I. BACKGROUND

MECHANIZATION OF CONTRACT ADMINISTRATION SERVICES (MOCAS) ACCOUNTS PAYABLE ACCRUAL PROCEDURES

TABLE OF CONTENTS: Page No.

I. BACKGROUND 2

II. GENERAL 3

III. MOCAS MONTHLY ACCOUNTS PAYABLE REPORT 10

IV. JOURNAL ENTRIES TO POST THE MOCAS ACCOUNTS PAYABLE 13

V. JOURNAL ENTRIES TO POST CONTRACT HOLDBACKS/WITHHOLDS 21

VI. REPORTING RESPONSIBILITIES 25

VII. ESTIMATION ACCRUALS: MOCAS, CONTRACT HOLDBACKS and MULTI-ACRN CLINs 27

VIII. FINANCIAL STATEMENT FOOTNOTE DISCLOSURE FOR MOCAS-RELATED ESTIMATES 32

Version: March 2008 1 of 33


I. BACKGROUND

Purpose. The purpose of these procedures is to provide the guidance for standard reporting and recording of Mechanization of Contract Administration Services (MOCAS) unpaid liabilities for accepted deliveries and performance and any related contract holdback amounts. The procedures relate to posting the accruals and are not intended to cover the full cycle of an accounts payable. The procedures include estimates and financial statement disclosure of accounts payable amounts when amounts are not available for recording during the accounting period.

Accounts Payable Process. Accounts payable are amounts owed to other entities for receipt of goods and services, progress in contract performance and rents. When an entity accepts title to goods whether the goods are delivered or in transit, a voucher for services, or a request for contract financing payments, the entity should recognize a liability for the unpaid amount. Normally, title passes when the goods are received. However, when goods are accepted by a government official at a contractor’s site or at a location other than the entity’s place of business, the accounts payable should be recorded as of the acceptance date. Integrated systems provide the most efficient method for capturing outstanding receipt and acceptance transactions so that an accounts payable can be recorded during the current financial reporting period. Conversely, when accounting systems do not receive transactions as a direct flow from entitlement and logistics, immediate recording of the accrual event is delayed. Current efforts within the Department of Defense (DoD) to employ the Wide Area Work Flow (WAWF) or related system to capture delivery for goods or services may provide the vehicle for bridging the gap between the logistics, entitlement and accounting systems. WAWF is an automated system that allows vendors to electronically submit invoices and receiving reports, and the Government to inspect, accept, receive and pay electronically. DoD Components have initiatives to exploit the WAWF entitlement and accounting advantages. Until full deployment and a MOCAS interface with accounting systems for timely recordation of MOCAS accruals within the accounting systems, information from external reporting will drive the accounts payable balance for financial statement presentation.

MOCAS Accounts Payable Source Transactions. MOCAS can be a reliable source for capturing DoD accounts payable amounts for contract pay when a direct transaction flow does not exist between entitlement and accounting systems. Although the foundation for MOCAS accounts payable transactions are material receipt notifications from source and destination acceptances, the accounting systems are not usually aware of the liability until an electronic notice or paid voucher is transmitted from MOCAS. Compensating controls are required to ensure complete recording and reporting payable information relating to contracts administered and payments made through the MOCAS by the DFAS Columbus Center (DFAS-CO). There are sources of information prior to payment regarding the existence of accounts payable amounts, but they have not been or have been inconsistently available for use in accounting systems. These sources include: (1) DD 250 material acceptance document that is distributed to procurement or logistics and program offices, (2) actual materiel receiving transactions by recipient locations, (3) shipment performance notices transmitted to logistics centers or program offices based on the DD 250 acceptance data entered into MOCAS, and (4) prevalidation of entitled payments with data contained in accounting systems.

Accounting entities, which do not have a reliable source for recording MOCAS payables, will have to rely on MOCAS to furnish accounts payable information. The DFAS Columbus



systems personnel developed monthly reports for recording and reporting MOCAS accounts payable data. Specifically, accounting entities must use the accounts payable related reports and supporting detail data provided by MOCAS for developing accounts payable balances to be included in financial statements These monthly MOCAS reports are available to the DFAS Networks for the Military Service Components, Defense Organizations and the United States Army Corp of Engineers (USACE), i.e., Military side, Treasury Index 21).

II. GENERAL

Objective of MOCAS Monthly Report. The objective of the monthly MOCAS report is to capture all MOCAS open accounts payable records at a given point in time and reflect those amounts in monthly budgetary and quarterly proprietary (financial) statements. This report covers payable activity from all three MOCAS regional databases, i.e., North, South and West. Specific stages of accounts payable provided in the MOCAS report include receipts unmatched to an invoice, receipts matched to an invoice, and Bureau Voucher Invoices.

Scope. These instructions apply to all military service general funds, their working capital funds, Treasury Index 97 allocated and non-allocated funds, Defense Organizations’ general and working capital funds. Based on OMB Circular A-136, rev July 2006, effective for FY 2007, for Foreign Military Sales (FMS) where the Executive Office of the President is the parent, the receiving agency, i.e., DoD, is responsible for reporting all budgetary and proprietary activity in their financial statements. Thus, appropriation “8242” is included in the scope of this instruction.

MOCAS Payable Types. To ensure the MOCAS accounts payable output is a complete and reliable source for recording and reporting liabilities, three general categories of payables have been identified that should be reported as a public payable. The general categories and their subcategories are:

Commercial Invoices

Commercial – a contractor’s invoice used in the private sector to bill for government received items

Service Invoices- payments for services provided to the government such as maintenance, storage or repair. These invoices usually require an administrative or procurement contracting officer’s signature

Refunds – internal MOCAS payment type for refunds to the contractor, i.e., discounts taken in error

Administrative Contract Officer – ACO approved (signature) invoices, no DD 250 is required. Payments for services provided to the government such as maintenance, storage or repair



Additional Supplemental Billing – a supplemental invoice for additional money after the original invoice has been paid, i.e., a change in unit price usually from a contract modification

Modification Not Billed – an invoice billing for a total amount of a modification which authorizes the payment of a specific amount which was not previously billed and paid

Termination Costs – cost incurred by the government for terminating a contract at the convenience of the government

Procurement Contracting Officer – PCO approved (signature) invoices, no DD 250 is required. Payments for services provided to the government such as maintenance, storage or repair

Freight Charges – payments for transportation charges to a contractor in accordance with the terms of the contract

Received But Not Billed – contractor re-invoices for remainder of government accepted delivery on a DD250

Financing

Progress Payments – payments made based on the cost incurred by the contractor as work progresses under the contract

Performance Based Payments (PBP) – payments based on specified performance actions being accomplished. Performance is usually measured by objective, quantifiable methods; accomplishment of defined events; other quantifiable measures of results. The Federal Acquisition Streamlining Act (FASA) of 1994 included this provision for use of PBP as an alternative to progress payments

Commercial Item Financing (CIF) – same as Performance Based Payments except the item is not government specific (i.e., commercial company can purchase the same item). CIF is another form of contract financing resulting from the FASA. FAR Part 12 and Part 52 were revised to allow contracts to be written in accordance with customary practices

Bureau Voucher Invoices – Cost reimbursement invoices.

The Defense Contract Audit Agency (DCAA) normally reviews and approves partial payment vouchers under cost-reimbursement type contracts. Acceptance documentation (DD250) is not required for payment processing; however, the payment voucher should be annotated to indicate Government acknowledgement.



Multi-ACRN CLINs. Ensuring the completeness of the accounts payable amounts reported in both budgetary and proprietary accounts required the inclusion of the aforementioned types of payables in the MOCAS monthly report. A limitation of this reporting process occurs when multiple Accounting Classification Reference Numbers (ACRN) are used to fund a single Contract Line Item Number (CLIN). This prevents MOCAS from allocating the payable to an appropriation. Thus the system cannot capture 100% of the MOCAS accounts payable total in the monthly report. Normally, receipt notifications are recorded in a CLIN that has a one to one relationship with an ACRN, i.e., a product or service funded through one line of accounting. For multi-ACRN CLINs, there is a one-to-many relationship between the CLIN and ACRNs, i.e., a product or service funded through more than one line of accounting. As a result, the appropriation bearing the multi-funded payable is not identified until an invoice is received and manual research is performed, adversely affecting the timeliness of recording the payable. To help mitigate the inability to record multi-ACRN CLIN related payables, an estimation process has been established to ensure complete reporting. Discussion related to this estimation method is included in Section VII.

