferred): Contract defines that this is a vendor relationship and will be treated as such in USAS.
    • Method 2: Obtain written confirmation from Agency B.
  3. No action needed at fiscal year-end if Method 1 or 2 above was completed successfully. Agency B does not report the grant in SEFA.

Decision Chart – Agency B
Receipt of Federal Grant Pass-Through Revenue [+]

  1. Agency B receives federal grant funds from other state agencies.
  2. Is Agency B a pass-through recipient or a vendor of this federal grant? See Interagency Federal Pass-Through Relationships.
    • If yes to pass-through recipient — follow the instructions under OPTION A.
    • If yes to vendor — follow the instructions under OPTION B.

      Note: Cash Conduit Option as discussed in GASB 24 is purposely omitted due to the infrequency of this situation. Information on this issue is provided at the end of this section, but was omitted from this chart for simplicity.

OPTION A (Interagency Pass-Through Revenue)

  1. Agency B must record these transactions as either.
    • Federal grant pass-through revenue (non-operating) COBJ 3971
      –OR–
    • Federal grant pass-through revenue (operating) COBJ 3978

      Note: Agency 537 has exclusive rights to use COBJ 3637 with certain situations.

  2. At the time the contract is written and before payments are made, use one of the following methods to verify with Agency A that these transactions will be treated as federal grant pass-through revenues:
    • Method 1 (preferred): Contract defines that these transactions are federal grant pass-through revenues and will be treated as such in USAS.
    • Method 2: Obtain written confirmation from Agency A.
  3. Complete the following steps at fiscal year-end:
    1. Recommended to obtain written confirmation from Agency A of the amounts, COBJs, AGLs and CFDA numbers used to verify:
      Agency B 3971 + 3978 = Agency A 7971 + 7978
    2. Record this exact amount in SEFA (including dollars and cents).
    3. Verify the following amounts are equal:
      • COBJs 3971 + 3978 per:
        • DAFR 8590 – Operating Statement Governmental
        • DAFR 8600 – Operating Statement Proprietary
        • DAFR 8910 – Interagency/Interfund Activity
          –OR– Review balances by using FMQuery–SIRS USAS Financial Statements and USAS Research Tools and running the reports below:

        • Operating Statement Governmental
          located in the Changes in Fund Balance – Governmental drop-down menu
        • Operating Statement Proprietary
          located in the Changes in Fund Balance – Proprietary drop-down men
        • Interagency/Interfund Activity
          located in the General Ledger Repost drop-down menu
      • Pass-Through Revenue per AFR operating statement
      • Federal Pass-Through From Amt per SEFA web application

OPTION B (Vendor)

  1. Agency B records these transactions as revenue from sales of goods and services using non pass-through revenue COBJs.
  2. At the time the contract is written and before payments are made, use one of the following methods to verify with Agency A that these transactions will be treated as vendor payments:
    • Method 1 (preferred): Contract defines that this is a vendor relationship and will be treated as such in USAS.
    • Method 2: Obtain written confirmation from Agency A.
  3. No action is needed at fiscal year-end if Method 1 or 2 above was completed successfully. Agency B does not report the grant in SEFA.

Federal Grant Pass-Through Issues [+]

Vendor Services Provided and Used vs. Subrecipient

At the time a grant is awarded, the agency disbursing funds (Agency A) to another agency (Agency B) is responsible for determining if the payment is recorded as a pass-through grant or a vendor payment:

  • Agency A must confirm these decisions in writing on the grant award to Agency B
  • Agency B must record the transaction as determined by Agency A

For federal grant subrecipient versus vendor determinations see Distinguishing Between Subrecipients and Vendors (also see Decision Chart – Agency A or Decision Chart – Agency B).

State vs. Federal Grant Pass-Through

If Agency A determines that a payment will be recorded as a grant pass-through transaction, Agency A is also responsible for determining the amount by funding source (such as state and/or federal) and if the payment is recorded as a state grant pass-through or a federal grant pass-through. Agency A must confirm this decision in writing on the grant award at the time the grant is originally awarded.

If the funds were initially received from the federal government, the pass-through is classified as federal. If the funds for the grant program originate from state appropriations, the pass-through is classified as state. For more information, see Pass-Through Activity.

Confirmations Required

Agency A must confirm the above decisions in writing to Agency B and Agency B must record the transaction as determined by Agency A to avoid disputes. Both parties should sign the confirmation.

