GRANT FINANCIAL

SYSTEM

REQUIREMENTS

Checklist for

Reviewing Systems

Under the Federal

Financial Management

Improvement Act

United States General Accounting Office

September 2001

OPR: OP GAO Form 515 (Rev. 3/99)

GAO

GAO-01-911G
GAO-01-911G – Grant Financial System Checklist (9/01)

______________________________________________________________________________

PREFACE

______________________________________________________________________________

September 2001

The Federal Financial Management Improvement Act (FFMIA) of 1996 requires, among

other things, that agencies implement and maintain financial management systems that

substantially comply with federal financial management systems requirements. These

requirements are detailed in the Federal Financial Management Systems Requirements

series issued by the Joint Financial Management Improvement Program (JFMIP), in

Office of Management and Budget (OMB) Circular A-127, Financial Management

Systems, and in OMB’s Revised Implementation Guidance for the Federal Financial

Management Improvement Act (FFMIA) of 1996, issued January 4, 2001. JFMIP intends

for the requirements to promote understanding of key financial management systems

concepts and requirements, to provide a framework for establishing integrated financial

management systems to support program and financial managers, and to describe

specific requirements of financial management systems.

We are issuing this checklist which reflects JFMIP’s first functional requirements

document issued for grant financial systems, Grant Financial System Requirements

(June 2000) to assist (1) agencies in implementing and monitoring agency grant financial

systems and (2) managers and auditors in reviewing their grant financial systems to

determine if they substantially comply with FFMIA. This checklist is not required to be

used in assessing grant financial systems. Rather, it is provided as a tool for use by

experienced staff and is one in a series of documents we have issued to assist agencies in

improving or maintaining effective operations. (See the last page of this document for a

list of related products.) This checklist, the JFMIP source document, and the two

previously mentioned OMB documents should be used concurrently. Those using this

tool must apply experienced judgment in its interpretation and application. They must

consider the impact of the completed checklist on an entire grant financial system and

whether the system, as a whole, substantially complies with requirements.

Additional copies of the checklist can be obtained from the U.S. General Accounting

Office, 700 4th Street NW, Room 1100, Washington, DC 20548, or by calling (202) 512-

6000, or TDD (202) 512-2537. This checklist replaces GAO’s previously issued exposure

draft of the Grant Financial System Requirements Checklist (GAO-01-238G, January

2001) and is available on the Internet on GAO’s Home Page (www.gao.gov) under “Other

Publications” and the subheading “Accounting and Financial Management.” Hard copies

of the JFMIP document also can be obtained from GAO or can be downloaded from the

JFMIP website at JFMIP.gov under “JFMIP Documents” and the subheading “System

Requirements.”

Jeffrey C. Steinhoff

Managing Director

Financial Management and Assurance
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(BLANK)
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CONTENTS

______________________________________________________________________________

Overview 5

Authoritative Guidance 6

How to Use This Checklist 7

Grant Financial System Requirements 9

System Overview 11

Introduction to Functional Requirements 12

Commitments 13

Decommitments 16

Obligations 18

Payments 21

Cost Accruals 26

Financial Reports 32

Interest Collections 36

Grant Closeout 38

Records Retention 40

General System Requirements 41

Information Technology in the Grants Process 44

Related Products 45

Figure

Figure 1: Agency Systems Architecture 5

Abbreviations

AP accrual process

ASAP Automated Standard Application for Payment System

CFDA Catalog of Federal Domestic Assistance

CFO Chief Financial Officer

CMIA Cash Management Improvement Act

DPPS Defense Procurement Payment System

FASAB Federal Accounting Standards Advisory Board

FCTR federal cash transaction report

FFMIA Federal Financial Management Improvement Act

FFMSR Federal Financial Management System Requirements

FMS Financial Management Service

FR financial reports

FRP financial report process

FSR financial status report

HHS Health and Human Services
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IT information technology

JFMIP Joint Financial Management Improvement Program

NARA National Archives and Records Administration

OMB Office of Management and Budget

OPM Office of Personnel Management

PMS Payment Management System

SFFAS Statement of Federal Financial Accounting Standards

SGL Standard General Ledger

TFM Treasury Financial Manual
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OVERVIEW

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The Federal Financial Management Improvement Act (FFMIA) of 1996 requires, among

other things, that agencies implement and maintain financial management systems that

substantially comply with federal financial management systems requirements. These

system requirements are detailed in the Financial Management Systems Requirements

series issued by the Joint Financial Management Improvement Program (JFMIP)1 and

Office of Management and Budget (OMB) Circular A-127, Financial Management

Systems. JFMIP requirements documents describe the federal financial system

architecture as

(1) core financial systems, (2) managerial cost accounting, and (3) 13 subsidiary or mixed

systems supporting agency operations, not all of which are applicable to all agencies.2

Figure 1 is the JFMIP model that illustrates how these systems interrelate in an agency's

overall systems architecture.

Figure 1: Agency Systems Architecture

 1

JFMIP is a joint cooperative undertaking of the Office of Management and Budget (OMB), the

General Accounting Office, the Department of Treasury, and the Office of Personnel Management

(OPM), working in cooperation with each other and with operating agencies to improve financial

management practices throughout the government. The program was initiated in 1948 by the

Secretary of the Treasury, the Director of the Bureau of the Budget (now OMB), and the

Comptroller General and was given statutory authorization in the Budget and Accounting

Procedures Act of 1950. The Civil Service Commission, now the Office of Personnel Management,

joined JFMIP in 1966.

