Process Group/Policy Details
Subject: Nonbudgetary Transactions
Process Group: Nonbudgetary Transactions
Title of Policy: Nonbudgetary Transactions
Effective Date: 07/01/2014
Approved/Revision Date: 07/01/2014
Approved by: State Controller
In This Policy
Process Group Description
This process group includes Nonbudgetary activity, which includes expenditure and revenue transactions that do not update budget buckets used to calculate funds availability and budgetary compliance.
Rationale or background to policy:
CORE provides flexibility for setting up and maintaining event types and/or transactions to allow for necessary accounting activity that is not appropriate to consider in calculating funds availability and budgetary compliance.
Policy Statement:
GA.PO.04 NonBudgetary Transactions
Nonbudgetary activity is limited only to specific transactions appropriate for nonbudgetary accounting. As a result, the Office of the State Controller shall centrally maintain the posting codes, event types, and document types in CORE that control the ability to record nonbudgetary activity. Because nonbudgetary attributes are set in posting codes, departments shall select event types that use the appropriate nonbudgetary posting codes when necessary.
Procedures:
GA.PR.04.1 Nonbudgeted Activity
Nonbudgeted activity impacts several functional areas and include:
Asset Management – The State does not budget depreciation expense.
Accounts Receivable – Bad debt expense (non revenue based) and revenue reductions for bad debt originating in the prior year – The State does not budget bad debt expense, nor revenue reductions resulting from recording bad debt expense.
Treasury Accounting – The State does not budget Treasury transaction fees.
Inventory Management – The State is on the consumption method. As a result, the purchase of inventory is nonbudgetary in nature. Budgetary expenditures are reflected as inventory is consumed.
General Accounting – As required by statute, June monthly general-funded payroll expenditures (“Pay Date Shift”) are nonbudgetary in the fiscal year in which the work was performed, but they are reflected for budgetary purposes in the subsequent fiscal year.
General Accounting – As required by statute, certain June general-funded purchases of services from Office of Information Technology (OIT) are nonbudgetary in the year of the service delivery, but they are reflected for budgetary purposes in the subsequent fiscal year. OIT’s related revenue is also deferred into the subsequent fiscal year for budget purposes only.
General Accounting – As required by statute, accruals for Medicaid services incurred but not billed by June 30 are nonbudgetary in the year of the service delivery, but they are reflected for budgetary purposes in the subsequent fiscal year. The related revenue is also deferred into the subsequent fiscal year for budget purposes only. Similar treatment is afforded to certain Children’s Health Plan services and Medicare clawback payments.
GA.PR.04.2 Modified to Full Accrual Basis Conversion Activity
Conversion activity from the modified to full accrual basis of accounting also impacts several functional areas. The State will use the General Full Accrual Account Group (GFAAG), CORE Fund 4710, for conversion entries between the government-wide statements that are on a full accrual basis, and the governmental fund-level statements that are on a modified accrual basis.
As a result, entries in the GFAAG are nonbudgetary and include:
Asset Management – In governmental fund types, expenditures will be offset as nonbudgetary in Fund 4710 with the recording of the asset in that fund. (See AM.PO.07)
Treasury Accounting (applies to all departments) – In governmental funds, the capital lease proceeds shall be reflected as nonbudgetary revenue, and the current value of future capital lease payments shall be reflected as nonbudgetary expenditures. These revenue and expenditure balances are the offsets when capitalizing the leased asset and lease liability in the GFAAG. Additionally, the reduction in the liability with a principal payment will be offset with a nonbudgetary credit to expenditures. (See TA.PO.04)
Treasury Accounting – In governmental funds, the bond proceeds will be recorded as nonbudgetary revenue and reflected in Fund 4710 as a liability with an offsetting entry to nonbudgetary bond proceeds revenue. Additionally, the reduction in the liability with a principal payment will be offset with a nonbudgetary credit to expenditures. If the bond proceeds are used to construct or purchase a capital asset and are budgeted, the resulting expenditures will be reported in the governmental fund and reduced in the GFAAG as nonbudgeted when the asset is capitalized. (See TA.PO.1)
GA.PR.04.3 Use of Nonbudgetary Transaction for Budgeted Nonaccounting Activity
Budgetary reporting for activity not reflected as expenditures is accounted for, in part, with nonbudgetary transactions. This treatment is applicable in proprietary funds to eliminate the budgeted expenditure for financial reporting.
Treasury Accounting – Budgeted proprietary fund bond and capital lease principal payments require the recording of a budgeted expense for budgetary reporting, which must be eliminated with a corresponding nonbudgetary expense that offsets the budgeted expense and records the liability reduction for financial statement reporting purposes.
Process Flowchart not applicable