Frequently Asked Questions - Grant Fund Classification

Principal Investigators and Department Administrators will have little to no impact as a result of the new accounting standard.  You will begin to receive new funds that begin with a “9” starting on May 1, 2019.  Research Accounting Services will be evaluating all existing fund numbers using the new guidance and assigning them to new predecessor funds. 

For grants that are active at June 30th of each fiscal year and are classified as Fund Type 24 - Contributory Sponsored Agreement - Restricted and also have a barrier other than adherence to Uniform Guidance, Research Accounting Services will reach out in July of each year requesting information.  The information will be related to whether or not the barriers identified in the award agreement have been met, when they were met, and if they have been met in whole or in part.  This information will likely be requested in the form of a questionnaire asking specific questions pertinent to your award. 

A fund type is a classification in our Banner general ledger system that allows for the classification of funds and their corresponding net asset balances.  Under the old accounting guidance, externally sponsored agreements were classified using one of two fund types:

 

• Fund type 18 is defined as an exchange transaction and is unrestricted.  This fund type included all federal, state, and local awards as well as awards from voluntary health organizations, industry, foundations, sub-awards and clinical trials.  Fund type 18 utilized funds that begin with a “4” or an “8”.  Prior to ASC 958 - Not-for-Profit Entities, the University and Academy of Natural Science classified all awards from federal, state and local governments as exchange transactions, which was consistent with the guidance and the higher education industry.  The reasoning was based on the notion that governments do not provide contributions. 

 

• Fund type 24 is defined as a contributory sponsored agreement and is considered restricted until the conditions of the award are met in full or in part.  This classification used to only encompass funds assigned to the roll-ups 2100 – Voluntary Health Organizations, 2200 – Industry/Corporate, 2300 – Foundations, and 2400 – Other Private Non-Profit Funding.  These funds had a restricted net asset classification.

As part of the transition to the new guidance, we have created fund type 23, which is defined as a contributory sponsored agreement – unrestricted-immediately released.  The reason for the use of the term “unrestricted-immediately released” in fund type 23’s title is that the barrier for most federal, state and local government awards is typically compliance with the Uniform Guidance.  The barriers related to these types of awards are overcome as soon as qualified expenditures are made, and as such they meet their conditions immediately. The funds themselves will be classified as unrestricted since they are immediately released from their restrictions but will all have a grant type that notes the conditional nature of the award.

Most federal, state and local grants will now be classified in the fund type 23 – contributory sponsored agreement – unrestricted - immediately released classification instead of the fund type 18 – exchange transaction classification.  The exception is for federal, state or local clinical trials, which will continue to be classified as exchange transactions.  These types of awards will be assigned a fund that begins with a “9”.  The second digit of the fund will delineate the type of funding in this category.  The third digit of the fund will range from 0 to 4.  The predecessor funds will always have a “0” in the third position.

Fund type 24, previously named contributory sponsored agreements, will now be called contributory sponsored agreements – restricted.  The numbering schema for this group is being expanded.  It will continue to utilize the roll-ups 2100 – Voluntary Health Organizations, 2200 – Industry/Corporate, 2300 – Foundations, and 2400 – Other Private Non-Profit Funding, but it will be expanded to include roll-ups to capture any federal, state, or local funding that meets the new guidance.  These funds will also start with a “9”.  The second digit of the fund will delineate the type of funding in this category.  The third digit of the fund number will range from 5 to 9.  The predecessor funds will always have a “5” in the third position.  These funds will have net assets that are classified as restricted.

Please reference our website for the new hierarchy.

Fund type 18–exchange transactions will continue to be utilized.  Awards that meet the new definition of an exchange transaction will be assigned fund numbers in that fund type’s schema.  Predominately, we will see clinical trials and contracts meeting these criteria.

The University’s consolidated financial statements and the Academy’s stand-alone financial statements will look very much as they do today as a result of this change.  The reason for this is related to what the Financial Accounting Standards Board (FASB) calls a "simultaneous release option" in Section 958-605-45-4A.  This option allows the University and the Academy to adopt a policy to report any sponsored agreements that were transitioned from fund type 18 - exchange transactions to fund type 23-contributory sponsored agreements - unrestricted - immediately released as “Without Restrictions” on the Statement of Activities.  This practice is known as a practical expedient and allows us to adopt this accounting treatment for only the awards being transitioned to the new fund type of "fund type 23-contributory sponsored agreements - unrestricted - immediately released" (i.e. those awards whose conditions are met over time as the award is expended and are subject to the Uniform Guidance).  The simultaneous release option allows the University and the Academy to consistently report under the old and new guidance the revenue streams for these awards as "Without Restrictions" on the Statement of Activities.  Further, the simultaneous release option also allows this policy to apply to only these types of contributory sponsored agreements and to continue to report other types of conditional contributions and contributory sponsored agreements as we have historically, within net assets “With Donor Restrictions” and then to release those revenues to “Without Restrictions” as the conditions of the agreement are met. 

 

The University and the Academy have reviewed all the grants that are active for fiscal year 2019 using the new accounting guidance criteria.  If a grant has conditions associated with it, other than that of Uniform Guidance, it will be reviewed as a part of the fiscal year-end close.  This review will require Research Accounting Services to contact the Principal Investigator and Business Manager of any award deemed conditional to ascertain if the barriers defined in the contract have been met in whole or in part.  If the conditions have been met, all the expenses and revenues recognized at the grant level can be recognized on the financial statements.  If the conditions have been met in part, then only the pro-rata portion of the revenues associated with those objectives can be recognized.  The adjustment for the difference will be made at a control fund level for financial reporting purposes so as to not distort the grant’s accounting records.  For a grant whose conditions have not been met, the adjustment will be made to reverse any revenues recognized at the grant level to-date and defer them until the conditions have been met in a control fund.