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INFORMATIONAL CIRCULAR NO. 04-A-006 (Supersedes 01-a-015) 
DATE:  September 17, 2003
SUBJECT: Processing of Transactions for Federal Grants
A & R CONTACT: Pam Karns  
Mike Lovich
(785) 296-2660  
(785) 296-2131
APPROVAL: Approved by Dale Brunton
SUMMARY: Updated the guidance on federal grants to include notification of the requirement for a Duns number and revised audit thresholds.

Informational circular 01-A-015 published on March 30, 2001 provided and revised the documentation required for federal grant moneys. This informational circular contains the final revisions to Circular No. A-133, notice of final policy issuance, and the Informational Circular 01-A-015 in its entirety. The revisions to information circular 01-A-015 are in italics.

The Office of Management and Budget (OMB) issued final revision to Circular A-133 in the June 27, 2003 Federal Register that concerns state, local governments, and non-profit organizations. The purpose of these final revisions is to (1) increase the threshold for audit from $300,000 to $500,000 and (2) increase the threshold for cognizant agency for audit from $25 million to $50 million.

At the same time, the Office of Management and Budget (OMB) issued a policy directive to implement the requirement for grant applicants to provide a Dun and Bradstreet (D&B) Data Universal Numbering System (DUNS) number when applying for Federal grants or cooperative agreements on or after October 1, 2003. A DUNS number must be included in every application for a new award or renewal of an award, whether an applicant is submitting a paper application or using the government-wide electronic portal (Grants.gov). By using the Grants.gov portal, entities will be able to store in a central repository organizational information that does not change from application to application. The DUNS number will be one of those stored elements. The universal identifier will be used for tracking purpose and to validate address and point of contact information for improved statistical reporting of federal grants and cooperative agreements. The use of DUNS numbers to identify entities receiving federal contracts enables the federal government to determine hierarchical data for related organizations. Copies of the organization's family-tree hierarchy can be obtained at OMB's Grants.gov online portal along with guidelines on how to obtain a DUNS number.

Applicants should verify that they have a DUNS number or take the necessary steps to obtain a DUNS number "as soon as possible" if there is a possibility that they may seek a grant on or after October 1, 2003. Applicants can receive a DUNS number at no cost by calling the toll free DUNS number request line at 1- 866-705-5711 or online at http://www.dnb.com/us/. About 10 to 12 data elements are required for Dun and Bradstreet to assign a DUNS number, including business name, address, telephone numbers, ownership information, length of establishment, legal structure of business, primary line of business and number of employees.

The State receives over $2 billion in federal grants annually. These grants/awards are received and used by many different state agencies. Each individual grant agreement usually includes certain specific language related to the use or distribution of the grant monies. The general categories of requirements are described in federal Office of Management and Budget (OMB) Circular A-133. We have attached a listing of certain definitions from the OMB Circular A-133 (Attachment 1). It is recommended that those agencies receiving federal grant awards obtain a copy of this circular. A copy of the circular may be obtained from the OMB home page at http://www.whitehouse.gov/omb under the caption Information for Agencies, Circulars.

Noncompliance with grant requirements may result in a refund of grant monies or the loss of funding for grant programs. Each state agency is responsible for identifying the federal awards received and expended and the programs under which they were received. This includes the Catalog of Federal Domestic Assistance (CFDA) number and name, award number and name, name of the federal agency, and applicable compliance requirements. Not only is this a federal requirement but much of this information is also necessary for preparation of the "Schedule of Expenditures of Federal Awards" contained in the "Financial and Compliance Audit Report State of Kansas Single Audit". This schedule lists all federal awards by federal agency, by federal CFDA/contract number, the name of the federal grantor/program/pass-through grantor, the dollar amount of the expenditures, and the amount of the funds passed through to subrecipient entities. The agency is also responsible for monitoring the subrecipient's activities. This is to provide reasonable assurance that the award is administered in compliance with federal requirements, for ensuring required audits are performed and prompt corrective action is taken, and for evaluating the impact of subrecipient activities on the pass-through entity's ability to comply with applicable federal regulations.