MOCAS Prevalidation. The prevalidation process is utilized by certain accounting systems to capture and record the accounts payable amounts at transaction level, which minimizes the effect of the Multi-ACRN CLINs. In these cases, MOCAS prevalidation requests are recorded as an accounts payable in the accounting system prior to the MOCAS disbursement. For example, when MOCAS requests a prevalidation that obligations are recorded in the accounting systems prior to making a disbursement, the accounting system will upon verifying the obligations are recorded send a prevalidation acceptance back to MOCAS and record an accounts payable simultaneously. As a result, the prevalidated amounts associated with all MOCAS payment types are identified on the monthly MOCAS reports so that the appropriate adjustments are made to avoid duplication.

Prevalidation. The effects of the prevalidation transaction must be considered before recording an estimate in order to avoid recording duplicate accounts payable amounts. Since the MOCAS Accounts Payable Report specifically identifies the prevalidation amounts for the ACRN Total amounts, the prevalidation ratio will only be used for estimating the multi-ACRN CLINS. This consideration is based on whether or not the Network records an accounts payable amount during the prevalidation process. The Network(s) that record an accounts payable amount during the prevalidation process must give consideration to the prevalidation ratio when determining the amount to record as the estimate. If the Network reverses all prevalidated amounts before recording the MOCAS accounts payable amounts, it is considered a Network that does not record an accounts payable during the prevalidation process for formula purposes only.

The prevalidation ratio is calculated by dividing the total prevalidation amount by the total Net Accounts Payable amount. A monthly prevalidation ratio should be established for each appropriation. Once the ratio is calculated, the estimate is multiplied by 1 – prevalidation ratio. For example, if an appropriation was reported in the MOCAS report with ACRN Total of $1M and of that amount, $250K was prevalidated, the prevalidated ratio would be calculated as follows:

Prevalidated Amount ($250K) divided by ACRN Total ($1M) = 25%As a result of the prevalidated ratio above, the estimate would be calculated as follows:



Estimate times (1 - .25) OR Estimate times 75%

To ensure standardization, each DFAS Network will be prompted by the DFAS model to answer whether or not an accounts payable transaction is recorded during the prevalidation process. The answer should be based upon how the majority of systems respond to a prevalidation request for the fund.

Contract Holdbacks / Withholds. MOCAS liabilities also include contract holdbacks, that are amounts withheld from contractors pending the completion of contracts; thus, protecting Government interest by mitigating potential losses. The Treasury Financial Manual Supplement, Section V, USSGL Crosswalk, requires holdbacks be classified in accounting reports as “Other Liabilities.” To establish control and ensure the proper classification of these liabilities, a separate report for contract holdbacks was created. The report should be used to record the MOCAS liabilities in both budgetary and proprietary financial reports.

Waivers from Use of MOCAS Report. Accounting systems that demonstrate the ability to capture MOCAS liabilities from sources outside of MOCAS with a high degree of accuracy may be granted a waiver from use of the MOCAS monthly report for reporting payables. However, these instructions include estimation procedures for recording accounts payable amounts related to items not included in the MOCAS report (i.e. multi-ACRN CLINS and early cutoff days for both accounts payable and contract holdbacks). The waiver only applies to the use of the MOCAS report and MOCAS cut-off estimates. The waiver does not apply to multi-ACRN CLIN estimates. The DFAS Standards and Compliance Directorate, Accounting Mission Area, Accounts Payable, is responsible for approving all waivers. Request for waivers must satisfy two objectives.

Receipts from MOCAS delivered goods and services must be entered into the accounting system at the point the entity accepts title for goods, receives services, or when progress in contract performance is made

Payables recorded from receipts must be liquidated upon MOCAS payments no later than 15 calendar days from disbursement date (OUSD (C) Subject: Distribution and Posting of Disbursements into the Department of Defense (DoD) Accounting Systems dated Dec 03, 2003

In order to meet the criteria above, a two-way analysis must be performed that compares MOCAS accounts payable amounts to those recorded in the accounting system and vise versa. For example, using the latest MOCAS reporting period, the initial review will compare the MOCAS transactions to those recorded in the accounting system. A subsequent review will compare the accounting system transactions to those recorded in MOCAS. At a minimum, the requestor must take a representative sample for each accounting system from the monthly MOCAS file and match those transactions to the transactions in the accounting system, and then a representative sample of the accounting system transactions are matched to the MOCAS transactions. The analysis must stratify transactions by counts and dollar amounts for both comparisons into three categories:

1) matched in both processes, i.e., transactions found in both MOCAS and the accounting system,



2) transactions from MOCAS administered contracts found in the accounting system but not in the MOCAS file, and

3) transactions in MOCAS but not in the accounting system.

Accounting activities unable to perform the stratification of transactions because of system limitations may use the Electronic Document Access (EDA) system (Electronic 110 Query) to trace MOCAS disbursements back to accounts payable transactions. When stratifying the transactions into one of the three categories, annotate the date the good or service was accepted, the date the receipt was entered into the accounting system, the date the transaction was paid and the date the payment was posted into the accounting system. These dates will be the basis for determining whether or not a waiver should be granted. Additionally the accounting activity should provide an analysis summary of those items falling into categories two or three above.

Once the disconnects between MOCAS and the accounting systems are identified, further analysis should be performed to pinpoint the systems, Disbursing Station Symbol Number, and types of transactions in order to establish corrective actions for the disconnects.

Sample Size. The population size to test for a waiver request should be determined by standard auditing sample techniques with a confidence level no less than 95 percent. The analysis and the method used to determine the sample size must be explained in the waiver request. The following formula will assist in determining the appropriate sample size to test.

Sample Size = e (1 – e) (S / C)2 + (e (1 – e)) / N

e is the Expected Error Rate. i.e., the percentage of MOCAS transactions expected not to be recorded in the accounting system. For purpose of calculating the sample size, the expected error rate should be no more than 5 percent, allowing flexibility for posting errors.

S is the Sampling Error or Sample Precision. Usually expressed as a +/- percentage in relation to the sample result. Sampling errors arise from estimating a population characteristic by looking at only one portion of the population rather than the entire population. It refers to the difference between the estimate derived from a sample and the 'true' value that would result if the whole population were evaluated under the same conditions. For the purpose of calculating the sample size, the Sampling Error percentage should not exceed 2 percent.

C is the confidence level desired (95% confidence level = 1.96 and 99% confidence level = 2.58). For the purpose of calculating the sample size, a minimum of 95% confidence level should be used.



N is the total population that the sample represents (the total MOCAS transactions). The total population represents the total transactions on the MOCAS files that are used for posting accruals to the accounting systems. For example, each Network has a Service specific file from each MOCAS region. The transaction total from all three files with your service number is the population to be sampled.

An excel spreadsheet or similar format is recommended for the waiver analysis. Included in the analysis should be all the elements of the above formula, the results of sample testing stratified as mentioned above, and other pertinent information that demonstrates the MOCAS accounts payable transactions are successfully recorded and reported in the accounting systems via a source other than MOCAS. An example of a waiver analysis summary and support is provided below:

WAIVER REQUEST ANALYSIS EXAMPLE

Purpose: The accompanying analysis demonstrates that the General Fund Enterprise Business Systems’ (GFEBS) integrated accounts payable process records events relating to the MOCAS liabilities in an effective and efficient manner, and therefore seeks to obtain a waiver from using the monthly MOCAS Accounts Payable Reports as the source for recording MOCAS liabilities.

Procedures: The review procedures included evaluating a representative sample of transactions from the December 31, 2005 MOCAS Accounts Payable Report, and determining whether or not these transactions were recorded in a timely manner within GFEBS. The sample transactions were identified based on the sampling techniques described in the “MOCAS Accrual Procedures,” using a 95% confidence level.

Results: The following summarize the results of our analysis.

1. 98% of the MOCAS detailed transactions were identified as recorded in a timely manner with GFEBS

2. During the waiver analysis, accounts payable transactions were identified in GFEBS that were not reflected on the MOCAS reports. Further, analysis of these transactions determined that these transactions were based on actual receipt and acceptance, therefore representing a legal liability. The receipt and acceptances were not input timely into MOCAS.