2

JFMIP has also issued the Framework for Federal Financial Management Systems (FFMSR-0,

January 1995) that defines the framework for establishing and maintaining financial management

systems to support management and deliver programs of the federal government. GAO published

a companion checklist, Framework for Federal Financial Management System Checklist

(GAO/AIMD-98-21.2.1, May 1998).
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Source: JFMIP Grant Financial System Requirements (June 2000).

To date, JFMIP has issued 10 of the 15 functional requirements. (See figure 1.) 3

We are issuing this checklist—which reflects JFMIP’s first functional requirements

document issued for grant financial systems, Grant Financial System Requirements

(June 2000)—to assist (1) agencies in implementing and monitoring their grant financial

systems and (2) managers and auditors in reviewing agency grant financial systems to

determine if they are in substantial compliance with FFMIA. This checklist is not a

requirement. However, it is provided as a tool for use by experienced staff. This

checklist; the JFMIP source document; OMB Circular A-127, Financial Management

Systems; and OMB’s Revised Implementation Guidance for the Federal Financial

Management Improvement Act (FFMIA) of 1996, issued January 4, 2001, should be used

concurrently. Staff members who use this tool must apply experienced judgment in its

interpretation and application. They must consider the impact of the completed checklist

on the entire grant financial system and whether the system, as a whole, substantially

complies with requirements.

Authoritative Guidance

OMB Circular A-127 and OMB’s implementation guidance provide the basis for assessing

compliance with the FFMIA requirements so the agencies can implement and maintain

financial management systems that comply substantially with federal requirements. The

implementation guidance identifies various criteria that an agency must meet to

substantially comply with these requirements. One set of criteria listed in the OMB

guidance is the JFMIP systems requirements series.

The source of all the questions in this checklist is the JFMIP Grant Financial System

Requirements (JFMIP-SR-00-3, June 2000). This JFMIP document is intended to identify

financial system requirements necessary to support grants programs. It does not intend

to identify the full scope of functional program requirements associated with grants

management programs. It should be noted that the checklist is based on the existing

published JFMIP standards and that changes in laws, regulations, and standards and

practices since the standards were issued are not included in the checklist.

The revised JFMIP document segregates functional requirements into two general

categories—mandatory and value-added. The mandatory requirements describe what the

system must do. They consist of the minimum acceptable functionality necessary to

establish a system and are based on federal laws and regulations. Mandatory

requirements are those against which agency heads evaluate their systems to determine

substantial compliance with system requirements under FFMIA. These requirements

apply to existing systems in operation and new systems planned or under development.

 3

Thus far, the series includes the (1) Core Financial System Requirements, (2) Inventory System

Requirements, (3) Seized Property and Forfeited Assets System Requirements, (4) Direct Loan

System Requirements, (5) Guaranteed Loan System Requirements, (6) Travel System

Requirements, (7) Human Resources & Payroll Systems Requirements, (8) System

Requirements for Managerial Cost Accounting (9) Grant Financial System Requirements and

(10) Property Management Systems Requirements. In early 1998, JFMIP decided to initiate

projects to update system requirements documents that were not current with regulations and

legislation. JFMIP also planned to initiate projects to complete the remaining systems

requirements.
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The checklist uses “(M)” immediately following the question to indicate that the item is a

mandatory system function.

The value-added requirements describe optional features and may consist of any

combination of the following: (1) using state-of-the-art technology, (2) employing the

preferred or best business practices, or (3) meeting the special management needs of an

individual agency. Agencies should consider value-added features when judging systems

options. The need for these value-added features in agency systems is left to the

discretion of each agency head. The checklist uses “(V)” immediately following the

question to indicate that the item is value-added and not mandatory.

How to Use This Checklist

OMB’s 2001 implementation guidance provides chief financial officers (CFO) and

inspectors general with a means for determining whether their agencies’ financial

management systems substantially comply with federal financial management systems

requirements. The annual reporting required by 31 U.S.C. 3512(d) is one means of

assisting agencies in the determination of substantial compliance. Agencies can also use

this checklist as a tool to help determine compliance with federal financial management

systems requirements.

Filling out this checklist will allow agencies to systematically determine whether specific

systems requirements are being met. In determining substantial compliance, agencies

should assess the results of the completed checklist on the grant financial system

requirements taken as a whole.

The checklist contains three columns with the first citing the question. Use the second

column to answer each question “yes,” “no,” or “na.” Use the third column to explain

your answer. A “yes” answer should indicate that the agency’s grant financial system

provides for the capability described in the question. For each “yes” answer, the third

column should contain a brief description of how the grant financial system satisfies that

capability and should also refer to a source that explains or shows the capability.

A “no” answer indicates that the capability does not exist. For a “no” answer, the third

column should provide an explanation and, where applicable, a reference to any related

supporting documentation (e.g., the agency is working on modifying or implementing its

grant financial system to have the capability available in subsequent years; management

believes the capability is not cost effective and will not enhance the grant financial

system’s ability to manage operations). Cost-benefit studies, or other reasoning, that

support a “no” answer should be identified in the explanation column. If there are no

cost-benefit studies or other support, a full explanation should be provided.

“No” answers should not be viewed individually or taken out of context. Rather, “no”

answers should be assessed as to their impact on the overall grant financial system and

the extent to which they inhibit the entire grant financial system from meeting substantial

compliance.

Certain questions within the checklist may not be applicable to the agency. Answer such

nonapplicable question(s) with “na” and provide an appropriate explanation in the third

column.
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(BLANK)
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GRANT FINANCIAL SYSTEM REQUIREMENTS

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The grant financial system requirements document provides an overview of grant system

requirements (there are no checklist questions drawn from pages 7–8 of the JFMIP source

document); an introduction to functional requirements (there are no checklist questions

drawn from pages 9–12 of the JFMIP source document); and functional requirements for

the eleven functions described below: (1) commitments, (2) decommitments,

(3) obligations, (4) payments, (5) cost accruals, (6) financial reports, (7) interest

collections, (8) grant closeout, (9) records retention, (10) general system requirements,

and (11) information technology in the grants process.

