1.35.15 Annual Close Guidelines

Manual Transmittal

May 28, 2019

Purpose

(1) This transmits revised IRM 1.35.15, Financial Accounting, Annual Close Guidelines.

Material Changes

(1) IRM 1.35.15.1, Program Scope and Objectives, added to conform to the new internal control requirements described in IRM 1.11.2, Internal Revenue Manual (IRM) Process. Also, rearranged and updated existing IRM content to place information involving internal controls for the IRM under this subsection. All subsequent subsections were renumbered, accordingly.

(2) IRM 1.35.15.1.3, Responsibilities, updated responsibilities.

(3) IRM 1.35.15.1.6(1)(k), Terms/Definitions, updated definitions.

(4) IRM 1.35.15.1.7, Acronyms, updated acronyms.

(5) IRM 1.35.15.1.8, Related Resources, updated title of Office of Management and Budget (OMB) Circular A-123.

(6) IRM 1.35.15.2.1(2), Midyear/Spend Plan Review, updated to reflect current process.

(7) IRM 1.35.15.2.2, Current Year Targets, updated to reflect current process.

(8) IRM 1.35.15.4, Obligations, updated to reflect current process.

(9) IRM 1.35.15.4.2.1(3), Miscellaneous Programs, deleted GSA Autos, no longer applicable.

(10) IRM 1.35.15.4.4(1), Treasury Executive Office Asset Forfeiture Funds, revised to reflect current process.

(11) IRM 1.35.15.5, Receipt and/or Acceptance, updated for clarity.

(12) IRM 1.35.15.6.3, Eliminating Intra-Departmental Transactions, revised to reflect change in Treasury requirement for third quarter reporting.

(13) IRM 1.35.15.7.1, Aging Unliquidated Commitments, updated to reflect current process.

(14) IRM 1.35.15.7.2, Aging Unliquidated Obligations, updated to reflect current process.

(15) Previous IRM 1.35.15.7.3, Director, Beckley Finance Center, deleted, position eliminated.

(16) Previous IRM 1.35.15.7.4, Director, Financial Management Policy Office, deleted due to Financial Management realignment.

(17) IRM 1.35.15.9, Accounting Code Changes, updated to reflect current process.

(18) IRM 1.35.15.11, Canceling Appropriations, updated to reflect current process.

(19) IRM 1.35.15.12.4, Year-end Payroll Accruals, updated to reflect current process.

(20) IRM 1.35.15.14, Mock Year-end System Testing, updated title and updated for clarity.

(21) IRM 1.35.15.15, Automated Close Process, updated to reflect current process.

(22) Previous IRM 1.35.15.15.1, Dollar Threshold, deleted, requirement no longer valid.

(23) Previous IRM 1.35.15.15.2, Other Criteria, deleted, requirement no longer valid.

(24) IRM 1.35.15.16, Verifying Trial Balance Reports, updated to reflect current process.

(25) IRM 1.35.15.17(1), New Fiscal Year Budget Load, updated for clarity.

(26) This revision includes changes throughout the document for the following:

  1. Updated all references of Government Relocation Accounting System (GRAS) to moveLINQ

  2. Updated all references of Integrated Procurement System (IPS) to Procurement for Public Sector (PPS)

  3. Updated all references of Director, Office of Procurement, Agency-Wide Shared Services to Office of the Chief Procurement Officer

  4. Updated the CFO office names and responsibilities

  5. Added minor editorial changes

Effect on Other Documents

IRM 1.35.15, dated July 20, 2015, is superseded.

Audience

All divisions and functions

Effective Date

(05-28-2019)

Ursula S. Gillis
Chief Financial Officer

Program Scope and Objectives

  1. Purpose: This IRM contains the annual close guidelines to assist the business units through the fiscal year-end closing process.

  2. Audience: All business units

  3. Policy Owner: CFO, Associate CFO (ACFO) for Financial Management (FM)

  4. Program Owner: The ACFO-FM develops and maintains this IRM.

  5. Primary Stakeholders: CFO, Office of the Chief Procurement Officer, division finance officers and business unit year-end coordinators

  6. Program Goals: To accomplish a successful fiscal year-end close.

Background

  1. These guidelines provide the policies and procedures for the IRS’s annual fiscal year-end close. While the CFO is responsible for producing auditable financial statements, a successful annual close and an unmodified audit opinion depend upon the actions of all managers and staff throughout the year.

  2. For the IRS’s administrative financial statements to be materially accurate and fairly state the IRS’s assets, liabilities, net position, net costs, changes in net position and budgetary resources as of and for the fiscal year ended on September 30, they need to reflect all income earned and expenses incurred for the applicable fiscal years. The Integrated Financial System (IFS) is designed to capture transactional data used for preparing the financial statements. Transactions that are not captured in IFS must be accounted for manually through accruals and year-end closing adjustments.

  3. Supplementing these guidelines are the annual FM and Corporate Budget (CB) year-end close guidelines, with attachments. The following attachments provide specific year-end guidance:

    1. Year-end travel cutoff dates

    2. FY 20XX year-end responsibilities and cutoff dates (in word and excel format)

    3. Closing of budget fiscal year 20XX appropriations

    4. FY 20XX Corporate Budget year-end guidance

  4. The FM and CB year-end close guidelines and attachments are available on the CFO website.

  5. The Redesigned Revenue Accounting Control System (RRACS) records and reports all revenue accounting transactions and financial data processed from IRS’s automated and manual tax systems. The RRACS tracks financial data from tax return receipt to tax payments or refund issuance. Other financial data is recorded, such as photocopy fees and installment agreement user fees. Data is entered in the system primarily at the Submission Processing Centers. The database is maintained at the Detroit Computing Center and consists of general ledger accounts (GLACs) and a variety of internal records used for balancing and reporting. Information detailing the revenue accounting closing processes can be found in IRM 3.17.63, Redesigned Revenue Accounting Control System, and IRM 3.17.64, Accounting Control General Ledger Policies and Procedures.

Authorities

  1. The authorities for this IRM include:

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

    2. Federal Managers’ Financial Integrity Act of 1982 (FMFIA), Pub. L. No. 97-255

    3. Government Management Reform Act of 1994 (GMRA), Pub. L. No. 103-356

    4. Federal Financial Management Improvement Act of 1996 (FFMIA), Pub. L. No. 104-208

    5. Government Performance and Results Act of 1993 (GPRA), Pub. L. No. 103-62

    6. Accountability of Tax Dollars Act of 2002 (ATDA), Pub. L. No. 107-289

    7. E-Government Act of 2002 (FISMA), Pub. L. No. 107-347

Responsibilities

  1. This section provides responsibilities for:

    1. CFO and deputy CFO (DCFO)

    2. ACFO for FM

    3. deputy ACFO for Administrative FM

    4. director, Government Payables and Funds Management (GPFM) Office

    5. director, Accounts Payable Financial Operations (APFO) Office

    6. director, Financial Reporting (FR) Office

    7. director, Cost Accounting and User Fees (CA/UF) Office

    8. director, Financial Management Systems (FMS) Office

    9. director, Travel Management Office

    10. director, Credit Card Services Office

    11. deputy ACFO for Custodial FM

    12. director, Unpaid Assessments and Analysis Office

    13. director, Custodial Accounting (CA) Office

    14. ACFO for CB

    15. Office of the Chief Procurement Officer (OCPO)

    16. division finance officers (DFOs)

    17. business unit year-end coordinators

CFO and Deputy CFO
  1. The CFO and DCFO are responsible for:

    1. Ensuring that the IRS’s financial statements are materially accurate and fairly state the IRS’s assets, liabilities, net position, net costs, changes in net position, budgetary resources and custodial activity as of and for the fiscal year ending September 30.

    2. Overseeing policies, procedures, standards and controls for IRS’s financial processes and systems.

    3. Preparing financial reports for external stakeholders.

Associate CFO for Financial Management
  1. The ACFO for FM is responsible for overseeing the administrative and custodial fiscal year-end close functions.

Deputy Associate CFO for Administrative Financial Management
  1. The deputy ACFO for Administrative FM is responsible for:

    1. Ensuring IRS’s compliance with administrative financial reporting requirements, including preparing the annual financial statements.

    2. Coordinating the annual financial statement audit with the Government Accountability Office (GAO).

    3. Establishing and maintaining accounting policy and procedures for internal accounting operations and financial reporting.

    4. Establishing accounting and financial management processes and procedures for business units and offices. These processes and procedures support the preparation of the quarterly and annual financial statements.

    5. Directly managing the quarterly and annual financial statements.

    6. Consolidating the annual financial statements for the administrative and custodial accounts.

    7. Issuing detailed year-end close guidelines and deadlines.

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

    1. Hosting year-end meetings with the business units to discuss tasks, issues and timelines for the year-end close.

    2. Processing and recording transactions including, but not limited to, those related to reimbursable projects, interagency agreements and deobligation requests.

    3. Providing guidance and assistance to the business units for reviewing unliquidated commitments and obligations and for reviewing their analyzed transactions submissions.

    4. Preparing the prompt payment report.

    5. Reviewing transaction activity and related error diagnostic messages including obligation reversals, receivables, payment reversals and interagency payment activity.

Director, Accounts Payable Financial Operations Office
  1. The director, APFO Office, is responsible for:

    1. Processing and recording accounts payable transactions.

    2. Reviewing transaction activity and related error diagnostic messages including payment reversals, advances and invoices.

