AGA Today

Federal Accounting Corner

Recording Receivables

Introduction
There are a number of different types of receivables that a federal agency can generate, but only some are specifically recognized in the Standard General Ledger (SGL) or should be reported on the Treasury Report on Receivables (TROR).

Revenue Related
Receivables are frequently related to revenue. In fact, it is booking receivables for credit sales that made double-entry bookkeeping a necessity. Federal agencies can earn revenue, tax it, or collect it on behalf of others. There are a number of specialized revenue receivable accounts in the SGL. Account 1320 Employment Benefit Contributions Receivable is only booked by agencies that administer employment-related benefits, and 1325 Taxes Receivable are only used by agencies that invoke the sovereign power of taxation. Agencies with credit programs can book 1350 for loans, 1340 for interest receivable, and 1360 for penalties and fines receivable. I would like to point out that, while the title for 1360 (Penalties, Fines, and Administrative Fees Receivable) is ambiguous, this account is only used for fees, etc. against debt or loans. An agency that collects fees as part of its mission (such as user fees) posts receivables to 1310 Accounts Receivable and not to 1360. Economy Act reimbursements also use 1310. Receivables for recognized revenue should be reported on the TROR and be actionable (that is, if the debtor doesn't pay, the agency takes steps to collect).

In the past, I have written about receivables related to revenue not yet earned. Some agencies book a receivable for reimbursement advances or for unearned revenue. While I can see the need to include such activity in the general ledger, I question whether such receivables are actionable or reported outside the agency (such as on the TROR or on the balance sheet). I would segregate such receivables and their associated liabilities by using subaccounts, so receivables for unearned revenue would not be mixed in with receivables for revenue, and unearned revenue not collected would be separate from collected unearned revenue.

Expense Related
The other main type of receivables are those related to spending. These are all actionable and should be reported on the TROR (some even have tax implications for debtors who don't pay up in a timely manner). An agency can bill a vendor for goods or services paid for but either returned or not received. Agencies also recognize bills for advances paid to others where that advance has not been used. These bills do not affect funds availability until they are collected. However, they can cause some reconciliation problems if not booked properly.

A bill against an expense posts to unfunded expenses (account 6790). When it is collected, the posting to 6790 is backed out and the original expense (usually 6100) is credited instead, along with a debit (reduction) to expenditures (generally 4902).

While expenses can be funded or unfunded, it is generally assumed that assets are always funded. We fund assets when we pay for them, but if we then credit the asset with only a receivable on the books, we are backing out the asset without funding though we're using the same SGL account. The net of the purchase and bill would be to debit 1310 and funds availability (such as 4610) and credit cash (1010) and expenditures (4902). That effectively makes the receivable funded. So while FMS entry C414 simply debits 1310 and credits the asset (with a note to back out the 8801-8804 postings), I would suggest that the agency also debit 6100 Operating Expenses/Program Costs and credit 6790 Other Expenses Not Requiring Budgetary Resources, converting the unaccepted or non-existent assets to a funded expense and leaving the receivable unfunded.

When a paid advance (such as a travel advance) is billed, the balance in 4802 Undelivered Orders - Obligations, Prepaid/Advanced should be relieved or else it will end up funding 1310. Generally the easiest way to do this is to process a voucher to expense the prepayment, thus recognizing an expenditure (moving the 4802 balance to 4902), then process an unfunded bill against the expenditure crediting account 6790. This will also make it simpler to write off the debt should that become necessary, because if the agency doesn't expend and expense the advance when booking the bill, it will have to before writing it off.

Conclusion
Receivables for revenue or expenses should be reported externally, whereas those for unearned revenue or advances to be received should not. When billing for goods returned (or not received) or advances paid but not vouchered, first recognize a funded expense and then the bill can credit unfunded expenses. This will simplify reconciliations and write-offs. —Simcha Kuritzky, CGFM, CPA     

This column is provided as part of a free exchange of ideas in federal accounting, and is not reviewed substantively before publication. Please send all comments, queries, or corrections to Simcha.Kuritzky@CGIFederal.com