1.35.5 Advances, Prepaid Expenses and Other Assets

Manual Transmittal

October 13, 2020

Purpose

(1) This transmits revised IRM 1.35.5, Administrative Accounting, Advances, Prepaid Expenses and Other Assets.

Material Changes

(1) IRM 1.35.5.1(2), Program Scope and Objectives, Audience; divisions and functions changed to business unit.

(2) IRM 1.35.5.1.2 (1)(j), Authorities, IRM 1.2.40.26 changed to 1.2.2, updated IRM reference.

(3) Previous IRM 1.35.5.1.3.3(1), Deputy ACFO for Administrative FM, removed Deputy ACFO for Administrative FM section and renumbered sections 1.35.5.1.4 to 1.35.5.1.9 because responsibility moved to section 1.35.5.1.3.3(1)(c), Director, Financial Reporting.

(4) Previous IRM 1.35.5.1.3.5(1)(a), Director, Accounts Payable Financial Operations Office, responsibility. Recording obligations for advances and prepaid expenses in the Integrated Financial System (IFS) is moved to IRM 1.35.5.1.3.5(1)(c), Director, Government Payables and Funds Management responsibility.

(5) IRM 1.35.5.1.7, Acronyms, updated.

(6) IRM 1.35.5.1.8(1)(g), Related Resources, Motor Vehicle Fleet Management Program, updated IRM name.

(7) IRM 1.35.5.3.4(1), Prepaid Postage, W&I Operation Support/Capital Management and Oversight (CMO)/Finance and Media and Publications (M&P), updated business unit name.

(8) IRM 1.35.5.3.4(2), Prepaid Postage, The financial manager/budget analyst for W&I is responsible for the posting of all postage obligations and expenses to the appropriate codes in IFS, updated business unit role.

(9) IRM 1.35.5.3.4(3), Prepaid Postage, BFC changed to Government Payables and Funds Management office, updated business unit name.

(10) IRM 1.35.5.3.4(4), Prepaid Postage, BFC changed to Government Payables and Funds Management office, updated business unit name.

Effect on Other Documents

IRM 1.35.5, dated October 1, 2018, is superseded.

Audience

All business units

Effective Date

(10-13-2020)

Ursula S. Gillis
Chief Financial Officer

Program Scope and Objectives

  1. Purpose: This IRM provides policies and procedures for accounting and reporting advances, prepaid expenses and other assets transactions.

  2. Audience: All business units

  3. Policy Owner: CFO

  4. Program Owner: CFO, FM, Financial Reporting

  5. Primary Stakeholders: CFO, Procurement, CI, W&I

  6. Program Goals: To ensure that all IRS operations relating to advances, prepaid expenses and other assets are accurately reported and comply with regulations.

Background

  1. In October 1990, the secretary of the Treasury, the director of the Office of Management and Budget (OMB) and the comptroller general established the Federal Accounting Standards Advisory Board (FASAB) by a memorandum of understanding (MOU). The FASAB is responsible for promulgating accounting standards for the U.S. government. The federal government recognizes these standards as generally accepted accounting principles (GAAP). To ensure compliance with FASAB, it is critical that the IRS maintain a system of processes and procedures for its accounting functions. This IRM provides the processes and procedures for recording advances, prepaid expenses and other asset accounts.

Authorities

  1. The authorities for this IRM include:

    1. Chief Financial Officers Act of 1990, Pub. L. No. 101-576, section 902

    2. IRM 1.2.48.11, Delegation Order 9-10, Authorization to Approve Confidential Expenditures

    3. 31 Code of Federal Regulations (CFR) 208, Management of Federal Agency Disbursements

    4. Travel and Transportation Reform Act of 1998

    5. 5 United States Code (USC) section 5707, Regulation and Reports

    6. 41 CFR 101-9, Federal Mail Management

    7. 41 CFR 102-192, Mail Management

    8. Travel Directive 74-10, Public Transportation Program, dated April 21, 2000

    9. Energy Policy Act of 1992, Pub. L. No. 102-486

    10. IRM 1.2.2, Delegation Order 1-30, Authorization and Approval of Official Travel within the United States

    11. 5 CFR 1315, Prompt Payment

    12. 5 USC section 7905, Federal Employees Clean Air Incentives Act, Pub. L. No. 103-172.

Responsibilities

  1. This section provides responsibilities for:

    1. CFO and Deputy CFO

    2. Associate CFO for Financial Management

    3. Deputy Associate CFO for Administrative Financial Management

    4. Director, Financial Reporting

    5. Director, Accounts Payable Financial Operations

    6. Director, Government Payables and Funds Management

    7. Associate CFO for Corporate Budget

    8. Office of the Chief Procurement Officer

    9. Business units

CFO and Deputy CFO
  1. The CFO and Deputy CFO are responsible for overseeing policies, procedures, standards and controls for IRS financial processes, including for advances, prepaid expenses and other assets.

