U.S. DOI Office of Financial Management

Appendix A, Acronym Glossary, explains the acronyms used in the Handbook.
Appendix B, Glossary, contains a lexicon of financial terms used in the Handbook.
Appendix C, Budget Object Class Codes, references www.doi.gov/pfm/boct_03.pdf for the DOI current FY Budget Object Class Table. The DOI budget object codes and definitions are at www.doi.gov/pfm/boct_03_handbook.pdf.

DEPARTMENT OF THE INTERIOR

ACCOUNTING HANDBOOK

CHAPTER 1. OVERVIEW

1.1 What is the Purpose and Scope of the Accounting Handbook?

The purpose of the Accounting Handbook, hereafter referred to as the Handbook, is to document principles and guidance to be followed by all Bureaus/Offices of the U.S. Department of the Interior (DOI). All DOI Bureaus/Offices are required to comply with the standards contained herein. Each Bureau/Office, however, may define supplementary directives and standards to satisfy their unique needs, as long as they are consistent with the DOI-wide standards.

The scope of material included in the Handbook is defined by the roles and responsibilities of the Office of Financial Management (PFM) as opposed to those of other DOI offices such as the Office of Budget and the Office of the Inspector General (OIG), and by the historical division in DOI of accounting functions from other supporting functions such as payroll and contracting. Other offices and functions have guidance or procedure manuals covering their responsibilities. This Handbook includes guidance related to PFM responsibilities, and includes summaries and references to other offices' policies as needed to describe the interactions of PFM activities with other DOI activities.

1.2 What Other Documentation Does This Handbook Reference?

The references in the DOI Electronic Library of Interior Policies (ELIPS) are linked to this Handbook as follows:

· Series: Budget, Part 328, Administrative Control of Funds – describes DOI requirements for controlling funds.

· Series: Financial Management, Part 330: General, Chapter 2, Principal Authoritative Sources for Financial Policies and Accounting Standards – lists the principal authoritative sources for financial policies and accounting standards.

· Series: Financial Management, Part 330: General, Chapter 3, DOI Financial Management/Accounting Organization – lists the DOI financial management and accounting organization roles and responsibilities.

· Series: Financial Management, Part 340: Management Accountability and Control – lists general policy, responsibilities, standards, guidelines, and reporting for management accountability and control.

· Series: Financial Management, Part 341: Financial Management Systems – lists policies and responsibilities for DOI financial management systems.

· DOI Handbooks: DOI financial policies and procedures are also contained in handbooks that can be accessed at www.doi.gov/pfm/policy.html.

· Federal Generally Accepted Accounting Principles (GAAP) Hierarchy at http://www.fasab.gov/accepted.html governs what constitutes GAAP for U.S. Government reporting entities.

1.3 Who Will Modify and Interpret the Handbook? PFM is responsible for establishing and implementing a policy development and maintenance process as defined in 330 DM 1. Modification and interpretation of this Handbook will follow the same process.

Submit requests for waivers or exemptions to the provisions of this Handbook in writing to the Director of PFM. Each request shall identify the specific requirement(s), state fully the reason(s) for the request, identify the period covered by the waiver or exemption, and include supporting documentation. The Director, PFM will promptly issue a response to each request for waiver or exemption.

1.4 What is the Effective Date of this Handbook? This Handbook is effective upon issuance.

1.5 Where Can I Direct Questions and Comments? Bureaus/Offices may direct questions or comments about this Handbook to PFM at 202-208-4701. Address written requests for interpretations of policies and standards to: Office of Financial Management, MS 5412 MIB, 1849 C Street NW, Washington, D.C. 20240

DEPARTMENT OF THE INTERIOR

ACCOUNTING HANDBOOK

CHAPTER 2. ASSETS

2.1 What is the Purpose of this Chapter?

This chapter establishes accounting standards to measure and recognize assets in general purpose financial reports, which are issued for users both internal and external to the Department of Interior (DOI). Assets are tangible or intangible items owned by the federal government that have probable economic benefits that can be obtained or controlled by a federal government entity.

