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

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

3. AEL WIOA Summer Institute: June 20 - 23, 2017
Obligation Defined
TWC Rule § 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 , 2017

4. 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 , 2017

5. 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 , 2017

6. 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 , 2017

7. 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 , 2017

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

9. 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 , 2017

10. 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 , 2017

11. 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 , 2017

12. 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 , 2017

13. 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 , 2017

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

15. 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 , 2017

16. 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 , 2017

17. 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 , 2017

18. 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 , 2017

19. 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 , 2017

20. 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 , 2017

21. 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 , 2017

22. 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 , 2017

23. 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 , 2017

24. 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 , 2017

25. 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 , 2017

26. 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 , 2017

27. 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 to verify cash draw access
AEL WIOA Summer Institute: June , 2017

28. 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: Thank you!
AEL WIOA Summer Institute: June , 2017