0301 Overview

This chapter establishes the Department of Veterans Affairs’ (VA) financial policies for recognizing and recording accounts and interest payable.

Key Points covered in this chapter:

• VA will recognize accounts payable when goods or services are received and accepted;
• VA will report accounts payable on the consolidated balance sheet in accordance with the Treasury Financial Manual (TFM) and Office of Management and Budget (OMB) Circular A-136;
• VA will disclose accounts payable not covered by budgetary resources in accordance with OMB Circular A-136; and
• VA will, in accordance with the TFM, present accounts payable balances as canceled on its fourth quarter Governmentwide Treasury Account Symbol Adjusted Trial Balance System (GTAS) submission prior to closing an appropriations account.

0302 Revisions

Section	Revision	Office	Reason for Change	Effective Date
Various	Edits per format standards; links update	OFP	Full review	April 2025
0304 and 0305	Added Administration and Staff Office CFOs, OFA, and OFR roles and policy actions.	OFP	CFOs direct accounting activity. OFA adjusts service and supply-based contract accruals. OFR manages financial reporting.	April 2025
030501	Added references for Antideficiency Act and record retention	OFA	Clarify requirement	April 2025
030503	Added reference to other chapters also addressing liability accruals	OFA & OFP	Expose larger scope of liability accruals	April 2025
030503	Described estimation process for medical services expense incurred but not yet reported (IBNR)	OFP	Moved estimation activity from definition	April 2025

For a complete list of previous policy revisions, see Appendix A: Previous Policy Revisions.

0303 Definitions

Accounts Payable – Amounts owed to other entities for items such as goods and services received and rents due.

Anti-Deficiency Act (ADA) Violation – Pursuant to 31 U.S.C. §§ 1341, 1342, and 1517, an ADA violation may occur when an obligation or an expenditure exceeds the amount, period of availability, or purpose of an appropriation or fund authorized by Congress and apportioned by OMB.

Appropriation – Provisions of law enacted by Congress, not necessarily in an appropriations act, authorizing the federal agency to incur obligations and make payments for a given purpose. Usually, but not always, an appropriation provides budget authority.

Closed or Canceled Accounts – Pursuant to 31 U.S.C. § 1552, accounts for which any remaining balances are withdrawn (closed or canceled) or are no longer available for obligation or expenditure for any purpose.

Exchange Transaction – A transaction in which each party to the transaction sacrifices value and receives value in return.

Governmentwide Treasury Account Symbol Adjusted Trial Balance System (GTAS) – A Treasury operated Governmentwide web-based system used by Federal agencies to submit both budgetary and proprietary financial data.

Incurred But Not Reported (IBNR) – An estimate of cost for services rendered but not yet paid.

Insurance Dividend – A dividend established when gains to operations are realized exceeding those essential to maintain solvency of the insurance programs.

Interest Payable – Interest incurred but unpaid on liabilities of the reporting entity.

Intragovernmental Liability – A probable future outflow or other sacrifice of resources resulting from a past transaction or event between Federal entities.

Interest on Late Payments – An amount normally calculated from the day after payment was due until the day payment is made.

Liability – A probable future outflow or other sacrifice of resources resulting from a past transaction or event.

Liabilities Covered by Budgetary Resources –Liabilities are considered covered by budgetary resources when:

• Funded by permanent indefinite appropriations that have been enacted and signed into law;
• Funds are available for use as of the balance sheet date;
• Funds may be apportioned by OMB without further action by Congress: and
• There is no contingency to be met before apportionment.

Non-exchange Transaction – Inflow of resources that the Federal Government has not earned but received as a donation, or due to legislation or regulation such as, taxes, duties, fines, and penalties. Donations may be financial resources such as cash or securities, or nonfinancial resources such as land or buildings.

Public Liabilities – Claims against the Government arising from transactions with individuals and entities outside the U.S. Government.

Recognize – To record a financial transaction in the financial records of an entity.

Refunds – Return of funds previously disbursed (payables) or collected (receivables).

Standard External Reports regarding TFM Crosswalks to Standard External Reports comprise the Balance Sheet, Statement of Net Cost, Statement of Changes in Net Position, Statement of Custodial Activity, Statement of Budgetary Resources, Standard Form 133 Report on Budget Execution and Budgetary Resources, and Schedule P.

Unexpired Accounts – Appropriation or fund accounts in which the authority for incurring or adjusting obligations has not yet expired.

0304 Roles and Responsibilities

Administration and Staff Office CFOs are responsible for ensuring finance staff coordinate with program offices to record liabilities for the unpaid amount of goods and services in the accounting period that VA accepts the goods or receives the services.

Financial Service Center (FSC) is responsible for appropriately recognizing, estimating, and recording of accounts payable.

Office of Financial Audit (OFA) is responsible for coordinating and supporting the financial statement audit process between Office of Inspector General, Administrations and Staff Offices, and the independent auditors. OFA is the principal audit liaison responsible for remediating financial statement audit findings and coordinating business process improvements and related internal controls.

