006.09.1 R1-19-4-1801. Reimbursement of Expenses Between Agencies (Also see R1-19-6-701)
AR ADC 006.09.1 R1-19-4-1801Arkansas Administrative Code
Ark. Admin. Code 006.09.1 R1-19-4-1801
006.09.1 R1-19-4-1801. Reimbursement of Expenses Between Agencies (Also see R1-19-6-701)
Generally Accepted Accounting Principles (GAAP) defines inter fund reimbursements as “repayments from the funds responsible for particular expenditures or expense to the funds that initially paid for them.” Per GAAP, interfund reimbursements should be treated as an increase in expenditures or expenses in the reimbursing fund and a decrease in expenditures in the reimbursed fund. Allocation of indirect cost (overhead) should also be classified as reimbursements. There are two methods available that comply with GAAP with one method restoring appropriation if a current year refund and the second method not restoring appropriation but reclassifying the transaction for financial reporting purposes. Refer to the Frequently Asked Questions Section for detailed examples of the two methods. Refunds to expenditures are permitted by law only in certain instances including reimbursements to State agencies for cost-sharing purposes.
GAAP also states that, when governments concentrate one or more risk financing activities in a single fund, premiums received from other funds should be treated as an interfund reimbursement. An exception to this rule is, when the premiums paid are in excess of related expenditures, these excess premiums should be treated as an interfund transfer. The current practice is for agencies to record expense and the risk financing activity to record revenue. Agencies should continue this practice. These payments will be evaluated and adjusted accordingly by the DFA-OA-CAFR Section.
The procedure used when one agency incurs expenses that is pursuant to a cost sharing arrangement entered into prior to the expense occurring between two agencies or an agency incorrectly paid another agency's invoice is a hybrid refund to expenditure transaction which is processed on a journal entry by the DFA-OA-Reconciliation Section. The purpose of the refund to expenditure transaction is to reduce expense and restore the appropriation used on the books of the agency that paid the expense and record the expense and reduce the appropriation on the other agency's books. Only a current year refund to expenditure gives the agency back their funding and appropriation to use again during the current fiscal year. Prior year refunds do not restore appropriation or funding unless the appropriation and funds have carry-forward authorization in the appropriation Act. The journal entry processed for hybrid refund to expenditures is outlined in the Frequently Asked Question Section.
Hybrid refunds to expenditure cannot be used to circumvent the appropriation process.
PLEASE NOTE: See reimbursement between agencies process in appendix P1-19-4-1801.
PLEASE NOTE: See refund to expenditure audit procedures P2-19-4-1801.
Current with amendments received through February 15, 2024. Some sections may be more current, see credit for details.
Ark. Admin. Code 006.09.1 R1-19-4-1801, AR ADC 006.09.1 R1-19-4-1801
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