AGENCY JOURNAL ENTRY REVIEW
General Ledger Reclassifications / Corrections

A General Ledger (GL) reclassification or correction is used to properly align financial transactions with the correct fund, general ledger account, and reporting requirements. These corrections ensure the accuracy, integrity, and audit readiness of financial records. Reclassifications are processed using a ZE or YV document type, must attach the 2026 updated version of the reclassification request form, and are subject to review and final approval by DFA’s Office of Financial Affairs.

Updated Requirements 
Detailed Explanation of the correction/reclassification (Critical) Each request must provide a clear, detailed, and transaction-specific explanation addressing why the correction is necessary, what corrective action has or will be implemented, and provide a complete and descriptive explanation of the transaction. Important: Simply stating “debit fund A and credit fund B” is not sufficient. The explanation must clearly describe the nature, purpose, and impact of the transaction.

Example of an Acceptable Explanation 
An expenditure was originally posted to fund 1234567890 using a debit to general ledger account 67890123 in the amount of $750.00 and a credit to cash general ledger account 10060000. This posting was made in error and should have been recorded in fund 3456789012 under general ledger account 65432109. To correct this error, the transaction will remove the expense from the incorrect fund by crediting general ledger account 67890123 in the amount of $750.00 and debiting cash general ledger 10060000 and reclassifying it to the appropriate fund by debiting general ledger account 65432109 and crediting cash general ledger 10060000 in fund 3456789012. Internal review procedures have been updated to ensure expenses are posted correctly going forward.

Two Agency level authorized approvals are required if: 
The total reclassification amount exceeds $25,000, or the transaction involves grant funding. Authorized signers must be at the level of Supervisor, Manager, Director, or Deputy. Requests that do not meet this approval requirements will be rejected.

Grant-Related Reclassifications 
Federal Compliance Requirements All expenditures charged to federal awards must comply with 2 CFR Part 200 (Uniform Guidance). Costs must be allowable, allocable to the specific funding source, reasonable and necessary, and consistently treated.

Unallowable Practices 
The following are strictly prohibited: transferring costs to fully expend grant funds, transfers to avoid lapsing or reverting funds, and rebalancing budgets without programmatic justification. Cost transfers based solely on fund availability or spending targets are not allowable and may result in audit findings.

Allowable Cost Transfers (Limited Circumstances) 
Cost transfers between funding sources may only occur when: the original charge was made in error and documentation supports the correction, the cost is allowable under the receiving funding source, the cost directly benefits the receiving program, the transfer is fully documented and justified or, the correction is made in a timely manner (not solely at period end).

Required Grant Documentation 
All grant-related reclassifications must include notice of Award, documentation of allowable costs (e.g., grant terms and conditions), cost allocation or cost sharing methodology (if applicable), and supporting documentation demonstrating allocability.

Required Justification 
All submissions must include: a clear explanation for the transfer, documentation showing the expense benefits of the grant, and evidence of proper approval in accordance with internal controls.

Moving Forward
Agencies are expected to: charge expenditures to the correct funding source at the time of purchase, maintain strong internal controls and review processes, and ensure proper cost allocation across funding streams. Failure to follow these standards may result in rejected transactions, compliance issues, or audit findings.

Common Reasons for Rejection

  • Two approvals are not provided when required
  • Explanation is vague, incomplete, or not transaction-specific
  • Supporting documentation is missing
  • Originating transaction documentation is not included
  • Grant-related requirements are not met
  • Transfer lacks justification or violates funding rules
  • 2-series finds must NOT adjust revenue general ledger accounts
Resources

Please remit questions to the following to Laura Law