3. 1% of the MOCAS detailed transactions were not recorded into GFEBS due to delays in the receipt and acceptance process. Controls were established to prevent such delays in the future. These controls include the following:

a. _________b. __________c. ____________



Transaction in Both MOCAS and the Accounting System

DEPT FY BSYM LIMIT SPIIN SHIP NO Invoice # ACRN AmtRecoup

AmtAccounts Payable

Accept Date

AP Post Date Disb Date

Disb Post Date

21 4 2033 GN0 01 DAAE07 0011 LJ S0048 B041617 $370.73 $0.00 $370.73 10/31/05 10/31/05 11/20/05 11/25/0521 4 2033 GN0 01 DAAE07 0011 LJ S0050 ML00198 $1,604.55 $0.00 $1,604.55 09/20/05 09/21/05 10/15/05 10/20/0521 4 2033 GN0 01 DAAE07 0011 LJ S0050 ML00198 $4,135.18 $0.00 $4,135.18 09/10/05 09/12/05 10/20/05 10/25/0521 4 2033 GN0 01 DAAE07 0011 LJ S0048 B041617 $6,691.48 $0.00 $6,691.48 09/04/05 09/05/05 10/01/05 10/06/0521 4 2033 GN0 01 DAAE07 0011 LJ S0050 ML00198 $6,691.48 $0.00 $6,691.48 09/01/05 09/30/05 09/25/05 09/30/0521 4 2035 D00 03 DAAE20 0007 KTC0005 0005 $12,734.00 $0.00 $12,734.00 10/02/05 10/02/05 10/25/06 10/30/0521 4 2035 D00 03 DAAE20 0007 KTC0008 0008 $25,468.00 $0.00 $25,468.00 10/06/05 10/07/05 10/28/05 11/02/0521 5 2033 GN0 01 DAAE07 0011 LJ S0048 B041617 $26,000.00 $0.00 $26,000.00 10/15/05 10/16/05 11/10/05 11/15/0521 3 2020 D03 02 DAAH23 0004 STR0209 80037067 $57,024.00 $0.00 $57,024.00 10/03/05 10/04/05 11/01/05 11/06/05

Transactions in the Accounting System but not in MOCAS


AmtAccounts Payable

Accept Date


Disb Post Date

21 3 2020 D03 02 DAAH23 0004 STR0210 80037069 $57,024.00 $0.00 $57,024.00 09/01/05 09/01/0521 3 2020 D03 02 DAAH23 0004 STR0211 80037567 $57,024.00 $0.00 $57,024.00 10/15/05 10/16/0521 3 2020 D03 02 DAAH23 0004 STR0212 80037566 $57,024.00 $0.00 $57,024.00 09/02/05 10/31/0521 3 2020 D03 02 DAAH23 0004 STR0213 80037708 $57,024.00 $0.00 $57,024.00 10/01/05 10/02/05

Transactions in MOCAS but not in the Accounting System


AmtAccounts Payable

Accept Date


Disb Post Date

21 4 2035 D00 03 DAAE20 0007 KTC0006 0006 $76,404.00 $0.00 $76,404.00 09/15/0521 4 2035 D00 03 DAAE20 0007 KTC0007 0007 $76,404.00 $0.00 $76,404.00 10/01/0521 4 2033 GN0 01 DAAE07 0011 LJ S0050 ML00198 $125,864.83 ($69,163.46) $56,701.37 10/13/05

Contract Number

Contract Number

Contract Number

Explanation

Explanation

Explanation

The accounting networks should coordinate their accounting system waivers and amounts with the Defense Agencies – Indianapolis Operations, Budget Executions and Reports Division (BERD) in order to avoid duplication of the MOCAS accruals.

A subsequent written waiver request is required if there is any process or procedural change that impacts the accounts payable recording and reporting.

When applying for a waiver, careful consideration should be given to assessing controls and supporting evidence associated with deviating from the standard process of accounting for MOCAS accounts payable. Specifically, an organization must demonstrate the internal controls, operating procedures, and provide adequate documentation to the audit community to support the deviation from the standard process.

Retention of the Monthly MOCAS Reports as Support for Budgetary and Proprietary Report. A retention policy for the monthly MOCAS accounts payable reports is required to fully support the funds management and financial reporting functions. The amounts recorded and reported for budgetary and proprietary purposes impact the tools used to assess the financial health of an entity. As a result, the details that support the amounts should be readily available for review and/or analysis. The DoD FMR Volume 1 Chapter 9 regulations refer to the National Archives and Records Administration (NARA) for retention guidance. However, supplemental guidance issued by OUSD (C) Memorandum dated October 20, 2003, Subject: Retention of Documentation Guidance, directs all activities to retain monthly accounting reports, accompanying systems backup that contain the supporting transactions, and related documentation for a period of one year after the appropriation cancels.

Any information added to the Monthly MOCAS Reports should be maintained with the original MOCAS Reports in order to provide an audit trail for the total amounts recorded as MOCAS accounts payable or contract holdback. For example, estimates are required for MOCAS multi-ACRN CLINS and Cut-off days. The formula used to calculate such estimates, as well as the



results, should be printed from the Estimation Database on the Accounts Payable Eportal. The printed report from the Estimation Database should be maintained with the original Monthly MOCAS Report. The Journal Voucher created for recording such amounts shall be maintained for each reporting entity for the retention period discussed above.

In addition to supporting the amounts in the Budgetary and Proprietary reports, evidence supporting specific transactions such as electronic documentation is defined as follows.

Electronic Documentation Support. Receiving reports may be either hard copy or in electronic form. Acceptable electronic forms include scanned documents into a system that has adequate controls over the scanning process and electronic systems. An electronic system is a system where all transactions originate in electronic form. Very few, if any, DoD systems are electronic systems. Systems that have data manually input are not electronic systems.

III. MOCAS MONTHLY ACCOUNTS PAYABLE REPORT

Purpose. The MOCAS report provides the Military Services and DoD Components’ supporting DFAS Center, accounts payable amounts by appropriation useful in preparation of the monthly reports on budget execution, i.e., SF 133, AR (M)1307, AR(M)1002 and proprietary statements, i.e., financial statements.

Location and Release of Monthly Reports. The accounts payable files are located on the corp1 ftp server at “corp1.dfas.mil” in “ftp_8/acctspay”. The files are available no later than the last business day of the calendar month.

For DFAS personnel, to get access to the Corp1 server, submit a request through your TASO. For non-DFAS personnel, to get access, complete DD Form 2875 and submit to DFAS-BSSE/CC or phone (614) 693-6665.

Composition of MOCAS Files. The MOCAS files are generated from three databases - North, South, and West and consist of the following accounts payable files.

1. Invoices Matched to Acceptance File2. Acceptances Unmatched to an Invoice3. Unpaid Bureau Voucher Numbers (BVN) – an SF 1034 with a detailed summary of costs.

Contractors usually submit costs on a monthly basis and invoices are received early in the subsequent month.

4. Withholds (Contract Holdbacks)5. Prevalidated Amount

An extract of the above files are provided at DoD Component level, i.e., Army (TI 21 and TI97), Navy (TI17 and TI97), Air Force (TI57 and TI97) and DLA (TI97 Columbus). The assignment of appropriations to a DoD Component is based on the MOCAS line of accounting table supplied from each DFAS treasury reporting Center. Defense funds aligned to specific Military Services are included in the related files for that Service. The Defense Organizations aligned to DFAS Columbus are included in the DLA file. All other Defense Organizations, to include the US



Army Corp of Engineers, not aligned to a Military Service are included in the Army file. The accounting office responsible for recording the MOCAS accounts payables should understand the file structure and content of their related file.

Calculation of Accounts Payable Amount to Record. The monthly MOCAS accounts payable reports include the amounts for all acceptance and receiving reports for which an invoice has not yet been paid, excluding the Multi-ACRN CLINS. Future enhancements may allow for these payables to be included on the monthly MOCAS accounts payable report. The reports contain detail transaction level information for each shipment number. Additional information included in the monthly MOCAS reports consist of progress payment recoupment and prevalidated amounts related to specific appropriations. Calculations must be performed in order to record and report the Net Accounts Payable amounts for each appropriation. For example, the total accounts payable amounts should be reduced by the progress payments paid and / or the accounts payable amounts already recorded during the MOCAS prevalidation process. The calculations will vary for the accounting systems that post an accounts payable transaction during the MOCAS prevalidation process and those that do not. The following are the calculations that should be performed prior to recording the MOCAS accounts payable amount for entries summarized in Section IV.

Journal Entry “A” and “E” in Section IV - Calculation When Recording Accounts Payable During Prevalidation ACRN Total minus Recoupment minus Prevalidated Amount = Net Accounts Payable

Journal Entry “B” in Section IV - Calculation for Accounting Systems That Do Not Record an Accounts Payable During Prevalidation ACRN Total minus Recoupment = Net Accounts Payable

Contract Withhold amounts do not factor in to the calculations for the accounts payable because they are classified as “Other Liabilities” on the financial reports. Its journal entries can be found in Section V.

