ALL AGENCIES, DEPARTMENTS, AND DISTRICTS
GOVERNED BY THE BOARD OF SUPERVISORS
EFFECTIVE: 01/01
_________________________________
David E. Sundstrom, Auditor-Controller
1.
POLICY
Revenues, expenditures, and expenses of County
funds for a given fiscal year must be recorded properly
within that fiscal year. Therefore, it is sometimes
necessary to accrue some revenues, expenditures,
or expense transactions during the year-end closing
process. It is the County's policy to accrue only
transactions that individually equal or exceed $5,000.
1.1
Purpose
The purpose of this procedure is to establish
guidelines for recording accruals at the end
of each fiscal year in accordance with Generally
Accepted Accounting Principles (GAAP) and
federal, state and County program requirements.
1.2
Authority
1.2.1
State of California Government Code
Sections 29120-29122 and 30200
Sections 29120-29122 prohibit
the authorization of obligations
that exceed appropriations.
Section 30200 authorizes the State
Controller to prescribe uniform
accounting principles for counties.
1.2.2
State of California Accounting Standards
and Procedures for Counties
Sections 1.17, 1.18, and 2.27
define accrual and modified accrual
bases for accounting and the timing
of accrual transactions.
Sections 8.13, 8.14, and 8.15
define the types of transactions
that are accrued.
Sections 8.31 and 8.32 define
year-end revenue and expenditure
accruals.
1.2.3
Governmental Accounting Standards
Board
The Codification of Governmental Accounting
and Financial Reporting Standards, Sections
1100, 1600, C50, C60, G60, L10, L20,
P20, P70, and P80 prescribe GAAP for
governments for revenue, expenditure,
and expense accruals, with specific
guidelines for transactions such as
claims and judgments, compensated absences,
grants, landfill closure and postclosure
costs, leases, pension costs, property
taxes, and proprietary fund accounting.
1.2.4
Board of Supervisors' Resolution
No. 82-162
Resolution No. 82-162, dated February
2, 1982, authorizes the Auditor-Controller
to prescribe the accounting policies
for all offices, departments, and institutions
under the control of the Board of Supervisors
(Board).
1.3
Definitions
1.3.1
Accrual
A transaction to record revenues or
expenditures/expenses in the accounting
period to which they are attributable,
although the related cash receipts or
disbursements may not be recorded until
the subsequent accounting period. Due
to the magnitude of the amounts transacted
by the County, accruals should only
be made for transactions that individually
equal or exceed $5,000.
Because cash transactions cannot be
processed after June 30, revenue accruals
are usually recorded by accounts receivable
entries, while expenditure and expense
accruals are usually recorded by liability
entries. Accruals can be based on estimates
or actual transactions.
1.3.2
Fiscal Year
The annual accounting period for the
County is the fiscal year of July 1
through June 30. The month of June is
referred to as Period 12. The accounting
books for the County for the month of
June are held open into July for additional
June entries, and this is referred to
as Period 13. Period 13 is divided into
several scheduled intervals. At each
interval, report updates are run (Point
Runs). The Auditor-Controller General
Ledger Unit schedules the intervals
and specifies various types of transactions
that are due by specified cutoff dates.
Accrual transactions for the fiscal
year are recorded after June 30 until
the books are closed.
1.3.3
Governmental Funds
General, special revenue, capital
projects and debt service funds. These
funds use the modified accrual basis
of accounting. (See Section
2.2.1.2.)
1.3.4
Proprietary Funds
Enterprise and internal service funds.
These funds use the full accrual basis
of accounting. (See
Section 2.2.1.1.)
1.3.5
Revenue
In governmental funds, revenues are
inflows of resources from external parties
that do not have to be repaid. Revenues
are booked or recognized when they are
available and measurable.
In proprietary funds, revenues are inflows
or other enhancements of assets or settlements
of liabilities during an accounting
period. Revenues are earned by delivering
or producing goods, or by rendering
services, and are recognized when they
are earned.
Because cash cannot be booked after
June 30, revenue is accrued using receivable
accounts.
1.3.6
Expenditure/Expense
The term "expenditure" applies
only to expendable trust and governmental
funds. Expenditures are outflows of
resources to external parties. Expenditures
are booked or recognized when the liability
is incurred.
The term "expense" applies
only to proprietary funds. Expenses
are outflows or other consumption of
assets or incurrences of liabilities
during an accounting period. Expenses
are incurred in the process of delivering
or producing goods, or of rendering
services, and are booked or recognized
when they are incurred.
Because cash cannot be booked after
June 30, expenditures and expenses are
accrued using liability accounts.
1.3.7
Encumbrance
An anticipated expenditure in the
form of purchase orders, contracts,
and other commitments that are chargeable
to an appropriation and for which part
of the appropriation is reserved. The
appropriation remains encumbered until
payment is made, or the obligation expires,
or cancellation occurs, at which time
some or all of the encumbrance is reversed.
