Policy
FIACCT 07-05_00 Pass- Thru Funds- Overview
Effective: July 1, 1994
Revised: October 7, 1996
Purpose
The purposes of this policy are:
A.
To clarify the definition of pass-through (pass-thru) funds.
B.
To provide guidance for complying with generally accepted accounting principles in accounting for pass-thru funds (as defined below).
C.
To define the Division of Finance policy regarding pass-thru funds that will be coded to revenue sources 4750–4753 and expenditure objects 7602–7604; and to identify when pass-thru funds should be accounted for in an Agency Fund.
Policy
A.
Pass-thru funds are to be reported as revenues and expenditures in the state organizations receiving the funds.
B.
If the state agency acts only as a cash conduit for the pass-thru funds, then the pass-thru funds will be accounted for in an Agency Fund (see definitions below).
C.
Record pass-thru funds in accordance with the procedures in the Receipt of Federal Funds policy in this section of this manual.
Definitions
A.
Pass-Thru Funds:
If a state agency receives grants or other financial assistance that is to be transferred to or spent on behalf of a secondary non-state entity, then the funds are pass-thru.
B.
Cash Conduit Pass-Thru Funds:
A state agency is a cash conduit for pass-thru funds if it merely transmits grantor-supplied money to the secondary recipient without any administrative or financial involvement in the program. A state agency has administrative or financial involvement if it does any of the following:
- The agency monitors the secondary recipient for compliance with program-specific requirements.
- The agency determines eligible secondary recipients, even if it uses grantor-established criteria.
- The agency has discretion in how the funds are allocated.
- The agency finances some direct program cost because of grantor-imposed matching requirements.
- The agency is liable for disallowed costs.
C.
Funds received from sources outside of state government, such as the federal government, associations of governments, private contributions, etc. are pass-thru funds.
D.
Funds received by a state department acting as the collecting or receiving agent are pass-thru funds.
E.
Pass-thru funds are funds received by a state department that has no authority to contract for or expend the funds. The State’s only authority is to record or account for the funds and to transfer the funds to the recipient who will expend the funds.
F.
Pass-thru funds are funds transferred from the State to the recipient who expends the funds. The recipient may be any entity outside the State’s fund groups (local governments, school districts, private organizations, association of governments, etc.) which has been given legal or contractual authority to expend the funds.
G.
Funds from the State are passed-thru if they are transferred intact with no additional rules, regulations, instructions, terms, or requirements made by the State to the recipient as to how the funds are to be spent. The only requirements as to the use of the funds would come from the outside source/grantor (federal government, private contributor, etc.).
H.
Funds may be considered pass-thru even if the State continues to provide accounting services to monitor the use of the funds.
I.
The State is not responsible for reporting to the outside granting agency as to how the funds have been spent. The recipient agency is responsible for reporting how the funds were spent.
Procedures
Responsibility
Action
Pass-Thru Funds
Agency
Receive the pass-thru funds and prepare a cash receipt using appropriate coding to
revenue sources.
Distribute funds to secondary recipient: Prepare payment voucher or wire transfer as
appropriate, using proper coding.
Cash Conduit Pass-Thru Funds
Agency
If an agency has cash conduit pass-thru funds, contact the Division of Finance to setup an Agency Fund.
Finance
Review the nature of pass-thru funds with the agency. If the funds are cash conduit pass-thru funds, then set up Agency Fund. Work with the agency to set up org and accounts to record receipts and disburse pass-thru funds.