1. Commitments. A commitment is the administrative reservation of a specific

amount of an agency’s available funds that provides for a later issuance incurring a

grant award and incurring the related obligation. (The checklist questions for this

area are drawn from pages 13–15 of the JFMIP source document.)

2. Decommitments. A decommitment is the act of reversing a commitment of funds

previously recorded in an agency’s financial system. (The checklist questions for

this area are drawn from pages 16–17 of the JFMIP source document.)

3. Obligations. An obligation occurs when an obligating official makes an award to an

entity on behalf of a federal awarding agency, thereby obligating that agency to

fund a project that relates to a federal grant program administered by that agency.

(The checklist questions for this area are drawn from pages 18–20 of the JFMIP

source document.)

4. Payments. Funds are paid to grantees as either advances or reimbursements. (The

checklist questions for this area are drawn from pages 21–24 of the JFMIP source

document.)

5. Cost accruals. Accrual accounting is the method of accounting in which an entity’s

financial position and operating results are measured by the flow of economic

resources. Transactions are recorded in the accounting period in which they occur,

or according to whose operations they benefit, regardless of when the related cash

receipts and disbursements take place. (The checklist questions for this area are

drawn from pages 25–29 of the JFMIP source document.)

6. Financial reports. Grantees are required to periodically report the financial results

of their grant-supported activities. (The checklist questions for this area are drawn

from pages 30–32 of the JFMIP source document.)

7. Interest collections. Interest earned on advances of federal funds must be handled

in accordance with administrative requirements based on the cost principles

established for the grantee organization involved. (The checklist questions for this

area are drawn from page 33 of the JFMIP source document.)

8. Grant closeout. The grantee’s authority to incur new obligations against the grant

expires at the end of the grant period. The grantee and its federal awarding agency
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Grant Financial System Requirements

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must then wind up all grant-related business through a process known as closeout.

(The checklist questions for this area are drawn from page 34 of the JFMIP source

document.)

9. Records retention. Agency systems must maintain, store, and permit ready

retrieval of grant financial data. (The checklist questions for this area are drawn

from page 35 of the JFMIP source document.)

10. General system requirements. The grant financial system, at the standard and/or

agency level, must be able to accept, process, and report on transactions with other

internal and external systems. (The checklist questions for this area are drawn

from page 36 of the JFMIP source document.)

11. Information technology in the grants process. This section describes a framework

for introducing information technology (IT) into the external grants process.

(There are no checklist questions drawn from pages 37–39 of the JFMIP source

document.)

The checklist questions follow the JFMIP source document. It should be noted that not

all questions apply in all situations and, as with the use of any checklist, professional

judgment should be exercised. Using the JFMIP source document and its “Appendix B:

Glossary/Dictionary,” which defines terms used, along with OMB Circular A-127,

Financial Management Systems, and OMB Revised Implementation Guidance for the

Federal Financial Management Improvement Act (FFMIA) of 1996, issued January 4,

2001, will help ensure that the user is cognizant of the background information necessary

to fully understand the questions.
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Grant Financial System Requirements

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System overview

Yes/no/

na Explanation

Note: There are no checklist

questions drawn from this section

of the JFMIP source document

(pages 7–8).
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Grant Financial System Requirements

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Introduction to functional

requirements

Yes/no/

na Explanation

Note: There are no checklist

questions drawn from this section

of the JFMIP source document

(pages 9–12).
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Grant Financial System Requirements

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Commitments

Yes/no/

na Explanation

Commitment process flow

1. Does the system support the

following major steps

associated with processing a

commitment for agencies with a

commitment process?

Decide to fund a grant.

Occurs after a proposal

application process

(involving application

receipt, review, and

selection) has been

completed. The steps or

procedures that an agency

follows before the funding

decision are dependent on

the specific requirements

established by the agency

based on the nature of the

agency’s grant programs.

(V)

Initiate commitment

request; input

budgetary/program data into

the system. Examples of

financial data elements

include the following:

commitment request

identifier,

requisition date,

corresponding proposal

identifier,

funding dollar amount,

fund code(s)/

appropriation code(s),

accounting code,

budget year(s) of

funding,

name of the individual

initiating the

commitment,
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Commitments

Yes/no/

na Explanation

object classification, and

catalog of federal

domestic assistance

(CFDA) number. (V)

Direct requested

commitment to approving

official. Approving

official(s) have the authority

to commit funds. They

review and approve or reject

the commitment request. As

part of their review, they

must verify funds

availability. Commitment

requests should be

transmitted electronically to

the approving official(s).

(V)

Review approved

commitment request against

edits; system performs

following edit checks.

Approved commitments are

processed through a series

of edit checks. For

example,

verify authority of

approving official(s),

validate commitment

data input by requestor,

verify accounting

code(s),

verify funds availability,

and

provide controls to

prevent processing a

duplicate document.

(V)

Commit funds and post

transactions to Standard

General Ledger (SGL).

Transactions are recorded in
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Commitments

Yes/no/

na Explanation

the financial system as

commitments against

budget accounts.

Committed dollars are

matched against budgetary

resources.

A requirement to use U.S.

Standard General Ledger

(SGL) accounts at the

transaction level is

contained in the Federal

Financial Management Act

(FFMIA) of 1996 and OMB

Circular A-127, Financial

Management Systems.