An encumbrance is not an expenditure
or a liability but merely a reserve
of appropriations. Expenditures and/or
liabilities are recorded when, and if,
goods are actually provided or services
are actually rendered. For further detail
on encumbrances, refer to County
Accounting Procedure (CAP) No. A.3.,
Encumbrances.
Journal voucher accruals do not reduce
encumbrances and therefore should not
be used to record accrual entries for
encumbered contract/purchase orders.
Therefore, accruals of expenditures
or expenses against encumbrances must
be processed through the Auditor-Controller
Claims Unit in order to reduce the encumbrance.
1.3.8
Appropriations
The authorization by the Board to
make expenditures and to incur obligations
for specific purposes, as provided for
in the Board's adoption of the County
Budget, and as changed thereafter by
budget transfers and changes to the
budget made by the Board.
Budget transfers are the documents
used to transfer appropriations from
one expenditure object or revenue code
to another within a fund/agency.
2.
PROCEDURES
2.1
Available Appropriations
2.1.1
Appropriations for Expenditures
The budget established for expenditures/expenses
(i.e. appropriations) should be sufficient
to cover any purchases including accruals
at year-end. Departments should continually
monitor the sufficiency of their appropriations.
Appropriations control is also for the
protection of the department/agency,
since Government Code Section 29121
states that "...obligations incurred
or paid in excess of the unencumbered
balance of the amounts authorized in
the budget appropriations are not a
liability of the county or special district,
but the official authorizing the obligation
in an amount known by him to be in excess
of the unencumbered balance of the appropriation
against which it is drawn is liable
therefor personally and upon his official
bond."
At year-end, budget transfers requiring
Board action must be submitted to the
Board prior to the Board's last meeting
in June. Budget transfers not requiring
Board approval must be submitted to
the Auditor-Controller General Ledger
Unit by June 30. Transfers of appropriations
from salaries and employee benefits
require CEO/Budget Office approval.
Budget transfers will be processed after
June 30 only for appropriation deficit
eliminations and will be coordinated
by the Auditor-Controller General Ledger
Unit and submitted to the Board.
Payment vouchers and/or checks will
be held if they overdraw appropriations
at the major object (also called "object
category") account code level,
at the land parcel/organization code
level for land purchases, or at the
project/organization code level for
capital projects. General Ledger staff
will request necessary budget transfers
to cover deficits. Payments being held
will be released when the appropriation
deficit is resolved.
2.1.2
Appropriations for Encumbrances
Departments/agencies are responsible
for ensuring that appropriations are
available to enable contract/purchase
orders to be encumbered at the end of
the fiscal year. Agenda item transmittals
for Board-approved contract encumbrances
must be submitted by the deadline for
the final meeting in June. If a budget
transfer is necessary, it must be delivered
to the Auditor-Controller General Ledger
Unit by June 30.
2.2
Journal Voucher Accruals
2.2.1
Fund Classification for Accruals
2.2.1.1
Full Accrual Basis Funds
Under the full accrual basis,
revenues are recognized when they
are earned (the right-to-receive
has occurred), and expenses are
recognized when they are incurred.
Proprietary funds and non-expendable
trust funds record transactions
on the full accrual basis.
2.2.1.2
Modified Accrual Basis Funds
Under the modified accrual basis,
revenues are recognized when they
are both measurable and available
to finance expenditures of the
current period. Expenditures are
generally recognized when the
related fund liability is incurred.
The governmental funds and expendable
trust funds record transactions
on the modified accrual basis.
2.2.1.3
Cash Basis Funds
June revenues or expenditures
are not accrued in cash basis
funds. After June 30, changes
are recorded in asset and liability
accounts that occur in cash basis
funds because of accruals recorded
in full accrual or modified accrual
funds. Pension trust, investment
trust, and agency funds, including
departmental trust funds, record
transactions on a cash basis.
Pension trust funds are accrual
basis funds, but the financial
statements for the Retirement
Fund are based on December 31
data. Investment trust and agency
funds, including departmental
trust funds, are custodial in
nature and do not involve measurement
of results of operations. Therefore,
no accruals in June are necessary.
For financial reporting purposes,
balances in these funds are adjusted
to full or modified accrual basis,
if necessary.
2.2.2
Expenditure/Expense Accruals
Accruals should be recorded for incurred
expenditures/expenses for which outflows
of cash or other assets will not occur
until after June 30. To record such
accruals, expenditures/expenses are
charged, and liabilities are booked.
At the beginning of the following fiscal
year, one of two types of entries is
recorded:
For accruals based on estimates,
the expenditure/expense and liability
entries are reversed. The actual
payments are charged to the expenditure/expense
account.