Federal Grant Pass-Through Year-End Accrual Policy [+]

Year-End Considerations for Federal Grant Pass-Throughs

  • Agency A COBJ 7971 or 7978 federal grant pass-through expenditure must equal Agency B COBJ 3971 or 3978 federal grant pass-through revenue.
  • COBJ 7971 and/or 7978 and 3971 and/or 3978 must equal the amount for pass-throughs reported in SEFA.
  • Verify the amounts for COBJ 3971 and/or 3978 as well as COBJ 7971 and 7978 are equal to the pass-through amounts on Exhibit II and/or Exhibit IV (AFR operating statement) by using:
    • DAFR 8590 – Operating Statement Governmental
    • DAFR 8600 – Operating Statement Proprietary
    • DAFR 8910 – Interagency/Interfund Activity
      –OR– Review balances by using FMQuery–SIRS USAS Financial Statements and USAS Research Tools and running the reports below:

    • Operating Statement Governmental
      located in the Changes in Fund Balance – Governmental drop-down menu
    • Operating Statement Proprietary
      located in the Changes in Fund Balance – Proprietary drop-down men
    • Interagency/Interfund Activity
      located in the General Ledger Repost drop-down menu
  • All items on the DAFR8910 must have the proper AGL. All NPs (no posts) must be corrected prior to fiscal year-end.

USAS Treatment of Federal Grant Pass-Throughs [+]

Federal Grant Pass-Through COBJs

The chart below presents related expenditure/expense and revenue COBJs:

Federal Grant Pass-Throughs
Disbursing Agency Receiving Agency
Object Group 39 Description Object Group 38 Description
7971 Federal Pass-Through Expenditure Interagency, Non-operating General Budgeted 3971 Federal Pass-Through Revenue Interagency, Non-operating General Budgeted
7978 Federal Pass-Through Expenditure Interagency, Operating General Budgeted 3978 Federal Pass-Through Revenue Interagency, Operating General Budgeted
Disbursing Agency Receiving Agency
Object Group 39 Description Object Group 30 Description
7667 Federal Pass-Through Expenditure Health – Medicaid Ins Provider 3637 Federal Pass-Through Revenue Medicaid Ins Provider – DSHS

At fiscal year-end, federal grant pass-throughs must be matched and then eliminated statewide to ensure revenues and expenditures/expenses are not overstated. At the statewide level, federal grant pass-through expenditures (COBJs 7971 and 7978) must equal the corresponding federal grant pass-through revenues (COBJs 3971 and 3978).

Monthly Monitoring of USAS Pass-Through Activity [+]

DAFR8680 – Detail Account Activity by Fund Report

If your agency used T-codes that did not allow the AGL or failed to record the AGL on pass-through transactions, you must make corrections to the AGL in USAS to ensure proper AGL information is recorded.

Request the DAFR8680 report on a monthly basis. The DAFR8680 report provides document level detail for pass-through transactions. Items with blank AGLs appear at the top of the report. For more information, see DAFR8680 Detail Account Activity by Fund.

Recording Federal Grant Pass-Through Expenditure [+]

Federal grant pass-through expenditure/expense can be recorded in USAS in several ways.

  • When the activity occurs within the state’s Treasury — Use the RTI process with T-code 274 and federal grant pass-through expenditure (COBJs 7971 or 7978). For more information, see RTI Table 1.
  • When the pass-through is expended to local funds from cash in state treasury (CIST) funds — Use the RTI process with T-code 268 to generate the payment. For more information, see RTI Table 11.
  • Any agency that does not expend the funds from cash in state treasury (CIST) funds — Use generic T-code 642 to record the expenditure when reconciling its AFR to USAS.

To assist with reconciling pass-through grant expenditures/expenses, request a USAS query from your financial reporting analyst. The USAS query reports the amount of cash expenditures/expenses the agency disbursed using COBJs 7971 and 7978.

Correction of Federal Grant Pass-Through Expenditure [+]

When a warrant is generated, the AGL is on the expenditure/expense general ledger (GL) account. The following sections list the correcting entries for any data entry errors that may have occurred due to the posting of an incorrect COBJ and/or a blank or incorrect AGL. Corrections are only made to prior year activity.

Note: When the fiscal year is still open, do not make corrections to the prior year activity — which is closed.

Correcting Blank or Incorrect AGL On Pass-Through Expenditures/Expenses

When correcting pass-through expenditures/expenses with T-codes 407/408 or 467R/467, be sure to use the recipient’s correct vendor number. This allows the Comptroller’s office to properly prepare the cash basis pass-through expenditure/expenses report to help agencies reconcile their pass-through amounts at fiscal year-end. The process to correct the AGL on pass-through expenditures/expenses:

If the entries are recorded BEFORE Aug. 31, 20CY:

Seq No Batch Type Doc Type Eff Date Fin Agy TC R AY PCA COBJ Amount Vendor No AGL Input GL USAS D23 Fund
To Reverse the Original Pass-Through Expenditure/Expense with a Blank or Incorrect AGL
(Use the COBJ that was input on the original entry)
(1) 4,8 J,K Current Date XXX 407   XX XXXXX XXXX $ XX.XX XXXXX
XXXXXX
Blank or Incorrect N/A XXXX
To Record the Pass-Through Expenditure/Expense with the Correct AGL
(2) 4,8 J,K Current Date XXX 408   XX XXXXX XXXX $ XX.XX XXXXX
XXXXXX
XXXXXXX0 N/A XXXX