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

    1. Preparing the IRS’s quarterly and annual financial statements, including notes to the financial statements, other information and required supplementary information and monthly trial balances for administrative accounts.

    2. Leading the transactional close process, including developing specific guidelines and procedures to be followed by the business units in preparing for the annual close.

    3. Preparing and recording entries for contingent liabilities.

    4. Establishing accrual methodology for payroll and non-payroll expenses.

    5. Preparing reports for both internal and external use including, but not limited to, the Fiscal Service Statement of Transactions reporting and the Treasury Report on Receivables.

    6. Coordinating and monitoring the clearance of accounts for canceling appropriations.

    7. Preparing, analyzing, reviewing and submitting annual, quarterly and monthly financial reports and certifications to Treasury including, but not limited to, the Treasury Information Executive Repository (TIER) and agency financial report (AFR) deliverables.

    8. Managing year-end system access and postings through controlling the opening and closing of adjustment periods.

    9. Preparing, reviewing and submitting provided by client (PBC) deliverables to GAO in support of the financial statement audit.

    10. Preparing, reviewing and submitting Office of Management and Budget (OMB), Circular A-123, PBC deliverables to Internal Controls.

    11. Posting year-end canceling fund adjustment in the Central Accounting Reporting System (CARS) to close the canceling funds officially.

    12. Confirming year-end closing balances in CARS.

    13. Certifying year-end balances in the Governmentwide Treasury Account Symbol Adjusted Trial Balance System (GTAS).

Director, Cost Accounting and User Fees Office
  1. The director, CA/UF Office, is responsible for:

    1. Producing and reconciling the statement of net cost (SNC).

    2. Executing and reconciling the cost allocation cycles.

    3. Preparing the exchange revenue reclassification work paper.

    4. Preparing, reviewing and submitting provided by client (PBC) deliverables to GAO for the financial statement audit.

Director, Financial Management Systems Office
  1. The director, FMS Office, is responsible for:

    1. Documenting and communicating detailed daily system processing schedules.

    2. Processing payroll expenses and related systemic accrual transactions in accordance with IRS’s policies and procedures.

    3. Developing, defining, implementing and maintaining a financial system project plan for the annual close.

    4. Developing, maintaining and executing the annual system closeout and new year system reset process.

    5. Ensuring all accounts close properly with no negative balances at year-end.

    6. Conducting mock systems testing to ensure the proper closing of all accounts.

Director, Travel Management Office
  1. The director, Travel Management Office, is responsible for:

    1. Processing and recording transactions including, but not limited to, travel and deobligation requests.

    2. Reviewing transaction activity and travel related error diagnostic messages.

    3. Communicating year-end cutoff dates.

Director, Credit Card Services Office
  1. The director, Credit Card Services Office, is responsible for:

    1. Communicating year-end cutoff dates.

    2. Processing year-end payment corrections and performing related error resolution actions.

Deputy Associate CFO for Custodial Financial Management
  1. The deputy ACFO for Custodial FM is responsible for:

    1. Accounting for all tax revenue receipt and refund activities and managing and reporting on unpaid assessments (taxes receivable).

    2. Preparing and issuing revenue (custodial) financial statements and information.

    3. Ensuring proper financial management and reporting of the custodial assets received by the IRS and reported to Treasury and other federal agencies.

    4. Establishing and maintaining custodial accounting policies and procedures.

Director, Unpaid Assessments and Analysis Office
  1. The director, Unpaid Assessments and Analysis Office, is responsible for overseeing the review of unpaid assessments and establishing unpaid assessments inventory policies and procedures, including related statistical estimation processes. Unpaid assessments inventory is reported on the financial statements as taxes receivable and allowance for doubtful accounts.

Director, Custodial Accounting Office
  1. The director, CA Office, is responsible for:

    1. Preparing the statement of custodial activity, the custodial portion of the balance sheet, associated notes, required supplementary information, other information and information for the management's discussion and analysis.

    2. Providing guidance, policies and procedures and coordinating the necessary steps to properly report and perform the tax revenue and refunds audit.

    3. Issuing procedures and directives to support financial reporting activities.

    4. Preparing, analyzing, reviewing and delivering monthly and quarterly financial reports to Treasury and OMB.

    5. Posting year-end canceling fund adjustments in the Central Accounting Reporting System (CARS) to close the canceling funds officially.

    6. Confirming year-end closing balances in CARS.

    7. Certifying year-end balances in the Governmentwide Treasury Account Symbol Adjusted Trial Balance System (GTAS).

Associate CFO for Corporate Budget
  1. The ACFO for CB is responsible for:

    1. Coordinating year-end close issues with FM and the OCPO, developing and issuing guidance and monitoring and controlling spending.

    2. Issuing budget guidance to the business units, including year-end closing guidance.

    3. Monitoring and tracking reimbursable earnings and assisting with year-end closing of reimbursable projects.

    4. Interpreting OMB budgetary and financial reporting changes for the coming fiscal year into system requirements.

    5. Providing FM with documentation of year-end adjustments to appropriated authority, reimbursements and user fees (for example: Standard Form (SF) 1151, Nonexpenditure Transfer Authorization, and SF 132, Apportionment and Reapportionment Schedule).

    6. Determining the amount of Federal Highway Administration’s unobligated authority and undisbursed cash to be withdrawn by the Federal Highway Administration.

    7. Coordinating with the OCPO to establish third and fourth quarter fiscal year commitment and obligation goals for the business units.

    8. Working with the OCPO and FM to monitor and maintain oversight of business unit and Servicewide commitment and obligation statuses to ensure compliance with the goals of committing 100 percent of procurement actions by July 31, obligating 92 percent of expiring non-labor funds by August 31 (91 percent for labor) and obligating 99.9 percent of expiring funds by September 30.

    9. Reviewing the year-end canceling fund adjustments posted by the FR Office in CARS to close the canceling funds officially and ensure the canceled budget authority is correct.

Office of the Chief Procurement Officer
  1. The OCPO is responsible for:

    1. Issuing information on annual acquisition planning dates.

    2. Issuing deadlines, in conjunction with the CFO, for submitting shopping carts, allowing ample time for the annual close.

    3. Issuing advance payment authorizations to cover the year-end blackout period.

    4. Administrating reviews, providing guidance, and monitoring and tracking open awards that are no longer valid.

    5. Awarding actionable requests received through the Procurement for Public Sector (PPS) system to support the goal of obligating 92 percent of all expiring non-labor funds by August 31.

    6. Reviewing, approving or rejecting requests for September obligations that exceed the established thresholds.

    7. Providing staff, support and system availability for posted transactions through September 30.

Division Finance Officers
  1. The DFOs and their business units are responsible for:

    1. Managing their funds according to sound, prudent and lawful financial management practices.

    2. Establishing and monitoring annual financial plans.

    3. Designating business unit year-end coordinators.

    4. Developing year-end action plans that identify tasks specific to the business unit, due dates and responsible parties.

    5. Establishing procedures and enforcing compliance to ensure the validity and appropriateness of commitments and obligations, ensuring that: commitments and obligations are accurate and properly documented, invalid commitments and obligations are promptly liquidated, and unliquidated commitment and obligation reviews are completed and submitted according to requirements.

    6. Attesting, on behalf of their management, that open commitments and obligations are accurate at year-end.

    7. Submitting estimated obligations to FM.

    8. Submitting all required documents to FM including, but not limited to, invoices, telephone bills, labor adjustments and estimates, and investigative advance reports.

    9. Performing all reimbursable agreements actions.

    10. Complying with all prescribed year-end close deadlines.

Business Unit Year-end Coordinators
  1. The business unit year-end coordinators are responsible for assisting the DFOs in their responsibilities stated above and for participating in year-end meetings.

Program Management and Review

  1. Program reports and certifications to Treasury: The FM organization prepares reports and certifications monthly, quarterly and annually. Some of these reports are used to prepare the consolidated Servicewide reports and certifications for Treasury and other external reviews and to monitor the IRS’s financial management activities throughout the fiscal year.

  2. The following chart lists the reports and certifications and their reporting frequency:

    Report and Certification Reporting Frequency
    Award Financial File Submission Monthly
    Corrective Action Plan Monthly
    Fiscal Service Statement of Transactions Monthly
    Prompt Payment Report Monthly
    1st TIER Submissions (required preliminary submission) Quarterly
    Quarterly Assurance Statement for Digital Accountability and Transparency Act (DATA Act) Quarterly
    Reconciliation of Net Cost of Operations to Budget (Disclosure) Quarterly
    Treasury Report on Receivables Quarterly
    AFR Note Disclosures Second, Third and Fourth Quarters
    2nd TIER Submission (called Only TIER on the non-quarter months) Monthly (except for Period 01)
    GTAS Monthly (except for Period 01)
    CARS Year-end Closing Verification Annually
    GTAS Certification on Year-end Data Annually
    Suspense Certifications Annually
    Treasury Report on Receivables Certification Annually
  3. Program effectiveness: Throughout the year and during fiscal year-end processing, program effectiveness is measured through several reviews. These reviews include, but are not limited to, the following:

    1. Spend plans/uncommitted balances/unobligated balances are reviewed to identify potential deficits and surpluses and to ensure the effective use of resources.

