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Reporting Requirements for Annual Financial Reports of State Agencies and Universities

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Reporting Requirements for Annual Financial Reports of State Agencies and Universities

Pass-Through Activity

Notes to SEFA
Note 2 – Reconciliation

The purpose of SEFA Note 2 is to reconcile the total monetary federal direct and pass-through revenues identified in SEFA Record List to the total federal expenditures presented in SEFA Schedule 1A. In SEFA Note 2, federal revenue is direct federal revenue plus federal non-state entity (NSE) pass-through revenue, while federal pass-through revenue is federal interagency pass-through revenue.

Prepare a formal reconciliation of the total federal revenues and federal pass-through revenues to the total pass-through to and expenditures in SEFA. The total federal revenues and federal pass-through revenues on the operating statement (Exhibit II, Exhibit IV and Exhibit VII) plus or minus the reconciling items, must equal the total pass-through to and expenditures reported in SEFA Schedule 1A.

  • Report federal revenue and federal pass-through revenue in Note 2 and tie the total to the operating statement.
    • Report direct federal revenue and federal NSE pass-through revenue as federal revenue.
    • Report interagency pass-through revenue as federal pass-through revenue.
  • Indirect cost recoveries and administrative costs recoveries are not listed separately but are included in the federal revenue or federal interagency pass-through revenue.
  • Revenue is not reported as a reconciling item.

The SEFA web application allows the entry of the legitimate reconciling items to reconcile federal revenue. Do not use SEFA Note 2 reconciling items to reconcile federal pass-through revenue, which must match federal pass-through revenue reported in USAS. Not all items apply to every agency. Some reconciling items automatically populate while other reconciling items require manual entry.

  • Automatically-populated reconciling items:
  • Manually-entered reconciling items:
    • State portion of State Unemployment Funds
    • Federal revenue received where a contractor (vendor) relationship exists between the agency and the federal government
    • Federal revenue received on the fixed fee basis contract
    • Federal revenue received from or sent to Texas A&M Research Foundation (Agency 014)
    • Medicare Part D activity
    • COBRA activity
    • Build America Bond activity
    • Early Retirement Reinsurance Program
    • Other additions or subtractions (Email SEFA.Texas@cpa.texas.gov to enter Other items in the SEFA web application.)

If the previous classifications do not match all the reconciling items, ensure that all revenues and expenditures are reported correctly as noted in examples below.

  • Funds collected but not expended are reported as deferred revenues; funds received but not passed through are reported as payables or Due to Subrecipients. These are not reconciling items. Disclose deferred revenue by ALN in SEFA Note 7. Universities are exempt from Note 7.
  • Subrecipients must include expenditures of pass-through funds as expenditures in SEFA.
  • Classifications of federal funds as previous year adjustments and changes in fund balance indicate errors were made in recording federal funds. Correct these items before preparing SEFA to ensure federal revenues and expenditures are reported in the appropriate fiscal year. Restatements are recorded in USAS, but not in SEFA. Accrual of revenue must occur in the year of the expenditure. If the expenditure did not occur in the following fiscal year, then reverse the revenue accrual and record a restatement in USAS. Do not adjust the current year’s revenue.
  • Earned federal funds are not a reconciling item.
  • For proprietary fund types that received federal surplus personal property, include a reconciling item for the difference between the estimated fair value recorded on Exhibit IV and the original federal acquisition cost of the property received.

According to GASB 65, the term deferred is only used when referring to deferred inflows of resources or deferred outflows of resources. As a result:

  • deferred revenue is now unearned revenue
  • deferred costs are now prepaid costs

The term deferred may still be used in SEFA to align with the Office of Management and Budget (OMB) Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (commonly referred to as the “Uniform Guidance”; formerly OMB Circular A-133).