Office of Financial Reporting (OFR) is responsible for reporting accounts payable and interest payable in the financial statements.

0305 Policies

030501 General Policies

1. When recording and reporting accounts and interest payable, VA will comply with the provisions of:
   • Statement of Federal Financial Accounting Standards (SFFAS) 1 and 5;
   • Office of Management and Budget (OMB) Circular A-136;
   • Treasury Financial Manual (TFM); and
   • ADA.
2. VA will support all amounts recognized as accounts or interest payable with valid documentation, and evidence of authorizations and approvals.
3. VA will maintain documentation of accounts payable valuation estimates and accrual calculations in accordance with National Archives and Records Administration requirements.

030502 Recognizing Accounts Payable

1. Administration and Staff Office CFOs will ensure finance staff coordinate with program offices to record a liability for the unpaid amount of goods and services in the accounting period that VA accepts the goods or receives the services.
2. VA will recognize and report accounts payable in accordance SFFAS 1.
3. VA will recognize a liability for exchange transactions in accordance with SFFAS 5.
4. VA will, in accordance with SFFAS 5, recognize a liability for non-exchange transactions for any unpaid amounts due to a Federal entity.
5. FSC will consolidate VA accounts payable data for the purposes of financial reporting.

030503 Calculating and Recording Accruals

1. Monthly, VA will estimate amounts owed for goods and/or services that have been ordered and received, but not billed/invoiced by the vendor.
2. VA uses an actuarial model to project/accrue Office of Community Care (OCC) program expenditures (Incurred But Not Reported (IBNR)) subject to obligation at claims approval legislative authority addressed in P.L. 116-260. For additional information on IBNR and other accrued liabilities, see Volume III, Chapter 5 – Obligation at Claims Approval, and other chapters in Volume VI – Liabilities.
3. VA will record the estimated accruals using the appropriate TFM United States Standard General Ledger (USSGL) Transaction Code.
4. Administration and Staff Office CFOs will ensure finance staff collaborate with program offices to monitor, validate, and adjust accrual amounts as needed.
5. During the third and fourth quarter reporting process, Office of Financial Audit will perform an analysis of service and supply-based contract accruals and adjust payables based on the methodology described in Appendix B: Accrual Methodology for Vendor Pay Obligations.
6. VA will reverse accruals at the beginning of the next accounting period.

030504 Accounting for and Recording Interest Payable

1. VA will record interest on late payment of invoices. Regarding payments see 31 U.S.C. § 3901 – 3907, and for refunds see 26 U.S.C. § 6611 for additional information.
   1. The interest rate in effect on the day after the payment due date is used to calculate the interest penalty.
   2. When an interest penalty is owed and not paid, interest will normally accrue on the unpaid amount until paid.
   3. The prompt payment interest rates change every six months. Current prompt payment rates and interest calculators may be found on the Treasury Bureau of Fiscal Service website under Prompt Payment.
   4. In accordance with 31 U.S.C § 3907, interest will not continue to accrue after one year or when a claim/dispute is filed under the Contract Disputes Act of 1978, pending resolution of the claim.
2. VA will pay interest to other Federal agencies, when applicable. The interest rates may vary as prescribed by Treasury.
3. VA will pay interest earned on insurance dividends annually to policyholders on the policy anniversary dates. If not paid by the end of the current accounting period a payable will be recorded.

030505 Financial Reporting for Accounts and Interest Payable

1. VA’s Office of Financial Reporting (OFR) will report accounts payable and interest payable in accordance with Fiscal Service TFM Crosswalks on Standard External Reports.
2. VA will report Intragovernmental transactions separately from amounts owed to the public. See Volume IX, Chapter 5 – Intragovernmental Transactions,and Volume VI, Chapter 2 – Intragovernmental vs. Public Liabilities.
3. VA will report liabilities not covered by budgetary resources (requiring future Congressional fund authorization) separately from liabilities covered by budgetary resources in accordance with OMB Circular A-136.

030506 Accounts Payable in Closed Appropriation Accounts

1. VA will allow 5 days prior to an appropriation account closing for any payments to clear Treasury.
2. In accordance with USSGL postings specified in TFM, VA’s annual close team will cancel valid payables in the appropriation account to be closed and re-establish the payable as an original appropriation closed payable in an unexpired fund related to the original appropriation.
3. VA will seek guidance from the Treasury if valid canceled payable exists, but a similar-purpose VA appropriation account does not exist.
4. VA will not use canceled appropriation account balances to satisfy payables once the appropriation account has closed.
5. Prior to closing an appropriation account, VA will identify valid payables on obligations. Payments of closed appropriation payables (canceled/re-established accounts payable) may not exceed one percent of the appropriation for that account and may not exceed the original appropriation limit. To prevent overpayments of canceled accounts payable that may cause an Anti-Deficiency Act violation, VA will:
   1. Identify the maximum amount that is permissible to charge current appropriations for payments that otherwise would have been properly chargeable to a canceled appropriation.
   2. Identify and monitor payments of the closed appropriation accounts payable to prevent overpayment from the current appropriation.
6. VA will reverse the closed appropriation accounts payable when payment is made with current year funds.

