Reporting Requirements for Annual Financial Reports of State Agencies and Universities

Pass-Through Activity

Miscellaneous Topics
Contingent Liabilities

Uniform Guidance requires that recipients of federal awards that pass-through funds to subrecipients determine if the results of subrecipient audits necessitate adjustment of the recipient’s own records.

To comply with this requirement, agencies should prepare a listing of its subrecipients’ questioned costs to determine if the questioned costs may have a material effect on the agency’s financial statements on the fund level or federal program level. If the magnitude and nature of the subrecipients’ questioned costs indicate a possible material effect on the agency’s financial statements, the agency must disclose this information in Note 15 of the agency’s AFR. This is not included in the notes to SEFA. The recipient must make adjustments to its grant accounting records for any unallowable costs.

If ultimate resolution of questioned costs indicates that material refunds are owed to the federal government, make appropriate adjustments to the financial statements and fully disclose in Note 15 of the agency’s AFR.