Accounting effect of entries recorded BEFORE Aug. 31, 20CY:

Debit Credit
(1) To Reverse the Original Pass-Through Expenditure/Expense with a Blank or Incorrect AGL:    
  0045 CIST $ XX.XX  
  5500 Expenditure Control – Cash   $ XX.XX
(2) To Record the Pass-Through Expenditure/Expense with the Correct AGL    
  5500 Expenditure Control – Cash $ XX.XX  
  0045 CIST   $ XX.XX

If a USAS transaction has a blank AGL that posted to CIST (GL 0045) or expenditure control-cash (GL 5500) and fiscal year-end has occurred, corrections can no longer be made by reversing the original T-codes because cash transactions cannot be backdated. Therefore, correct the transaction using the expenditure transfer process outlined below:

If the entries are recorded AFTER Aug. 31, 20CY:

Seq No Batch Type Doc Type Eff Date Fin Agy TC R AY PCA COBJ Amount Vendor No AGL Input GL USAS D23 Fund
To Accrue a Reversal of an Original Pass-Through Expenditure/Expense with a Blank or Incorrect AGL
(Use the COBJ that was input on the original entry)
(1) 4,5,8 J,K 0832CY XXX 467 R XX XXXXX XXXX $ XX.XX XXXXXXX
XXXXXXX
Blank or Incorrect N/A XXXX
Attention: Be sure to note the use of the R (reversal code). This reversal code ensures no interfund receivables/payables are established for this transaction.
 
To Accrue and Record a Pass-Through Expenditure/Expense with the Correct AGL
(2) 4,5,8 J,K 0832CY XXX 467   XX XXXXX XXXX $ XX.XX XXXXXXX
XXXXXXX
XXXXXXX0 N/A XXXX

Accounting effect of entries recorded AFTER Aug. 31, 20CY:

Debit Credit
(1) To Accrue a Reversal of an Original Pass-Through Expenditure/Expense with a Blank or Incorrect AGL:    
  1049 Interfund Payable – Current $ XX.XX  
  5501 Expenditure Control – Accrued   $ XX.XX
(2) To Accrue and Record a Pass-Through Expenditure/Expense with the Correct AGL:    
  5501 Expenditure Control – Accrued $ XX.XX  
  1049 Interfund Payable – Current   $ XX.XX

Generated Entries Note: T-code 467 posts as of the effective date of this transaction and generates a cash entry (T-code 471) that posts on the system management date. If this entry is backdated, the generated entry posts in the next fiscal year.

Correcting COBJ on Pass-Through Expenditures/Expenses

Be especially cautious when correcting COBJs by ensuring that the COBJ for Agency A still matches with the corresponding COBJ for Agency B.

For example, if Agency A already confirmed with Agency B that a federal grant pass-through COBJ was used and Agency A decides to change the COBJ to a state grant pass-through COBJ or a non pass-through COBJ, Agency A must notify Agency B of the change before the interagency deadlines to allow the correction to be made on both sides of the pass-through. The AGL only needs to be entered on the side of the transaction with the pass-through COBJ.

When correcting pass-through expenditures/expenses with T-codes 407/408 or 467R/467, be sure to use the recipient’s correct vendor number. This allows the Comptroller’s office to properly prepare the cash basis pass-through expenditure/expense report to help each agency reconcile its pass-through amounts at fiscal year-end. Correct the COBJs on pass-through expenditures/expenses using the process outlined below:

If the entries are recorded BEFORE Aug. 31, 20CY:

Seq No Batch Type Doc Type Eff Date Fin Agy TC R AY PCA COBJ Amount Vendor No AGL* Input GL USAS D23 Fund
* The AGL number MUST be input on the lines of entry that include pass-through COBJs unless the original transaction had a pass-through COBJ and a blank AGL. See the example to correct blank AGLs. If changing from one pass-through COBJ to another, both lines must have the AGL. If changing from a pass-through COBJ to a non-pass-through COBJ, the AGL must be entered on the line with the pass-through COBJ.
To Reverse the Original Expenditure/Expense with an Incorrect COBJ (Use the COBJ that was input on the original entry)
(1) 4,8 J,K Current Date XXX 407   XX XXXXX Incorrect COBJ $XX.XX XXXXXXXXXXXXXX XXXXXXX0 N/A XXXX
To Record the Pass-Through Expenditure/Expenses with the Correct COBJ
(2) 4,8 J,K Current Date XXX 408   XX XXXXX Correct COBJ $XX.XX XXXXXXXXXXXXXX XXXXXXX0 N/A XXXX