030507 Reporting Accounts Payable in Closed Appropriation Accounts

1. In accordance with 31 U.S.C. § 1554 within 15 days after the close of each fiscal year VA will submit to the President and Treasury Secretary  a report of the obligations and canceled balances for each closing appropriation account. For canceled accounts payable, the report will provide a description, a reference to the fiscal year of the appropriation, the balances canceled, and any payments made for canceled accounts payable.
2. VA will present accounts payable balances as canceled on its fourth quarter GTAS submission before an appropriations account will be closed. For further accounting guidance, refer to the USSGL TFM, Section III, Account Transactions, Part F, Yearend Preclosing and Closing Entries, on the USSGL website.
3. VA will report accounts payable from canceled appropriations in accordance with Fiscal Service TFM Crosswalks to Standard External Reports and OMB Circular A-136.

0306 Authorities and References

• United States Code (U.S.C.)
  • 26 U.S.C. § 6611, Interest on overpayments
  • 31 U.S.C. § 1341, Limitations on expending and obligating amounts
  • 31 U.S.C. § 1342, Limitation on voluntary services
  • 31 U.S.C. § 1517, Prohibited obligations and expenditures
  • 31 U.S.C. § 1552, Procedure for appropriation accounts available for definite periods
  • 31 U.S.C. § 1553, Availability of appropriation accounts to pay obligations
  • 31 U.S.C. § 1554, Audit, control, and reporting
  • 31 U.S.C. § 1555, Closing of appropriation accounts available for indefinite periods
  • 31 U.S.C. Ch. 39, Prompt Payment, §§ 3901-3907
  • 38 U.S.C. § 1701, Statutory Notes, Recording of Obligations, referencing P.L. 116-260 Obligation at claims approval
• Contract Disputes Act of 1978
• FASAB SFFAS Handbooks by Chapter  
  • 1, Accounting for Selected Assets and Liabilities
  • 5, Accounting for Liabilities of The Federal Government
• OMB Circulars
  • A-136, Financial Reporting Requirements
• National Archives and Records Administration
• Treasury, USSGL
• Treasury, Prompt Payment
• TFM Volume 1, Part 2, Central Accounting and Reporting
• TFM Crosswalks to Standard External Reports
• VA Financial Policy
• Volume III, Chapter 5 – Obligations at Claim Approval
• Volume VI, Liabilities:
  • Intragovernmental vs. Public Liabilities
  • Treasury Debt Borrowing
  • Liabilities for Loan Guarantees
  • Federal Employees’ and Veterans’ Benefit Liabilities
  • Environmental and Disposal Liabilities
  • Insurance Liabilities
  • Employees Accrued Salaries and Benefits
  • Contingent Liabilities
• Volume IX, Chapter 5 – Intragovernmental Transactions

0307 Rescissions

Volume VI, Chapter 3 – Accounts and Interest Payable, August 2021.

Appendix A: Previous Policy Revisions

Section	Revision	Office	Reason for Change	Effective Date
Various	Reformatted to new policy format and completed five-year review	OFP	Reorganize chapter layout	August 2021
0305 Policies	Updated policy statements	OFP	Properly reflect VA’s current accounting and recognition of accounts payable, interest payable, and accounts payable in closed appropriation accounts	August 2021
Appendices A and B	Moved items into policy section	OFP	Items were policy statements not procedures	August 2021

Appendix B: Accrual Methodology for Vendor Pay Obligations

1. VA will calculate and estimate accrual adjustments for Vendor Pay Obligations in quarter three and quarter four of each fiscal year.
2. Accruals for service and supply-based contracts (Vendor Pay) are posted in the financial system using an automated process. In the third and fourth quarters, VA reviews the automated estimated accrual balances and records adjustments to the accruals. In subsequent quarters, the adjusted vendor pay accrual balances are reviewed and evaluated for reasonableness.
3. VA will calculate separate estimates for two groups of VA funds to adjust Vendor Pay accruals. They are referred to as the “Traditional Funds” and “Medical Services Funds” estimates.
4. VA will calculate two rates (Aged Liquidation, and Current Liquidation) that will be applied to the accrual estimate for Traditional Funds and Medical Services Funds.
   1. The first rate, called the “Aged Liquidation Rate” is applied to accruals for prior year obligations as part of the accrual estimate calculation for Traditional Funds and Medical Services Funds.
   2. The second rate, called the “Current Liquidation Rate” is applied to accruals for current year obligations as part of the accrual estimate calculation for Traditional Funds and Medical Services Funds.