AGENCY: OFFICE OF MANAGEMENT AND BUDGET

EFFECTIVE DATE: 7-16-04

EXPIRATION DATE: INDEFINITE

SUPERSEDES: 95-19-OMB

SUBJECT: FEDERAL FUNDS

ATTENTION: DIRECTORS OF ADMINISTRATION AND CHIEF FISCAL OFFICERS

FOR INFORMATION CONTACT: WILLIAM MAUGHAN

PHONE: (609) 292-5004

The purpose of this circular letter is to clarify the Office of Management and Budget's policies and procedures regarding the establishment of federal grant accounts, reporting requirements and related transactions in the New Jersey Comprehensive Financial System (NJCFS).

I. OVERVIEW

The Grant Accounting Module of the NJCFS provides a budgetary control structure, independent from appropriations, which is tailored to grant requirements. In addition, it provides an automated mechanism for recording both direct and indirect grant costs and associated revenues. In order to facilitate statewide reporting and analysis of the federal programs, it is necessary that all departments utilize the Grant Accounting Module.

See Section XII for a glossary of terms used in this circular letter.

II. FEDERAL GRANTS WEBSITE

The federal government has established a website (www.grants.gov), which allows organizations to electronically search and apply for competitive grant opportunities from federal agencies. Agencies must have a Dun and Bradstreet number (DUNS) to conduct business within the website. Agencies should contact the Accounting Bureau, Grants Analysis Unit if a DUNS number needs to be created or identified, or if there are questions relating to accessing the website.

III. APPROPRIATIONS AND REVENUE BUDGETS

Appropriations and revenue budgets are established in either of two ways.

1. Automatically established through the budget process if included in the annual Appropriations Act. When established through the Act, the amount is generally an estimate provided by the agency to OMB's Budget Office, based on historical data or application information.
   Agencies should develop budgets if there are any indications that grant funds will be allocated in the following fiscal year. Early in the fourth quarter of the fiscal year, agencies are required to notify OMB of changes needed in the subsequent fiscal year to conduit and subgrantee relationships and/or the new fiscal year's budget authority. This ensures data integrity when the Integrated Planning and Budget (IPB) system passes appropriation records to NJCFS.

2. Established or increased by an OMB directory letter pursuant to language contained in the Appropriations Act.

IV. RELATIONSHIP OF APPROPRIATIONS AND REVENUE BUDGETS TO GRANTS

There must be at least one appropriation unit for each government-wide number. (See Section V. for a description of government-wide number.) A government-wide number must contain one conduit appropriation. Appropriations cannot fund multiple government-wide numbers.

The conduit appropriation unit must be linked to the revenue budget. Subgrantee appropriations units are not permitted to have revenue budgets linked to them.

There must be one revenue budget per government-wide number. The only instance in which there may be more than one revenue budget for a government-wide number is if OMB's Bureau of Budget, Management and Planning appropriates within each State fiscal year for a multiple-year grant award. The revenue budget will have different fiscal years, the same revenue source each year, and will be linked to the conduit.

V. FEDERAL AID MASTER TRANSACTION

In order to activate a conduit or subgrantee appropriation unit, a federal aid master (FM) transaction must be processed in NJCFS. This FM transaction requires the establishment of a federal aid number, which identifies the conduit or specific subgrantee portion of the grant award; thus, the conduit and each subgrantee will have a unique federal aid number. This federal aid number is alphanumeric and 12 characters in length. There are no other requirements for its coding structure.

The conduit and subgrantee appropriations units and the revenue budget are linked to the federal aid number through the Federal Aid Inference Table (FAIT), maintained by OMB.

The combination of agency code and federal aid number is the key for the FM transaction. When increasing or decreasing federal budget authority, the conduit/subgrantee indicator and the Catalog of Federal Domestic Assistance Number (CFDA) must also be entered on the FM transaction. Modifications to an FM transaction require only the information that is to be modified.

For reporting purposes, the Grant Accounting Module in NJCFS requires the establishment of a unique government-wide number for each federal grant award. This government-wide number is required on each FM transaction in order to establish and maintain the link among the federal aid numbers that pertain to the same grant. The government-wide number is 12 characters in length and is constructed as follows:

Conduit Agency Code	State FY in which Federal Government. Authorized the Grant	Descriptor
XXX	XX	XXXXXXX

Although there can be only one conduit agency per government-wide number, there can be more than one subgrantee agency that assists the conduit agency in complying with the grant award.
If applicable, State, bond, or local match is to be indicated on the FM and the appropriation account that is funding the match should be provided. Each category of match must be assigned a unique reporting category.

The conduit agency enters and approves an FM for itself and each subgrantee agency. The document(s) is forwarded to OMB, Grants Analysis Unit, for review and processing together with the following:

• The executed federal grant award, which specifies the start/end dates, total funding, brief project description, CFDA number and signature of authorized federal agent.