    2. Reimbursable agreement activity is reviewed and an estimate is made for the work completed through September that has not been charged or recognized as revenue.

    3. Open commitments must be monitored closely to ensure the optimal use of funds.

    4. Outstanding obligations are reviewed on a regular basis to ensure outstanding obligations are accurate and valid.

    5. Travel and relocation obligations are reviewed on a regular basis to ensure outstanding obligations are accurate and valid.

    6. Suspense accounts and unposted invoices are reviewed.

Program Controls

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

    Area of Concern Control Method
    Delegation of Authority Authority to approve critical processes is delegated to the appropriate level in the business unit.
    Separation of Duties Separate roles are established for preparers, reviewers and approvers. This limits access of specific content to approved individuals.
    IFS/PPS Access User profiles for access are appropriate for job requirements.
    Proper and Efficient Usage of Funds The CB and the OCPO establish obligation goals for business units to accomplish by fiscal year-end.
    Return of Surplus Funds Business units must return any surplus funds identified as early as possible to improve funds management and allow the IRS to reallocate and spend the funds.
    Recording and Documentation Business units must record fiscal year-end transactions accurately and timely, with proper documentation supporting system entries.

Terms/Definitions

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

    1. Acceptance - Acknowledgment by an authorized government official that goods received and/or services rendered conform to the contract requirements.

    2. Accounts payable - A liability to pay an organization or entity for goods and/or services that the IRS has received and accepted.

    3. Accounting period - A length of time, usually a month, in which transactions are posted into IFS. The IRS defines its accounting periods to correspond to a fiscal month and a fiscal year. For example, accounting period 01 corresponds to October of the fiscal year and accounting period 12 corresponds to September of the fiscal year.

    4. Accrued expense - An expense incurred for which the goods and/or services have been consumed but receipt has not been recorded.

    5. Budget fiscal year - A fiscal year for which Congress authorized and appropriated funds.

    6. Capital asset - An asset including land, structures, equipment and intellectual property (including software) that has an estimated useful life of greater than two years.

    7. Commitment - An administrative reservation of funds prior to obligation. Typically, commitments are created by a purchase requisition/shopping cart.

    8. Financial plan - A plan to spend funds to accomplish a mission during a specified period, typically a fiscal year. In addition to stating the funds to be spent, the plan also includes any available supplemental resources to be used, such as user fees or reimbursements.

    9. Financial plan manager (FPM) - The official responsible for day-to-day operations of monitoring and controlling a financial plan’s funds in the budget execution phase.

    10. Integrated Financial System (IFS) - The IRS’s official administrative financial management system.

    11. Non-procurement action - An action not requiring a contract signed by a warranted contracting officer (CO). In this type of action, the goods and/or services are acquired via other means. For example, an authorized purchase cardholder may procure goods that cost less than the micro-purchase threshold. Other non-procurement actions include reimbursable work authorizations (RWAs); security work authorizations (SWAs); SF 182s, Authorization, Agreement and Certification of Training; Forms 2785, Requisition/Obligation Estimate Adjustment Notice or Internal Revenue Bill of Lading (IRBL).

    12. Obligation - A binding agreement that may result in outlays, immediately or in the future. Budgetary resources must be available before obligations can be legally incurred.

    13. Receipt - An acknowledgment that the government received the goods and/or services.

    14. Redesigned Revenue Accounting Control System (RRACS) - The IRS’s automated system used to provide accounting control for all revenue accounting transactions.

    15. Separation of duties - A key internal control concept under which no single individual has complete control over a financial transaction from beginning to end. Examples include separating the responsibility for receiving checks from posting them in a financial system; making purchases with the purchase card, approving the purchases and paying the vendor; and entering an obligation and recording the receipt and acceptance of goods and/or services received under that obligation.

    16. Spend plan - A plan to use both labor and non-labor resources, including an explanation of expected anomalies and funding challenges; an analysis, by age, of unliquidated commitments and obligations pending final action; and proposed budget realignments and a confirmation of spending, by budget activity category (BAC), for both multi-year and no-year funds.

    17. Travel authorization - An electronic or written document submitted for approval to authorize official travel.

    18. Travel obligation - An obligation resulting from a travel authorization. However, unlike other obligations, the government is not bound to complete the acquisition. Funds are reserved for the intended trip.

    19. Undelivered order - An order for which the goods and/or services have not been received.

    20. Unliquidated obligation - An obligation for which a portion or all the goods and/or services have yet to be received.

Acronyms

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

    ACRONYM DESCRIPTION
    ACFO Associate CFO
    AINFC Automated Interface to the National Finance Center
    APFO Accounts Payable Financial Operations
    AUC Aging Unliquidated Commitments
    BFC Beckley Finance Center
    CARS Central Accounting Reporting System
    CB Corporate Budget
    Fiscal Service Bureau of the Fiscal Service
    FM Financial Management
    FMS Financial Management Systems
    FPM Financial Plan Manager
    FR Financial Reporting
    GAO Government Accountability Office
    GLAC General Ledger Account
    GPFM Government Payables and Funds Management
    GTAS Governmentwide Treasury Account Symbol Adjusted Trial Balance System
    IFS Integrated Financial System
    OCPO Office of the Chief Procurement Officer
    OMB Office of Management and Budget
    PPS Procurement for Public Sector
    RRACS Redesigned Revenue Accounting Control System
    SGL Standard General Ledger
    TIER Treasury Information Executive Repository
    TP Trading Partner

Related Resources

  1. Related resources for this IRM include:

    1. OMB Circular No. A-11, Preparation, Submission and Execution of the Budget

    2. OMB Circular A-123, Management's Responsibility for Enterprise Risk Management and Internal Control

    3. Appendix D to OMB Circular No. 123, Compliance with the Federal Financial Management Improvement Act of 1996

    4. OMB Circular A-134, Financial Accounting Principles and Standards

    5. OMB Circular No. A-136, Financial Reporting Requirements

    6. Federal Accounting Standards Advisory Board Statements of Federal Accounting Concepts and Standards

    7. Government Accountability Office's (GAO) Principles of Federal Appropriations Law(Red Book)

    8. IRM 1.33.3, Reimbursable Operating Guidelines

    9. IRM 1.33.4, Financial Operating Guidelines

    10. IRM 1.35.4, Purchase Card Program

    11. IRM 1.35.24, Establishing Commitments and Obligations

    12. IRS Financial Management Codes Handbook

    13. IRM 3.17.63, Redesigned Revenue Accounting Control System

    14. IRM 3.17.64, Accounting Control General Ledger Policies and Procedures

Spend Plan

  1. Each business unit, under the direction of the FPM, prepares a spend plan. This plan enables management to monitor its actual financial performance against its spend plan.

Midyear/Spend Plan Review

  1. After the close of the second quarter, CB conducts a midyear/spend plan review with each business unit to assess and report on the IRS’s financial position for internal and external stakeholders. This midyear/spend plan review process is an opportunity for business units to review their financial performance for the October through March timeframe and to evaluate the April through September projections. This review ensures that the business unit is spending at a rate that will achieve its final spending targets.

  2. The midyear/spend plan review:

    1. Evaluates spending to ensure timely obligation of funds, per CFO and OCPO guidance.

    2. Identifies potential unfunded needs and surpluses.

    3. Identifies potential base shortfalls that can be corrected in the multi-year planning process.

    4. Promotes timely posting of reimbursables.

  3. After a complete analysis of the spend plans, the business unit and/or CB adjusts the plans as necessary.

  4. Business units are required to meet commitment and obligation targets established jointly by the CFO and the OCPO. Each business unit must record shopping carts and the resulting obligations in IFS timely and follow the approved spend plan.

  5. Additional information on managing spend plans, including realigning funds, is provided in IRM 1.33.4, Financial Operating Guidelines.

Current Year Targets

  1. The IRS should commit 100 percent of procurement actions by July 31, obligate 92 percent of expiring non-labor funds by August 31, and obligate 99.9 percent of expiring funds by September 30. The OCPO, in conjunction with CB, is responsible for communicating these targets, tracking target progress and reporting target results. Obligations can be recorded or modified through September 30 of each fiscal year.

  2. The OCPO is responsible for reviewing, certifying and managing targeted open obligation balances to pursue further reductions in open obligations by fiscal year-end and to validate those that remain. The aging unliquidated commitments (AUC) reports assist in this process.

Recording Financial Transactions

  1. Correctly recording all actual and estimated fiscal year financial transactions ensures that the IRS presents its financial statements fairly in all material respects and that its financial statements are in conformity with United States generally accepted accounting principles. This includes:

    1. Posting all obligations timely and accurately. The authority to incur obligations for a fiscal year (except for no-year funds and multi-year funds with at least one year remaining) expires at midnight, eastern daylight time (EDT), on September 30.

    2. Recording the receipt and acceptance of goods and/or services promptly.

    3. Processing pending invoices where receipt and acceptance has been recorded.

    4. Estimating accruals to ensure that the IRS recognizes unpaid expenses.

    5. Closing out accounts properly to ensure that account balances are correct.

  2. Non-procurement shopping carts created in PPS automatically post to IFS in real time. Procurement shopping carts are automatically posted against the budget and reflected in PPS.