Accounting effect of entries recorded BEFORE Aug. 31, 20CY:

Debit Credit
(1) To Reverse the Original Expenditure/Expense with an Incorrect COBJ:    
  0045 CIST $ XX.XX  
  5500 Expenditure Control – Cash   $ XX.XX
(2) To Record the Pass-Through Expenditure/Expense with the Correct COBJ:    
  5500 Expenditure Control – Cash $ XX.XX  
  0045 CIST   $ XX.XX

If the entries are recorded AFTER Aug. 31, 20CY:

Seq No Batch Type Doc Type Eff Date Fin Agy TC R AY PCA COBJ Amount Vendor No AGL* Input GL USAS D23 Fund
* The AGL number MUST be input on the lines of entry that include pass-through COBJs unless the original transaction had a pass-through COBJ and a blank AGL. See the example to correct blank AGLs. If changing from one pass-through COBJ to another, enter the AGL on both lines. If changing from a pass-through COBJ to a non-pass-through COBJ, enter the AGL on the line with the pass-through COBJ.
To Accrue a Reversal of an Original Expenditure/Expense with an Incorrect COBJ
(Use the COBJ that was input on the original entry)
(1) 4,5,8 J,K 0832CY XXX 467 R XX XXXXX Incorrect COBJ $ X.XX XXXXXXXXXXXXXX XXXXXXX0 N/A XXXX
Attention: Be sure to note the use of the R (reversal code). This reversal code ensures no interfund receivables/payables are established for this transaction. If a correction needs to be made to the GAAP fund, see Correcting D23 and GAAP Fund On Pass-Through Expenditures/Expense below.
 
To Accrue and Record a Pass-Through Expenditure/Expense with the Correct COBJ
(2) 4,5,8 J,K 0832CY XXX 467   XX XXXXX Correct COBJ $ X.XX XXXXXXXXXXXXXX XXXXXXX0 N/A XXXX

Accounting effect of entries recorded AFTER Aug. 31, 20CY:

Debit Credit
(1) To Accrue a Reversal of an Original Expenditure/Expense with an Incorrect COBJ    
  1049 Interfund Payable – Current $ XX.XX  
  5501 Expenditure Control – Accrued   $ XX.XX
(2) To Accrue and Record a Pass-Through Expenditure/Expense with the Correct COBJ    
  5501 Expenditure Control – Accrued $ XX.XX  
  1049 Interfund Payable – Current   $ XX.XX

Generated Entries Note: T-code 467 posts as of the effective date of this transaction and generates a cash entry (T-code 471) that posts on the system management date. If this entry is backdated, the generated entry posts in the next fiscal year.

Correcting D23 and GAAP Fund on Pass-Through Expenditures/Expenses

If at fiscal year-end an agency realizes the D23 fund(s) and/or GAAP fund(s) are incorrect for a pass-through transaction that was already coordinated and is in balance with the other agency, the Comptroller’s office recommends the following method to correct the error. This discrepancy may occur due to an occasional immaterial coding or data entry error.

Processing these suggested corrections will require the agency with the incorrect D23 fund to process additional USAS correcting entries the following fiscal year to correct the D23 fund on the reversing accrual entries.

If the incorrect D23 fund and the correct D23 fund are both within the same GAAP fund, no entry is required by the Comptroller’s office — although the agency may choose to do the entry if needed for internal purposes. If the GAAP fund is incorrect, the Comptroller’s office requires the agency to make the correction. In both situations, the Comptroller’s office recommends that the agency make the correction within its own agency to avoid re-coordination with the other agency. If the D23/GAAP fund is the only error, the agency may leave the pass-through due from/due to as is and run the GAAP fund adjustment through other expenditures (for governmental funds)/other operating expenses (for proprietary funds) using COBJ 7970 as outlined below:

If the entries are recorded AFTER Aug. 31, 20CY between different GAAP funds:

Seq No Batch Type Doc Type Eff Date Fin Agy TC R AY PCA COBJ Amount Vendor No AGL Input GL USAS D23 Fund
To Accrue a Reversal of an Original Pass-Through Expenditure/Expense with an Incorrect USAS D23 Fund and GAAP Fund
(1) 4,5,8 J,K 0832CY XXX 467 R XX XXXXX 7970 $ XX.XX XXXXXXXXXXXXXX N/A N/A Incorrect D23 Fund
To Accrue and Record a Pass-Through Expenditure/Expense with the Correct USAS D23 Fund and GAAP Fund
(2) 4,5,8 J,K 0832CY XXX 467   XX XXXXX 7970 $ XX.XX XXXXXXXXXXXXXX N/A N/A Correct D23 Fund
To Record a Due From in the Incorrect D23 Fund
(3) 8 U 0832CY XXX 662   XX 99999 N/A $ XX.XX N/A XXXXXXX0 0283 Incorrect D23 Fund
To Record a Due To in the Correct D23 Fund
(4) 8 U 0832CY XXX 663   XX 99999 N/A $ XX.XX N/A XXXXXXX0 1053 Correct D23 Fund
To Eliminate System Clearing Created in Step 3
(5) 5 U 0832CY XXX 647   XX 99999 N/A $ XX.XX N/A XXXXXXX0 1049 Incorrect D23 Fund
To Eliminate System Clearing Created in Step 4
(6) 5 U 0832CY XXX 646   XX 99999 N/A $ XX.XX N/A XXXXXXX0 1049 Correct D23 Fund