• A screen print of the appropriation (APPR) record that is linked to the grant award.

• A screen print of the revenue (REVB) record that is linked to the grant award.

• A memorandum requesting the establishment of corresponding FAIT entries.

In accordance with Section 883D of the Uniform Administrative Requirements for Grants and Cooperative Agreements to State and Local Governments, grant end dates should be 90 days after the expiration of the funding date. For closeout purposes, the grant end date may be adjusted from 90 to 180 days. If extenuating circumstances dictate an end date beyond 180 days, the agency should provide OMB with justification supporting the end date proposed on the FM. If the award end date must be extended beyond the initial date, the State agency must supply a copy of a time extension request, or justification for the extension to the FM transaction.

It is the conduit agency's responsibility to ensure billing and collection of revenue within the federal requirements of its respective federal agency, unless other arrangements have been made.

Funds Passed Through a Non-State Entity

If a State agency receives federal funds through a non-State entity, the agency must ensure that the NJCFS appropriation record, identified as a dedicated fund, indicates the source is a federal grant. Further, it is the agency's responsibility to establish the funds in the Grant Accounting Module using an FM transaction so that spending activity can be captured for the Schedule of Expenditures of Federal Awards (SEFA).

Dedicated accounts can be established for State accounts pursuant to language in the Annual Appropriations Act. If a dedicated account was not identified in the Annual Appropriations Act, the agency should submit a NJCFS appropriation transaction (AP), revenue budget transaction (RB), and supporting documentation to establish the funding.

VI. EXCESS APPROPRIATION AUTHORITY

If an appropriation account has excess authority resulting from a federal authorization that is less than anticipated, OMB will place the excess appropriation authority in reserve. Within the same State fiscal year, the excess authority may be used to support an unanticipated grant increase within the same program above the initial anticipated appropriation authority, based on language in the General Provisions section of the Appropriations Handbook. At no time shall the excess authority be used to fund an unanticipated grant award/appropriation. Excess authority not required to support unanticipated grant increases should be reverted. This is accomplished by submitting a request to OMB.

It is the conduit agency's responsibility to identify excess appropriation authority by program within the conduit and subgrantees' grant accounts, and transfer that appropriation authority when needed. Such movement of authority is to be processed as a transfer of appropriation (TA) in accordance with the Appropriations Handbook General Provision Language.

VII. SUPPLEMENTAL GRANT AWARDS

At times, the federal government provides increases to federal grant awards requiring corresponding increases to State appropriations and modifications to the Grant Accounting Module. Agencies should follow the guidelines in Section VI., Excess Appropriation Authority, for funding these increases.

Should adequate excess authority not exist, the agency should request that OMB issue a Directory Letter based on the language in the Appropriations Handbook, Federal Funds section. In these cases, the agency will need to enter, approve and forward AP, RB and modifying FM transactions with the supporting grant award to OMB.

VIII. USE OF UNOBLIGATED FEDERAL BALANCES

There are occasions when the federal government will permit an agency to utilize an unobligated prior year balance. In such cases, it is the agencies' responsibility to enter FM adjustments (decrease/increase). The FMs should be forwarded to OMB with a copy of the federal authorization.

The budget authority from the prior year will be placed in reserve and the budget authority in the current year will be increased by using excess authority within the current year (see Section VI.) or an OMB directory letter based on language in the Appropriation Act, Federal Funds section (see Section VII.)

IX. FEDERAL GRANT TRANSACTIONS

Transactions cannot be processed against a grant until the FAIT entry has been completed. Payroll transactions will process but will post against the agency's default account. Agencies will then have to process the correcting transactions to move the payroll expenses to the correct federal appropriation account once the FAIT entry has been entered.

All transactions that are posted against a federal grant require a reporting category, which is created when a conduit agency creates the FM transaction. The NJCFS system identifies from the transaction when a reporting category is required based on the "G" or "B" indicator located in the field G/P indicator on the APPR screen.

When an agency draws down funds from the federal government for expenditures relating to a federal grant, these funds must be posted as revenue. A refund to an appropriation account is not appropriate for a drawdown of federal funds. Agencies should post the revenue in the same fiscal year/grant award in which the expenditure was incurred.

Since grant expenditures can be incurred in other than grant accounts (e.g., payroll), it is the agency's responsibility to process expenditure modifications (EMs) and/or Intra-governmental Payment Vouchers (UAs and AVs) such that expenditures will be accurately reflected within the Grant Accounting Module. Agencies should make every effort to adjust expenditures quarterly within the same State fiscal year in which the expenditure was incurred or by the end of the State fiscal year.

