Accruals, Obligations and Expenditures, Oh My! Tim Urbanovsky, TWC Finance Lori Slayton, TWC AEL AEL WIOA Summer Institute: June 20 -23, 2017

AEL WIOA Summer Institute: June 20 - 23, 2017 Obligations AEL WIOA Summer Institute: June 20 - 23, 2017

AEL WIOA Summer Institute: June 20 - 23, 2017 Obligation Defined TWC Rule §800.52 - Definitions Debt established by a legally binding contract, letter of agreement, sub-grant award, or purchase order Executed prior to the end of a contract period Goods or services provided by end of contract period Liquidated 60 calendar days after end of contract period AEL WIOA Summer Institute: June 20 - 23, 2017

Characteristics of Obligations Bona fide need Written Definite and certain legal commitment Specific goods or services Definite vs. indefinite quantity Legally binding Availability of funds Delivery date Multi-year contracts and option years Can occur prior to or at same time as expenditure Budgets and plans do not create obligations AEL WIOA Summer Institute: June 20 - 23, 2017

What Do Obligations Tell Me? Portion of each budget line item that has been legally committed for a specific purpose Amounts available for other purposes Tracking of obligations can help avoid committing more funds than are contracted under the grant contract Overages generally cannot be charged to other federal/state contracts unless costs are allowable under both and fall within the period of availability of funds for both grant contracts AEL WIOA Summer Institute: June 20 - 23, 2017

AEL WIOA Summer Institute: June 20 - 23, 2017 Purchase Orders Purchase order creates obligation when issued. For example: equipment, supplies, computers Reporting: Obligation if items not received by month-end If items received by month-end, receipt liquidates obligation; report expenditure AEL WIOA Summer Institute: June 20 - 23, 2017

AEL WIOA Summer Institute: June 20 - 23, 2017 Recap: Obligations Tracking supports good grant management Reflects a legally binding debt Supported by documentation Allowable under grant Occurs during the period of availability of funds Plans and budgets are not obligations AEL WIOA Summer Institute: June 20 - 23, 2017

AEL WIOA Summer Institute: June 20 - 23, 2017 Expenditures AEL WIOA Summer Institute: June 20 - 23, 2017

Accrued Expenditures Defined TWC Rule §800.52 Charges incurred during a given period for goods and tangible property received and services performed that cause decreases in net financial resources In other words, the value of goods and services received during the grant contract period that will be paid for during a future reporting period of the same grant contract AEL WIOA Summer Institute: June 20 - 23, 2017

AEL WIOA Summer Institute: June 20 - 23, 2017 Accrued Expenditures Documentation: Time records Invoices for goods and services received Purchase requisitions and receiving reports Approved indirect cost rate, if applicable Contracts Travel expense reports Tuition cost AEL WIOA Summer Institute: June 20 - 23, 2017

AEL WIOA Summer Institute: June 20 - 23, 2017 Cash to Accrual Basis Must report accrued expenditures If normally operate on a cash basis, do not have to convert system, but must have a process to capture and report accruals Sample methods: Linking spreadsheets approach Simplified approach Suspense file approach AEL WIOA Summer Institute: June 20 - 23, 2017

Cash Disbursements— Advance Payments Allowable advance payments limited to: Subscriptions Insurance premiums (current period) Tuition (current term) Leases (current month) Vendor requires advance payment Credit appropriately for any refunds AEL WIOA Summer Institute: June 20 - 23, 2017

AEL WIOA Summer Institute: June 20 - 23, 2017 Recap: Expenditures Report cash disbursements (for items not previously reported), plus accrued expenditures Failure to include accrued expenditures violates federal, state, and TWC requirements If existing accounting system does not track obligations and accruals, must have separate process for calculating amounts AEL WIOA Summer Institute: June 20 - 23, 2017

AEL WIOA Summer Institute: June 20 - 23, 2017 Examples Obligations and Expenditures AEL WIOA Summer Institute: June 20 - 23, 2017

Definite Quantity Contract Legally binding definite quantity contract for specific services creates obligation when executed For example: sub-contracts for AEL services Reporting: Report obligation for portion of contract that will be fulfilled during the grant contract If portion of the work falls outside period of availability of funds for current grant contract, split the obligation based on best estimate of value of work to be performed Report expenditures monthly; reduce obligation AEL WIOA Summer Institute: June 20 - 23, 2017

Indefinite Quantity Contract Legally binding written contract for indefinite quantity of specific goods or services Possible examples: cash equivalents Reporting: If no minimum quantity required by contract no obligation reported until order is placed If contract requires minimum quantity, contract creates obligation for that amount Additional orders create additional obligations Report expenditures as items/services received AEL WIOA Summer Institute: June 20 - 23, 2017

Participant Training – Scenario 1 Enrollment Drop Deadline Class Ends Invoice Training provider invoices after participant enrolls Obligate when participant enrolls in training Only portion due and payable under current grant contract Accrue expenditures monthly, until earlier of: Fully accrued Cost becomes due and payable Participant drops out of training (if applicable) Requires ongoing data sharing between financial and program personnel AEL WIOA Summer Institute: June 20 - 23, 2017