Accounts and entries are

identified in the Treasury

Financial Manual (TFM),

Supplement No. 2, that is

available on the SGL

website at

www.fms.treas.gov/ussgl.

(V)

Notify procurement/grants

office to start negotiation of

grant with potential grantee.

Outstanding commitments

must be reviewed and

reconciled continuously

throughout the year to

ensure that they are

converted to valid

obligations. Funds not

obligated should be

decommitted no later than

the date on which funds

expire. (V)
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Decommitments

Yes/no/

na Explanation

(All requirements in the

“Decommitments” chapter of the

JFMIP source document are valueadded. However, decommitment

requirements are mandatory when

commitment requirements are

adopted by the agency.)

Decommitment process flow

1. Does the system support the

following major steps

associated with processing a

decommitment?

Initiate the decommitment

request. The decommitment

action is initiated by the

individual requesting

decommitment. This

request should be

transmitted electronically to

the proper financial

official(s). Organizationspecific budgetary and

program data are entered

into the system regarding

the request. (V)

Perform edit checks.

Approved decommitments

are processed through a

series of edit checks:

Verify authority of

approving official(s).

Validate data input by

requestor, including

CFDA number. (V)

Decommit funds and post to

SGL. The transaction

should be recorded in the

financial system as a
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Decommitments

Yes/no/

na Explanation

decommitment against the

budgeted accounts.

The requirement to use SGL

accounts at the transaction

level is contained in the

Federal Financial

Management Improvement

Act (FFMIA) of 1996 and

OMB Circular A-127,

Financial Management

Systems. Accounts and

entries are identified in the

Treasury Financial

Manual, Supplement No. 2,

which is available on the

SGL website at

www.fms.treas.gov/ussgl.

(V)

Notify program staff.

Decommitments are

confirmed with program

staff. (V)

Convert outstanding

commitments. Outstanding

commitments must be

converted to valid

obligations or decommitted

before the expiration date of

the funds committed. (V)
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Obligations

Yes/no/

na Explanation

Obligation process flow

1. Does the system support the

following major steps

associated with processing an

obligation?

Review grant proposal. The

proposed grant action is

reviewed. The grant is

negotiated with the grantee,

and a grant agreement

document is prepared. The

applicant may review and

approve or reject the grant

agreement document. (M)

Direct grant agreement

document to obligating

official. Obligating

official(s) have the authority

to legally bind the federal

government to provide

funds for a specific project

or purpose. Obligating

officials review and approve

or reject grant agreement

documents. They also

provide for approval or

disapproval of grant

obligation. (M)

Perform edit checks.

Approved obligations are

processed through a series

of edit checks:

Verify authority of

obligating official(s).

Validate grant obligation

against edits in the core

financial system.

Verify funds availability.

Validate input data,

including the Catalog of
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Obligations

Yes/no/

na Explanation

Federal Domestic

Assistance (CFDA)

number.

Provide controls to

prevent a duplicate

obligation. (M)

Obligate funds. Record

transactions into the grants

financial management

system. Provide the

capability of maintaining the

chronological order of

commitments, obligations,

and payments. Provide the

capability of citing multiple

appropriations or other

funding sources. Record

obligations or federal funds

authorized based on grant

awards and liquidate related

commitment(s). (M)

Capture data elements.

Examples of financial data

elements are:

grant number;

grantee or recipient

name;

grantee identifier;

grant purpose;

dollar amount;

accounting classification

data, e.g.:

appropriation,

object classification,

project, and

program;

tax payer identification;

and

CFDA number. (M)

Post transaction to the SGL.

A requirement to use SGL

accounts at the transaction
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Obligations

Yes/no/

na Explanation

level is contained in the

Federal Financial

Management Improvement

Act (FFMIA) of 1996 and

OMB Circular A-127,

Financial Management

Systems. Accounts and

entries are identified in the

Treasury Financial

Manual, Supplement No. 2,

which is available on the

SGL website at

www.fms.treas.gov/ussgl.

(M)
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Payments

Yes/no/

na Explanation

Payment process flows

1. Does the system support the

following major steps?

Receive payment request

from grantee. The grantee

submits a request for cash.

If the awarding agency and

the grantee have agreed to

use a pooled payment

procedure, the grantee

requests a single dollar

amount covering all its

grants with the awarding

agency. Otherwise, the

grantee identifies the

amount of cash needed for

each grant. (M)

Include optional data

elements. Requirements in

the request include

grantee name and

identifier,

amount requested,

grantee official

authorized to submit

request,

authorized grantee’s

information,

amount of funds

authorized,

amount approved,

amount disallowed,

program funding codes,

and

appropriation code(s).

(M)

Review request. (M)

Perform edit checks. Screen

the request for missing data
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Payments

Yes/no/

na Explanation

elements, clerical errors,

internal logic (e.g., request

not in excess of federal

funds authorized). Perform

nonroutine edit checks

installed by the federal

awarding agency, such as:

Verify whether the

grantee is delinquent in

submitting financial

reports if financial

reports are required.

Verify funds availability.

Provide controls to

prevent processing a

duplicate payment. (M)

Flag record. The record

may be flagged if the grantee

is subject to sanctions

requiring the withholding of

payments. Verification of

Work Performed requests

for reimbursement are

forwarded to the

appropriate personnel for

verification of the work

completed. (M)

Transfer cash to designated

payee and post transactions

to SGL. The federal

awarding agency transfers

the approved amount to the

grantee’s financial

institution and the

transaction is posted to SGL.

Payments may be recorded

in SGL as an advance or as

an expenditure, depending

on agency program

requirements.

