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Contract and Grant Revenue Recognition Program
Document
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Contract and Grant Revenue Recognition Program
Documentation
Purpose
To provide the background information and detailed GL program documentation related to the
recognition of revenue on contract and grant centers.
Introduction and Background
Generally accepted accounting principles require that contract and grant revenue be recognized
when earned, which is typically based on when expenses are incurred. In the early 1990s, after
using a manual year-end process for several years, Vanderbilt implemented a month-end unbilled
receivable program to recognize revenue and corresponding receivables for revenue earned but
not yet billed to or received from the sponsor. At that time, the predominance of federal
contracts and grants and many private awards were funded based on costs incurred.
During the FY 2007 financial close process, the Office of Financial Affairs (OFA) noted that FY
2007 revenues on contract and grant centers (and correspondingly, fund balances) were
significantly higher than expected. Discussions with the Office of Contract and Grant
Accounting (OCGA) and Department of Finance (DOF) revealed the cause to be a growing trend
by sponsors, including federal agencies, to fund awards in advance of expenses. This indicated a
need to review contract and grant centers for possible revenue deferrals.
OFA used Business Objects to manually identify potential centers and amounts to be deferred for
FY 2007 and 2008. For federal awards, the conclusion was reached that revenues equal to net
preliminary fund balances for Department of Defense and Health and Human Services should be
deferred for external financial reporting. Non-federal awards with the potential for revenue
deferral were reviewed by OCGA and DOF and a subset identified for deferral.
While the manual process worked for the short-term, the advance funding