Invalid Limits. There may be situations where the limits reported on the monthly MOCAS Report are inconsistent with the approved limits established by Treasury and OUSD. These conditions will exist when the DoD Components use additional limits to control funds or the MOCAS line of accounting table may not be current. Invalid limits affect the proper alignment of MOCAS accounts payable amounts to the correct SF 133 report. The SF 133 reports are required by OMB which fulfills federal statute 31.USC.1511-1514. Responsibilities for resolving invalid limits are explained in Section VI, Invalid Limits.

Unfunded Payables. In applying the accounting entries from sections IV and V, an abnormal negative balance in the undelivered order amount, account 4801 may occur. Regardless, all accounts payables should be recorded. This situation is an indication of unrecorded obligations such as contract modifications or expenditure recording errors. Immediate research should be initiated by the responsible DFAS Network to determine any late unrecorded contract modifications or if any expenditure had been applied to the wrong fund account. If appropriate obligation entries or corrections cannot be made, the funding authority must be contacted regarding the funding of the negative balance.



The research mentioned above should include identifying the specific conditions causing the abnormal balance in the Undelivered Orders - GLAC 4801 (i.e. unrecorded obligations, miscoded disbursements, etc.). If the research concludes that the abnormal balance is caused by the original obligation exceeding current year expended authority, then the journal entries for Entry “C” in section IV should be recorded.

Cancelled Appropriations. Included in the monthly MOCAS Accounts Payable Report may be amounts related to cancelled appropriations. Such amounts will be included as liabilities and expenses in the currently available appropriation account from which they will be paid. The total of all payments from that current appropriation may not exceed the lesser of:

1. The unexpended balance of the canceled appropriation or2. The unexpired unobligated balance of the currently available appropriation or3. One percent of the total original amount appropriated to the current appropriation

being charged.

n/b. For more detailed procedure requirements, please consult the DoD FMR Vol 3, chapter 10, paragraph 1002.

When such amounts will be included in the year-end budget execution report and financial statements of a current appropriation, they must be presented as obligated and funded liabilities. Therefore, in lieu of a debit to 4801 shown in the accounting entries below, the debit will be to account 4610, Allotments – Realized Resources. Coordination with the funding authority should be accomplished in accordance with the usual practice.

Asset or Expense. Knowledge of a particular appropriation and included programs will determine the allocation to asset or expense accounts. Future reports from MOCAS may include the Object Class which will communicate the proper asset account vice an expense account.



IV. JOURNAL ENTRIES TO POST THE MOCAS ACCOUNTS PAYABLE

MOCAS accounts payable adjustments should be recorded at Fiscal Year, Basic Symbol, for general / appropriated funds and TI 97 Working Capital Funds. For all TI97 General Funds, accounts payable adjustments should be posted at Fiscal Year, Basic Symbol and Limit (4 digit level ONLY). Recording the MOCAS adjustments at transaction level is permissible provided the entry impacts the Customer at the four-digit limit. The basic accounting entries must be performed for both budgetary and proprietary report preparation. For all appropriations, the Net Accounts Payable amounts calculated above, as well as the recoupment amounts, should be recorded and reported. The following table provides the necessary journal entries that should be recorded in the accounting systems at the aforementioned level. An explanation that coincides with the “Entry Reference” is below the table.

EntryRef

Basic Entry Basic EntryDebit 4801 Undelivered Orders - Obligations, Unpaid Debit XXXX Operating Expense / Program Costs

Credit 4901 Delivered Orders - Obligations, Unpaid and / or Appropriate Asset AccountTo record the delivery of goods or services and accrue a liability Credit 2110 Accounts Payable

To record the delivery of goods or services and accrue a liability

Basic Entry with Progress Payment Recoupment Basic Entry with Progress Payment Recoupment1) Debit 4801 Undelivered Orders - Obligations, Unpaid Debit XXXX Operating Expense / Program Costs2) Debit 4802 Undelivered Orders - Obligations, Prepaid/Advanced and / or Appropriate Asset Account

1) Credit 4901 Delivered Orders - Obligations, Unpaid Debit XXXX Nonproduction Costs2) Credit 4902 Delivered Orders - Obligations, Paid Credit 2110 Accounts Payable

Credit 1410 Advances to OthersTo record the delivery of goods or services and accrue a liability

Basic Entry (Original Obligation Exceeds CY Expenditure Authority) Basic EntryDebit 4801 Undelivered Orders - Obligations, Unpaid Debit XXXX Operating Expense / Program Costs

Credit 4610 Allotments - Realized Resources and / or Appropriate Asset AccountCredit 4620 Unobligated Funds Exempt from Apportion Credit 2110 Accounts PayableCredit 4901 Delivered Orders - Obligations, Unpaid To record the delivery of goods or services and accrue a liability

Basic Entry Expenditure Authority Exceeds Original Obligation) Basic EntryDebit 4801 Undelivered Orders - Obligations, Unpaid Debit XXXX Operating Expense / Program CostsDebit 4610 Allotments - Realized Resources and / or Appropriate Asset AccountDebit 4620 Unobligated Funds Exempt from Apportion Credit 2110 Accounts Payable

Credit 4901 Delivered Orders - Obligations, Unpaid To record the delivery of goods or services and accrue a liability

Recorded Simulaneously With Basic Entry (See Notes for Exceptions)Debit 3107 Unexpended Appropriations - Used

Credit 5700 Expended AppropriationsTo record appropriations used this fiscal year

Budgetary Proprietary

To record the delivery of goods or services in the same year the order was placed and accrue a liability. The current-year expended authority is less than the original obligation.

E

A

B

C

D

GENERAL FUNDS

To record the delivery of goods or services and accrue a liability when an advance (progress payments) was paid.

To record the delivery of goods or services in the same year the order was placed and accrue a liability. The current-year expended authority is greater than the original obligation.

Budgetary entry "D" should be recorded as a result of the Tri-Annual review.

CURRENT & EXPIRED YEAR APPROPRIATION ACCOUNTS PAYABLE



EntryRef

Use of CY Funds for a Cancelled Appropriation Use of CY Funds for a Cancelled AppropriationDebit 4610 Allotments - Realized Resources Debit 6100 Operating Expense / Program CostsDebit 4620 Unobligated Funds Exempt From Apportionment Credit 2110 Accounts Payable

Credit 4901 Delivered Orders - Obligations, Unpaid



Removal of Payable from Cancelled Appropriation Removal of Payable from Cancelled AppropriationDebit 4350 Cancelled Authority Debit 2960 Accounts Payable From Cancelled Appropriations

Credit 4201 Total Actual Resources - Collected Credit 6800 Future Funded Expense

To record and obligation and accounts payable in an unexpired appropriation for a valid bill related to a cancelled appropriation

To record in the cancelled appropriation the removal of the cancelled payable upon receipt of a valid bill. The budgetary entry reduces the balance of authority that remains upon cancellation.


H

F

G

To record an obligation and accounts payable in an unexpired appropriation for a valid bill related to a cancelled appropriation

Budgetary ProprietaryCANCELLED YEAR APPROPRIATION ACCOUNTS PAYABLE

Explanation of Journal Entries – General Funds

A. To record the delivery of goods or services and accrue a liability

Budgetary (2007 USSGL Transaction Code B402)i. Purpose. This entry moves the obligation from the Undelivered Orders to

Delivered Orders Unpaid to indicate that delivery has been made and record the accounts payable.

ii. Impact. Decreases Undelivered Orders and increases Delivered Orders Unpaid accounts. (see Unfunded Payables paragraph)

Proprietary (2007 USSGL Transaction Code B402 simultaneously with B134)i. Purpose. The entry made recognizes the delivery of a good or service and

records the legal liability of the organization. Special consideration should be given to the recording of an asset or expense.

ii. Impact. Increases the expense and/or asset and accounts payable accounts.

B. To record the delivery of goods or services and accrue a liability when an advance (progress payment) was paid

Budgetary (2007 USSGL Transaction Code B402, B404)i. Purpose. The entry made moves the obligations from the Undelivered Orders

to Delivered Orders Unpaid for both unpaid and paid accounts, to give recognition to progress payment(s) paid.

ii. Impact. Decreases Undelivered Orders and increased Delivered Orders for both unpaid and paid accounts. (see Unfunded Payables paragraph)

Proprietary (USSGL Transaction Code B402, B404, simultaneously B134)i. Purpose. The entry made recognizes the delivery of a good or service and

records the legal liability of the organization. In addition, the entry decreases



any prepaid amounts such as progress payments and increases the appropriate assets and/or expense account. Special consideration should be given to the recording of an asset or expense.

ii. Impact. Decreases the Advances to Others and increases Operating Expense / Program Costs and/or Assets, Nonproduction Costs, and Account Payable accounts.

