AGA Today
Federal Accounting Corner
By: Simcha Kuritzky, CGFM
Billing for Reimbursable Advances
Background
Treasury's Standard General Ledger (SGL) doesn't acknowledge it, but it
is a widespread practice among agencies nonetheless: billing
reimbursable clients for advances. There are a number of good business
reasons to do this, but what I'm going to focus on is how an agency can
account for it.
Null
The easiest way to account for such a bill is to do no postings, as a
bill for an advance has no accounting significance. You don't have a
right to the funding, though you do have the right to refuse to perform
any work until you get it. This also avoids the problem of reporting
actions on the receivable (on what used to be the Schedule 9 of the
SF-220): If the bill gets canceled or you collect less than what was
billed, it really isn't written off; and if you collect more, you don't
have to refund it or transfer the excess to the General Fund the way you
usually have to for an over-collection of a bill. However, billing for
advances can be a very significant activity for a fund or even an
agency, and the agency may want to track it in their general ledger.
Full Posting
The SGL entry for simultaneously establishing a reimbursable agreement
and collecting an advance against it is:
C182 Debit 1010 Fund Balance with Treasury
Debit 4222 Unfilled Customer Orders with Advance
Credit 2310 Advances from Others
Credit 4210 Anticipated Reimbursements and Other Income
If
we replace 1010 with 1310 Accounts Receivable, then 4222 is no longer
synchronized with proprietary cash. If we eliminate the 4222 entry, then
it is no longer synchronized with 2310. Also, 1310 is normally
synchronized with 4251 Reimbursements and Other Income Earned –
Receivable. So the only way to keep all these relationships intact is to
add 4252, to offset the cash impact of 4222 and the earned
reimbursements of 4251, as follows:
Debit 1310 Accounts Receivable
Debit 4222 Unfilled Customer Orders with Advance
Debit 4251 Reimbursements and Other Income Earned – Receivable
Credit 2310 Advances from Others
Credit 4210 Anticipated Reimbursements and Other Income
Credit 4252 Reimbursements and Other Income Earned – Collected
Proprietary-Only Posting
Of
course an agency that has significant bills for advances will have a
very strange looking SF-133 and Statement of Budgetary Resources, as
line 3D1a (mapped to account 4252) will go negative. One way to avoid
this is to record the entry only in the proprietary accounts (1310 and
2310). In order to maintain the relationships of 1310 to 4251 and 2310
to 4222, a special subaccount for 1310 can be used that maps to 4222
instead of to 4251. Alternatively, the debit account could be to a
special subaccount of 2310 such as Contra Advances from Others –
Receivable
Conclusion
Bills for advances have no real accounting impact, and the null posting
option is probably best. Agencies that use their general ledger to track
bills, however, may want to consider a proprietary-only model. —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.