  3. These activities are discussed below and in the references provided in IRM 1.35.15.1.1, Background.

Obligations

  1. Procurement obligations are posted in real time once the award/mod is ordered:

    1. Business units enter shopping carts in PPS for manual obligations and the subsequent commitment posts in IFS. Non-procurement obligations are posted manually in IFS upon receipt of a manual obligating document.

    2. IFS performs an automated interface daily between ConcurGov and IFS or moveLINQ and IFS. This applies to travel and relocation-related transactions only.

Purchase Cards

  1. An approved and funded ERP Central Component (ECC) purchase card requisition is required in advance of each purchase card purchase. Once the business unit enters the requisition, it is established in IFS. The FPM approval creates the commitment in IFS.

  2. Business units must log purchases into the purchase card module and reference the appropriate requisition by close of business on September 30 to establish payment authority. Only those purchases recorded in order logs remain open as commitments in the purchase card module after September 30. All other commitments established in IFS are reversed.

  3. After October 1, IFS uses the accounting string information from the unliquidated purchase card module transactions for the preceding fiscal year for the obligation and payment.

  4. Additional information on purchase cards can be found in IRM 1.35.4, Purchase Card Program.

Manually-Entered Obligations

  1. This section provides year-end information specific to unique programs that require manual entry.

Miscellaneous Programs
  1. The FM organization prescribes earlier than usual cutoff dates for submitting manual documents, allowing the FR Office additional time to review manual entry transactions for completeness, exercise quality control measures and develop more precise estimates of account balances as of September 30. These cutoff dates are issued in the FM year-end close guidance.

  2. For the program or activity listed below, the business unit enters the shopping cart in PPS, establishing the commitment, and is required to monitor commitment amounts to ensure that they are sufficient to cover anticipated needs through the fiscal year-end. The GPFM Office manually records the obligation in IFS, using the documentation listed below. The business unit uses this same documentation to transmit any changes in the obligation amount.

    Program or Activity Documentation
    Administrative Summons Form 2785, Requisition/Obligation Estimate Adjustment Notice
    Attorney Fees
    Disclosure of Information - Administrative Claims
    Foreign Service
    Government Bills of Lading/Internal Revenue Bills of Lading
    Government Printing Office
    Motor Pool
    Sales/Seizures
    Settlement Agreements
    Tax Lien Fees
    Telephones
    Treasury Franchise Fund
    Imprest Fund for Investigative Purposes Form 2785, Requisition/Obligation Estimate Adjustment Notice or Reconciliation Purchase Worksheet
    Security Work Authorizations Federal Protective Service (FPS) 57(T), Security Work Authorization
    Reimbursable Work Authorizations General Services Administration (GSA) Form 2957, Reimbursable Work Authorization
    Personal Property Claims Print screens of the shopping cart and accounting data from ME53N
    Representation Fund
    Torts
    Training (no credit cards or convenience checks) SF 182, Authorization, Agreement and Certification of Training
  3. For the program or activity listed below, there is no commitment recorded in PPS to draw down funds in IFS. The GPFM Office must manually record the obligation using the documentation listed. The business unit uses these same forms to transmit changes in the obligation amount.

    Program or Activity Documentation
    Foreign Service *Form 2785, Requisition/Obligation Estimate Adjustment Notice
    Consolidated American Payroll Processing System (CAPPS)
    Postage
    Rent
    Unemployment Compensation for Federal Employees (UCFE)
    Federal Telecommunication Services (FTS)
    Federal Tax Lien Revolving Fund (FTLRF) *Memo request

    Note:

    *Funds are obligated from the accounting string.

Blanket Purchase Agreements
  1. The blanket purchase agreement (BPA) is a simplified method of filling anticipated repetitive needs for supplies and services by establishing charge accounts with qualified sources. The BPAs are normally limited to local businesses from which numerous individual purchases will be made during a specified time.

  2. During a BPA period of performance, each IRS employee who is authorized to place calls against the BPA maintains a call log to record each service request and the dollar amount. Depending upon business unit procedures, the authorized caller either references the call to a bulk-funded commitment or records a commitment in PPS corresponding to the dollar value of each call. At the end of each month, the authorized caller must submit a copy of the funded call log to the APFO Office to record the obligation in IFS.

  3. The APFO Office establishes special procedures for the submission of the call logs at year-end. These procedures generally require authorized callers to submit interim call logs in August, with projections for anticipated calls through the end of the fiscal year. The FM organization publishes the specific dates in the FM year-end close guidance.

Travel and Relocation

  1. Travel obligations represent travel that has been authorized, but not yet vouchered. Therefore, it is especially important that travelers:

    1. Enter or request new authorizations for travel that will be taken before the end of the fiscal year so these dollar amounts can be obligated

    2. File vouchers timely so unneeded travel amounts can be deobligated

  2. The FM organization publishes year-end deadlines for the manual and electronic submission of travel authorizations and travel vouchers, including those for long-term taxable travel and relocation, in its annual year-end close guidance. Business units need to comply with these deadlines so that travel can continue without interruption. Business units may not submit requests for manual authorizations or advances to circumvent the requirements associated with automated systems, nor may offices request manual advances for individuals who can obtain advances by using their travel cards.

Treasury Executive Office Asset Forfeiture (TEOAF) Funds

  1. The TEOAF obligation activity (awards or modifications) for the Mandatory, Super Surplus and Secretary Enforcement programs must be processed in PPS and posted to IFS no later than close of business on September 26 to assure proper elimination cut-off with the IRS’s trading partner (TP). The affected funds end in 09R3D and 09F3D.

Receipt and/or Acceptance

  1. To estimate the accounts payable liability as of September 30 accurately, timely notices of receipt and/or acceptance are crucial. Inappropriate or overstated receipt and/or acceptance must be corrected in IFS to properly state the liability. The FM organization must receive receipt and/or acceptance by the date specified in the FM year-end close guidance. Notification is to be performed as follows:

    1. Electronic: All valid electronic receipt and/or acceptance data must be input as soon as possible, but no later than the date specified in the FM year-end close guidance.

    2. Manual: All invoices and related receipt and acceptance documents for manual obligations (Forms 2785, BPA logs, etc.) must be forwarded to FM no later than the dates specified in the FM year-end close guidance.

Invoices and Payments

  1. To facilitate year-end processing, it is helpful if business units and/or vendors submit invoices for goods and/or services that were obtained during the fiscal year to FM before the accounting records are closed. The FM organization publishes specific dates for the submission of invoices for the fiscal year annually in its year-end close guidance.

Commercial Transactions

  1. Generally, each contract contains specific language that governs invoicing procedures. Business units should not make requests directly to the vendor that differ from the invoicing terms in the contract. The CO contacts the vendor to request changes in invoicing frequency.

Intra-governmental Transactions

  1. Generally, federal agencies use the Intra-governmental Payment and Collection (IPAC) system to record fees between agencies. The FM organization records expenses and credits associated with IPAC transactions in a suspense account when acceptance has not occurred. At year-end, it is particularly important that business units certify that both receipt and acceptance of goods and/or services have taken place to minimize the number and dollar value of transactions in the suspense account at the end of each fiscal year.

Eliminating Intra-departmental Transactions

  1. Each Treasury bureau and office reports the transactions that it has with other Treasury bureaus, TPs and offices. To avoid duplicating these transactions in its financial statements, Treasury instructs its bureaus and offices to reconcile their transactions with one another. The intra-agency transaction by eliminations (TEP) report is the primary source of information available to the FR Office to reconcile intra-departmental transactions. The TEP is an on-line report in the TIER system, which displays elimination differences using standard general ledger (SGL) data submitted to Treasury by each Treasury TP. The FR Office submits the SGL data via TIER.

  2. The FR Office conducts quarterly reconciliations with each TP that has reciprocal pairing differences above the established threshold reported on the TEP report. For the year-end reconciliation, balance differences must be reconciled and/or adjusted to bring the TP balance differences below Treasury’s threshold.

  3. Bureaus must perform intra-departmental elimination reconciliations through September 30 and submit required reports by the due dates provided in the annual Treasury Financial Reporting Timeline.

Commitment and Obligation Reviews

  1. Commitments set aside funds for future obligations and represent a resource management tool to draw down budget availability. Obligations are legally binding agreements created by awards, contracts or purchase orders. Business units and/or the OCPO enter the values of the negotiated agreements (obligations) into IFS prior to the beginning of work. Obligations draw down (liquidate) commitments. Expenditures draw down (liquidate) obligations.

  2. Timely management of commitments and obligations enables the IRS to maximize its financial resources. The FM organization provides the aging unliquidated commitments (AUC) and the aging unliquidated obligations (AUO) reports to the business units and the OCPO on predetermined dates. Business units and the OCPO review, annotate, certify and return the reports to FM by the prescribed due date. The reviews ensure the legitimacy, accuracy and accountability of open balances. Business units and/or the OCPO must take immediate action to liquidate invalid commitments and obligations and exercise diligent oversight to ensure those items determined valid become expenditures.

  3. Since all current year open commitments and obligations draw down available budgets, amounts decommitted or deobligated become available for funding other items during the fiscal year.

Aging Unliquidated Commitments

  1. The AUC report serves as a useful tool in monitoring open commitment balances. It also helps the FPM ensure the flow of resources from commitments to obligations. Commitments decrease the available budget when posted to the GL. Business units must continue to monitor the open commitment balances to ensure that these balances are at an appropriate level to cover obligations for the rest of the fiscal year.