The values posted to these

SGL accounts depend on
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Payments

Yes/no/

na Explanation

whether the grantee

requested the payment

advance by the pooling or

grant-by-grant method. If

the grant-by-grant method

was used, the portion of the

disbursement designated by

the grantee for each grant is

posted to a subsidiary

account corresponding to

that grant. If the grantee

used the pooling method,

the entire payment advance

is distributed among grant

subsidiary accounts by

algorithm. Regardless of the

method used, additional

operations must be

performed to further

distribute the payment

advance among the

contributing sources on a

reasonable basis for any

grant funded by multiple

sources.

SGL accounts are required

for advance payments and

for reimbursement

payments from appropriated

funds for current operating

expenses only. A

requirement to use SGL

accounts at the transaction

level is contained in the

Federal Financial

Management Improvement

Act (FFMIA) of 1996 and

OMB Circular A-127,

Financial Management

Systems. Accounts and

entries are identified in the

TFM, Supplement No. 2,

which is available on the

SGL website at

www.fms.treas.gov/ussgl.

(M)
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Payments

Yes/no/

na Explanation

The following value-added

requirements will become

mandatory upon issuance of

governmentwide system

standardization policy. (Note: In

June 1998, the CFO Council

released a report endorsing the use

of one of three existing systems by

the federal government for grant

payments by October 1, 2002. The

report is available on the World

Wide Web at:

www.financenet.gov/financenet/fed

/cfo/grants/cd0618.htm.

Initiative to streamline grant

payment systems in the federal

government

2. If the entity is a Department of

Defense organization, is it using

the Defense Procurement

Payment System (DPPS)? (V)

3. If the entity is a civilian federal

department or agency, is it using

one of the following two

systems?

The Automated Standard

Application for Payment

System (ASAP) provided by

the Financial Management

Service (FMS) of the U.S.

Department of the Treasury

and the Federal Reserve

Bank of Richmond. (V)

The Payment Management

System (PMS) provided by

the Department of Health

 and Human Services (HHS).

(V)
______________________________________________________________________________

Grant Financial System Requirements

______________________________________________________________________________

Page 25 GAO-01-911G – Grant Financial System Checklist (9/01)

Payments

Yes/no/

na Explanation

It should be stressed that the

CFO Council endorsed these

systems for the grant payment

process only. Individual

agencies may elect to use these

systems for additional grant

processes. The Council’s goal is

to significantly reduce the

number of federal cash

drawdown systems used

throughout the federal

government and reduce the

costs associated with the

development and maintenance

of multiple systems.
______________________________________________________________________________

Grant Financial System Requirements

______________________________________________________________________________

Page 26 GAO-01-911G – Grant Financial System Checklist (9/01)

Cost Accruals

Yes/no/

na Explanation

Overview

1. Is a liability (i.e., an account

payable to the grantee)

recognized for any unpaid

amounts due as of the reporting

date in accordance with Federal

Accounting Standards Advisory

Board (FASAB) Statement of

Federal Financial Accounting

Standards Number 5,

Accounting for Liabilities of

the Federal Government?

Generally, this is a two-step

process. The first step is to

recognize as an expense and as

a payable the amount of

allowable expense that the

grantees have incurred as of the

end of the period but have not

collected from the agency. That

amount may include amounts

claimed by the grantee or

amounts incurred but not

reported by the grantee. This

will require the agency to

estimate the amounts not

reported to it by the grantee but

due the grantee.

The second step occurs after

the grantee has submitted

financial reports giving its

actual costs. At that time, the

agency should make any entries

needed to adjust the expense

amounts previously recognized.

In addition to accruing

expenses, the agency may be

required to accrue a receivable

related to improper payments.

In some, but not all cases,

agencies may request

reimbursement from grantees
______________________________________________________________________________

Grant Financial System Requirements

______________________________________________________________________________

Page 27 GAO-01-911G – Grant Financial System Checklist (9/01)

Cost Accruals

Yes/no/

na Explanation

for amounts improperly

expended. (M)

2. Does the grant accrual system

generally maintain various data

such as the following?

internal historical financial

data,

criteria/structure of agency

programs, and

relevant external

information on the timing

and nature of recipients’

cash flows. (M)

3. Does the grant system maintain

the amounts disbursed to

grantees during each year and

the amounts of expenses

reported by the grantee? (M)

4. In addition, are other data such

as grant award amounts and

remittances included in this

information database? (M)

5. Do these data include the

amounts disbursed to grantees

during each year and the

amounts actually expended by

the grantees? (M)

6. Does the system have either a

format structured to facilitate

accrual accounting or provide

an alternate process that will

calculate an accrual estimate?

(M)

7. When faced with the dilemma of

estimating year-end accruals, is

one of the following several

alternate processes used?
______________________________________________________________________________

Grant Financial System Requirements

______________________________________________________________________________

Page 28 GAO-01-911G – Grant Financial System Checklist (9/01)

Cost Accruals

Yes/no/

na Explanation

Poll all grantees as of

September 30 of each fiscal

year.

Take a statistical sample of

grantees and base

projections on the sample.

Perform a linear regression

or other appropriate

statistical analysis as of the

end of each fiscal year,

using amounts disbursed to

grantees versus amounts

expensed in previous years

to arrive at an algorithm to

estimate current year-end

status of accruals.

Forecast the fourth quarter

expenditures using a

forecasting model such as

the autoregressive

forecasting model or the

exponentially weighted

moving-average forecasting

model.

Estimate and post a grant

accrual based on an analysis

of the aggregate amount of

disbursements and not on

individual grantee file

reviews. (V)

Accrual Process Flows

8. Does the system support the

following major process steps?