Associate CFO for Financial Management
  1. The Associate CFO for Financial Management and Deputy Associate CFO for Administrative Financial Management are responsible overseeing financial management functions related to advances, prepaid expenses and other assets.

Director, Financial Reporting
  1. The director, Financial Reporting, is responsible for:

    1. Overseeing accounting procedures and internal controls for advances, prepaid expenses and other assets.

    2. Providing clarifying guidance and assistance on administrative accounting policy matters, including advances, prepaid expenses and other assets.

    3. Ensuring advances, prepaid expenses and other assets are properly recorded in the administrative financial statements.

Director, Accounts Payable Financial Operations
  1. The director, Accounts Payable Financial Operations, is responsible for posting expenses or assets in IFS to draw down advances and obligations.

Director, Government Payables and Funds Management
  1. The director, Government Payables and Funds Management Office, is responsible for:

    1. Receiving and disseminating Intra-governmental Payment and Collection System (IPACs) transactions for business unit review and certification.

    2. Establishing policies for debt collection associated with advances (for example: travel, relocation, invitational).

    3. Recording obligations for advances and prepaid expenses in the Integrated Financial System (IFS).

    4. Collecting debts associated with advances (for example: travel, relocation, invitational).

Associate CFO for Corporate Budget
  1. The ACFO for Corporate Budget is responsible for providing budget and analytic expertise to the business units and IRS leadership to ensure compliance with advance payment policies and procedures.

Office of the Chief Procurement Officer
  1. The OCPO is responsible for establishing, maintaining and ensuring compliance with advance payment policy and procedures, in accordance with Federal Acquisition Regulation (FAR) Part 32, Contract Financing, and Department of the Treasury regulations and acquisition procedures.

Business Units
  1. The business units are responsible for:

    1. Submitting all required supporting documents to FM including, but not limited to, expense and advance reports and reconciliations.

    2. Approving employee advances and vouchers in accordance with Delegation Order 1-30, Authorization and Approval of Official Travel, within the United States.

  2. The CI organization is responsible for supervising and accounting for investigative advances.

  3. The W&I organization has additional responsibilities related to prepaid postage as follows:

    1. Administering the funding and overall leadership of the mail management program.

    2. Formulating estimated postage charges for the fiscal year.

    3. Providing an estimated obligation amount to the Funds Management Section.

    4. Reporting penalty business reply mail (BRM) to the Government Payables Section monthly.

    5. Reconciling the U.S. Postal Service (USPS) expenditure report monthly.

    6. Certifying USPS bills for payment.

Program Management and Review

  1. Program reports and reviews: Several reports and reviews are in place to ensure compliance with the requirements of this IRM. They include, but are not limited to, the reports and reviews listed below.

  2. The CFO/CI organizations perform the following for investigative advances. CI submits a monthly open investigative advances report to the Review and Reconciliation Section monthly. The Review and Reconciliation Section reconciles this report to the subsidiary ledger account quarterly.

  3. The Accounts Payable Financial Operations office reviews the open investigative advances report for repayment status monthly.

  4. The CFO/W&I organizations perform the following for prepaid postage.

    Review Description
    Weekly Summary Report The Correspondence Production Services (CPS) major cost centers must submit a weekly summary of postage transactions to the Government Payables and Funds Management office. This weekly summary report is maintained to develop budget planning, and verification and reconciliation of US Postal Service (USPS) billings.
    IPAC Billing Document The W&I Strategy and Finance Office reviews and completes the IPAC billing document provided by the Government Payables Section to determine if funds are available.
    Monthly USPS Expenditure Report The W&I Strategy and Finance office reviews this report provided by the CFO Financial Management Systems office for accuracy.

  5. The Public Transportation Subsidy Program (PTSP) Staff perform the following for the PTSP program.

    Review Description
    Recertification PTSP participants review and recertify their PTSP benefits annually.
    Quality Review A quarterly random review ensures the PTSP staff are providing quality responses to PTSP participants’ questions.
    Withdrawal Review A monthly review ensures all separated PTSP participants are removed from the PTSP database.
    Department of Transportation (DOT) Funding Reports Reports detail the financial status of the PTSP program, provided monthly..

