Accruals September 2009

Accrual Accounting: It’s the Law ! 31 U.S.C mandates accrual accounting for all Federal Agencies. FMFIA of 1982 requires reports of non-compliance. CFO Act, GPRA, GMRA, etc. FASAB Standards & Concepts Audited Financial Statements (OMB Directed)

Prior Financial Audit Finding: “Some accounts payable and related expenses are overstated, and some are not accrued at year-end.”

If a good/service was received as of September 30, :59:59 PM It’s an Accrual

If a good/service was NOT received as of September 30, 2009 It’s an Undelivered Order (UDO) Both (Accruals & UDOs) are considered Obligations

Understanding the Difference Budget versus Accounting Undelivered Orders + Accruals + Disbursements = Total Obligations + Accruals + Disbursements = Total Costs

So what does all this mean? Do I have to do accruals for everything?

Object Class 11xx and 12xx: Personnel Comp & Benefits -Accruals computed by CBS system based on prior pay period -Finance Office enters NOAA-wide accruals

Object Class 41xx: Grants and Subsidies -Finance Office and the Grants Management Division do these accruals To States, Universities, & Others

To accrue or not to accrue, that is the question. William Shakespeare

Recording Accruals Receiving Reports Invoice Performance Reports Use Estimates from COTR, Contractor, and/or Company Prior Month, Qtr., Year UDO Amount Use Common Sense

Examples of Accruals - #1 1.NOAA contracts with Santa to hire his employee, Bernard Elf, to work from January 1 to December Bernard Elf is paid $12,000 annually. 3.Santa doesn’t bill NOAA until the next year. What is the accrual amount as of September 30?

Examples of Accruals - #1 $12,000 / 12 months = $1,000 a month $1,000 x 9 months = $9,000

Examples of Accruals - #2 1.NOAA contracts with Lakadasical Billing Company to count dolphins in the Atlantic Ocean from January 1 to December NOAA pays them $5,000 a week. 3.Lakadasical’s last invoice was dated August 17 and NOAA paid it. What is the accrual amount as of September 30?

Examples of Accruals - #2 $5,000 week x 6 weeks = $30,000

Examples of Accruals - #3 1.NOAA contracts with Seymour Skies to monitor weather in Climate, Kansas, from October 1 – September 30. He has to submit quarterly progress reports. 2.He is paid $24,000 annually. 3.His last progress report was paid and was through June 30. What is the accrual amount as of September 30?

Examples of Accruals - #3 $24,000 annually / 4 quarters = $6,000

Examples of Accruals - #4 1.NOAA contracts with Billsontime Scuba Services (BSS) to check out damage to a reef in Florida. 2.All of BSS’s bills have been paid except one. 3.The only unpaid bill is for the month of September for $20,000. What is the accrual amount as of September 30?

Examples of Accruals - #4 $20,000

Line/Staff Offices responsibilities... The Period of Performance must be identified clearly on Contracts, Purchase Orders, and Interagency Agreements.

Line/Staff Offices responsibilities... Contact Person on Purchase Orders and Interagency Agreements is the person responsible for estimating the accrual. The COTR on Contracts is the person responsible for estimating the accrual.

Line/Staff Offices responsibilities... The Contact People on Purchase Orders, Interagency Agreements, and Contracts should know how to estimate an accrual.

Line/Staff Offices responsibilities... The contact person must give us a written explanation of how he/she estimated the accrual.

Finance Office responsibilities... We will continue to emphasize the importance of accruals in the Year End Closing Instructions memo.

August 2009 Finance Office created the AP504D Undelivered Orders Over a Specified Amount Report for the Line/Staff Offices to use to identify documents by FMC that may need to be accrued.