For accruals based on actual amounts,
the accrual entries are not reversed.
Cash is transferred and the liability
account is reduced.
2.2.3
Revenue Accruals
To record earned but uncollected revenues,
an account receivable is booked and
revenue accounts are credited. At the
beginning of the following fiscal year,
one of two types of entries is recorded:
For accruals based on estimates,
the account receivable and revenue
entries are reversed. When the actual
revenues are collected, they are
credited to the revenue account.
For accruals based on actual amounts,
the accrual entries are not reversed.
The actual receipt of revenue is
credited directly to the accounts
receivable account.
2.2.4
Journal Voucher Information
The accrual journal voucher should
include a description that references
the subsequent journal voucher or deposit
order that books the accrual reversal
or the actual expenditure or receipt
of cash. The accrual journal voucher
and the subsequent reversing entry (if
applicable) must be submitted together
to the Auditor-Controller General Ledger
Unit..
2.2.5
Cash Transfers
Cash transfers for June business can
only be made through noon on the last
working day of June. After that time,
all of the usual cash entries on journal
vouchers must be replaced with receivable/liability
entries. (See attached JV examples,
entries [2], [3], and [4] on Exhibits
I and II.)
The receivable/liability entries should
not be made until after June 30.
2.2.6
Cash Transfers
Cash transfers for June business can
only be made through noon on the last
working day of June. After that time,
all of the usual cash entries on journal
vouchers must be replaced with receivable/liability
entries. (See attached JV examples,
entries [2], [3], and [4] on Exhibits
I and II.)
The receivable/liability entries should
not be made until after June 30.
2.2.7
Journal Voucher Preparation and Submittal
Accrual journal vouchers should
include a description that references
the subsequent journal voucher or
deposit order that books the accrual
reversal or the actual expenditure
or receipt of cash. The accrual
journal voucher and the subsequent
reversing entries must be submitted
together to the Auditor-Controller
General Ledger Unit.
Accruals recorded via journal
voucher must include sufficient
explanations and supporting schedules
explaining the accruals.
Journal voucher expenditure accruals
may not include any transactions
for which encumbrances have already
been recorded or for any transactions
that are valued at less than $5,000.
The Auditor-Controller General
Ledger Unit must receive all department/agency
journal vouchers by noon on each
established deadline set by the
Auditor-Controller for each fiscal
year.
Journal Vouchers submitted during
July must be boldly identified as
either June or July business. This
identification should be at the
top of the document near the space
provided for the journal voucher
number.
Accounts payable liabilities in excess
of $5,000 will be accrued by the Auditor-Controller
Claims Unit. To be recorded as payment
vouchers for a given fiscal year, the
following documents must be received
by the deadline that is established
each fiscal year by the Claims Unit:
Receivers and partial receivers
(must show actual date received)
Invoices (with approving signatures)
Claims for payment
Revolving fund (petty cash) replenishment
requests
NOTE: All documents must have the
proper expenditure coding, vendor
name and contract/purchase order number.
Documents must be identified as either
June or July business.
2.3.2
Other Claims Accruals
Accruals of claims that will be paid
by the Auditor-Controller Claims Unit
must be processed by the Claims Unit
to ensure that encumbrance entries are
properly processed. Expenditure accruals
are necessary when payments for current
year obligations cannot be processed
by the Claims Unit's deadline. Accruals
may be based on actual charges or on
estimates. Documents received within
one or two working days of the deadline
for payment voucher accruals may be
accrued by the Claims Unit through the
accrual process.
2.4
Deposit Order Accruals
Up through the cutoff date for Period 13,
Point Run #2, July deposit orders must include
a detailed description of the cash received
and the actual date of the collections. The
fiscal year of the collections must be indicated
on each deposit order.
The word ACCRUED must be written next to items
being accrued if a journal voucher is prepared
to record accruals for deposit orders. If
all items on the deposit order are being accrued,
ALL ITEMS ACCRUED must be written. At a minimum,
any individual line item on a deposit order
of $5,000 or more should be accrued if it
meets the criteria for accrual.
Correction memos for each fiscal year's invoices
and deposit orders must be submitted to the
Auditor-Controller Accounts Receivable Unit
by the deadline it establishes. This allows
time for processing the information through
the accounts receivable system.
2.5
Payroll Accruals
Payroll expenditures are accrued for June
workdays that are not paid by June 30. In
July, accruals are reversed and actual expenditures
for the entire pay period are recorded.
2.6
Other Specific Accruals
There are specific rules and procedures
for certain revenue, expense, and expenditure
accruals. Examples are claims and judgments,
incurred but not reported claims, compensated
absences, grants, landfill closure and postclosure
costs, leases, pension costs, and property
taxes. Any questions on these types of accruals
should be directed to the manager of the Auditor-Controller
General Ledger Unit.
Legal