C. To record the delivery of goods or services in the same year the order was placed and accrue a liability. The current-year expended authority is less than the original obligation.

Budgetary (2007 USSGL Transaction Code B404)i. Purpose. The entry made moves the obligations from the Undelivered Orders

to Delivered Orders Unpaid and recognizes that the Current-Year Expenditure Authority is less than the original obligation.

ii. Impact. Decreases Undelivered Orders and increases Delivered Orders, Allotments – Realized Resources (for Category A & B Funds), and Unobligated Funds Exempt From Apportionment (Category C Funds). (see Unfunded Payables paragraph)

Proprietary (2007 USSGL Transaction Code B404)i. Purpose. The entry made recognizes the delivery of a good or service and


ii. Impact. Increase Operating Expense / Program Costs and/or Assets, Nonproduction Costs, and Account Payable accounts.

D. To record the delivery of goods or services in the same year the order was placed, and accrue a liability. The current-year expended authority is greater than the original obligation. This condition should be identified and corrected during the tri-annual review.

Budgetary (2007 USSGL Transaction Code B406)i. Purpose. The entry made moves the obligations from the Undelivered Orders

to Delivered Orders Unpaid and recognizes that the Current-Year Expenditure Authority is greater than the original obligation.

ii. Impact. Decreases Undelivered Orders, Allotments – Realized Resources (for Category A & B Funds), and/or Unobligated Funds Exempt From Apportionment (Category C Funds), and increase delivered Orders Unpaid. (see Unfunded Payables paragraph)

Proprietary (2007 USSGL Transaction Code B406)



i. Purpose. The entry made recognizes the delivery of a good or service and records the legal liability of the organization. Special consideration should be given to the recording of an asset or expense.


E. To record appropriations used this fiscal year. To be recorded with any current-year recognition of goods and services received.

Budgetary (USSGL Transaction Code B134)i. Purpose. None – No Budgetary Entry

ii. Impact. None

Proprietary (USSGL Transaction Code B134)i. Purpose. The entry made recognizes the Expended Appropriations. This

transaction does not stand alone. This transaction is not recorded by special or non-revolving funds trust funds, with the exception 1) special funds that receive appropriation or allocation transfers general fund appropriated Treasury Appropriation Fund Symbols (TAFS), or 2) special or trust funds that receive amounts appropriated from the General Fund of the Treasury via Treasury Appropriation Warrant.


F. To record an obligation and accounts payable in an unexpired appropriation for a valid bill related to a cancelled appropriation.

The total of all payments from that current appropriation may not exceed the lesser of:

1. The unexpended balance of the canceled appropriation or2. The unexpired unobligated balance of the currently available appropriation or3. One percent of the total original amount appropriated to the current appropriation

being charged.

n/b. For more detailed procedure requirements, please consult the DoD FMR Vol 3, chapter 10, paragraph 1002.

Budgetary (2007 USSGL Transaction Code B412)i. Purpose. To recognize the amount to be paid from current year funds for

cancelled appropriations. ii. Impact. Decreases Allotments – Realized Resources and/or Unobligated

Funds Exempt From Apportionment and increases the Delivered Orders Unpaid.






G. To record appropriations used this fiscal year. To be recorded with any current-year recognition of goods and services received.

Budgetary (USSGL Transaction Code B134)i. Purpose. None – No Budgetary Entry

ii. Impact. None

Proprietary (USSGL Transaction Code B134)i. Purpose. The entry made recognizes the Expended Appropriations. This



H. To record in the cancelled appropriation the removal of the cancelled payable upon receipt of a valid bill. The budgetary entry reduces the balance of authority that remains upon cancellation. This is only addressing the invoice received for a cancelled appropriation. The assumption is that the reclassification of accounts payable from an expired appropriation to a cancelled appropriation had already been recorded during year-end procedures in the year the appropriation cancelled.

Budgetary (2007 USSGL Transaction Code D145)i. Purpose. To decrease the Cancelled Authority and the Total Actual

Resources – Collected.ii. Impact. Decreases Cancelled Authority and the Total Actual Resources

Collected.

Proprietary (2007 USSGL Transaction Code D145)i. Purpose. To remove the amount recorded as an accounts payable prior to the

cancellation of the fund. ii. Impact. Decreases Accounts Payable from Cancelled Appropriations and

Future Funded Expense.



EntryRef

Debit 4801 Undelivered Orders - Obligations, Unpaid Debit 6100 Operating Expense / Program CostsCredit 4901 Delivered Orders - Obligations, Unpaid and / or Appropriate Asset Account

To record the delivery of goods or services and accrue a liability Credit 2110 Accounts PayableTo record the delivery of goods or services and accrue a liability

WORKING CAPITAL FUNDS


I

I. To record the delivery of goods or services and accrue a liability.

Budgetary (2007 USSGL Transaction Code B404)i. Purpose. This entry moves the obligation from the Undelivered Orders to

Delivered Orders Unpaid to indicate that delivery has been made and record the accounts payable.







Contract Financing Payments. In certain contracts, advance payments are allowed to be issued to the vendor prior to the delivery and government acceptance of the good or service. Contract financing payments, as defined by FAR 32, include advance payments, performance-based payments, commercial advance and interim payments, progress payments based on cost, and interim payments under a cost reimbursement contract for non-services. These are all methods of contract financing and the receipt of invoices related to these types of payments should initiate the accrual of an asset and associated accounts payable.

Progress Payment Based on a Percentage of Completion. According to FAR, progress payments under fixed-priced contracts for construction are not Contract Financing Payments. The Defense Federal Acquisition Regulation mandate that progress payments based on a percentage of completion may only be used only for contracts for construction, which includes real property, ship building, ship alteration, and repair.

The accrual of a current accounts payable for an interim contract financing payment that has been received, but not paid, prior to the close of the accounting period should be recorded in “Other Assets,” accounts number 1990, with the posting attribute for Contract Financing Payments. The following table provides examples of the accrual of a Progress Payment prior to the payment in two separate circumstances followed by an explanation:

EntryRef

Accrual of Progress Payment RequestDebit 1990 Other Assets (To include CFP Attributes)

Credit 2110 Accounts Payable

Accrual of Progress Payment Request Accrual of Progress Payment Request for Real PropertyDebit 4801 Undelivered Orders - Obligations, Unpaid Debit 1720 Construction-In-Progress

K Credit 4901 Delivered Orders - Obligations, Unpaid Credit 2110 Accounts PayableTo record the accrual of an interim payment for real property, ship building, alteration, and repair (progress payments based on a percentage of completion) at month-end for outstanding invoices.

To record a liability associated with a Progress Payment request, an invoice prior to payment, in an unexpired appropriation for Real Property

Contract Financing PaymentsCURRENT & EXPIRED YEAR APPROPRIATION ACCOUNTS PAYABLE

JTo record an accrual of a performanced based payment, commercial financing interim payment, progress payment based on costs at month-end for outstanding invoices.

ProprietaryBudgetary

J. To record the accrual of Contract Financing Payments other than Progress Payments based on the percentage-of-completion

i. Purpose. None – No Budgetary Entry ii. Impact. None

Proprietary (Per OUSD Policy Decision August 2007)

i. Purpose. The entry made recognizes a liability for the Progress Payment related costs incurred on a contract by the vendor.

ii. Impact. Increases Other Assets and Accounts Payable accounts.



K. To record the accrual of a Progress Payment request based on the percentage of completion.

Budgetary (Established based on DoDFMR and OUSD(C) discussion)

i. Purpose. This entry moves the obligation from the Undelivered Orders, Obligations Unpaid to Undelivered Orders, Obligations Prepaid/Advances to indicate that a valid Progress Payment request was received for a Progress Payment based on the percentage of completion.

ii. Impact. Decreases Undelivered Orders, Obligations Unpaid and increases Undelivered Orders, Obligations Prepaid or Advanced accounts.

Proprietary (Established based on DoDFMR and OUSD(C) discussion)

i. Purpose. The entry made recognizes a liability for the Progress Payment related contract progress by the vendor.

ii. Impact. Increases the Construction-In-Progress and Accounts Payable accounts.



V. JOURNAL ENTRIES TO POST CONTRACT HOLDBACKS / WITHHOLDS Contract holdback liabilities are accounted for separately from accounts payable in general

ledger account 2130, Contract Holdbacks. Holdback amounts are common in construction contracts. Holdback amounts for MOCAS payments are applicable to expense items or equipment items, which when for military equipment, is expensed in account 6900, Nonproduction Costs. The following table shows the budgetary and proprietary entries for appropriated (general funds) and working capital funds.