  2. The AUC review requires business units to review and validate selected EC-non-procurement requisitions, CQ -purchase card single funded requisitions, BQ-purchase card bulk funded requisitions and Procurement shopping cart commitments older than a predetermined date. The specific criteria used to select transactions for review vary annually, but take into consideration the age of the open commitment.

  3. To accommodate fourth quarter requirements, year-end and the 99.9 percent obligation goal, business units must review AUC reports more frequently as September 30 nears. This is critical to ensure that valid commitments either become obligations by September 30 or are liquidated if not needed. Business units must liquidate invalid commitments to maximize budgetary potential as obligation authority against open commitments ends at midnight, EDT, on September 30.

Aging Unliquidated Obligations

  1. The AUO report serves as a useful tool in monitoring open obligations. When business units and the OCPO determine that an AUO balance is overstated and will not be expended, they must modify the obligation to reflect accurate amounts. The AUO reviews include the review of outstanding travel transactions.

  2. The AUO review process focuses on at-risk obligations. The established criteria for at-risk obligations consists of the following:

    1. No activity over a predetermined time.

    2. The period of performance has expired.

  3. Once the GPFM Office identifies the at-risk obligations, it sends the list of obligations to the business units and the OCPO. The GPFM Office continually works with the OCPO and the business units to determine if the questionable obligations are reasonable, as extenuating circumstances may justify prolonged periods of inactivity. If not, the GPFM Office works with the OCPO and the business units to cancel or modify obligations, as appropriate.

  4. The GPFM Office runs monthly summary queries detailing the total dollars still outstanding for inactive obligations. These summary queries enable the ACFO for FM to monitor the progress of corrective actions regarding the at-risk obligations.

Reimbursable Agreements

  1. A reimbursable agreement is a signed agreement between the IRS and an outside customer that sets out the terms and conditions under which the reimbursable work arrangement will be performed.

  2. Reimbursable agreements fall into the following categories:

    1. Federal government (non-Treasury)

    2. Non-federal, state, local and foreign government

    3. Intra-departmental (Treasury/Bureau)

    Note:

    Non-federal, state, local and foreign government agreements are frequently paid in advance. Federal government agreements are usually paid monthly.

  3. The business unit budget office reimbursable coordinator, business unit project coordinator and FPM are responsible for ensuring the projects proceed in accordance with the provisions of the reimbursable agreement. Year-end procedures for closing reimbursable agreements should begin no later than mid-June of each year. At the end of the year, in accounting period 12, the business unit project coordinator and FPM will review the reimbursable activity for the year and estimate the amount of work completed through September that has not been charged or recognized as revenue. The business unit budget office reimbursable coordinator will record the estimated reimbursable earnings on the SF-FV50, Schedule of Reimbursable Project Earnings. The business units and FM must post all adjustments and earnings by the dates specified in the FM year-end close guidance.

  4. Additional guidance on reimbursable agreements can be found in IRM 1.33.3, Reimbursable Operating Guidelines, and on the CFO and CB websites.

Accounting Code Changes

  1. The validity and accuracy of the IRS’s financial reports depend on the correct use of accounting codes. Business units may process accounting code changes in coordination with Procurement, APFO and GPFM Offices if they post erroneous accounting string information (for example: fund, cost center, functional area, material group) to IFS. Accounting code change errors must meet certain requirements to determine if the change is necessary.

  2. Business units should report accounting code changes for manual obligations as they are identified throughout the year by submitting a request via email to *CFO BFC Electronic Obligations or *CFO BFC Electronic EV for labor-related changes. For Procurement obligations, the business unit will work with the CO or the CO and the GPFM Office, as determined by the pre-award or post-award level, at the time the accounting code change is needed.

  3. The IRS uses TPs derived from GL accounts to trace intra-governmental transactions where one agency provides goods and services to another. Business units can process multiple GL accounts that infer the same TP in the same document. However, IFS cannot process expense transfer documents for accounting code changes that reference more than one unique TP.

  4. Business units must correct all identified accounting code changes before September 30 to reflect the correct fund center/financial plan status at fiscal year-end. Business units must report errors identified during September to FM by the accounting code change request date detailed in the FM year-end close guidance to ensure that FM will have sufficient time to make the changes prior to year-end.

  5. There are separate accounting code change rules for earned income tax credit, payroll, purchasing and travel and relocation transactions. IRM 1.35.15.9.4, Earned Income Tax Credit; IRM 1.35.15.9.5, Payroll; IRM 1.35.15.9.6, Purchasing; and IRM 1.35.15.9.7, Travel and Relocation, discuss these rules.

Accounting Code Changes Related to Prior Year Obligations and Expenses

  1. Business units process accounting code changes for prior year open obligations when no expense has been posted. Accounting code changes to prior year open obligations are handled the same way as accounting code changes for current year obligations.

  2. Business units are permitted to process change requests for prior year expenses on an exception basis. The IRS has already reported these expenses in the prior year's audited financial statements. Business units can process these accounting code changes after obtaining permission from the FR Office.

Accounting Code Changes Related to Office of Management and Budget Directives

  1. Business units will process all accounting code changes related to OMB directives.

Accounting Code Changes Related to a Continuing Resolution

  1. Business units may process accounting code changes that result from differences between how the IRS funded an activity during a continuing resolution and the actual budget in the same manner as all other accounting code changes.

Earned Income Tax Credit

  1. The earned income tax credit (EITC) is a refundable credit created in 1975 to offset the effect of Social Security taxes on low-income families encouraging them to seek employment rather than welfare. The IRS established the Return Integrity and Compliance Services (RICS), Refundable Credits Administration, to ensure refund compliance. Since the EITC program has been decentralized, staffing is controlled by each business unit's commissioner.

  2. Prior to FY 2005, EITC had its own direct fund (appropriation) to which business units charged expenses. Beginning in FY 2005, EITC no longer had its own fund and the IRS’s allocated budgeted dollars for EITC to specific Taxpayer Services, Enforcement and Operations Support funds. Business units use sub-funds associated with each of these funds to track EITC expenses. See IRM 1.35.15.9.4(7), Earned Income Tax Credit, for the home fund and EITC sub-fund listings.

  3. Business units should charge EITC non-payroll expenses against the appropriate EITC sub-fund. If expenses are erroneously charged against another fund, business units should follow the standard process for accounting code changes.

  4. Business units also should charge EITC payroll expenses against the appropriate EITC sub-fund. However, in many cases, business units cannot separate the portion of payroll expense attributable to EITC from payroll expenses for other work, so both EITC and non-EITC labor and benefits expenses are initially charged to the business unit's home fund. Business units determine the portion of payroll expense attributable to EITC each month based on a pre-defined methodology maintained by the business units.

  5. Budget analysts in the business units create expense transfer entries to move the EITC payroll-related expenses from the home fund to the appropriate EITC sub-fund. Before moving expenses, the budget analyst should verify that sufficient resources have been moved from the home fund to the sub-fund to cover the transfer.

  6. Budget analysts must also use the accounting string from the original payroll interface transaction whenever possible, changing only the fund.

  7. The home funds and corresponding EITC sub-funds are as follows:

    Home Fund EITC Sub-fund
    XXXX0912D XXXX09E2D
    XXXX0913D XXXX0917D
    XXXX0919D XXXX09E9D
  8. Once all lines on the expense transfer are entered and the budget analyst has reviewed them for accuracy, the budget analyst “parks” (saves without posting) the transaction. The budget analyst must then complete a standard expense voucher (EV) payroll worksheet from FM’s website and email it to *CFO BFC Electronic EV. Business units use the EV payroll worksheet for all EV-type transactions processed by GPFM. Budget analysts must review the EV payroll worksheet and validate that it matches exactly with the data entered in IFS before forwarding it to *CFO BFC Electronic EV.

  9. Additional details on creating an EITC payroll expense transfer document in IFS, can be found on the IFS website.

Payroll

  1. Payroll data enters IFS through the automated interface to the National Finance Center (AINFC) and through manual entries, such as accrual adjustments at year-end. Business units should ensure that payroll data entering IFS is posted to the appropriate accounting string. If the business units post data to an erroneous accounting string, they can make accounting code changes.

  2. Business unit budget analysts are responsible for creating entries to make payroll-related accounting code changes using expense transfer transactions with document type EV. When entering the expense transfer transactions with document type EV for payroll, the budget analyst must enter the full accounting string (cost center, functional area, GL code, etc.) where the original payroll expenses were charged.

  3. Once all lines on the expense transfer are entered and the budget analyst has reviewed them for accuracy, the budget analyst "parks" (saves without posting) the transaction in IFS. The budget analyst must then complete a standard EV payroll worksheet from FM’s website, sign the EV document and email it to *CFO BFC Electronic EV. Budget analysts must review the EV payroll worksheet and validate that it matches exactly with the data entered in IFS before forwarding it to the EV mailbox. The FV-50 transaction is set up to ensure that the amounts on the credit side of the ledger match exactly with the amounts on the debit side of the ledger. If they do not match, the transaction cannot be saved in IFS.