  6. The program effectiveness is determined by:

    1. Ensuring that all IRS operations comply with applicable regulations, as they relate to advances, prepaid expenses and other assets

    2. Maintaining sound processes and procedures, as they relate to advances, prepaid expenses and other assets

    3. Increasing awareness of internal controls, as they relate to advances, prepaid expenses and other assets

Program Controls

  1. Several program controls are in place to ensure compliance with the requirements of this IRM. They include, but are not limited to, the controls listed below.

    Control Control Method
    Delegation of Authority Authority to approve critical processes is delegated to the appropriate level in the business unit and is documented.
    Separation of Duties Separate roles are established for federal agency travel administrators, preparers, reviewers and approvers to ensure appropriate access.
    Recording of Advances, Prepaid Expenses and Other Assets Business units submit advance payment certification forms to Government Payables and Funds Management to process payments and record advances and prepaid expenses into IFS.
    Reconciliation of Advances, Prepaid Expenses and Other Assets The FM organization reconciles and verifies the balances to the general ledger control accounts monthly. Reconciliation of the USPS expenditure report and the transactions in IFS is a joint responsibility of the CFO/FM, W&I Strategy and Finance Office and W&I/Customer Assistance Relationships and Education (CARE)/Media and Publications (M&P)/Mail Management Project Office (MMPO).
    Travel Advances Advances cannot be issued to cover transportation costs.
    The controls for advances are:
     
    • Standard cardholders cannot get travel advances since they have automated teller machine (ATM) withdrawal access.

    • Invitational travelers or interns cannot get travel advances.

    • Restricted cardholders can get up to 40% of all reimbursable expenses, except transportation costs.

    • Only one advance is allowed per authorization.

    • No cardholders can get 100% of all advance for reimbursable expenses.




     
    Liquidation of Travel Advances Advances are liquidated with each travel voucher. If the traveler does not file a voucher timely, the system deobligation utility will convert the advance to a debt for the traveler.
    Relocation Advances Advances of Funds, relocation advances are limited to the minimum amount needed to cover the employee’s needs, but no more than 75% of the estimated reimbursable expenses expected to be incurred. Refer to IRM 1.32.12.10.3 for details.
    Pre-Audit Flags Pre-audit flags have been identified for items that exceed the IRS’s policies and the traveler is required to provide a justification to the approving official explaining any requests that are flagged.

Terms/Definitions

  1. In this IRM, the terms below have the following meanings:

    1. Advances - Payments made by the IRS to its employees, contractors, grantees or others prior to receiving goods or services (also referred to as advance payments).

    2. Assets - An item that embodies a probable future economic benefit that can be obtained or controlled by the federal government or a reporting entity as a result of past transactions or events.

    3. Draw down - Reduction to an advance or prepaid expense account balance when expenses are recorded in the general ledger.

    4. Intra-governmental Payment and Collection System (IPAC) - A standardized interagency fund transfer mechanism for federal program agencies (FPAs). IPAC facilitates the intra-governmental transfer of funds with descriptive data from one FPA to another.

    5. Other assets - Items not otherwise classifiable to a specific asset account.

    6. Prepaid expenses - Payments made by the IRS to vendors or other federal agencies to cover certain periodic expenses before those expenses are incurred. Typical prepaid expenses are rents paid to a lessor at the beginning of a rental period (also referred to as prepayments).

    7. Subsidiary ledger - A detailed record of the individual transactions comprising the balance of a general ledger control account.

Acronyms

  1. The following chart contains acronyms that are used throughout this IRM:

    Acronym Description
    BRM Business Reply Mail
    CARE Customer Assistance Relationships and Education
    CFR Code of Federal Regulations
    CIMIS Criminal Investigation Management Information System
    CO Contracting Officer
    DOT Department of Transportation
    ETS Electronic Travel System
    FAR Federal Acquisition Regulation
    FASAB Federal Accounting Standards Advisory Board
    FM Financial Management
    FPA Federal Program Agencies
    GAAP Generally Accepted Accounting Principles
    GSA General Services Administration
    IAA Interagency Agreement
    IFS Integrated Financial System
    IPAC Intra-governmental Payment and Collection System
    LPOC Local Point of Contact
    M&P Media and Publications
    MMPO Mail Management Project Office
    MOU Memorandum of Understanding
    OMAS Official Mail Accounting System
    OMB Office of Management and Budget
    PTSP Public Transportation Subsidy Program
    USPS U.S. Postal Service