Accounting effect of entries recorded AFTER Aug. 31, 20CY between different GAAP funds

Debit Credit
(1) To Accrue a Reversal of an Original Pass-Through Expenditure with Incorrect USAS D23 Fund and GAAP Fund    
  1049 Interfund Payable – Current $ XX.XX  
  5501 Expenditure Control – Accrued   $ XX.XX
(2) To Accrue and Record a Pass-Through Expenditure with the Correct USAS D23 Fund and GAAP Fund    
  5501 Expenditure Control – Accrued $ XX.XX  
  1049 Interfund Payable – Current   $ XX.XX
(3) To Record a Due From in the Incorrect D23 Fund    
  0283 Due From Other Funds $ XX.XX  
  9999 System Clearing   $ XX.XX
(4) To Record a Due To in the Correct D23 Fund    
  9999 System Clearing $ XX.XX  
  1053 Due To Other Funds   $ XX.XX
(5) To Eliminate System Clearing Created in Step 3    
  9999 System Clearing $ XX.XX  
  1049 Interfund Payable – Current   $ XX.XX
(6) To Eliminate System Clearing Created in Step 4    
  1049 Interfund Payable – Current $ XX.XX  
  9999 System Clearing   $ XX.XX

Generated Entries Note: T-code 467 posts as of the effective date of the transaction and generates a cash entry (T-code 471) that posts on the system management date. If this entry is backdated, the generated entry posts in the next fiscal year.

Recording Federal Grant Pass-Through Revenue [+]

Federal grant pass-through revenue can be recorded in USAS in several ways.

  • When the activity occurs within the state’s Treasury — Use the RTI process with T-code 273 and federal grant pass-through revenue (COBJs 3971 or 3978). For more information, see RTI Table 1.
  • Agencies receiving pass-through funds by warrant rather than through the RTI process — Use T-code 145 or 149 when depositing the funds to the state’s Treasury. These T-codes allow the use of pass-through COBJs.
  • Any agency not recording local funds to the state’s Treasury must use generic T-code 643 to record revenue when reconciling its AFR to USAS.

To assist with reconciling pass-through grant revenue, request a USAS query from your financial reporting analyst. The USAS query reports the amount of cash revenue the agency received using COBJ 3971 and COBJ 3978.

Correction of Federal Grant Pass-Through Revenue [+]

Whether the RTI process is used or a warrant is received, the correct AGL information must be recorded on the revenue GL account. The following sections list the correcting entries for any data entry errors that may have occurred due to the posting of an incorrect COBJ and/or a blank or incorrect AGL. Corrections are only made to prior year activity.

Note: When the fiscal year is still open, do not make corrections to the prior year’s activity — which is closed.

Correcting Blank or Incorrect AGL on Pass-Through Revenues

If a USAS transaction has a blank or incorrect AGL that posted to CIST (GL 0045) or revenue control-cash (GL 5000), correct the transaction using the revenue transfer process outlined below:

If the entries are recorded BEFORE Aug. 31, 20CY:

Seq No Batch Type Doc Type Eff Date Fin Agy TC R AY PCA COBJ Amount Vendor No AGL Input GL USAS D23 Fund
To Reverse an Original Pass-Through Revenue with a Blank or Incorrect AGL (Use the COBJ that was input on the original entry)
(1) 5,8 J Current Date XXX 406   XX XXXXX XXXX $ XX.XX N/A Blank or Incorrect N/A XXXX
To Record the Pass-Through Revenue with the Correct AGL
(2) 5,8 J Current Date XXX 405   XX XXXXX XXXX $ XX.XX N/A XXXXXXX0 N/A XXXX

Accounting effect of entries recorded BEFORE Aug. 31, 20CY:

Debit Credit
(1) To Reverse an Original Pass-Through Revenue Deposit with a Blank or Incorrect AGL    
  5000 Revenue Control – Cash $ XX.XX  
  0045 CIST   $ XX.XX
(2) To Record the Revenue Pass-Through with the Correct AGL    
  0045 CIST $ XX.XX  
  5000 Revenue Control – Cash   $ XX.XX