EntryRef

Basic Entry Basic EntryDebit 4801 Undelivered Orders - Obligations, Unpaid Debit 6100 Operating Expense / Program Costs

Credit 4901 Delivered Orders - Obligations, Unpaid and / or Appropriate Asset AccountTo record the delivery of goods or services and accrue a liability Debit 6900 and / or Non Production Costswhen Contract Holdbacks are recognized. Credit 2130 Contract Holdbacks

To record the delivery of goods or services and accrue a liabilitywhen Contract Holdbacks are recognized.

Reclassification Debit 2110 Accounts Payable

Credit 2130 Contract HoldbacksTo record the reclassification of expended balances held back fromContractors from Accounts Payable

For General Funds OnlyDebit 3107 Unexpended Appropriations - Used

N Credit 5700 Expended AppropriationsTo record appropriations used this fiscal year

CONTRACT HOLDBACKSCURRENT & EXPIRED YEAR APPROPRIATION ACCOUNTS PAYABLE


L

M

EntryRef

Use of CY Funds for a Cancelled Appropriation Use of CY Funds for a Cancelled AppropriationDebit 4610 Allotments - Realized Resources Debit 6100 Operating Expense / Program CostsDebit 4620 Unobligated Funds Exempt From Apportionment Credit 2130 Contract Holdbacks

Credit 4901 Delivered Orders - Obs, Unpaid



Removal of Payable from Cancelled Appropriation Removal of Payable from Cancelled AppropriationDebit 4350 Cancelled Authority Debit 2960 Accounts Payable From Cancelled Appropriations

Credit 4201 Total Actual Resources - Collected Credit 6800 Future Funded ExpenseQTo record in the cancelled appropriation the removal of the cancelled payable upon receipt of a valid bill. The budgetary entry reduces the balance of authority that remains upon cancellation.


P

CANCELLED YEAR APPROPRIATION ACCOUNTS PAYABLEBudgetary Proprietary

O To record and obligation and accounts payable in an unexpired appropriation for a valid bill related to a cancelled appropriationTo record an obligation and accounts payable in an unexpired

appropriation for a valid bill related to a cancelled appropriation



L. To record the delivery of goods or services and accrue a liability when contract holdbacks are recognized

Budgetary (2007 USSGL Transaction Code B404) i. Purpose. This entry moves the obligation from the Undelivered

Orders to Delivered Orders Unpaid to indicate that delivery has been made and record the accounts payable.


Proprietary (2007 USSGL Transaction Code B404 simultaneously with B134)i. Purpose. The entry made recognizes the delivery of a good or service and



M. To record the reclassification of expended balances held back from contractors from accounts payable

Budgetary None

Proprietary (2007 USSGL Transaction Code D508)i. Purpose. To reclassify the holdbacks from accounts payable to contract

holdbacksii. Impact. Decreases the accounts payable and increases contract holdbacks.

N. To record appropriations used this fiscal year.

Budgetary (2007 USSGL Transaction Code B134)iii. Purpose. None – No Budgetary Entry iv. Impact. None

Proprietary (2007 USSGL Transaction Code B134)i. Purpose. The entry made recognizes the Expended Appropriations. This


ii. Impact. Increases Unexpended Appropriations – Used and increases expended Appropriation.



O. To record an obligation and accounts payable in an unexpired appropriation for a valid bill related to a cancelled appropriation.

Budgetary (2007 USSGL Transaction Code B412)i. Purpose. To recognize the amount to be paid from current year funds for

cancelled appropriations. ii. Impact. Decreases Allotments – Realized Resources and/or Unobligated

Funds Exempt From Apportionment and increases the Delivered Orders Unpaid.

Proprietary (2007 USSGL Transaction Code B412)i. Purpose. The entry made recognizes the delivery of a good or service and


ii. Impact. Increases the expense and/or asset and contract holdbacks accounts.

P. To record appropriations used this fiscal year. To be recorded with any current-year recognition of goods and services received.

Budgetary (2007 USSGL Transaction Code B134)i. Purpose. None – No Budgetary Entry

ii. Impact. None

Proprietary (2007 USSGL Transaction Code B134)i. Purpose. The entry made recognizes the Expended Appropriations. This


ii. Impact. Increases Unexpended Appropriations – Used and increases expended Appropriation.

Q. To record in the cancelled appropriation the removal of the cancelled payable upon receipt of a valid bill. The budgetary entry reduces the balance of authority that remains upon cancellation.

Budgetary (2007 USSGL Transaction Code D145)i. Purpose. To decrease the Cancelled Authority and the Total Actual

Resources – Collected.ii. Impact. Decreases Cancelled Authority and the Total Actual Resources

Collected.



Proprietary (2007 USSGL Transaction Code D145)i. Purpose. To remove the amount recorded as a contract holdbacks prior to the

cancellation of the fund. ii. Impact. Decreases Contract holdbacks from Cancelled Appropriations and

Future Funded Expense.

Quick Reference Journal Entry Table for Accounts Payable and Contract Holdbacks

En

try Type

Accounts Payable Contract HoldbacksGF WCF GF WCF

Curr / Exp Cancelled Curr / Exp CancelledBasic A, E I J, L J, KBasic & Progress Payment B, EOBs > Curr Yr Exp Authority C, ECurr Yr Exp Auth < OBs D, EReceipt for Cancelled Approp F, G, H M, N, OReclassify Accounts Payable K



VI. REPORTING RESPONSIBILITIES

Reporting Networks. The MOCAS Accounts Payable Report aligns the appropriations, including the TI97 accounts at the four-digit limit level, to a specific DoD Organization based on the appropriation tables i.e., Master Appropriation Reference Table (MART-Air Force), Centralized Master Edit Table (CMET- Navy) and Headquarters Accounting and Reporting System (HQARS- Army) from the three Treasury reporting DFAS Networks. The DoD Organizations that are used by MOCAS are limited to Army, Air Force, DLA and the Navy. The accounting networks responsible for the DoD Component general funds should only record the MOCAS accounts payable amounts for those specific Treasury Indeces (i.e., TI 17, TI21 and TI57). In addition, the accounting networks should record the MOCAS accounts payable amounts for their Military Service Working Capital Funds. The Defense Agencies – Indianapolis Operations Budget Execution and Reports Division (BERD) will record the MOCAS accounts payable amounts for TI97 General Fund accounts. Any amounts recorded for the TI97 accounts deviating from the MOCAS accounts payable file must be reported back to the originating source of the SF 133 (i.e., Columbus Center’s SF 133s submitted to BERD). The Central FMS Office is responsible for ensuring MOCAS FMS payables and estimates are recorded and reflected on the financial reports. The following table depicts alignment of responsibility for recording MOCAS accounts payable.

Service Codes DoD Organization DFAS Network1 or 5 Army (Includes TI 21 & USACE Only*) Indianapolis2 or 6 Air Force (TI 57 Only) Denver4 or 8 Navy (TI17 Only) Cleveland/Kansas CityAll All TI 97 General Funds Accounts (To Defense Agencies –

include Service Codes 3 and 7) Indianapolis BERDAll Foreign Military Sales, i.e., TI97 “8242” Indianapolis FMS Office*All entities granted a waiver should coordinate their exempted appropriations/limits and communicate with BERD so that the exclusions are reflected in the monthly MOCAS accounts payable recording and reporting.

TI 97 Non-Military Service Working Capital Funds. The TI97 Working Capital Funds (WCF) responsibility is aligned to the supporting DFAS accounting office. The following table depicts the alignment of responsibility for recording the MOCAS accounts payable amounts for the TI97 WCF.DDRS Reporting Entities DFAS NetworkCorporate Information Management ColumbusDefense Commissary Agency ColumbusDefense Finance and Accounting Service Columbus (until transferred to Indianapolis)Defense Information Systems Agency Cleveland (until transferred to Columbus)Defense Logistics Agency ColumbusDefense Security Service DenverDefense Technical Information Center ColumbusHeadquarters Account, Comptroller Defense Agencies IndianapolisJoint Logistics Systems Center DenverManagement Systems Support Office ColumbusCounter Intelligence Field Activity Columbus



US Transportation Command DenverReporting Level. In an effort to report the MOCAS accounts payable for each DoD

Component, adjustments should be recorded at Fiscal Year, Basic Symbol, for general / appropriated funds and TI 97 Working Capital Funds. For all TI97 General Funds, accounts payable adjustments should be posted at Fiscal Year, Basic Symbol and Limit (4 digit level ONLY). Recording the MOCAS adjustments at transaction level is permissible provided the entry impacts the customer, depending on the fund identified above, at the proper reporting level. The accounts payable amounts should be reflected in all budgetary reports, i.e. Statement of Budgetary Resources. In addition, these amounts should also be reflected in the related financial statements, i.e. Balance Sheet, Statement of Net Cost, etc., for each reporting period.