  4. The GPFM Office will review the expense transfer document to ensure that the information in the expense transfer transaction with a document type EV matches the EV payroll worksheet and that the transaction nets to zero. If there is a discrepancy between the parked expense transfer transaction and the submitted EV payroll worksheet, the GPFM Office will return the EV payroll worksheet to the originating business unit for correction before completing the transaction. Additionally, if the expense transfer transaction references a non-payroll GL account, the GPFM Office will send the expense transfer document back to the business unit and the business unit will not be able to process the transaction. If unsure of accounts or amounts to use, contact the FR Office for clarification. If the GPFM Office identify no errors, they will process the expense transfer transaction with document type EV.

Purchasing

  1. When a business unit determines that either a manual or a procurement purchase-related accounting code change needs to be made, the business unit must send an email with the accounting code change form attached to *CFO BFC Electronic Obligations. For Procurement obligations, the business unit will create an adjustment Accounting Code Change (ACC) shopping cart, which routes to the Office of Procurement Support Services (OPSS) ACC Purchasing Group to start the modification process. Business units must furnish suitable documentary evidence explaining the reason for the change. In cases requiring a fund change, the GPFM Office may require additional documentation. The APFO and GPFM Offices will ensure that documentation is adequate and complete before making any changes.

  2. The method of processing purchasing-related accounting code changes will vary depending on where in the purchasing sequence of events the business unit identified the error. The purchasing sequence of events has four distinct phases or levels:

    1. Shopping cart level - Business unit recorded the shopping cart in PPS, which posted to IFS, but no obligation exists.

    2. Obligation level - Obligation was created in IFS, but has not had any receipt and/or acceptance posted.

    3. Receipt and acceptance level - Business unit recorded receipt and/or acceptance in IFS.

    4. Payment level - The APFO Office disbursed payment to a vendor.

  3. Both the GPFM and APFO involvement is required to process all purchase-related accounting code changes and posting obligations with receipt and/or acceptance. The APFO office also processes payment accounting code changes.

Accounting Code Change at Requisition Level
  1. When the business unit identifies an error at the non-procurement shopping cart level, the business unit can usually process the accounting code change with no APFO and GPFM Office involvement. To correct the error, the business unit updates the accounting string in IFS as soon as it discovers the error. The business unit should make changes for all errors found regardless of the dollar amount.

Accounting Code Change at Obligation or Receipt and/or Acceptance Level
  1. When the business unit identifies an error at the obligation or receipt and/or acceptance level, the OPSS ACC Purchasing Group, Procurement, the GPFM Office and the business unit will process accounting code changes.

  2. To correct a manual obligations error, the GPFM Office reverses the obligated lines and any receipt and/or acceptance lines in IFS that reflect the inaccurate accounting string. The business unit updates the shopping cart accounting string in IFS. The GPFM Office reestablishes the obligated line(s) and any receipt and/or acceptance line(s) with the new accounting string in IFS.

  3. For Procurement obligations at the receipt and acceptance level, the business unit submits an accounting code change request email to the *CFO BFC Electronic Obligations mailbox to request the change. The business unit creates an adjustment ACC shopping cart, which routes to the OPSS ACC Purchasing Group to start the modification process. The GPFM Office reverses any receipt and/or acceptance lines in IFS that reflect the inaccurate accounting string. The CO processes a modification to overlay the string on the existing CLIN with the accurate accounting string. The GPFM Office reestablishes the receipt and acceptance in IFS.

Accounting Code Change at Payment Level
  1. When the business unit identifies an accounting code error at the payment level, Procurement, the APFO and GPFM Offices and the business unit will process the accounting code changes.

  2. To correct a manual obligation error, the GPFM Office reverses the obligated lines and the APFO Office reverses any payment activity reflecting the inaccurate accounting string. The business unit updates the shopping cart accounting string in IFS. Once the business unit updates the accounting string information in IFS, the GPFM Office reestablishes the obligation and the APFM Office reestablishes the payment records.

  3. For Procurement obligations, the business unit submits an email requesting an accounting code change to the *CFO BFC Electronic Obligations mailbox. The business unit also creates an adjustment ACC shopping cart, which routes to the OPSS ACC Purchasing Group to start the modification process. The GPFM Office reverses the receipt and/or acceptance lines and the APFO Office reverses any payment activity that reflects the inaccurate accounting string. The CO creates a modification to overlay the string on the existing CLIN. The GPFM Office reestablishes the receipt and/or acceptance and the APFO Office reestablishes the payment transactions.

Travel and Relocation

  1. When a business unit determines that a travel accounting code change is needed, they submit an Excel-based form to IFS, which generates a parked EV document. The EV document is forwarded to the Travel Processing Unit at *CFO BFC Travel Authorizations and Accting Codes or CFOBFCTAC@irs.gov for review, approval and posting of the parked document.

  2. Accounting code changes cannot be processed for relocation authorizations generated in moveLINQ.

Error Found at Authorization/Obligation Level
  1. Business units usually process accounting code changes found at the authorization/obligation stage with no APFO or GPFM Office involvement.

  2. Travelers should make every effort to enter requests in ConcurGov using the correct accounting string information. The approving official needs to carefully review all authorizations to ensure that the traveler has entered the appropriate accounting string. This is especially important if the travel relates to work done for another office because the traveler will need to change the accounting string information in ConcurGov to reflect that of the authorizing office.

  3. Travelers, with manager approval, can amend erroneous accounting string information found at the authorization/obligation stage within ConcurGov, if the traveler has not submitted vouchers for the authorization/obligation. Modifying the authorization/obligation in ConcurGov will zero out the incorrect accounting code lines in IFS and obligate the corrected accounting code lines without creating a new obligation document in IFS.

  4. For manually-entered authorization/obligation accounting string errors, the business unit enters the change in IFS via an EV transaction and parks the document. The travel EV workbook is then sent to the GPFM Office for review/approval by the Travel Operations staff.

  5. Accounting code changes cannot be processed in moveLINQ for relocations. If the business unit identifies an error in the accounting code, they must email the assigned relocation coordinator. The coordinator will perform the necessary steps to deobligate the current authorization in moveLINQ and re-enter it using the correct information. This will also generate a new authorization number for the relocating employee. This should only be completed if there have been no expenditures against the original authorization.

Errors Found for Open Obligations and Fully Expensed Obligations
  1. The APFO and GPFM Offices cannot make changes in moveLINQ to expensed relocation items. The APFO and GPFM Offices cannot make accounting code changes in ConcurGov to expensed items. Consequently, if the GPFM Office makes a change to an accounting code after the expense has been vouchered, the reports in ConcurGov will not reflect any of the accounting code changes made. Business units should use the IFS travel reports to evaluate and correct travel data that reflects any potential accounting code changes.

  2. For ConcurGov-related and manually-entered authorization/obligation accounting string errors, the business unit enters the change in IFS via an EV transaction and parks the document. The travel EV workbook is then sent to the GPFM Office for review/approval by the Travel Operations staff.

  3. Accounting code changes cannot be processed in moveLINQ for relocations. If the business unit identifies an error in the accounting code, they must email the assigned relocation coordinator. The coordinator will perform the necessary steps to deobligate the current authorization in moveLINQ and re-enter it using the correct information. This will also generate a new authorization number for the relocating employee. This should only be completed if there have been no expenditures against the original authorization.

Funds Control at Year-end

  1. The IFS has a funds control feature that prevents users from recording an obligation that would cause a budgetary accounting string to exceed its allocated funds. This feature applies to accounting strings that specify an appropriation, a financial plan and a functional area. However, more detailed accounting strings that reference office codes, object classes and sub-object classes are not controlled by this feature. As a result at year-end, IFS generally reports negative fund balances for some of these more detailed accounting strings along with fund surpluses for others. The FR Office takes corrective measures throughout the fiscal year to restore these balances to zero by year-end.

Canceling Appropriations

  1. Annual appropriations expire at the end of the fiscal year for which they were enacted. Agencies may record certain types of transactions against expired accounts for five years after expiration. Transactions that may be recorded include obligation decreases and cancellations, obligation increases that are not the result of new work or project scope changes and the receipt and acceptance of goods and/or services. After this five-year period, the accounts cancel with no further transactions allowed, including the payment of an invoice against which a receipt and acceptance has been recorded. For example, annual appropriations and multi-year appropriations that expired on September 30, 2014 are canceled on September 30, 2019.

  2. Business units should prepare for closing the transactions for canceling fiscal year appropriations in July of each fiscal year. A detailed review of unliquidated obligations for the canceling fiscal year is necessary to determine if a vendor is likely to bill for goods and/or services ordered.

  3. Invoices received after a fiscal year appropriation is canceled are paid out of the current year’s appropriations. However, no more than one percent of the current year appropriation is available to cover canceled year obligations. The payment itself cannot exceed the balance that had remained on the initial obligation before it was deobligated.

  4. The IFS year-end closing process includes the automatic reversal of accounts payable, obligations and accounts receivable against canceling year appropriations. This involves the following steps:

    1. Reversing unpaid invoices and receipt and/or acceptance and moving the balances to unliquidated obligations, as appropriate

    2. Deobligating unliquidated obligations

    3. Transferring receivables to the general fund receipt account - canceled receivables

  5. The FR Office prepares and records entries to clear remaining proprietary account balances for the appropriations being canceled. Budgetary accounts are adjusted to reflect all total resources as canceled appropriations.

  6. The FR Office posts year-end canceling adjustments in CARS to officially close the canceling funds. Corporate Budget reviews the posting to ensure the canceled budget authority is correct.