If a USAS transaction has a blank AGL that posted to CIST (GL 0045) or revenue control — cash (GL 5000) and fiscal year-end has occurred, corrections can no longer be made by reversing the original T-codes because cash transactions cannot be backdated. Therefore, correct the transaction using the revenue transfer process outlined below:

If the entries are recorded AFTER Aug. 31, 20CY:

Seq No Batch Type Doc Type Eff Date Fin Agy TC R AY PCA COBJ Amount Vendor No AGL Input GL USAS D23 Fund
To Accrue a Reversal of an Original Pass-Through Revenue with a Blank or Incorrect AGL:
(1) 4,5,8 J 0832CY XXX 465 R XX XXXXX XXXX $XX.XX XXXXXXXXXXXXXX Blank or Incorrect N/A XXXX

Attention: Be sure to note the use of the R (reversal code). This reversal ensures no interfund receivables/payables are set up for this transaction. If a correction must be made to the GAAP fund, see Correcting D23 and GAAP Fund On Pass-Through Revenues.

To Accrue and Record a Pass-Through Revenue with the Correct AGL:
(2) 4,5,8 J 0832CY XXX 465   XX XXXXX XXXX $XX.XX XXXXXXXXXXXXXX XXXXXXX0 N/A XXXX

Accounting effect of entries recorded AFTER Aug. 31, 20CY within the same GAAP fund/agency:

Debit Credit
(1) To Accrue a Reversal of an Original Pass-Through Revenue with a Blank or Incorrect AGL    
  5001 Revenue Control – Accrued $ XX.XX  
  0279 Interfund Receivable – Current   $ XX.XX
(2) To Accrue and Record a Pass-Through Revenue with the Correct AGL    
  0279 Interfund Receivable – Current $ XX.XX  
  5001 Revenue Control – Accrued   $ XX.XX

Generated Entries Note: T-code 465 posts as of the effective date of the transaction and generates a cash entry (T-code 469) that posts on the system management date. If this entry is backdated, the generated entry posts in the next fiscal year.

Correcting COBJ on Pass-Through Revenues

Be especially cautious when correcting COBJs by ensuring that the COBJ for Agency A still matches with the corresponding COBJ for Agency B.

For example, if Agency A already confirmed with Agency B that a federal pass-through COBJ was used and Agency A decides to change the COBJ to a state grant pass-through COBJ or a non pass-through COBJ, Agency A must notify Agency B of the change before the interagency deadlines to allow the correction to be made on both sides of the pass-through. The AGL only needs to be entered on the side of the transaction with the pass-through COBJ.

If the entries are recorded BEFORE Aug. 31, 20CY:

Seq No Batch Type Doc Type Eff Date Fin Agy TC R AY PCA COBJ Amount Vendor No AGL* Input GL Fund
* The AGL number MUST be input on the lines of entry that include pass-through COBJs unless the original transaction had a pass-through COBJ and a blank AGL. See the example to correct blank AGLs. If changing from one pass-through COBJ to another, enter the AGL on both lines. If changing from a pass-through COBJ to a non-pass-through COBJ, enter the AGL on the line with the pass-through COBJ.
To Reverse an Original Pass-Through Revenue with an Incorrect COBJ
(Use the COBJ that was input on the original entry)
(1) 5,8 J Current date XXX 406   XX XXXXX Incorrect COBJ $ XX.XX N/A XXXXXXX0 N/A XXXX
To Record the Pass-Through Revenue with the Correct COBJ
(2) 5,8 J Current Date XXX 405   XX XXXXX Correct COBJ $ XX.XX N/A XXXXXXX0 N/A XXXX

Accounting effect of entries recorded BEFORE Aug. 31, 20CY:

Debit Credit
(1) To Reverse an Original Pass-Through Revenue with an Incorrect COBJ    
  5000 Revenue Control – Cash $ XX.XX  
  0045 CIST   $ XX.XX
(2) To Record the Pass-Through Revenue with the Correct COBJ    
  0045 CIST $ XX.XX  
  5000 Revenue Control – Cash   $ XX.XX

If the entries are recorded AFTER Aug. 31, 20CY:

Seq No Batch Type Doc Type Eff Date Fin Agy TC R AY PCA COBJ Amount Vendor No AGL* Input GL USAS D23 FUND
* The AGL number MUST be input on the lines of entry that include pass-through COBJs unless the original transaction had a pass-through COBJ and a blank AGL. See the example to correct blank AGLs. If changing from one pass-through COBJ to another, enter the AGL on both lines. If changing from a pass-through COBJ to a non-pass-through COBJ, enter the AGL on the line with the pass-through COBJ.
To Accrue a Reversal of an Original Pass-Through Revenue with an Incorrect COBJ
(Use the COBJ that was input on the original entry)
(1) 4,5,8 J 0832CY XXX 465 R* XX XXXXX Incorrect COBJ $XX.XX XXXXXXXXXXXXXX XXXXXXX0 N/A XXXX

Attention: Be sure to note the use of the R (reversal code). This reversal ensures no interfund receivables/payables are set up for this transaction. If a correction must be made to the GAAP fund, see Correcting D23 and GAAP Fund On Pass-Through Revenues.

