Academic journal article Journal of Accountancy

GASB Proposal on Accounting for Grants

Academic journal article Journal of Accountancy

GASB Proposal on Accounting for Grants

Article excerpt

A Governmental Accounting Standards Board exposure draft would change accounting requirements for grants and other forms of financial assistance, including pass-through grants, food stamps and on-behalf payments.

"Governments have done a masterful job of scrambling their transactions, and GASB is trying to sort out who's doing what and why," commented Randall Finden, assistant deputy auditor of the state of Washington. He added the GASB proposal could have far-reaching effects since grants are a significant part of local and state government financing.

Pass-through grants are received by a government entity that then either transfers the money to another government entity or spends it on that entity's behalf. The ED requires recipients to recognize all cash pass-through grants as revenues and expenditures in a government, proprietary or trust fund. Only in rare cases when a recipient government serves solely as a cash conduit--that is, it has no administrative or direct financial involvement in the program--would grants be reported in agency funds (which recognize only increases and decreases in cash, not revenues and expenditures).

For food stamps, the ED requires state governments to report their distributions as revenues and expenditures in either the general or a special revenue fund, whether the state government distributes the benefits directly or through agents and whether the benefits are in paper or electronic form. …

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