Related Resources

  1. Related resources for this IRM include:

    1. FAR, Part 32, Contract Financing

    2. FAR, Part 52, Solicitation Provisions and Contract Clauses

    3. FASAB Statement of Federal Financial Accounting Standards 1: Accounting for Selected Assets and Liabilities

    4. Government Accountability Office’s (GAO) Principles of Federal Appropriations Law

    5. OMB Circular A-11, Preparation, Submission, and Execution of the Budget

    6. Executive Order 13150, Federal Workforce Transportation

    7. IRM 1.14.7, Motor Vehicle Management

    8. IRM 1.22.1, Mail and Transportation Management Overview

    9. IRM 1.22.4, Postage Accountability and Reporting Requirements

    10. IRM 1.32.11, Official IRS City-to-City Travel Guide

    11. IRM 1.32.12, IRS Relocation Travel Guide

    12. IRM 1.33.4, Financial Operating Guidelines

    13. IRM 1.35.15, Annual Close Guidelines

    14. Department of the Treasury Acquisition Procedures (DTAP), Part 1032, Contract Financing

    15. DTAP Part 1052, Solicitation Provisions and Contract Clauses

    16. IRS Acquisition Procedures (IRSAP), Part 1032, Contract Financing

    17. IRSAP Part 1052, Solicitation Provisions and Contract Clauses

Advance Payment

  1. Business units requesting contract payment for commercial entities in advance of the delivery of goods and services must assist the contracting officer (CO) with compliance of the requirements listed in FAR Subpart 32.4, Advance Payments for Non-Commercial Items.

  2. For interagency agreements (IAAs) that will require payment in advance of the receipt of goods and/or services, the requesting organization must coordinate and obtain approval from Corporate Budget for the advance portion. The approval must be included in the requisition package before it is forwarded to Corporate Budget for processing as a manual obligation. Procurement will not process the IAA until the business unit has obtained this approval.

  3. Business unit managers must ensure that the goods and or services have been received timely according to the obligation terms. Any variance should be reported to the CO or business unit personnel who signed the IAA as soon as possible.

Types of Advances, Prepaid Expenses and Other Assets

  1. Advances, prepaid expenses and other assets are reported as current assets on the IRS balance sheet.

  2. All business units are responsible for ensuring compliance pertaining to this IRM and with the internal control requirements outlined in IRM 1.35.5, Advances, Prepaid Expenses and Other Assets.

  3. Advances:

    • Investigative advances

    • Employee advances

  4. Prepaid expenses/other assets:

    • Prepaid postage

    • PTSP

Investigative Advances

  1. The investigative advance program provides CI agents funding for ongoing covert investigations. The CI director of the Office of Special Investigative Techniques forwards the request for funds to the Accounts Payable Financial Operations office. The Accounts Payable Financial Operations office records the funds as an investigative advance until the investigation is closed and CI returns the funds. The special agent-in-charge (SAC) is responsible for the supervision and accounting of an investigative advance.

  2. The request for funds includes the name of the person who is responsible for accounting for the advance and the payee information necessary for processing the payment.

  3. The Accounts Payable Financial Operations office records the payment to an IFS advance account and sends the check to the Director of the Office of Special Investigative Techniques for distribution.

  4. The Review and Reconciliation section maintains a subsidiary ledger which contains all outstanding investigative advances. CI forwards a monthly report with a listing of all open investigative advances to the Review and Reconciliation section. When the investigation is complete, the Director of the Office of Special Investigative Techniques sends a check for the total amount of the advance to, the Government Payables and Funds Management office. The Debt Collection Unit deposits the check and draws down the balance in the advance account.

  5. The Review and Reconciliation section and CI reconcile their subsidiary ledgers to the IFS – Investigative Advances report (ZINVA). The Review & Reconciliation section reconciles the subsidiary ledger to the general ledger control account quarterly.

  6. The General Ledger section of the CFO Financial Reporting office further reviews the reconciliations of the Review & Reconciliation section to validate the analysis, assumptions, and results.

  7. For additional information on investigative advances, see IRM 1.35.18, Imprest Funds, and IRM 9.11.1, Fiscal and Budgetary Matters.

Travel Advances

  1. The IRS advances all or part of employees' estimated travel and relocation expenses for official government travel and relocation to employees who meet the requirements in compliance with IRM 1.32.11, Official IRS City-to-City Travel Guide, or IRM 1.32.12, IRS Relocation Travel Guide.

  2. Eligible employees may submit advance requests either an electronic travel authorization in Electronic Travel System (ETS) or submits Form 13635, Manual Travel Authorization, directly to Travel Processing Unit. The ETS interfaces into IFS and records approved travel advances. The Travel Processing Unit records manual travel authorizations in IFS and relocation authorizations in moveLINQ, which interfaces to IFS. Only one advance is allowed per authorization for non-relocation travel.