2.2 What are the Authoritative Sources?

The policies and procedures contained in this chapter are issued pursuant to:

· Federal Accounting Standards Advisory Board (FASAB) Statements of Federal Financial Accounting Standards (SFFAS) SFFAS No. 1, Accounting for Selected Assets and Liabilities, http://www.fasab.gov/pdffiles/sffas-1.pdf

· SFFAS No. 2, Accounting for Direct Loans and Loan Guarantees http://www.fasab.gov/pdffiles/sffas-2.pdf

· SFFAS No. 3, Accounting for Inventory and Related Property at: http://www.fasab.gov/pdffiles/sffas-3.pdf

· SFFAS No. 6, Accounting for Property, Plant, and Equipment, SFFAS No. 10, Accounting for Internal Use Software, SFFAS No. 11, Amendments to Accounting for PP&E: Definitions and SFFAS No. 16, Amendments to Accounting for PP&E: Multi-use Heritage Assets at http://www.fasab.gov/standards.html

· SFFAS No. 7, Accounting for Revenue and Other Financing Sources at http://fasab.gov/pdffiles/sffas-7.pdf

· SFFAS No. 18, Amendments to Accounting Standards for Direct Loans and Loan Guarantees http://www.fasab.gov/pdffiles/sffas18.pdf

· SFFAS No. 19, Technical Amendments to Accounting Standards for Direct Loans and Loan Guarantees http://www.fasab.gov/pdffiles/sffas-19.pdf

· FASAB Interpretation #1: Reporting on Indian Trust Funds in General Purpose Financial Reports of the Department of Interior and in the Consolidated Financial Statements of the United States Government: An Interpretation of SFFAS No.7 http://fasab.gov/interprt.html

· FASAB Interpretation # 5: Recognition by recipient Entities of Receivable Nonexchange Revenue: An Interpretation of SFFAS 7 http://fasab.gov/interprt.html.

· Accounting and Auditing Policy Committee (AAPC) Federal Financial Accounting and Auditing Technical Release No. 2: Determining Probable and Reasonably Estimable for Environmental Liabilities in the Federal Government http://www.fasab.gov/aapc/technicl.html

· AAPC Federal Financial Accounting and Auditing Technical Release No. 3: Federal Accounting Standards Advisory Board Auditing Estimates for Direct Loan and Loan Guarantee Subsidies under the Federal Credit Reform Act Amendments to Technical Release 3: Preparing and Auditing Direct Loan and Loan Guarantee Subsidies under the Federal Credit Reform Act http://www.fasab.gov/aapc/technicl.html

· AAPC Federal Financial Accounting and Auditing Technical Release No. 4: Reporting on Non-Valued Seized and Forfeited Property http://www.fasab.gov/aapc/technicl.html

· AAPC Federal Financial Accounting and Auditing Technical Release No. 6: Federal Accounting Standards Advisory Board Preparing Estimates for Direct Loan and Loan Guarantee Subsidies under the Federal Credit Reform Act Amendments to Technical Release 3: Preparing and Auditing Direct Loan and Loan Guarantee Subsidies under the Federal Credit Reform Act http://www.fasab.gov/aapc/technicl.html

· AAPC Federal Financial Accounting and Auditing Technical Release No.10: Accounting for Internal Use Software http://www.fasab.gov/aapc/technicl.html.

· GAO Policy and Procedures Manual for Guidance of Federal Agencies, Title 2, Appendix 1 – Most of the standards contained in this appendix have been superseded by standards issued by FASAB. Standards not yet superseded are listed in the GAO publication Accounting Principles, Standards, and Requirements - Title 2 Standards not Superseded by FASAB Issuances, GAO-02-248G, November 2001 at http://www.gao.gov.

· OMB Bulletin No. 01-09, "Form and Content of Agency Financial Statements;" http://www.whitehouse.gov/omb/bulletins/b01-09.html

2.3 What are Assets and How are they Recognized?

A. Generally Accepted Accounting Principles (GAAP)

· SFFAS No. 1, Accounting for Selected Assets and Liabilities, Paragraphs 18-26, define intra-governmental and governmental assets, and entity and non-entity assets at http://www.fasab.gov/pdffiles/sffas-1.pdf.

B. Federal Agency Guidance

· Treasury Financial Manual Vol. 1 http://www.fms.treas.gov/tfm/vol1/index.html

· GAO Policy and Procedures Manual for Guidance of Federal Agencies, Title 7, http://www.gao.gov.