To Accrue and Record a Pass-Through Revenue with the Correct COBJ
(2) 4,5,8 J 0832CY XXX 465   XX XXXXX Correct COBJ $XX.XX XXXXXXXXXXXXXX XXXXXXX0 N/A XXXX

Accounting effect of entries recorded AFTER Aug. 31, 20CY

Debit Credit
(1) To Accrue a Reversal of an Original Pass-Through Revenue with an Incorrect COBJ    
  5001 Revenue Control – Accrued $ XX.XX  
  0279 Interfund Receivable – Current   $ XX.XX
(2) To Accrue and Record a Pass-Through Revenue with the Correct COBJ    
  0279 Interfund Receivable – Current $ XX.XX  
  5001 Revenue Control – Accrued   $ XX.XX

Generated Entries Note: T-code 465 posts as of the effective date of the transaction and generates a cash entry (T-code 469) that posts on the system management date. If this entry is backdated, the generated entry posts in the next fiscal year.

Correcting D23 and GAAP Fund on Pass-Through Revenues

If at fiscal year-end an agency realizes the D23 fund(s) and/or GAAP fund(s) are incorrect for a pass-through transaction that was already coordinated and is in balance with the other agency, the Comptroller’s office recommends the following method to correct the error. This discrepancy may occur due to an occasional immaterial coding or data entry error.

Processing these suggested corrections will require the agency with the incorrect D23 fund to process additional USAS correcting entries the following fiscal year to correct the D23 fund on the reversing accrual entries.

If the incorrect D23 fund and the correct D23 fund are both within the same GAAP fund, no entry is required by the Comptroller’s office, although the agency may choose to do the entry if needed for internal purposes. If the GAAP fund is incorrect, the Comptroller’s office requires the agency to make the correction. In both situations, the Comptroller’s office recommends that the agency make the correction within its own agency to avoid re-coordination with the other agency. If the D23/GAAP fund is the only error, the agency may leave the pass-through due from/due to as is and run the GAAP fund adjustment through other revenues (for governmental funds)/other operating revenues (for proprietary funds) using COBJ 3970 as outlined below:

If the entries are recorded AFTER Aug. 31, 20CY between different GAAP funds:

Seq No Batch Type Doc Type Eff Date Fin Agy TC R AY PCA COBJ Amount Vendor No AGL Input GL USAS D23 Fund
To Accrue a Reversal of an Original Pass-Through Revenue with an Incorrect USAS D23 Fund and GAAP Fund
(1) 4,5,8 J 0832CY XXX 465 R XX XXXXX 3970 $XX.XX XXXXXXXXXXXXXX N/A N/A Incorrect D 23 Fund
To Accrue and Record a Pass-Through Revenue with the Correct USAS D23 Fund and GAAP Fund
(2) 4,5,8 J 0832CY XXX 465   XX XXXXX 3970 $XX.XX XXXXXXXXXXXXXX N/A N/A Correct D23 Fund
To Record a Due To in the Incorrect D23 Fund
(3) 8 U 0832CY XXX 663   XX 99999 N/A $XX.XX N/A XXXXXXX0 1053 Incorrect D23 Fund
To Record a Due From in the Correct D23 Fund
(4) 8 U 0832CY XXX 662   XX 99999 N/A $XX.XX N/A XXXXXXX0 0283 Correct D23 Fund
To Eliminate System Clearing Created in Step 3
(5) 5 U 0832CY XXX 646   XX 99999 N/A $XX.XX N/A XXXXXXX0 0279 Incorrect D 23 Fund
To Eliminate System Clearing Created in Step 4
(6) 5 U 0832CY XXX 647   XX 99999 N/A $XX.XX N/A XXXXXXX0 0279 Correct D23 Fund

Accounting effect of entries recorded AFTER Aug. 31, 20CY between different GAAP funds

Debit Credit
(1) To Accrue a reversal of an original Pass-Through Revenue with an Incorrect USAS D23 Fund and GAAP Fund    
  5001 Revenue Control – Accrued $ XX.XX  
  0279 Interfund Receivable – Current   $ XX.XX
(2) To Accrue and Record a Pass-Through Revenue with the Correct USAS D23 Fund and GAAP Fund    
  0279 Interfund Receivable – Current $ XX.XX  
  5001 Revenue Control – Accrued   $ XX.XX
(3) To Record a Due To in the Incorrect D23 Fund    
  9999 System Clearing $ XX.XX  
  1053 Due To Other Funds   $ XX.XX
(4) To Record a Due From in the Correct D23 Fund    
  0283 Due From Other Funds $ XX.XX  
  9999 System Clearing   $ XX.XX
(5) To Eliminate System Clearing Created in Step 3    
  0279 Interfund Receivable – Current $ XX.XX  
  9999 System Clearing   $ XX.XX
(6) To Eliminate System Clearing Created in Step 4    
  9999 System Clearing $ XX.XX  
  0279 Interfund Receivable – Current   $ XX.XX

