PRO-FIN-GRT-017.02 Released

Grant Revenue Recognition & Indirect Cost Recovery 12/01/15

Grant Revenue Recognition & Indirect Cost Recovery

Procedure

Document #: PRO-FIN-GRT-017.02 Version #: 2.0

Document Owner: Office of Finance Date of Last Update: 12/01/15

Update: Angela Grigorian Status: Released

General Description

Purpose:

To provide guidance regarding CRS’ standard practices for recording revenues and indirect cost recovery on cash grants.

Scope:

This pronouncement covers the accounting treatment for recognizing revenue on all cash grants that are considered exchange transactions received by CRS from the following donors:

·  United States Government (USG) Agencies and Departments

·  Non-USG public donors, such as governments and multi-lateral organizations such as the United Nations (UN), the European Union (EU) and The Global Fund (TGF)

·  Foundations and other private organizations

To illustrate full flow of the processes, examples in this procedure begin with the receipts of donor funds.

This procedure does not apply to donated commodities and other in-kind contributions, which are addressed in Policy POL-FIN-IKD-019 and the related procedures. The procedure is also not intended to cover the revenue recognition for USAID contracts governed by FAR and AIDAR.

Overview of Steps

1.  Revenue Recognition, Other than on Indirect Cost Recovery

2.  Revenue Recognition on Indirect Cost Recovery

Detailed Steps

1.  Revenue Recognition, Other than on Indirect Cost Recovery

When funding is awarded by a donor, a determination must be made as to whether the funding represents an exchange transaction (grant) or a contribution. (See the Definitions section of this procedure for the distinctions between the funding types.) Contributions usually come from private sources, such as individuals, foundations and corporations. Cash contributions are recorded in A/C 5150. Their treatment is not covered by this procedure. Refer to “Classification of Donor Funding as Grant or Contract vs. Contribution” policy POL-FIN-REV-016.

Funding received from public sources, such as governments, parastatals, the United Nations, the European Union, and the Global Fund is generally in the form of exchange transactions (grants). Funding received from other private organizations and from private foundations is normally in the form of exchange transactions (grants), but occasionally may be given by the donor as a contribution. Grant funding that is considered an exchange transaction is recorded as a liability in the respective donor source when received. Revenue is recognized when the funds have been expended on approved activities.

HQ prepares and records all entries for recognizing revenue on grants, other than those for program income. Office of Finance records revenue (RR) for all grants based on expenses charged during the period in the following manner:

·  TE = Total allowable expense, excluding ICR, charged to the donor source/project

·  PI = Less program income recorded in the donor source/project, where appropriate

Stated simply:

RR = TE – PI

The following chart shows the grant revenue and liability accounts used by CRS. Country Programs should never have balances on their books in Account 3031, Advances Received for Programs – USG. Entries to that account are only made at HQ and they are never transferred to the field.

Through the revenue recognition process, the Office of Finance (Finance) reduces (debits) the liability to the donor and increases (credits) grant revenue. CRS uses separate revenue and liability accounts to distinguish the source of the funding. Grant revenue activity is not transferred to the field office databases, but the entries that affect grant liability balances, excluding A/C 3031, are transferred.

The grant revenue accounts CRS regularly uses and their corresponding liability accounts are shown in the following table.

Funding
Source
(See Notes) / Funding
Receipt
Location / Revenue
Account Name / Revenue
Account Number / Liability
Account Name / Liability
Account Number / Liability
Entry Sent to Field?
USG1
Prime Award / HQ / Grant Revenue – USG / 5330 / Advances – USG Grants / 3031.200 / No
USG Sub Award / HQ / Grant Revenue - USG / 5330 / Advances - USG Subawards / 3036 / Yes
USG Monetization / HQ &
Locally / Grant Revenue - USG / 5330 / Monetization Grant Payable / 30334 / Yes
USG Non-Monetization Local Award / Locally / Grant Revenue - USG / 5330 / Local Grant Payable / 3034 / Yes
United
Nations2 / HQ / Grant Revenue – UN Agencies / 5331 / Advances – Other Grant Donors / 3032 / Yes
European
Union / HQ / Grant Revenue – EU Agencies / 5332 / Advances – Other Grant Donors / 3032 / Yes
Non-US Public Donor or Non-Profit3 / HQ / Grant Revenue – Other / 5340 / Advances – Other Grant Donors / 3032 / Yes
All Non-USG Local Awards / Locally / Various / Various / Local Grant Payable / 3034 / Yes

Notes:

1 - Includes receipts from all USG agencies, departments and bureaus, such as: US Agency for International Development (USAID) / Washington, local USAID missions, US embassies, US Department of State, and the US Department of Agriculture.