C. DOI Guidance

· Specific balance sheet line items and disclosures requiring special attention are included in the Financial Statement Preparation Guidance, Chapter 2 Balance Sheet, A-Assets at www.doi.gov/pfm/finstate.html.

2.4 What are the Requirements for the Ledgers?

Bureaus/Offices must maintain sufficiently detailed general ledger and subsidiary ledger accounts to provide the categories of assets needed for reports. Bureaus/Offices must review asset accounts and verify them as prescribed in the schedule of reconciliations located in the DOI Accounting Handbook, Chapter 6.1.2, General Ledger Accounting.

2.5 What are the Specific Standards for Assets?

2.5.1 Cash

A. Generally Accepted Accounting Principles (GAAP)

SFFAS No. 1, Accounting for Selected Assets and Liabilities, Paragraphs 27-30, http://www.fasab.gov/pdffiles/sffas-1.pdf designate cash as an asset, include the items that make up cash and define entity, non-entity, and restricted cash.

B. Federal Agency Guidance

Treasury Financial Manual Vol. 1, inclusive, with specific references to Parts 2, 4, 5, and 6 http://www.fms.treas.gov/tfm/vol1/index.html
CashLinkII http://www.fms.treas.gov/cashlink/index.html
GAO Policy and Procedures Manual for Guidance of Federal Agencies, Title 7, inclusive, with specific reference to Chapters 2, 5, and 6 http://www.gao.gov.
GAO Policy and Procedures Manual for Guidance of Federal Agencies, GAO publication Accounting Principles, Standards, and Requirements - Title 2 Standards not Superseded by FASAB Issuances, GAO-02-248G, November 2001, E-30 Foreign Currency, at http://www.gao.gov.

C. DOI Guidance

· Financial Statement Preparation Guidance, at www.doi.gov/pfm/finstate.html.

· Cash Management Handbook www.doi.gov/pfm/policy.html.

2.5.2 Fund Balance with Treasury

A. Generally Accepted Accounting Principles (GAAP)

· SFFAS No. 1, Accounting for Selected Assets and Liabilities, Paragraphs 31-39, http://www.fasab.gov/pdffiles/sffas-1.pdf define fund balance with Treasury; describe what the fund balance includes and does not include, how it is increased and decreased; define authority to borrow, obligated balance not yet disbursed and the unobligated balance; and discuss the explanation of differences between the fund balance with Treasury and an agency’s general ledger balances.

B. Federal Agency Guidance

· Treasury Financial Manual Vol. 1, inclusive, with specific references to Parts 2, 4, 5, and 6 http://www.fms.treas.gov/tfm/vol1/index.html

· Fund Balance with Treasury Reconciliation Procedures, a Supplement to 1 TFM 2-5100 http://www.fms.treas.gov/tfm/vol1/supplements/background.html

· CashLinkII http://www.fms.treas.gov/cashlink/index.html

· GAO Policy and Procedures Manual for Guidance of Federal Agencies, Title 7, inclusive, with specific reference to Chapters 2, 3, 5 and 6 http://www.gao.gov.

C. DOI Guidance

· Financial Statement Preparation Guidance, at www.doi.gov/pfm/finstate.html.

2.5.3 Accounts Receivable and Losses on Accounts Receivable (See Section 2.5.9 of this Handbook for a discussion on Loans Receivable.)

A. Generally Accepted Accounting Principles (GAAP)

· SFFAS No. 1, Accounting for Selected Assets and Liabilities, Paragraph 40 states that an accounts receivable arises from claims to cash or other receivables. Paragraphs 41-52, discuss recognition of receivables, separate reporting, entity versus non-entity receivables, and recognition of losses due to uncollectible amounts http://www.fasab.gov/pdffiles/sffas-1.pdf

· SFFAS No. 7, Accounting for Revenue and Other Financing Sources at http://fasab.gov/pdffiles/sffas-7.pdf

B. Federal Agency Guidance

· Treasury’s “Instructional Workbook for Preparing the “Report on Receivables Due From the Public” Section A at http://www.fms.treas.gov/debt/dmrecv.doc.

· OMB Circular A‑129, Policies for Federal Credit Programs and Non-Tax Receivables, Appendix A - IV, Managing the Federal Government’s Receivables http://www.whitehouse.gov/omb/circulars/a129/a129rev.html.