  3. Employees must submit either an electronic voucher via ETS or manual voucher within five workdays after the completion of travel. If the employee’s travel lasts two or more months, the employee must submit a travel voucher every 30 days. Upon approval, ETS interfaces the voucher information into IFS and draws down the balance in the advance account. The Travel Processing Unit’s entries for manual vouchers also draw down the advance account balance. The portion of the travel advance that exceeds the travel expenses claimed on an approved travel voucher becomes a debt to the employee.

  4. The ETS de-obligates travel authorizations that do not have a corresponding voucher 30 days after the travel end date. The ETS interfaces the deobligations daily into IFS. The de-obligation prompts the IFS to draw down the advance balance automatically by the amount outstanding and is recorded as an accounts receivable. The Government Payables and Funds Management office pursues collection of the receivable.

  5. For additional information on travel and relocation advances, see IRM 1.32.11, Official IRS City-to-City Travel Guide, and IRM 1.32.12, IRS Relocation Travel Guide.

Relocation Advances

  1. Employees may receive relocation advances for the following:

    1. Househunting

    2. Temporary Quarters Subsistence Expense (TQSE)

    3. En route travel

    4. Transportation of a mobile home in lieu of household goods

    5. Shipment and/or storage of a privately owned vehicle

    6. Transportation and temporary storage of household goods

  2. Advances should be kept to the minimum amount needed to cover the employee’s needs, but no more than 75 percent of the estimated reimbursable expenses expected to be incurred.

  3. Employees must apply for separate advances to cover allowed expenses for househunting, en route travel, temporary quarters and shipping and storage of household goods. Requests for advances should be submitted two weeks before an employee anticipates incurring a relocation expense.

  4. Advances for regular travel cannot be combined with relocation advances.

  5. Employees must submit a relocation voucher within 15 calendar days of completing or cancelling any of the relocation activities and liquidate the outstanding advance.

  6. For additional information on relocation advances, see IRM 1.32.12, IRS Relocation Travel Guide.

Prepaid Postage

  1. The IRS purchases postage from USPS for postage meters, business reply mail, bulk mailing permits, stamps and postage paid envelopes. Funding for the purchase of postage resides in the W&I financial plan. The W&I/Media and Publications (M&P) and Capital Management and Oversight (CMO) certify the USPS bills submitted by USPS for payment. The accurate and timely postage expenditure information is critical to identifying opportunities for cost containment and developing future postal budget options. It also enables the IRS to closely monitor and reconcile expenses and react to changes in expenditure patterns.

  2. Responsibilities for the management of IRS postage needs reside in W&I. The IRS requires that all transactions for purchasing postage be recorded in IFS. The financial manager/budget analyst for W&I is responsible for the posting of all postage obligations and expenses to the appropriate accounting codes in IFS.

  3. The USPS requires payment for postage in advance; therefore, the Government Payables and Funds Management office pays USPS one-twelfth of the yearly postage estimate each month based on an average of the previous two fiscal years actual payments and current postage trends. The Government Payables and Funds Management office records the payments in a prepaid expense account in IFS. As the IRS uses postage, the Government Payables and Funds office receives expense reports from postage users and records the expense information in IFS to draw down the prepaid expense account balance and record the payment.

  4. Postage expense is recorded on a one-month lag following review by the Government Payables and Funds Management office of the monthly expense reports. After year-end closes, the W&I Strategy and Finance office determines the final postage costs to be expensed for the prior fiscal year which results in an adjustment to the postage advance balance, related obligation balances and actual expenses recorded against the prior fiscal year funds. After W&I Strategy and Finance office receives the final expense certification from the W&I Strategy and Finance office, Government Payables and Funds Management office posts the entries in IFS and closes advances and obligations.

  5. For additional information on prepaid postage, see IRM 1.22.1, Mail and Transportation Management Overview, IRM 1.22.4, Postage Accountability and Reporting Requirements, and IRM 1.35.15, Annual Close Guidelines.

Public Transportation Subsidy Program

  1. The PTSP program was established to encourage employees to use public transportation when commuting for work.

  2. The Department of Transportation (DOT) provides public transportation subsidy to IRS employees through PTSP. The DOT created TRANSERVE to provide administrative services and expertise in support of the IRS customer agency transit benefit program. TRANSERVE provides monthly customer statement of transit benefits reports showing the amount of usage per month. The DOT requires payment in advance and bills the IRS quarterly for 1/4th of the yearly estimate. The quarterly PTSP advances are based on the customer statement transit benefit reports.

  3. Throughout the fiscal year, the Accounts Payable Financial Operations office posts actual expenses in the IFS based on the customer statement of transit benefit received from the IRS customer support analyst.

  4. For additional information on the PTSP program, see IRM 1.32.15, Public Transportation Subsidy Program (PTSP).