2 - Includes all United Nations agencies, such as: FAO, IMF, UNDP, UNHCR, UNICEF, UNITAID, WBG, WFP, and WHO.

3 - Includes all foreign governmental agencies and nonprofits.

4 - All monetization proceeds received for a monetization consortium should be credited to A/C 3033. That liability account is debited when the revenue recognition entry is recorded. However, the portion of monetization proceeds received on behalf of other agencies when CRS serves as the lead agency for an umbrella monetization should be credited to Account 3035 – Umbrella Monetization Payable. The distribution of cash to the other agencies that partake in an umbrella monetization should be debited to Account 3035, along with the payment of any expenses associated with the administration of the sale. No corresponding revenue entries are made relating to this account since it is used only for pass-through purposes. CRS’ portion of an umbrella monetization's sale proceeds should be recorded in Account 3033. Refer to the Monetization Sales Accounting & Reporting Policy (POL-FIN-MTZ-021) for the distinction between an umbrella monetization and a monetization consortium.

1.1 Examples of Revenue Recognition Entries

Examples of revenue recognition entries for several types of grant awards appear below:

A.  Revenue recognition on an award funded by a UN agency through cash sent directly to the Country Program

In March, CRS/Niger receives a grant in local currency (CFA) directly from the World Food Programme (WFP). The grant is for 55,000,000 CFA, which equals $103,400 USD when received. The donor requires that the cash be maintained in a separate bank account. CRS/Niger submits a New Donor Source/Project Form (NDSPN) to set up Donor Source/Project Number (DSPN) 6775.6720493 in local currency for recording the grant activity. Upon receipt of approval to open a segregated bank account, the Country Program sets up A/C 1050.002 in its general ledger for that account.

a.  The Country Program makes the following entry to book the receipt of cash, properly recording the credit to the Local Grant Payable liability account (Account 3034), not a revenue account.

T0 / T2 / T4
Donor
Source Code / Project Number / G/L Account
Number / Vendor
Code / Description / Debit
L/C
Amount / Credit
L/C
Amount
6775 / 6720493 / 1050.002 / Cash received from WFP / 55,000,000
6775 / 6720493 / 3034 / Cash received from WFP / 55,000,000

For the month of April, CRS/Niger incurs allowable expenses against the award totaling 3,990,000 CFA or $7,500 at the rate of 532 CFA/$1. There is no program income.

b.  Office of Finance makes the following entry on HQ’s books in April to record the revenue.

T0 / T2 / T4
Donor
Source Code / Project Number / G/L Account
Number / Vendor
Code / Description / Debit
USD
Amount / Credit USD
Amount
6775 / 6720493 / 3034 / April Revenue Recognition / 7,500
6775 / 6720493 / 5331 / April Revenue Recognition / 7,500

c.  The revenue remains on HQ's books in USD, but Office of Finance transfers the debit to the liability account via Intra-Agency to CRS/Niger and converts it to local currency as shown below.

T0 / T2 / T4
Donor
Source Code / Project Number / G/L Account
Number / Vendor
Code / Description / Debit
L/C
Amount / Credit L/C
Amount
6775 / 6720493 / 3034 / April RR – WFP / 3,990,000
6775 / 6720493 / 8505 / April RR – WFP / 3,990,000

B.  Revenue recognition on an award funded through HQ drawdowns against the USG Letter of Credit

USAID awards CRS $5,400,000 for use in Niger. The USG funds the grant through the federal letter of credit. Office of Finance assigns DSN 8499 to the award and CRS/Niger submits a NDSPN form setting up 8499.6720487 for recording the grant activity. Office of Finance draws down $180,000 against the federal letter of credit, crediting liability A/C 3031.200, Advances – USG Grants.

a.  Office of Finance records the following entry on HQ’s books to record the receipt of cash from the USG.