Initiate the accrual process

(AP). The accrual process

must have the ability to

review electronic files of

grant and grantee

records including

program and financial

files and
______________________________________________________________________________

Grant Financial System Requirements

______________________________________________________________________________

Page 29 GAO-01-911G – Grant Financial System Checklist (9/01)

Cost Accruals

Yes/no/

na Explanation

select and retrieve

specific items (data)

from these files and

compare that data to

data stored in other

programs. (M)

Update AP program accrual

file. Data available for

selection during the AP

accrual process should

include the grantee’s

identification number, types

of grants received, grant

numbers, dollar amounts,

time periods, grantee’s

financial history by fiscal

quarters, and other data

considered pertinent to the

agency. (M)

Run AP program accrual

file. The accrual process

uses the information

collected to recognize

liabilities for any unpaid

amounts due at a specific

time, e.g., the end of a

month, quarter, or fiscal

year.

Two situations can exist:

Negative cash balance:

Grantee liabilities

exceed advances, i.e.,

there is a negative cash

balance, which indicates

there is a receivable to

the grantee and an

accounts payable to the

agency.

Positive cash balance:

Advances exceed

grantee liabilities, i.e.,
______________________________________________________________________________

Grant Financial System Requirements

______________________________________________________________________________

Page 30 GAO-01-911G – Grant Financial System Checklist (9/01)

Cost Accruals

Yes/no/

na Explanation

there is a positive cash

balance, which indicates

there is a payable to the

grantee and an accounts

receivable to the agency.

(M)

Review/approve program

results/approve. The

information produced from

the accrual process allows

an agency to reasonably

estimate the amount of

funds listed as an advance to

grantees that should be

expensed and the amount of

unreported grantee

expenses to record as a

liability at the end of a fiscal

period. (M)

Post the grant accrual

amount. A requirement to

use Standard General

Ledger (SGL) accounts at

the transaction level is

contained in the Federal

Financial Management

Improvement Act (FFMIA)

of 1996 and OMB Circular A127, Financial Management

Systems. Accounts and

entries are identified in the

TFM, Supplement No. 2, that

is available on the SGL

website at

www.fms.treas.gov/ussgl.

(M)

Validation of accrual estimates

9. If the grantee reports

components of the accrual

(e.g., where the grant reports

cash expenditures) have the

data for cash expenditures been
______________________________________________________________________________

Grant Financial System Requirements

______________________________________________________________________________

Page 31 GAO-01-911G – Grant Financial System Checklist (9/01)

Cost Accruals

Yes/no/

na Explanation

entered into the agency’s files,

compared to the cash portion of

the accrual, and adjustments

made to the accrual if material

differences are identified? (V)

10. Does the system support the

following major steps?

Verification process begins.

The verification process

begins after the grantee’s

financial reports, for the end

of the fiscal period involved,

are received and the data

from these reports have

been entered into the

agency’s files. (M)

Review/approve program

results. The agency

analyzes the data input from

these reports, compares

them to the estimated

expenditures projected by

the AP, and posts the SGL

entries. After comparing the

projected expenditures with

those of the financial report,

the required adjustments are

calculated and made so that

the estimated expenditures

equal the actual

expenditures. (M)
______________________________________________________________________________

Grant Financial System Requirements

______________________________________________________________________________

Page 32 GAO-01-911G – Grant Financial System Checklist (9/01)

Financial Reports

Yes/no/

na Explanation

Financial report process (FRP)

flow

(Note: Process steps from initiating

the financial report process through

sending financial reports (FR) to

grantees are not applicable to

agencies that do not prepare FRs.

Their systems begin with the step

“Receive financial report.”)

1. Does the system support the

following major steps

associated with processing

financial reports?

Initiate FRP.

Update FRP file.

Run RFP file/prepare

financial report.

Receive financial report.

Perform edit checks.

Prepare transaction and

post to SGL.

Reconcile. (M)

Initiate the financial report

process

2. Does FRP have the ability to do

the following?

review electronic files of the

grant and grantee, including

program and financial files,

select and review specific

items (i.e., data) from these

files, and

compare the selected data

to data previously stored in

FRP. (M)
______________________________________________________________________________

Grant Financial System Requirements

______________________________________________________________________________

Page 33 GAO-01-911G – Grant Financial System Checklist (9/01)

Financial Reports

Yes/no/

na Explanation

Update FRP file

3. Do data selected by FRP include

the following grantee items?

grantee’s identification

number,

types of grants received,

grant identifying number,

dollar amounts,

time periods of

performance,

grantee’s financial history by

grant, and

other data considered

pertinent by the granting

agency. (M)

Run FRP file. Prepare financial

report.

4. Does FRP use the information

collected to prepare financial

reports for the grantees at a

specific time, e.g., the end of a

month or a quarter? (M)

5. Does FRP have the ability to

prepare the reports in both

electronic and hard copy

formats? (M)

Receive financial report

6. Do financial reports received

electronically from the grantees

feed automatically into the

grants financial report process?