Generated Entries Note: T-code 465 posts as of the effective date of the transaction and generates a cash entry (T-code 469) that posts on the system management date. If this entry is backdated, the generated entry posts in the next fiscal year.

Cash Conduit – Proper Fund Type for Reporting of Pass-Throughs [+]

Per GASB 24, agencies often receive grants and other financial assistance to transfer to (or spend on behalf of) a secondary recipient. These amounts are referred to as pass-through grants. Record all cash pass-through grants received by an agency on the financial statements.

As a general rule, pass-through grants are recognized as revenue and expenditure or expenses in a governmental, proprietary or trust fund. In those infrequent cases in which an agency serves only as a cash conduit, the grant is reported in an agency fund (FT09).

An agency serves only as a cash conduit if it merely transmits grantor-supplied moneys without having administrative or direct financial involvement in the program.

An agency has administrative involvement if, for example, it:

  • Monitors secondary recipients for compliance with program-specific requirements
  • Determines eligible secondary recipients or projects, even if using grantor-established criteria
  • Has the ability to exercise discretion in how the funds are allocated

An agency has direct financial involvement if, for example, it:

  • Finances some direct program costs because of a grantor-imposed matching requirement
  • Is liable for disallowed costs

Important Note: GASB found that when considering administrative and direct financial involvement, recipient agencies should report few, if any, pass-through grants in agency funds. For more information, see GASB 24.

Pass-Through Refund from Funds Held Outside the State’s Treasury Prior to August 31, 20CY [+]

Agencies are required to use an RTI for transfers of funds between agencies when both funds are within the state’s Treasury and for transfers between agencies with funds outside the state’s Treasury. However, it is not possible to use the RTI process prior to August 31, 20CY to record federal pass-through refunds from funds held outside the state’s Treasury (local funds) to funds held in the state’s Treasury. Therefore, the receiving agency coordinates with the disbursing agency to determine the correct AGLs and COBJs to record the federal pass-through refund using USAS journal entries. This facilitates proper recoding on both agencies for the reconciliation of federal pass-throughs.

Agencies must use the RTI process for fiscal year-end entries. Use RTI Table 4 to record a fiscal year-end federal pass-through decrease accrual for funds in the state’s Treasury and funds held outside the state’s Treasury.

Receiving agency processing refund before Aug. 31, 20CY:

Seq No Batch Type Doc Type Eff Date Fin Agy TC R AY PCA COBJ Amount Vendor No AGL* Input GL USAS D23 Fund
* The AGL must be input on the lines of entry that include the pass-through COBJ.
To Record Refund of Pass-Through Expenditure
(1) 4,5 D MMDDYY XXX 180   XX XXXXX 7971 or 7978 $ XX.XX N/A XXXXXXX0 N/A XXXX

Accounting effect of receiving agency processing refund before Aug. 31, 20CY:

Debit Credit
(1) To Record Refund of Pass-Through Expenditure    
  0045 CIST $ XX.XX  
  5500 Expenditure Control – Cash   $ XX.XX

Disbursing agency processing refund before Aug. 31, 20CY:

Seq No Batch Type Doc Type Eff Date Fin Agy TC R AY PCA COBJ Amount Vendor No AGL* Input GL USAS D23 Fund
* The AGL must be input on the lines of entry that include the pass-through COBJ.
To Record Refund of Pass-Through Revenue
(1) 4,5 U MMDDYY XXX 643 R XX XXXXX 3971 or 3978 $ XX.XX N/A XXXXXXX0 N/A XXXX
To Record Funds Held Outside the State’s Treasury
(2) 4,5 U MMDDYY XXX 645   XX XXXXX N/A $ XX.XX N/A N/A 0040 XXXX

Accounting effect of disbursing agency processing refund before Aug. 31, 20CY:

Debit Credit
(1) To Record Refund of Pass-Through Revenue    
  5100 GAAP Revenue Offset $ XX.XX  
  9999 System Clearing   $ XX.XX
(2) To Record Funds Held Outside the State’s Treasury    
  9999 System Clearing $ XX.XX  
  0040 Cash in Bank   $ XX.XX
Glenn Hegar
Texas Comptroller of Public Accounts
Questions? Contact statewide.accounting@cpa.texas.gov
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