T0 / T2 / T4
Donor
Source Code / Project Number / G/L Account
Number / Vendor
Code / Description / Debit
USD
Amount / Credit USD
Amount
1050 / 9400000 / 1019.100 / Cash received from USAID / 180,000
8499 / 6720487 / 3031.200 / Cash received from USAID / 180,000

b.  During the month of April, Finance transfers $500,000 (266,000,000 CFA) to CRS/Niger to cover all of the Country Program’s forecasted cash needs for the month. Office of Finance records the entry shown below for the transfer of cash to CRS/Niger.

T0 / T2 / T4
Donor
Source Code / Project Number / G/L Account
Number / Vendor
Code / Description / Debit
USD
Amount / Credit USD
Amount
1050 / 6720000 / 1098 / CRS/Niger’s cash request for April / 500,000
1050 / 9400000 / 1019.200 / CRS/Niger’s cash request for April / 500,000

c.  The Intra-Agency file sent to CRS/Niger for the cash transfer is automatically recorded in the Country Program's SunSystems general ledger as follows, assuming that the currency conversion rate is 532 CFA per $1 USD.

T0 / T2
Donor
Source Code / Project Number / G/L Account
Number / Description / Debit
USD Amount / Credit
USD Amount / Credit
L/C
Amount
1050 / 6720000 / 8501 / HQ cash transfer / 500,000
1050 / 6720000 / 8505 / HQ cash transfer / 500,000 / 266,000,000

d.  Upon confirmation from its bank that the cash transferred from HQ has been received, CRS/Niger records the following manual cash receipt journal entry. In the example, we assume that the Country Program's commingled local currency bank account transactions are booked in general ledger A/C 1040.001and the currency conversion rate is 532 CFA per $1 USD.

T0 / T2
Donor
Source Code / Project Number / G/L Account
Number / Description / Debit
L/C
Amount / Debit
USD Amount / Credit
USD
Amount
1050 / 6720000 / 1040.001 / Receipt of cash from HQ / 266,000,000 / 500,000
1050 / 6720000 / 8501 / Receipt of cash from HQ / 500,000

e.  CRS/Niger records 94,164,000 CFA ($177,000) in expenses pertaining to the grant in question in April. That sum includes expenses transferred via Intra-Agency, but excludes indirect cost recovery. In the month of April, Office of Finance records the following entry in the USD equivalent to recognize the grant revenue.

T0 / T2 / T4
Donor
Source Code / Project Number / G/L Account
Number / Vendor
Code / Description / Debit
USD
Amount / Credit
USD
Amount
8499 / 6720487 / 3031.100 / April Revenue Recognition / 177,000
8499 / 6720487 / 5330 / April Revenue Recognition / 177,000

No entry is sent to the Country Program for this federally funded grant. The revenue recognition appears only on HQ’s books.

C.  Revenue Recognition on USG Monetization if sales proceeds are received by the Country Program

CRS/Niger arranges for a monetization sale to Céréales en Flocons de Niamey (CFN), a local buyer. Office of Finance assigns DSN 7996 upon receipt of a Donor Source Number Request, a copy of the grant agreement, a copy of the monetization sales agreement signed by both parties, and the budget from CRS/Niger. CRS/Niger sends Office of Finance a NDSPN form setting up local currency DSPN 79966720333 to capture the related transactions, along with a BMF. The Country Program also sets up a T4 vendor number (V2567-672) for CFN in SunSystems.

In accordance with the requirements of the Monetization Sales Accounting & Reporting Policy, POL-FIN-MTZ-021), CRS/Niger records a general journal entry to debit Accounts Receivable - Trade (A/C 1211) using the buyer's T4 code (V2567-672) and to credit Monetization Grant Payable (A/C 3033) as of the date the monetization sales agreement for 660,000,000 CFA is signed.

a.  CRS/Niger receives 660,000,000 CFA ($1,240,000) in March and deposits those proceeds into a separate local currency bank account. CRS/Niger makes the following cash receipt journal entry to record the receipt of the proceeds in local currency. To simplify this example, let us assume that CRS/Niger received the full amount of the sales price when the buyer took possession of the goods and that the quantities delivered agreed to those specified in the monetization sales agreement.