(M)

7. Are reports received in hard

copy manually input to the

report process? (M)
______________________________________________________________________________

Grant Financial System Requirements

______________________________________________________________________________

Page 34 GAO-01-911G – Grant Financial System Checklist (9/01)

Financial Reports

Yes/no/

na Explanation

Edit process

8. Does the edit process review

the report and verify for

completeness,

mathematical

correctness,

validity of information

such as grant numbers

and award numbers,

proper certification,

assurance that amounts

reported as expenditures

do not exceed the

balance of funds

available,

controls to prevent the

processing of duplicate

reports, and

the return of reports

failing the edit process

to the grantee. (M)

Transactions prepared and

posted to SGL

9. If the federal

department/agency uses other

agency systems for processing

grantee’s financial reports (e.g.,

HHS’ Payment Management

System), does it have a

reconciliation process in place

between the other agency’s

financial systems and the

agency’s SGL? (M)

10. Are SGL entries used to expense

advance payments? A

requirement to use SGL

accounts at the transaction level

is contained in the Federal

Financial Management

Improvement Act (FFMIA) of

1996 and OMB Circular A-127,
______________________________________________________________________________

Grant Financial System Requirements

______________________________________________________________________________

Page 35 GAO-01-911G – Grant Financial System Checklist (9/01)

Financial Reports

Yes/no/

na Explanation

Financial Management

Systems. Accounts and entries

are identified in TFM,

Supplement No. 2, which is

available on the SGL website at

www.fms.treas.gov/ussgl. (M)

11. Are SGL entries also used to

adjust for differences between

the grant expenditures

previously posted to these

accounts when reimbursement

payments were made to the

grantees and the grant

expenditures reported on the

grantee’s financial reports?

A requirement to use SGL

accounts at the transaction level

is contained in the Federal

Financial Management

Improvement Act (FFMIA) of

1996 and OMB Circular A-127,

Financial Management

Systems. Accounts and entries

are identified in TFM,

Supplement No. 2, which is

available on the SGL website at

www.fms.treas.gov/ussgl. (M)

Reconciliation

12. Is sufficient and appropriate

information maintained for

reconciliation with the agency’s

core financial system? (M)
______________________________________________________________________________

Grant Financial System Requirements

______________________________________________________________________________

Page 36 GAO-01-911G – Grant Financial System Checklist (9/01)

Interest Collections

Yes/no/

na Explanation

Overview

1. Is the interest earned on

advances of federal funds

handled in accordance with the

prescribed administrative

requirements based on the cost

principles established for the

grantee organization involved?

(M)

2. Does the system support the

following major steps?

State governments: Interest

earned on advances of

federal funds by state

agencies, instrumentalities,

and fiscal agents is governed

by the Cash Management

Improvement Act (CMIA) of

1996, (i.e., Public Law 101-

453). State organizations

and/or representatives not

subject to CMIA and its

implementing regulations

are treated as “other

organizations.” (M)

Other organizations: Interest

earned on federal advances

by other grantee

organizations is subject to

OMB Circular A-110, Grants

Management Common

Rule, or program regulations

as applicable. In

accordance with Section .22

of OMB Circular A-110

concerning entities that earn

interest earned on federal

advances in excess of $250

per year in the aggregate

this interest must be

remitted annually to HHS,
______________________________________________________________________________

Grant Financial System Requirements

______________________________________________________________________________

Page 37 GAO-01-911G – Grant Financial System Checklist (9/01)

Interest Collections

Yes/no/

na Explanation

Payment Management

System, Rockville, Maryland

20852. This office acts as

the governmentwide agent

for all collections of interest

generated from grant

advances. (M)
______________________________________________________________________________

Grant Financial System Requirements

______________________________________________________________________________

Page 38 GAO-01-911G – Grant Financial System Checklist (9/01)

Grant Closeout

Yes/no/

na Explanation

Financial processes

1. Does the system support the

following major processes?

financial status report (FSR)

closing process,

federal cash transaction

report (FCTR) process,

posting of closing

collections,

reconciliation. (M)

Financial status report (FSR)

closing process

2. Does the amount reported as

expense agree with the cash

disbursed on FCTR? (M)

3. Are unobligated balances

deobligated in the accounting

system? (M)

4. Is a closing transaction

recorded/issued to close out the

grant in the accounting system?

(M)

5. Are procedures established to

identify grantees who are

delinquent in submitting final

reports? (M)

Federal cash transaction report

process

6. Does the granting agency

monitor accounts that have

expired grants and that have not

been reported as closed by the

recipient? (M)

7. Does the agency track open

grants funded from
______________________________________________________________________________

Grant Financial System Requirements

______________________________________________________________________________

Page 39 GAO-01-911G – Grant Financial System Checklist (9/01)

Grant Closeout

Yes/no/

na Explanation

appropriations that are expiring

within the next 12 months?

(M)

Post closing collections

8. Does the agency have

accounting procedures to

collect receivables and liquidate

payables due after the closeout

of the grant? (M)

Reconciliation

9. Is sufficient information

maintained to reconcile with the

agency’s core financial system?

(M)
______________________________________________________________________________

Grant Financial System Requirements

______________________________________________________________________________

Page 40 GAO-01-911G – Grant Financial System Checklist (9/01)

Records retention

Yes/no/

na Explanation

1. Does the agency system(s)

maintain, store, and permit

ready retrieval of grant financial

data? The time frames for

various parts of this

requirement differ depending on

the subject matter. (M)

2. Is the system sufficiently

flexible to retain and purge data

consistent with varying

recordkeeping requirements?

(M)

3. Is the destruction of agency

records, created within the

federal government, approved

by the National Archives and

Records Administration (NARA)

per 36 CFR 1228?

Expenditure accounting records

are currently authorized for

disposal by General Records

Schedule 7, Expenditure

Accounting Records, and

General Records Schedule 20,

Electronic Records. Copies may

be obtained from the agency’s

records officer or from NARA.

For expenditure records not

covered by this authority or for

any questions regarding the

disposition of federal records,

contact:

National Archives and

 Records Administration

7th Street and Pennsylvania

 Avenue, NW

Washington, DC 20408.