Estimating Accruals

  1. Certain types of expenses are incurred but not yet processed in IFS by year-end. These expenses must be estimated. The estimates of accrued expenses are classified into four components:

    1. Major contract accruals

    2. Specifically-identified accruals

    3. Percentage-estimated accruals

    4. Payroll accruals

Major Contract Accruals

  1. Due to the dollar amounts involved and the corresponding risks to the financial statements in the event of misstatement, the FR Office has initiated a separate and distinct annual process to accurately reflect the accrued liabilities for IRS’s major contracts.

  2. The FR Office selects the major contracts based on a multi-factor analysis which considers certain contract characteristics, such as current year-to-date expenditures and open obligation balances as of a specific date. The FR Office submits the selected major contracts to the OCPO. Once the OCPO concurs, the FR Office selects individual task orders for confirmation based upon open obligation balances as of June 30.

  3. For each major commercial contract, the FR Office drafts a confirmation letter to the vendor requesting an estimate of cumulative earned revenue as of September 30. The OCPO sends the confirmation letter to the vendor via email or regular mail.

  4. Concurrently, the FR Office completes a review of each selected vendor’s contract, billing files and cumulative contract payments. The FR Office computes an estimate of cumulative earned revenue as of September 30 for each major contract and compares its estimate to the estimate submitted by the vendor. If the two estimates differ by less than $500,000, the FR Office accepts the vendor's estimate as the basis for determining the accrued expense on that contract.

  5. If the two estimates differ by more than $500,000, the FR Office expands the scope of its field work for that contract. The FR Office then performs additional procedures such as discussions with the CO, contracting officer's representative (COR), the FR major contract accrual coordinator and vendor personnel until a consensus on a final estimate is achieved.

  6. Once the FR Office has completed its analysis, it provides any additional guidance necessary to calculate the year-end accrual.

Specifically-Identified Accruals

  1. The FR Office has identified expense classifications which are more easily analyzed on a specific basis because of their similarities. The FR Office refers to these expense classifications as specifically-identified expenses and accrues these expenses on an as needed basis:

    Expense Accrual Methodology Based On:
    Federal Employees Compensation Act (FECA) Account - Unfunded An analysis of historical unfunded FECA chargeback reports (excluding amounts to be funded in the current fiscal year) to develop a cumulative estimate. The methodology used allows the estimate to be adjusted every three months based upon actual costs. The FR Office adjusts this accrual in TIER to agree to the actual cost information provided by the Fiscal Service at each quarter end, as well as in final reconciliation at year-end.
    FECA Account - Actuarial An analysis of two years of historical actuarial data to develop an estimated ending accrual balance for the current year-end. The difference between the beginning accrual balance and the estimated ending accrual balance is amortized evenly throughout the year. The FR Office adjusts this accrual in IFS to match the actual liability information provided by Treasury at year-end.
    Imputed Costs - Fiscal Service The accrual estimate is a combination of Fiscal Service's year-to-date actual and projected costs. This estimate is reduced by anticipated offsets.
    Imputed Costs - Health, Life and Pension Imputed Office of Personnel Management (OPM) health, life and pension costs are recorded monthly based on an annual year-to-date accrual using numerous cost factors (as provided by OPM) multiplied by actual payroll data such as annual salaries and head counts (via Statistical Analysis System (SAS) and/or Business Warehouse (BW) reports).
    Postage An analysis of two years of historical data to develop a year-to-date cost estimate. This estimate is reduced by current year paid expenses, resulting in the accrual amount.
    UCFE An analysis of pure loss data and Equifax reports are used to develop quarterly cost patterns which are further refined into monthly estimates. The accrual is based on the monthly estimates for all months that are unpaid as of the accrual date.
    Unfunded Annual Leave The most current leave report received from the National Finance Center.
    Judgment Fund The dollar amount of judgment fund claims received less claims paid for a specified time in the Fiscal Service judgment fund received/paid report.

Percentage-Estimated Accruals

  1. The FR Office uses a percentage-estimated accrual methodology to develop a year-end estimated liability for expenses that occur during the year, but are not recorded as transactions prior to the close of the fiscal year. This accrual methodology excludes items accounted for in the major contracts accrual, specifically-identified expense accruals and payroll expense-related accruals.

  2. Each fiscal year, the FR Office identifies expenses recorded by accounting group in the first eight months of the current fiscal year that should have been recorded in the prior fiscal year. The FR Office divides these amounts by the prior fiscal year’s recorded expenses through mid-September to develop a percentage ratio of unrecorded expenses. The FR Office then applies an average of the three most recent fiscal years’ percentage ratios of unrecorded expenses to the year-to-date recorded expenses as of mid-September for all transactions except major contracts (excluded), specifically-identified expenses (zero percent) and payroll expenses (excluded).

  3. In addition, the FR Office reviews the reasonableness of the prior fiscal year-end accruals by comparing the recorded accrual by accounting group to the actual expenses recorded by accounting group for the first eight months of the current fiscal year that relate to the prior fiscal year. The FR Office researches and documents any significant differences as to the cause and appropriateness.

Year-end Payroll Accruals

  1. The U.S. Department of Agriculture National Finance Center, via the AINFC, transmits payroll data to IFS. Using this data, AINFC generates a basic payroll estimate (accrual) and posts the transactions to IFS, which are used to prorate the remaining workdays of the month and establish a monthly payroll accrual. The system will generate an accrual on September 1 for the remaining workdays of the fiscal year. This accrual will be adjusted as subsequent pay period actuals are processed during September. In addition, the last pay period that is processed in September will contain an accrual for overtime and terminal leave.

  2. The AINFC automatically records a payroll accrual in IFS to ensure that sufficient funds are reserved to cover the payroll disbursement in full. Since September 30 rarely falls exactly at the end of a pay period, the FMS Office advises HCO and the National Finance Center how the pay period should be split for the last pay period of the fiscal year.

  3. The FR Office provides the business units with supplemental instructions clarifying how year-end payroll accruals and/or adjustments are recorded in IFS.

  4. The methodology used for the monthly accrual applies to the annual accrual, except for certain transaction types (including overtime and terminal leave). Because the AINFC payroll process uses a straight time accrual, this process cannot anticipate special circumstances such as significant amounts of cash awards, overtime, terminal leave, retention bonuses or gainsharing awards earned but unpaid in September. The FR Office provides guidance to the business units to adjust the accruals for the following:

    1. Overtime - IFS develops an accrual based on the last disbursed payroll in September. After the last actual pay period is processed, the business units will have the opportunity to adjust the system-generated accruals.

    2. Terminal leave - Terminal leave is accumulated annual leave that remains unused and unpaid at year-end for separated employees. The IFS develops this accrual using the last disbursed payroll in September. The business units may adjust the straight time accrual based on their knowledge of actual terminal leave payable to their separated employees.

    3. Retention bonuses/gainsharing awards - IFS does not generate an accrual for retention bonuses or gainsharing awards. Each business unit is responsible for determining whether a payroll labor accrual or adjustment is necessary.

Other Entries

  1. In addition to the accrual entries, the FR Office makes adjusting entries on an as needed basis. The following chart lists the type of transaction and the associated adjustment:

    Type of Transaction Adjustment
    Seized Property/Special Money Balance is adjusted to equal the balance disclosed on the asset forfeiture tracking and retrieval system report (AFTRAK).
    Depreciation Balance is adjusted to recognize depreciation for a capitalized asset.
    Fund Balance with Treasury (FBWT) adjusted to the CARS Account Statement Balance is adjusted to equal the balance recorded and disclosed by Treasury. (This is a TIER adjustment, not made in IFS).
    Letter Rulings Balance is adjusted to equal the balance recorded in CARS.
    Suspense Reclassification Balance is adjusted to reclassify transactions from the suspense account to the proper account.
    Property, Plant and Equipment (PPE) Balances are adjusted to record asset additions that were recorded as expenses, reclassify asset balances that were recorded incorrectly and to record assets acquired through capital lease.
    Capital Lease Liability and Capital Lease Interest Accrual Balances are established to record new capital lease liabilities. Payments against lease liabilities are reclassified from expense to the capital lease liability. Interest is accrued and posted to the liability and expense accounts.
    Appropriated Special Fund Receipts Income Balances for user fees are adjusted to reflect actual amounts received. At year-end, the balance is adjusted to equal the balance in CARS. (This can be a TIER and/or IFS adjustment).
    Appropriation and Balance Transfers Balances are adjusted to reflect the transfer of funds between Treasury fund symbols.
    Accounts Receivable Write-Off Balance is adjusted to remove an account receivable from the books when it is determined to be uncollectible.
  2. At year-end, the FR Office makes the following adjusting entries:

    Type of Transaction Adjustment
    Allowance for Doubtful Accounts Balance is adjusted to increase or decrease the allowance for uncollectible accounts.
    Contingent Liabilities Balance is adjusted based on legal representation letters.
    Intra-governmental and Departmental Eliminations Through coordination with Treasury and other federal TP, intra-governmental balances are researched and adjusted to reflect applicable account balances as agreed upon with the TP.
    PPE Asset Disposals The asset balances are reduced, the corresponding accumulated depreciation is reduced and the gain or loss is posted.
    Canceled Appropriations’ Balances Prior to Cancellation Capitalized asset balances in canceling year appropriations are transferred to a no-year appropriation.
    Account receivables are reversed and established in the general fund receipt account – canceled receivables fund.
    Accounts payable are reversed for any amounts that will not be paid by year-end.
    Undelivered orders are deobligated.
    Canceling Appropriations The FBWT is adjusted to zero. Expired authority is closed to canceled authority.
    General Fund Receipt Accounts - Closing Adjustments Liability accounts for collections are adjusted to equal the cash collected. The liability accounts are closed against the FBWT.
    Treasury Forfeiture Fund Balance is adjusted to reclassify transactions from the revenue account to the transfer-in account.

