Academic journal article Journal of Accountancy

GASB Sets Standards for Accounting for Grants

Academic journal article Journal of Accountancy

GASB Sets Standards for Accounting for Grants

Article excerpt

The Governmental Accounting Standards Board issued a statement setting accounting and financial reporting standards for payments one government transfers to another for subsequent distribution to a third party. Statement no. 24, Accounting and Financial Reporting for Certain Grants and Other Financial Assistance, deals with pass-through grants, food stamps and on-behalf payments for fringe benefits and salaries.

Statement no. 24, which is effective for periods beginning after June 15, 1995, requires recipients to recognize cash pass-through grants as revenue and expenditures in a governmental, proprietary or trust fund. State governments must report their food stamp distributions as revenue and expenditures in the general or a special revenue fund. On-behalf payments for fringe benefits and salaries are considered direct payments made by one entity to a third-party recipient on behalf of another, legally separate, employer. Employer governments must recognize revenue and expenditures for these on-behalf payments.

"The standards for on-behalf payments are the most important contribution of this statement," said Venita M. Wood, a project manager with the GASB. "Such transfers are made with great frequency, yet they have not always been disclosed. Consequently, taxpayers aren't aware that such payments are being made. This statement brings to light another area of government financing."

"The GASB statement provides needed guidance on grants," said Walter F. …

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