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Accruals. September 2009. 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).

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slide1

Accruals

September 2009

slide2

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
Prior Financial Audit Finding:
  • “Some accounts payable and related expenses are overstated, and some are not accrued at year-end.”
slide4

If a good/service was received as of

  • September 30, 2009
  • 11:59:59 PM

It’s an Accrual

slide5

If a good/service was NOT received as of

September 30, 2009

It’s an Undelivered Order (UDO)

Both (Accruals & UDOs) are considered Obligations

slide6

Understanding the DifferenceBudget versus Accounting

Undelivered Orders

+ Accruals

+ Disbursements

= Total Obligations

+ Accruals

+ Disbursements

= Total Costs

slide7

So what does all this mean?

Do I have to do accruals for everything?

slide8

Object Class 11xx and 12xx: Personnel Comp & Benefits

  • Accruals computed by CBS system based on prior pay period
  • Finance Office enters NOAA-wide accruals
slide9

Object Class 41xx:Grants and Subsidies

  • Finance Office and the Grants Management Division do these accruals

To States,

Universities,

& Others

slide10

To accrue or not to accrue,

that is the question.

William Shakespeare

slide11

Recording Accruals

  • Receiving Reports
  • Invoice
  • Performance Reports
  • Use Estimates from COTR, Contractor, and/or Company
  • Prior Month, Qtr., Year
  • UDO Amount
  • Use Common Sense
slide12

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?
slide13

Examples of Accruals - #1

$12,000 / 12 months = $1,000 a month

$1,000 x 9 months = $9,000

slide14

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?
slide15

Examples of Accruals - #2

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

slide16

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?
slide17

Examples of Accruals - #3

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

slide18

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?
slide20

Line/Staff Offices responsibilities...

The Period of Performance

must be identified clearly

on Contracts,

Purchase Orders,

and Interagency Agreements.

slide21

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.

slide22

Line/Staff Offices responsibilities...

The Contact People on

Purchase Orders,

Interagency Agreements,

and Contracts

should know how to

estimate an accrual.

slide23

Line/Staff Offices responsibilities...

The contact person must

give us a written explanation

of how he/she

estimated the accrual.

slide24

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

slide25

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.