The telephone number is

(202) 501-5400. (M)
______________________________________________________________________________

Grant Financial System Requirements

______________________________________________________________________________

Page 41 GAO-01-911G – Grant Financial System Checklist (9/01)

General System Requirements

Yes/no/

na Explanation

1. Is the system, at the standard

and/or agency level, able to

accept, process, and report on

transactions with other internal

and external systems? (M)

2. Does the system record and

track such transactions and

related information in order to

provide the basis for central

control? This may require a

custom interface to properly

identify and format the

transactions. (M)

3. Does the system provide

flexibility in accepting data

input from multiple media so

that it can recognize the unique

data input requirements of

interface systems? (M)

4. Does the system subject all

transactions from interfacing

systems to the grant financial

system edits and validations?

(M)

5. Does the system provide the

capability of customizing data

input, processing rules, and edit

criteria? (M)

6. Does the system provide

flexibility in defining internal

operational procedures and in

supporting agency

requirements? (M)

7. Does the system provide the

capability of identifying and

processing information from

other systems that interface

with and update the standard

grant financial system? (M)
______________________________________________________________________________

Grant Financial System Requirements

______________________________________________________________________________

Page 42 GAO-01-911G – Grant Financial System Checklist (9/01)

General System Requirements

Yes/no/

na Explanation

8. Does the system provide the

capability of allowing users to

customize output for reporting

and providing interfaces to

other systems necessary to meet

agency requirements for

external processing (e.g.,

general ledger posting, budget

formulation, budget

reconciliation, and budget

execution)? (M)

9. Does the system capture the

transaction dates in order to

ensure compliance with the

Cash Management Improvement

Act? (M)

10. Does the system capture

information to comply with the

reporting and referral

requirements of the Debt

Collection Improvement Act of

1996? (M)

11. Does the system capture

information necessary for

reporting on property, plant,

and equipment in the hands of

grantees as required by

Statement of Federal Financial

Accounting Standards (SFFAS)

No. 6, Accounting for Property,

Plant, and Equiqment? (M)

12. Does the system capture

financial information necessary

to comply with OMB Circular A110, Uniform Administrative

Requirements for Grants and

Agreements with Institutions

of Higher Education,

Hospitals, and Other NonProfit Organizations (11/19/93,

amended 9/30/99)? (M)
______________________________________________________________________________

Grant Financial System Requirements

______________________________________________________________________________

Page 43 GAO-01-911G – Grant Financial System Checklist (9/01)

General System Requirements

Yes/no/

na Explanation

Other general systems issues

13. Does the agency use the variety

of general systems

requirements—including data

stewardship, systems

architecture, systems

integration, internal control, and

others—contained in the JFMIP

Federal Financial Management

System Requirements (FFMSR)

document entitled Framework

for Federal Financial

Management Systems (FFMSR0) issued January 1995? The

framework document along

with all other JFMIP

requirements documents can be

found at

www/financenet.gov/jfmip/jfmi

p.htm. (M)
______________________________________________________________________________

Grant Financial System Requirements

______________________________________________________________________________

Page 44 GAO-01-911G – Grant Financial System Checklist (9/01)

Information technology in the

grants process

Yes/no/

na Explanation

Note: There are no checklist

questions drawn from this section

of the JFMIP source document

(pages 37–39).

(193013)
______________________________________________________________________________

Related Products

______________________________________________________________________________

Page 45 GAO-01-911G – Grant Financial System Checklist (9/01)

These related products address three main categories: internal control, financial

management systems, and financial reporting (accounting standards). We have

developed these guidelines and tools to assist agencies in improving or maintaining

effective operations and financial management.

Internal Control

Standards for Internal Control Streamlining the Payment Process

in the Federal Government, While Maintaining Effective

Internal

GAO/AIMD-00-21.3.1, November 1999. Control, GAO/AIMD-00-21.3.2,

May 2000.

Determining Performance and Internal Control Management and

Accountability Challenges and High Evaluation Tool, GAO-01-1008G,

Risks, GAO-01-159SP, November 2000. August 2001.

Financial Management Systems

Framework for Federal Financial Inventory System Checklist,

Management System Checklist, GAO/AIMD-98-21.2.4, May 1998.

GAO/AIMD-98-21.2.1, May 1998.

System Requirements for Managerial Core Financial System

Requirements

Cost Accounting Checklist, Checklist, GAO/AIMD-00-21.2.2,

GAO/AIMD-99-21.2.9, January 1999. February 2000.

Human Resources and Payroll Direct Loan System Requirements

Systems Requirements Checklist Checklist, GAO/AIMD-00-21.2.6,

GAO/AIMD-00-21.2.3, March 2000. April 2000.

Travel System Requirements Seized Property and Forfeited

Assets

Checklist, GAO/AIMD-00-21.2.8, Requirements Checklist,

May 2000. GAO-01-99G, October 2000.

Guaranteed Loan System

Requirements Checklist,

GAO-01-371G, March 2001

Financial Reporting (Accounting Standards)

“Checklist for Reports Prepared Under the CFO Act,” (Section 1004 of the

GPO/PCIE Financial Audit Manual (FAM), July 2001). This is a checklist

containing agency financial statement reporting requirements.

These documents are available on the Internet on GAO’s home page (www.gao.gov)

under the heading “Other Publications” and the subheading “Accounting and Financial
______________________________________________________________________________

Related Products

______________________________________________________________________________

Page 46 GAO-01-911G – Grant Financial System Checklist (9/01)

Management.” They can also be obtained from GAO, 700 4th Street NW, Room 1100,

Washington DC 20548, or by calling (202) 512-6000 or TDD (202) 512-2537.