Mock Year-End System Testing

  1. Mock year-end testing is performed two or three times before the September 30 year-end close. Mock testing is performed to ensure that all programs and processes executed during year-end close are working properly, that data issues that could create problems are resolved before year-end and that all persons participating in the process know how and when to execute their steps.

  2. The FMS Office establishes an annual mock year-end system testing schedule that details the activities, processes, programs, dependencies, timeframes and responsible individuals. Mock year-end system testing, planning and preparation takes place in April and May. Actual testing takes place in May through September.

  3. Mock 1 and Mock 2 are complete end-to-end tests of year-end close programs, processes and procedures. Based on identified issues, a contingency Mock 3 will be scheduled to test certain programs or data that are new or complicated.

  4. Mock 1 and Mock 2 testing covers the activities that FM performs during the year-end close including:

    1. Environmental/technical build

    2. Execution of programs, processes, activities and entries performed for year-end close

    3. Execution of system processes in funds management to roll-up budget and reflect the proper status of resources

    4. Execution of system processes to close general ledger account (GLAC) balances and carry forward beginning balances into the new fiscal year

  5. Mock 3 testing is based on issues identified in Mock 1 and Mock 2. Mock 3 includes the execution of selective programs, processes and/or data.

Automated Close Process

  1. The IFS is programmed to automatically perform many of the functions required for fiscal year-end closing. The IFS year-end close process includes the following system-generated entries:

    1. Close revenue and expenses to the cumulative results of operations (net position)

    2. Close budgetary accounts relating to appropriations, transfers and collections to calculate total actual resources

    3. Close budgetary accounts relating to outlays, refunds and anticipated amounts to calculate expired/carryover authority

  2. The IFS automatically carries forward beginning balances to the new fiscal year:

    1. Balance sheet accounts (assets, liabilities, equity)

    2. Unliquidated obligations

    3. Undelivered orders

    4. Uncollected earned reimbursements

    5. Unpaid expenses

    6. Delivered orders unpaid

    7. Unfilled customer orders

    8. Available balances

    9. Actual resources

    10. Available budget authority

Verifying Trial Balance Reports

  1. This subsection discusses both the pre-close and post-close trial balances and the beginning balances for the new fiscal year.

Accounting Period Description

  1. Although September 30 is the last day of the fiscal year and signals the end of accounting period 12, there are additional accounting periods used by the FR Office for designated processes required to closeout a fiscal year, produce the financial statements and open the next fiscal year.

  2. Accounting period 13 and 14 are used for year-end closing entries. Accounting period 15 is used for GAO adjustments, if required. Accounting periods 14/15 and 16 are used for preparing the pre-close and post-close trial balances respectively, as discussed in IRM 1.35.15.16.2, Pre-Close and Post-Close Trial Balances at Year-end, and IRM 1.35.15.16.3, Beginning Balances for the New Fiscal Year.

Pre-Close and Post-Close Trial Balances at Year-end

  1. To verify the pre-close and post-close trial balances, the FR Office must analyze IFS-generated trial balance reports for accounting periods 14/15 and 16, respectively. After all transactions are posted for the fiscal year and the year-end closing process has been executed, trial balance reports are generated from IFS for further analysis by the FR Office.

  2. The FR Office summarizes the period 14/15 and period 16 trial balances by SGL account, GLAC, Treasury account symbol and fund and compares the account balances for the respective periods to determine if the correct closing entries occurred and were completed in accordance with the Fiscal Service prescribed closing rules for SGL accounts (see the closing accounts quick reference chart found on Treasury’s Standard General Ledger website). The closing accounts quick reference chart indicates the proprietary revenue and expense accounts that close to the cumulative results of operations account, as well as those accounts that remain open with carry-forward balances for the new fiscal year. This comparison enables the FR Office to determine if the budgetary accounts were closed appropriately based on their status as unexpired, expired or canceled appropriations.

  3. The comparison of the period 14/15 and period 16 trial balances are reviewed to ensure no differences exist. The FR Office researches and resolves any differences noted to ensure:

    1. No errors occurred during IFS closing.

    2. No subsequent entries have posted that might erroneously affect the period 00 opening balances.

  4. Identified errors are documented and submitted to management for review and resolution.

  5. Once the FR Office has resolved all issues and has re-executed the closing routine, if necessary, the FR Office compares the period 15 and period 16 trial balances to confirm the corrections were made successfully and no issues remain.

  6. The quality control process described above is used for three different sets of IFS trial balances:

    1. A trial balance for an allocation account with the Federal Highway Administration delivered to the Department of Transportation and maintained by the IRS. Although these funds are not included for financial reporting, the IRS is still responsible for their accurate accounting. These funds are reviewed in the same manner as any externally reported funds.

    2. A trial balance for an Affordable Care Act allocation account delivered to Health and Human Services and maintained by the IRS. Although these funds are not included for financial reporting, the IRS is still responsible for their accurate accounting. These funds are reviewed in the same manner as any externally reported funds.

    3. A set of trial balances which only includes the financial statement funds issued to the public.

Beginning Balances for the New Fiscal Year

  1. Following IFS close at year-end, the FR Office verifies the accuracy of the October 1 beginning balances as described in IRM 1.35.15.15, Automated Close Process. IFS uses an automated closing process in period 16 to close the applicable proprietary and budgetary accounts.

  2. After all applicable proprietary and budgetary accounts have been closed, trial balance reports are generated from IFS for further analysis by the FR Office.

  3. The FR Office summarizes the period 16 and period 00 trial balances by SGL account and Treasury symbol and compares the account balances for the respective periods to determine if IFS brought the correct balances forward.

  4. The comparison of the period 16 and period 00 trial balances are reviewed to ensure no differences exist. The FR Office researches and resolves any differences noted to ensure that:

    1. No errors occurred during IFS close.

    2. No subsequent entries have posted to IFS that might erroneously affect the period 00 opening balances.

  5. Identified issues are documented and submitted to management for review and resolution.

  6. Once the FR Office has resolved all errors and re-executed the closing routine, if necessary, the FR Office again compares the period 16 and period 00 trial balances to confirm that corrections were made successfully and that no issues remain.

  7. The quality control process described above is used for three different sets of IFS trial balances:

    1. A trial balance for an allocation account with the Federal Highway Administration delivered to the Department of Transportation and maintained by the IRS. Although these funds are not included for financial reporting, the IRS is still responsible for their accurate accounting. These funds are reviewed in the same manner as any externally reported funds.

    2. A trial balance for an Affordable Care Act allocation account delivered to Health and Human Services and maintained by the IRS. Although these funds are not included for financial reporting, the IRS is still responsible for their accurate accounting. These funds are reviewed in the same manner as any externally reported funds.

    3. A set of trial balances which only includes the financial statement funds issued to the public.

New Fiscal Year Budget Load

  1. The CB, in collaboration with the FMS Office, enters a plan version of the new fiscal year budget into IFS in early September. This plan version does not have any financial accounting effects, it serves as a budget to process travel authorizations prior to the start of the next fiscal year. On October 1, the budget is loaded into IFS version 0 according to apportionments approved by OMB. The CB accomplishes this by using an automated budget upload process and manual data entry procedures.

  2. Depending on when Congress approves the IRS’s appropriations, the initial budget upload may contain approved appropriated amounts or it may reflect planned activity as it appears in plan development.

  3. Existing balances of no-year and multi-year funds are systemically carried forward at the beginning of the new fiscal year to ensure funds are available for open obligations and to incur new obligations.

Financial Statements

  1. Detailed guidance on the form and content of the agency’s financial statements can be found in OMB Circular No. A-136, Financial Reporting Requirements.

  2. At year-end, the IRS prepares the following financial statements:

    1. Balance sheet

    2. Statement of net cost

    3. Statement of changes in net position

    4. Statement of budgetary resources

    5. Statement of custodial activity

  3. In addition to the financial statements, the IRS prepares:

    1. Notes to the financial statements

    2. Required supplementary information

    3. Other information

  4. The FR and Custodial Accounting Offices account for the appropriations made to carry out IRS’s tax collection efforts and for the gross amount of taxes collected, refunds paid and unpaid taxes. The FR Office provides the amounts for the line items in the financial statements and the notes to the financial statements, required supplementary information and other information. The FR Office is also responsible for consolidating the line items into the financial statements.

  5. The CFO has overall responsibility for compiling the IRS’s financial statements and disclosures. Specific organizational responsibility for each report is indicated below.

    Name of Report Lead Role
      FM, specifically the FR Office FM, specifically the Unpaid Assessments and Analysis Office/ Custodial Accounting Office
    Balance Sheet X  
    Statement of Net Cost X  
    Statement of Changes in Net Position X  
    Statement of Budgetary Resources X  
    Statement of Custodial Activity   X
    Notes to the Financial Statements X  
    Required Supplementary Information X  
    Other Information X