C. DOI Guidance

· Financial Statement Preparation Guidance, at www.doi.gov/pfm/finstate.html.

· Department of the Interior Financial Administration Memorandum No. 2001-014, September 27, 2001 www.doi.gov/pfm/policy.html.

· Cash Management Handbook www.doi.gov/pfm/policy.html.

· Credit and Debt Management Handbook www.doi.gov/pfm/policy.html.

Record the receivable in the appropriation or fund that will be credited when collections are accomplished, unless otherwise provided by law or Departmental policy. Internal control begins prior to the transaction that gives rise to the receivable. Bureaus/Offices should control the events and conditions surrounding the delivery of goods, services, etc., that generate receivables so that there is a reasonable assurance that the receivable will be collected in full. After the receivable has been created, the responsibility shifts to the control exercised over the conditions that may affect its collection value. Thus, methods of control require administrative procedures that provide adequate control over the receivables from the initial transaction to collection. After establishing the controls, measure the effectiveness of the controls by periodic examination rather than relying on a low loss ratio as a measure of such effectiveness. Document the controls in Bureau/Office supplements.

2.5.3.1 What is a Method for Estimating the Allowance for Doubtful Accounts and Loans Receivable?

Bureaus/Offices must establish and maintain reserves for losses on accounts and loans receivable. Since it is a normal part of doing business that not all receivables are actually collected, establish an allowance for doubtful accounts to reduce the gross amount of receivables to its estimated net realizable value. Accounts receivable and associated interest, penalties, fines, and administrative receivables are recorded in the following asset standard general ledger (SGL) accounts:

131A – Accounts Receivable, Off-Budget, Billed

131C – Accounts Receivable, On-Budget, Billed

131G – Accounts Receivable, Off-Budget, Billed – Refund Receivable

131H – Accounts Receivable, Off Budget, Billed – Refund Receivable – Capitalized Assets

131J – Accounts Receivable, Off Budget, Billed – Advance/Deferred Revenue/Suspense

134A – Interest Receivable- Billed

136A – Penalties, Fines, and Administrative Fees Receivable- Billed

Make regular estimates, at least quarterly, for receivables that are not collectible.

The allowance for doubtful accounts should take into consideration not only the principal amount of potentially uncollectible accounts receivable but also the amount of any related interest, penalties, fines, and administrative fees. The allowance for doubtful accounts is recorded as a credit in the contra- SGL accounts with a debit to SGL 6720 - Bad Debt Expense. For non-exchange revenue, debit the contra-revenue account. The contra-SGL accounts are:

1319 - Allowance for Loss on Accounts Receivable vs. SGL 131A & 131C

1349 - Allowance for Loss on Interest Receivable vs. SGL 134A

1369 - Allowance for Loss Penalties, Fines, and Administrative Fees

Receivable vs. SGL 136A

2.5.3.2 What are the Bureau/Office Responsibilities?

· Review the accounts receivable overdue status codes and dates that have been assigned to delinquent account receivable debt to verify their accuracy.

· Report by no later than the 15^th day of the last month of each quarter, any loan balances that are potentially uncollectible. Base this report on an analysis of both current and long-term loan balances. For each loan which is deemed potentially uncollectible, provide the following information:

Ø Name of loan

Ø Fund

Ø Program

Ø Cost authority

Ø Unbilled amount (with separate columns for principal and interest)

Ø Billed amount not yet paid (with separate columns for principal, interest, penalties, and administrative fees)

Ø Factors which might indicate that the collection is uncertain, including individual risk factors associated with groups or categories of similar loans

Review overdue status codes to determine which should be excluded from the allowance for doubtful accounts.
Analyze specific debts which are less than 180 days delinquent and which are associated with debtors who have one or more other outstanding debts that are more than 180 days delinquent to determine if all delinquent debts associated with the debtor should be included in the allowance.
Summarize the totals by Bureau/Office and fund to establish the current estimate for the allowance for doubtful accounts.
Prepare and enter the document(s) into the accounting system to adjust the allowance for doubtful accounts SGLs by Bureau/Office and fund to equal the current estimate.
Perform a Bureau-wide analysis of the estimate of the allowance for doubtful accounts for adequacy.