Participant Training – Scenario 2 Enrollment/ Payment Due Class Ends Drop Deadline Training provider requires advance payment Per training provider’s payment terms Demonstrates bona fide need for advance payment Report expenditure for full cost of training that is due and payable Training provider refund policy Requires ongoing data sharing between financial and program personnel, if a refund is possible AEL WIOA Summer Institute: June 20 - 23, 2017

Salaries, Wages and Levelling Accrue salaries and wages earned between the last pay date and the end of that month; no obligation How to appropriately account for leveled salaries in CDER AEL WIOA Summer Institute: June 20 - 23, 2017

Annual Leave for AEL Staff No obligation Unfunded Leave If leave recorded/charged to program when leave is taken, report expenditure in month leave was taken Funded Leave If cost for leave is recorded/charged to program when earned, report expenditure for month that leave was earned AEL WIOA Summer Institute: June 20 - 23, 2017

AEL WIOA Summer Institute: June 20 - 23, 2017 AEL Employee Travel No obligation or expenditure unless: Travel actually performed; or Ticket was purchased Issuance of travel authorization does not obligate or constitute an accrued expenditure of funds AEL WIOA Summer Institute: June 20 - 23, 2017

AEL WIOA Summer Institute: June 20 - 23, 2017 Employee Travel If at the end of the month: Ticket was ordered, but not received – obligation Ticket ordered and received – expenditure Lodging for future travel booked – report nothing Employee received travel advance – expenditure Travel occurred but employee has not submitted expense report – expenditure (if measurable and reliable estimate available) Employee submitted expense report for travel –expenditure (if not previously accrued) Tim: 1. Ticket ordered, but not received. Rationale similar to purchase order discussion. Order has been placed for a ticket that will be received at a future date. 2. Ticket ordered and received. Rational similar to purchase order discussion. Order was placed that created and obligation. Receipt of ticket liquidated obligation. Reportable as an expenditure. 3. Lodging for future travel book. Report nothing. Assumes that the reservation can be cancelled without penalty. If the entity can cancel at any time and is not “on-the-hook” to purchase the room, no debt is created by booking the room and no obligation exists. Additionally, no service has been received because no lodging has been provided, and no cash has been disbursed, so no expenditure exists. 4. Travel advance. The entity would have drawn and disbursed cash to pay the advance to the employee. Cash disbursements for amounts not accrued during a prior month are to be included in current month expenditures. 5. Travel occurred but no expense report. Accrue to the extent that the expenditure can be reliably estimated (e.g. based on travel authorization or other documentation). If cannot be reliably estimated, report as expenditure when expense report is received. 6. Travel occurred and expense report received. Report as expenditure unless previously accrued. AEL WIOA Summer Institute: June 20 - 23, 2017

AEL WIOA Summer Institute: June 20 - 23, 2017 Key Points Report obligations and expenditures in the Cash Draw and Expenditure Reporting system Three report types: Monthly Final Revised Final Designated due dates by report type Cash access can be temporarily turned off if any report is five days past due AEL WIOA Summer Institute: June 20 - 23, 2017

Monthly Expenditure Report TWC Rules §800.52: Definitions Monthly expenditure report--A written or electronically submitted report by a Board or an AEL grant recipient that contains information regarding services for each category of funding allocated by the Commission, and in which the Board or an AEL grant recipient lists expenditures and obligations by category of funding. AEL WIOA Summer Institute: June 20 - 23, 2017

Monthly Expenditure Report Report obligations (if applicable) and expenditures Also include any adjustments for errors or omissions on a previous report Enter $0.00 if no activity during month. Due on 20th calendar day by 11:59 p.m. AEL WIOA Summer Institute: June 20 - 23, 2017

Final Expenditure Report Same as monthly report with exception of the following: Cannot be certified if a cash draw transaction is pending Due to/Due from the Agency must be $0.00. Change report submission from a monthly report to a final report Due by 11:59 p.m. on the 60th calendar day following the end of the contract AEL WIOA Summer Institute: June 20 - 23, 2017

AEL WIOA Summer Institute: June 20 - 23, 2017 Cash Draw Cutoff Cash draw access turned off at 12 a.m. on the 5th calendar day that a report is past due Affects all active grant award contracts (not just the one with the late report) No notice when cash access is restored Can e-mail cashdraw.ta@twc.state.tx.us to verify cash draw access AEL WIOA Summer Institute: June 20 - 23, 2017

AEL WIOA Summer Institute: June 20 - 23, 2017 Anything We Missed…. If you aren’t sure about something, please consult with your TWC Contract Manager or Program Specialist and let us help you find the answer. The TWC Rules that govern financial reporting and related items can be found here: http://www.twc.state.tx.us/agency/texas-workforce-commission-rules Thank you! AEL WIOA Summer Institute: June 20 - 23, 2017