X. REPORTS

It is the conduit agency's responsibility to ensure that NJCFS is properly reflecting federal expenditures within the Grant Accounting Module based on Financial Status Reports (SF-269) or equivalent reports submitted to the federal government. OMB may request agencies to provide a copy of these status reports to confirm accountability within NJCFS.

Subgrantee agencies should take necessary action to comply with the reporting time frames contained in its
agreement with the conduit agency so that the conduit agency can meet the reporting time frames of the federal grant requirements.

System reports available to assist in monitoring grant activity are:

• GN01 - Government-Wide Grant Report

• GN15 - Government-Wide Grant Receivables Report

• GN16 - Federal Grant Analysis Monthly Report

• G100 - Federal Aid Expenditure Summary Report

• G110 - Federal Aid Transactions Detail Report

The above system reports are generated on CD and distributed to each State agency after each fiscal quarter and after the month of July.

XI. PROCEDURES

1. Once the federal grant is fully expended and all revenue has been collected at the end of the grant period, the conduit agency should process a modifying FM transaction to inactivate the grant in NJCFS. If federal grant expenses do not equal collections, the conduit agency is responsible for identifying and making the adjustments within NJCFS. Where agencies did not spend the full federal authorization, and expenditures equal collections, OMB may require justification for the failure to fully spend the federal grant authority. Excess authority not needed to fund unanticipated grant increases should be reverted. In these cases, agencies should submit a request to OMB to revert the authority.

2. Conduit and subgrantee agencies should enter into memorandums of agreement (MOAs) to fulfill federal grant requirements. Conduit agencies are responsible for identifying and transferring authority within the State appropriation accounts that fund the grant award, in accordance with language found in the General Provision Language section of the Appropriations Handbook. At no time should a check be issued or reimbursement documents processed for this purpose.

3. In the month of July, OMB generates the GN12 report titled Federal Grant Analysis Report. This report captures transactions that were processed against federal grant awards for the prior 12 month period (July1 through June 30), and is sorted by CFDA number. This information is used to create the Schedule of Expenditures of Federal Awards (SEFA) for the State Single Audit.

   OMB provides State agencies with their portion of the GN12 report and requests them to reconcile their claims as reported on federal status reports to GN12 expenditures, and to certify to OMB that the reconciliation has been completed. It is extremely important that any differences from the claims to the GN12 report for the year ending June 30 be provided to OMB so that the SEFA reflects accurate expenditures.

4. Agencies are required to reconcile their quarterly federal reports to NJCFS expenditures. This reconciliation should be performed by the agency within 60 days after the end of the each quarter. All adjustments identified in the reconciliation should be processed within NJCFS to ensure data integrity. Exceptions to the quarterly reconciliation must be submitted in writing to OMB for approval. If an agency does not complete the reconciliation, OMB reserves the right to audit the agency's records or to advise the State Auditor. A State agency may be requested to submit a copy of any quarterly reconciliation to OMB to verify compliance.

XII. GLOSSARY

Below is a listing of terms that are used in this Circular Letter, along with a brief explanation:

1. Appropriation - Statutory authority given by the legislative body to a state agency, allowing it to incur obligations and make expenditures for specific purposes within a specified period of time.

2. Conduit Agency - Appropriation agency that receives funds from the federal government, controls authorized spending by a subgrantee, and reports to the federal government.

3. Federal Aid Inference Table (FAIT) - Table in the NJCFS, which defines the valid reporting category and accounting distribution code combinations that are used to access the Grant Accounting Module and which are required on related transactions.

4. Federal Aid number - An alphanumeric number that identifies the conduit or specific subgrantee portion of the grant award.

5. Government-wide number - A number that establishes and maintains the link among the federal aid numbers that pertain to the same grant.

6. Integrated Planning and Budgeting (IPB) - OMB's automated budgeting system, which supports development and loading of budgetary data into NJCFS at the start of each fiscal year.

7. Reconciliation - Process performed by the conduit agency where the claim made to the federal government is balanced to the expenditures processed within a given time frame.

8. Reporting Category - Code in the accounting distribution that identifies grants for reporting and is linked to a grant budget to control encumbrances, expenditures, and revenues made against the grant.

9. Revenue Budget - Mechanism in NJCFS to estimate and account for revenues.

10. Reserve - To reduce the excess available spending authority that is above the federal grant authority.

11. Revert - To lapse the excess available spending authority within the appropriation.

12. Schedule of Expenditures of Federal Awards (SEFA) - Listing of all expenditures by Catalog of Federal Domestic Assistance numbers for a given time frame.

13. Subgrantee Agency - Agency that assists the conduit agency with the programmatic needs of a federal grant award.

14. Transfer of Appropriation (TA) - Transaction used to transfer budget authority from one appropriation to another.

Charlene M. Holzbaur
Director