Grants, Entitlements, and Carryover

When I started working at a California school district one of the first things I had to learn was the difference between a grant and an entitlement. A few years ago the state accounting manual was revised to refer to funding sources (resources) as either those with a fund balance or those with unearned revenue and no fund balance.

online entitlement


The word “entitlement” was possibly abandoned due to the negative connotations that surround it.  If a writer describes someone as “entitled” this is just a less abrasive way of saying “you’re a jerk.”  Entitlements are part of the nasty political lexicon where liberals and conservatives press their particular ideologies concerning welfare and other transfer payments.

So I get it.  The neutrality of the term (if it was ever neutral) is completely gone.  Yet, is was a helpful concept for me to learn the ropes of grant accounting and I reintroduce it here to describe the ways that funding can be received by school districts.


This is where a state or federal governmental authority remits funds to a school district with no application and no “spend or lose” requirement.  The easiest example I can present is Lottery funding.  When California voters approved the establishment of a state lottery a requirement was included to give a certain percentage to schools.  Schools do not have to apply for this funding.  It just shows up every quarter.

  • Revenue is earned when it is received
  • Unspent amounts are part of the fund balance, which does not have to be zero at year’s end
  • Amounts earned but not received at year end (e.g. the fourth quarter lottery payment) are set up as accounts receivable, regardless of whether these amounts have been spent or not
  • The carryover calculation is easy. The spendable amount that carries over to the new school year is the resource’s fund balance


Districts can apply for a myriad of grants.  If they don’t apply they don’t receive it.  The donor can (and will) take back any proceeds that were not used by the end of the grant period.  Thus any funding received prior to spending is actually a liability (unearned revenue).

  • Revenue is recognized when it is spent
  • Grant amounts received in advance of spending are reversed to a liability account (unearned revenue) at year end
  • The carryover calculation is not so straightforward, since the fund balance is always zero.  Carryover is the total amount of unearned revenue, both received (see your accrual set up) and yet to be received (see the award letter).  More on this calculation here.

The accounting manual lists nearly every resource a school district might receive. It used to indicate “E” or “G” for entitlement or grant.  Now it indicates “F” or “U”, where F equals fund balance and U equals unearned revenue.

This helps, except there are many local funding sources that could be either an F or a U.  The above explanation will, I hope, help you to correctly classify these local amounts.

Rule of Thumb: If you applied for it, it is a grant.

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