Invalid Limits. Invalid limits prevent the proper alignment of MOCAS accounts payable amounts to the correct SF 133 reports. The Defense Agencies – Indianapolis Operations Budget Execution and Reports Division (BERD) and the DFAS accounting office supporting the DoD Component responsible for establishing limits outside of the Treasury/OUSD limits should work together to ensure proper reporting of the MOCAS accounts payable. The DFAS office should provide the crosswalk necessary to link the additional funds control limit to the Treasury/OUSD limit. However, for erroneous limits, the BERD should work with the DFAS Columbus, Financial Control Division, Master Appropriation Unit, to resolve and prevent future reporting of the erroneous limit.

Control for Ensuring all MOCAS Accounts Payables are Recorded. A method for monitoring of the recording of the MOCAS accounts payable amounts must exist to ensure the completeness of the accounts payable. In order to accomplish this, each reporting entity, as identified in DoD’ s financial statement Defense Departmental Reporting System (DDRS), should communicate to the DFAS Standards and Compliance Directorate, Accounting Mission Area, Accounts Payable, an analysis of its accounts payable. The vehicle to be used for this purpose is the Monthly Accounts Payable Report (MAPR). The MAPR depicts - the sources of accounts payable, the related appropriation and reporting entity, the comparison of commercial pay reported accounts payable to accounts payable reported on the financial reports and the aging of accounts payable by entitlement system.

The DFAS accounting offices are primarily responsible for reconciling and validating the accounts payable amounts from the source entitlement systems to the accounting systems. The MOCAS accounts payable reported amounts on the MAPR by the reporting entities will be compared to the monthly MOCAS Accounts Payable Report to ensure completeness. Any discrepancies between the MOCAS reported amounts on the MAPR and the amounts on the monthly MOCAS Accounts Payable Report must be documented. The accounting systems that have a waiver from using MOCAS as a source for accounts payable should identify the amounts from the MOCAS Accounts Payable Report that is applicable to those systems. The MAPR instructions will be provided at a later date, but prior to its scheduled implementation date of December 2008.



VII. ESTIMATION ACCRUALS: MOCAS CUT-OFF, CONTRACT HOLDBACKS and MULTI-ACRN CLINs

Generally Accepted Accounting Principles referenced in the Statements of Federal Financial Accounting Standards (SFFAS) #1, par.77, require estimates of accounts payable amounts when an entity accepts title to goods, and amounts are not available for recording during the accounting period. As such, estimates are required for all MOCAS contract deliveries during the reporting period for which the amounts are not readily available for recording in the accounting records before the financial reports are generated. Specifically, estimates should be developed and recorded for Multi-ACRN CLINs and transactions occurring during cut-off. MOCAS cut-off events occur as a result of month-end processing cycles and regional transfers.

MOCAS estimates are required for the following three circumstances:

A. Accounts Payable transactions occurring during cut-off (reflect as “Accounts Payable – Public on balance sheet)

B. Contract Holdbacks transactions occurring during cut-off (reflect as “Other Liabilities – Public on balance sheet)

C. Liabilities associated with Multi-ACRN CLINs for the current month (reflect as “Accounts Payable – Public on balance sheet)

Estimated liability amounts related to the above are applicable to balance sheet line items classified as “Accounts Payable” (Public) and “Other Liabilities” (Public) and should be recorded in addition to the monthly MOCAS Accounts Payable Report, ensuring completeness of accounting records.

An analysis of several estimation methods was performed to determine which would be most effective and efficient estimating methods for the three MOCAS liability categories. Although the responsibility for selecting and maintaining the estimation method is clearly management’s, the Department of Defense Inspector General’s Office, Quantitative Methods Division, assisted DFAS in analyzing the potential estimation methods by evaluating the characteristics of the MOCAS data and assessing the method’s effectiveness in estimating liabilities.

The estimation method described below was selected based on its ease of application and effectiveness in estimating amounts for accounts payable determined by comparing the estimates to actual amounts. The methods provide a standard DFAS approach for establishing liability amounts. The method chosen consider the impact of the current month’s accounts payable activity, the cut-off days from the previous month that roll over into the current month’s liabilities, and the work effort to establish monthly estimates. This is the standard DFAS method to use when posting the monthly MOCAS accruals in order to ensure the proper liability amounts are reported for both budgetary and proprietary purposes at the reporting levels described in Section IV.



A. Accounts Payable Estimates for Cut-off. The formula for estimating the accounts payable amounts for cut-off days will be standard across the Networks. The prevalidation process will not affect estimating for cut-off because MOCAS does not send out prevalidation requests during cut-off days. The following formulas and explanation are applicable to the estimation of accounts payable amounts for monthly cut-off.

Estimation Formula for Each Reporting Entity Described in Section IV

Monthly Estimate = (Daily Average* Multiplied By Number of Cut-off Days**)

*Daily Average Amount Using Monthly MOCAS Report Daily Average = ((Net Accounts Payable(1) Divided by Business Days(2) in the Current Month)

(1) Net Accounts Payable

Net Accounts Payable = (ACRN Total less Recoupment)

(2) Business Days

Business Days = (Weekdays in Month minus Holidays minus Current Month Cut-off Days **

**Cut-off Days - Will Be Communicated by Accounts Payable High Performing Organization (HPO)

Cut-off Days = (Weekdays that Business Transactions are Excluded from the Monthly MOCAS Accounts Payable Reports)

B. Contract Holdback Estimates for Cut-off. Monthly estimates of the Contract Holdback liability is an accounting requirement because liabilities have been incurred and their amounts are not available for recording during the accounting period. The estimated amounts for Contract Holdback liabilities are classified as “Other Liabilities” in the financial reports. The prevalidation process will not affect estimating for cut-off because MOCAS does not send out prevalidation requests during cut-off days. The following formula and descriptions are applicable for estimating Contract Holdbacks.

Estimation Formula for Each Reporting Entity Described in Section IV

Monthly Estimate = (Daily Average# Multiplied By Number of Cut-off Days##)

#Daily Average Amount Using Monthly Holdback Report

Daily Average = (Net Holdbacks (1) Divided by Business Days (2))



(1) Net Holdbacks

Net Holdbacks = (Holdbacks) (2) Business Days

Business Days = (Weekdays in Month minus Holidays minus Current Month Cut-off Days**

##Cut-off Days - Will Be Communicated by the Accounts Payable HPO

Cut-off Days = (Weekdays that Business Transactions are Excluded from the Monthly MOCAS Accounts Payable Reports)

C. Multiple Accounting Classification Reference Number (ACRN) Contract Line Item Number (CLIN). The Defense Federal Acquisition Regulations (DFAR) establishes the requirements for contract administration and establishing the contract line item information that includes the accounting citation. Specific requirements are provided for identifying the items purchased to its related funding sources. This is accomplished by having a direct relationship between the CLIN and ACRN, a one-to-one relationship. When a one-to-one relationship exists, the accrual process can proceed as usual because notification of receipt in MOCAS establishes an accounts payable record for the related CLIN and ACRN, or line of accounting. Although the DFAR states that each CLIN shall reference a single ACRN, it also establishes exceptions to the rule. The exceptions are permissible when:

1. A single, non-severable deliverable to be paid for with R&D or other funds properly incrementally obligated over several fiscal years in accordance with DoD policy;

2. A single, non-severable deliverable to be paid for with different authorizations or appropriations, such as in the acquisition of a satellite or the modification of production tooling used to produce items being acquired by several activities; or

3. A modification to an existing contract line item for a non-severable deliverable that results in the delivery of a modified item(s) where the item(s) and modification are to be paid

for with different accounting classification citations.

When the above exceptions are exercised, obstacles are created that prevent timely posting of accounts payable transactions to the accounting records due to delays in identifying the appropriate lines of accounting. The exceptions are applicable to non-severable items only. Examples of non-severable items are the purchases of a satellite or spy plane that provide benefits to and are funded by multiple organizations.

Recording an accounts payable transaction for a non-severable item poses an accounting treatment dilemma since more than one DoD Component is supplying funds for payment to a contractor. The DoD Component who should record the liability is not able to do so until the invoice is received and manual research of the payment instructions within the contract is performed. For the accounts payable reporting process, this creates a delay in the process and contributes to untimely and incomplete reporting of the liabilities because these amounts are not



captured on the monthly MOCAS Accounts Payable Reports. As a result, a monthly estimate of the multi-ACRN CLINs must be established for those reporting entities that are receiving MOCAS disbursements related to non-severable items. In order to determine your monthly accrual estimates, each DFAS Network will access the DFAS Accounts Payable Eportal and execute the model for a desired month. The model will yield the estimates relating to the appropriations for its respective Customer(s).