Non-federal entities that expend $500,000 or more in a year in federal awards shall have a single audit or program specific audit conducted for that year. Non-federal entities that expend less than $500,000 a year in federal awards are exempt from federal audit requirements for that year, but records must be available for review or audit by appropriate officials of the federal agency, pass-through entity and the General Accounting Office (GAO) of the federal government. Subpart B-Audits __.200 Audit requirements, page 17 of OMB Circular A-133 should be referred to for more specific details.

It is the responsibility of each agency to maintain information to identify its federal receipts and expenditures by CFDA number and name, the name of the federal agency from which the grant is received, and each grant type. The grant receipt or payment types include: receipt (or payment includes a recipient deposit), a pass-through deposit, a transfer of federal funds where the pass-through entity and the subrecipient entity are both state agencies, a vendor payment for goods or services, and expenditures to subrecipients outside the state system. Payment documents for internal agency operations will not require federal grant information to be included on the vouchers. However, this information must be readily accessible by the auditors during the annual A-133 audits. Grant receipt documents, transfers of federal funds to another state agency by interfund voucher (expenditure subobject code 7310) and warrant payments to entities outside of the State (expenditure subobject codes 5010-5080 and 7940) must have this information on the receipt and payment documents to enable the A-133 auditors to discern the source and type of federal grant payments.

State agency is a recipient

When a state agency is a recipient, it should record the receipt of federal funds as revenue sub-object (RSO) code 40xx. When the agency expends the federal funds to the beneficiary of the program, it should record them as expenditure sub-object (ESO) code 50xx or 55xx. When the agency expends the federal funds as program expenditures to a vendor, it should record them using the appropriate ESO code.

State agency is a pass-through entity

When a state agency is a pass-through entity, it should record the receipt of federal funds as RSO code 40xx. When it passes through (expends) the federal funds to an outside entity, it should record it as ESO code 50xx. When the agency passes through (expends) the federal funds to the subrecipient state agency, it should record them as ESO code 7310.

State agency is a subrecipient

When a state agency is a subrecipient from another state agency, it should record the receipt of federal funds as RSO code 6605. When the agency expends the federal funds as program expenditures to a vendor, the agency should record them using the appropriate ESO code.

Recipient and subrecipient entities may both make payments to vendors with grant monies. Vendors may be other state agencies, other governments, or may be non-governmental entities. Attachment 2 reviews vendor indicators in detail as does paragraph ___.210, page 18, of OMB Circular A-133.

A complete discussion of the responsibilities and obligations of recipient, subrecipient, pass-through and vendor entities is contained in OMB Circular A-133. Attachment 2 is a checklist to assist agencies in determining subrecipient, vendor, and pass-through entity. Policy and Procedure Manual Filing Numbers 6,002 and 7,002, OMB Circular A-133, and Characteristics of Subrecipients and Vendors (Attachment 2) will guide agencies in their coding for federal grant transactions.

Agency use of the following expenditure and revenue sub-object codes should be reviewed closely:

ESO 5010-5080     Federal Aid Payments: federal funds received by the State and disbursed to political subdivisions or qualified organizations as aid to individuals, school aid, and for other aid as defined in the appropriating act.
ESO 5520-5530 Direct Federal Welfare Assistance
ESO 7310 Inter-Agency Transfers (Federal)
ESO 7940 Return of Unexpended Federal Grants to Federal Agencies
RSO 4010-4090 Amounts received from the federal government to aid in the support of a specific function of government
RSO 6605 Operating Transfers In - Federal Aid from Other State Agencies


Attachment 1: Certain Definitions from OMB Circular No. A-133 
Attachment 2: Characteristics of Subrecipients and Vendors (.pdf)