Question

A city receives a federal grant, which the city must pass through to smaller units of...

A city receives a federal grant, which the city must pass through to smaller units of government who meet the eligibility requirements. The city must monitor these smaller units of government for compliance with grant requirements.

a.) How should the city recognize this grant in its fund financial statements?

b.) Would your answer be different if the city were not required to monitor the other governments for compliance with grant requirements? Explain.

Homework Answers

Answer #1

Answer A: Usually, Governments (City) receive grants transfer to secondary recipients. Those amounts are referred to as pass-through grants. City should recognize cash pass-through grants as revenue and expenses or expenditures in a governmental fund and as revenue and expenses in the government-wide financial statements.

Answer B: In some cases in which a recipient government serves only as a cash conduit not required to monitor the other governments for compliance with grant requirements, the grant should be reported in an agency fund, in which case it would not be reported in the governmental fund or government-wide financial statements.

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