Simple Exponential Smoothing. To determine the estimates for multi-ACRN CLINs, historical data from the MOCAS Shared Data Warehouse is used to forecast amounts to record for both budgetary and proprietary financial reports. The estimation process used must satisfy two qualities.

A “goodness of fit” relative to the behavior of the data A low degree of difficulty to implement and maintain relative to an acceptable level of

benefit.

The simple exponential smoothing method proved to possess those qualities for effectively estimating accounts payable amounts for multi-ACRN CLINs. This method weighs actual accruals and forecasted accruals of previous months CLIN accounts payable transactions and applies that to the current month’s estimate for financial reporting purposes. Each estimate is a weighted average of the current observation and the smoothed value of previous observations. The weights decline exponentially looking back over time, giving greater consideration to the most recent events or transactions.

The model for simple exponential smoothing is:

Monthly MOCAS Estimate = (α times previous month’s disbursement amount)plus

((1 - α) times previous month’s estimate)

Where “α” means “Alpha” and represents a weight expressed as a percent that helps minimize wide fluctuations in the data range. Quantitatively, this concept is known as a smoothing constant. Currently, alpha is equal to forty-seven percent based on the analysis performed in coordination with the Quantitative Methods Division from the Office, Inspector General. A maintenance routine will be executed at least 3-4 times a year to ensure alpha, is representative of the behavior of the data.

D. Data Sources for Estimated Amounts

MOCAS Monthly Accounts Payable Report As the Source for Cut-off Days. The current month MOCAS Accounts Payable Report is the source used to develop cut-off day estimates for both accounts payable and contract holdbacks. The Access Database placed on the DFAS Accounts Payable Eportal will utilize these reports in developing estimates for the cut-off days.



In addition to developing the estimates, the monthly MOCAS Accounts Payable Report will be used to develop prevalidation ratios for General Fund and Working Capital Fund for each Military Service and Other Defense Organizations.

Shared Data Warehouse (SDW) As the Source for Estimating Multi-ACRN CLINs. SDW is an Oracle Database that is used to store contract administration and payment data collected from MOCAS. All contract data from MOCAS are downloaded to SDW on a daily basis. Subsequent data extracts provide historical data necessary for analysis and estimates. All DCMA and DFAS employees can request access to SDW through their respective TASOs.

The historical data from SDW was used to develop and test the estimation method established for multi-ACRN CLINS, and will continue to be the source for the monthly multi-ACRN CLIN estimations. The Defense Contract Management Agency (DCMA) has created a controlled process for obtaining multi-ACRN CLIN data. The Access Database placed on the DFAS Accounts Payable Eportal will utilize this data in producing the estimates to record and report.

E. Reversing the Accounts Payable Journal Entries. As discussed in Section VI, Reporting Responsibilities, all amounts from the MOCAS Accounts Payable Report to include estimates should be recorded, at Fiscal Year, Basic Symbol, for general / appropriated funds and TI 97 Working Capital Funds. For all TI97 General Funds, accounts payable adjustments should be posted at Fiscal Year, Basic Symbol and Limit (4 digit level ONLY). Recording the MOCAS adjustments at transaction level is permissible provided the entry impacts the customer at the four-digit limit. Once the MOCAS accounts payable amounts are recorded and reported in the financial records, all MOCAS accrual transactions must be reversed prior to the start of the next accounting period. The reversal entry should be established from the documentation supporting the initial MOCAS accrual entry for the current accounting period and restore the financial records to their original state. All documentation supporting the initial MOCAS accrual and reversal entries should be retained in accordance with requirements discussed in Section II, General - Retention of the Monthly MOCAS Reports as Support for Budgetary and Proprietary Report.



VIII. FINANCIAL STATEMENT FOOTNOTE DISCLOSURE FOR MOCAS-RELATED ESTIMATES

Information disclosed in notes to the financial statements is a basic requirement to explain or amplify financial information recognized in the financial statements. This is essential to help readers understand financial information provided and has long been viewed as an integral part of financial statements prepared in accordance with GAAP. Financial Accounting Standards Board (FASB) Statement of Financial Accounting Concept Nos. 4 and 5, and Statement of Federal Financial Accounting Concepts (SFFAC) No. 1 provide guidance for financial statement disclosures and amounts related to less than exact measures such as estimates, judgments, summarizations and allocations. As explained in the preceding section, the MOCAS accounts payable process contains three categories whose events and conditions can not be readily discerned on the face of the financial statements for public accounts payable and other liabilities and thus require disclosure to help users understand their impact.

MOCAS estimates are required for amounts related to multi-ACRN CLINs (multi-funded items/services) and cut-off events for public accounts payable and contract holdbacks. For financial reporting disclosure of estimates, a DFAS standard narrative is provided below for inclusion in the appropriate disclosure section for each reporting entity for which an estimate is provided on the monthly MOCAS output files and reports. When deciding to disclose estimates, reporting entities must give careful consideration to its materiality choosing to include these estimates and thus the applicable narratives below.

The following paragraph is a recommended introductory statement when reporting entities disclose MOCAS estimates in their financial statements.

“Generally Accepted Accounting Principles referenced in the Statements of Federal Financial Accounting Standards (SFFAS) # 1, par.77, require estimates of accounts payable amounts when an entity accepts title to goods, and amounts are not available for recording during the accounting period. It is management’s representation, the estimates below best approximates actual expected liabilities without material misstatement for the stated scenarios. With the exception of the initial reporting year, comparative estimate amounts between reporting years are provided. To aid the user in understanding the events and the financial impact estimates had on the public payable balance reported, the following footnote disclosure is provided.”

The following paragraphs are recommended footnote disclosures to be reported in the financial statements for the MOCAS payable estimates. Depending on your reporting entity’s applicability of the three different payable estimates below, any or all may apply.

1. “Multi-Accounting Classification Reference Number Contract Line Item Number (Multi-ACRN CLIN) related products and services whose funding is held by more than one DoD Component.

The identification of who records the payable is not known until the receipt/acceptance acknowledgment, the vendor’s invoice and the contract



are matched and the payment terms reviewed. This impacts a reporting entity’s ability to record payables at time of transfer of title and within the financial reporting period.

As a result, a Simple Exponential Smoothing forecasting method was used to approximate the value of multi-ACRN CLIN liabilities incurred for a given reporting period. This method was selected because of its goodness of fit applicability and its low degree of difficulty to implement and maintain. The method utilizes the previous month’s actual accounts payable amounts and the forecasts, giving a greater weight to the most recent data. For period ending, DD-MMM-YYYY and DD-MMM-YYYY, the [Name of Reporting Entity], reported an estimate of $$$$$$ and $$$$$$, which is included in the final balance of $$$$$$ and $$$$$$, respectively, for public payables.”

2. “Mechanization of Contract Administration Services Cut-off Events for month-end processing cycles and regional transfers.

During the course of a financial reporting month, MOCAS experiences regular cut-off events that render the system temporarily inoperable and thus the accessibility for extracting liability data is unavailable. This occurrence prevents payable and other liability data from being reported in the same financial reporting period as the payable event occurred. Examples of cut-off events impacting public payables include month-end processing and regional transfers between MOCAS databases. These same events impact contract holdbacks which are amounts withheld from grantees or contractors pending completion of related contracts. For these events impacting public payables and other liabilities, estimates are required.

A standard monthly estimate was used to approximate the accounts payable value attributed to cut-off for a given reporting period. The method calculates a daily payable average based on the number of business days in the current month and applies that amount to the number of cut-off days. For period ending, DD-MMM-YYYY and DD-MMM-YYYY, the [Name of Reporting Entity], reported an accounts payable estimate of $$$$$$ and $$$$$$, which is included in the final balance of $$$$$$ and $$$$$$, respectively, for public payables.

A standard monthly estimate was used to approximate the contract holdback liabilities value attributed to cut-off for a given reporting period. The method calculates a daily contract holdback average based on the number of business days in the current month and applies that amount to the number of cut-off days. For period ending, DD-MMM-YYYY and DD-MMM-YYYY, the [Name of Reporting Entity], reported an estimate of $$$$$$ and $$$$$$ which is included in the final balance of $$$$$$ and $$$$$$, respectively, for other liabilities.”


Date post:	24-May-2015
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I. BACKGROUND

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