# Presentation: 162581

## Accruals

**  ****September  2006**

## Accrual Accounting:  It’s the Law !

- 31 U.S.C. 3512 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.”*

## September 30, 2006

**September 30, 2006**
**11:59:59 PM**

- It’s an Accrual

## If a good/service was NOT received as of

- September 30, 2006
- 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

- NOAA contracts with Santa to hire his employee, Bernard Elf, to work from January 1 to December 31.
- Bernard Elf is paid $12,000 annually.
- 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

- NOAA contracts with Lakadasical Billing Company to count dolphins in the Atlantic Ocean from January 1 to December 31.
- NOAA pays them $5,000 a week.
- 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

- NOAA contracts with Seymour Skies to monitor weather in Climate, Kansas, from October 1 – September 30.  He has to submit quarterly progress reports.
- He is paid $24,000 annually.
- 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

- NOAA contracts with Billsontime Scuba Services (BSS) to check out damage to a reef in Florida.
- All of BSS’s bills have been paid except one.
- 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.
**http://www.corporateservices.noaa.gov/~finance/FOAOD.html**

## August 2006

- Finance Offices reviewed
- UDOs over $100K
- and sent out emails
- requesting the
- contact person to
- estimate an accrual for year end.

## Is there anything else

- the Line/Staff Offices
- should do?

## YES:

**Review Instructions:**
- _[www.corporateservices.noaa.gov/~finance/FOAOD.html](http://www.corporateservices.noaa.gov/~finance/FOAOD.html)_
**2. Remember what**
**       ****was Accrued**
**QUESTIONS  ??????????????**
**www.corporateservices.noaa.gov/~finance/FOAOD.html**