# Presentation: 162579

## Accruals

## 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.”*

## Accrual Accounting

- An accounting method that records revenues and expenses when they are incurred, regardless of when cash is exchanged.  The term “accrual” refers to any individual entry recording revenue or expense in the absence of a cash transaction.
- Costs that we have incurred even though we have not paid the bills.

## September 30, 2008

**September 30, 2008**
**11:59:59 PM**

- It’s an Accrual

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

- September 30, 2008
- 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 Compensation & Benefits

**   ****Payroll accruals are generated in CBS based on the prior pay period and specific criteria by the Funds Management Branch**

## Object Class 41xx:Grants

**   ****The Finance Office and the Grants Management Division formulate 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**
**Estimates from COTR, Contractor, and/or Company**
**Prior Month, Qtr., Year**
**UDO Amount**
**Use Common Sense**

## Example of a Monthly Calendar Event

- 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?

## Example of a Monthly Calendar Event

- $12,000 / 12 months = $1,000 a month
- $1,000 x 9 months = $9,000

## Example of a Weekly Calendar Event

- NOAA contracts with Lackadaisical Billing Company to count dolphins in the Atlantic Ocean from January 1 to December 31.
- NOAA pays them $5,000 a week.
- Lackadaisical’s last invoice was dated August 17 and NOAA paid it.
- 			What is the accrual
-                  amount as of
- 			September 30?

## Example of a Weekly Calendar Event

- $5,000 week x 6 weeks = $30,000

## Example of a Quarterly Calendar Event

- 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 though June 30 and it was paid.
- 	What is the accrual amount as of
- 	September 30?

## Example of a Quarterly Calendar Event

- $24,000 annually / 4 quarters = $6,000

## Example of a Vendor Cost Estimate

- 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?

## Example of a Vendor Cost Estimates

- $20,000

## Line/Staff Office Responsibilities

- The Contact Person on                             Purchase Orders and Interagency Agreements and the COTR on Contracts                              are the people responsible                                 for submitting the accrual.
- A written explanation of how the accrual was determined is required.

## Finance Office Responsibilities

- An email is sent to the COTR/Contact Person asking them to determine if an accrual is needed.
- The email contains a file listing documents      with Undelivered Order balances greater than $100K and an Accrual Form.

## 
Over accruing causes problems in the following year because expenses are over stated in the prior year and under stated in the current year.

Accruals should be submitted for any goods/services that have been received. 

Accruals are only reversed upon request.

Including the Period of Performance on obligating documents provides a better opportunity to estimate accruals using one of the calendar event methods.

- Over accruing causes problems in the following year because expenses are over stated in the prior year and under stated in the current year.
- Accruals should be submitted for any goods/services that have been received.
- Accruals are only reversed upon request.
- Including the Period of Performance on obligating documents provides a better opportunity to estimate accruals using one of the calendar event methods.