2.5.3.3 What is the Criteria for Accounts Receivable Collectibility?

· FASAB requires that losses on receivables be recognized when it is more likely than not that the receivables will not be totally collected. The phrase “more likely than not” means more than a 50 percent chance of loss occurrence.

· Use age of receivables as the primary criterion in estimating the allowance for accounts receivable that will not be collected. Except as adjusted below, the estimate for the allowance for doubtful accounts will be all debts more than 180 days delinquent. Adjust this amount as follows:

Ø The allowance will be increased for the total amount of debt that is less than 180 days delinquent that is bankrupt.

Ø The allowance may be increased for debt less than 180 days delinquent if it is owed by a debtor who has other debt which is over 180 days delinquent. Analyze the debtor’s history and related factors to determine if it is appropriate to include the debt less than 180 days delinquent in the allowance.

Ø The allowance may be decreased for debt more than 180 days delinquent if the debt is in a certain status. For example, a debt being collected through installment payments will be excluded from the allowance estimate even though the debt is more than 180 days delinquent.

2.5.3.4 Loans Receivable (See Section 2.5.3.1 of this Handbook for allowance for doubtful accounts for loans receivable; Section 2.5.3.2 for a discussion of Bureau/Office responsibilities; and Section 2.5.3.4.2 for the criteria for collectibility.)

A. Generally Accepted Accounting Principles (GAAP)

· SFFAS No. 2, Accounting for Direct Loans and Loan Guarantees, concerns the recognition and measurement of direct loans, the liability associated with loan guarantees, and the cost of direct loans and loan guarantees http://www.fasab.gov/pdffiles/sffas-2.pdf. SFFAS No. 2 states that generally, direct loans obligated and outstanding prior to October 1, 1991, are recorded as loans receivable at their outstanding principal balance reduced by an allowance for estimated uncollectible amounts. Direct loans and loan guarantees committed after September 30, 1991, are estimated at the net present value of their estimated net cash inflows.

Ø Paragraph 22 and 23 discuss the recognition of post 1991 direct loans and loan guarantees

Ø Paragraphs 24-29 discuss the subsidy costs of post 1991direct loans and loan guaranteed

Ø Paragraphs 30-32 discuss subsidy amortization and reestimation

Ø Paragraphs 33-36 discuss criteria for default cost estimates

Ø Paragraphs 37-38 discuss revenues and expenses

Ø Paragraphs 39-40 discuss pre-1992 direct loans and loan guarantees

Ø Paragraphs 41-56 discuss modification of direct loans and loan guarantees

Ø Paragraphs 57-60 discuss foreclosure of post-1991 direct loans and loan guarantees

Ø Paragraph 61 discusses the write-off of direct loans

· SFFAS No. 18, Amendments to Accounting Standards for Direct Loans and Loan Guarantees amends SFFAS No. 2 to improve financial reporting for subsidy costs and performance of Federal credit programs at http://www.fasab.gov/pdffiles/sffas18.pdf.

· SFFAS No. 19, Technical Amendments to Accounting Standards for Direct Loans and Loan Guarantees presents technical amendments to portions of SFFAS No. 2 http://www.fasab.gov/pdffiles/sffas-19.pdf .

· AAPC Federal Financial Accounting and Auditing Technical Release No. 3: Federal Accounting Standards Advisory Board Auditing Estimates for Direct Loan and Loan Guarantee Subsidies under the Federal Credit Reform Act Amendments to Technical Release 3: Preparing and Auditing Direct Loan and Loan Guarantee Subsidies under the Federal Credit Reform Act removes preparation guidance to only include audit guidance and reflects new guidance and terminology in the area of credit reform http://www.fasab.gov/aapc/tr3-revised.pdf.

· AAPC No. 6: Federal Accounting Standards Advisory Board Preparing Estimates for Direct Loan and Loan Guarantee Subsidies under the Federal Credit Reform Act Amendments to Technical Release 3: Preparing and Auditing Direct Loan and Loan Guarantee Subsidies under the Federal Credit Reform Act amends the implementation guidance to prepare and report credit subsidy estimates provided in Technical Release 3 http://www.fasab.gov/aapc/aapctr6.pdf.

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