The Water Resources Discipline began using fixed price Joint Funding Agreements in FY 1996 as a part of implementing the findings of the Federal-State Cooperative (Coop) Program audit. Agreements are considered fixed price when the cost center has notified the customer in writing that the work will be conducted on a fixed price basis, when a bill will be issued for the full amount of the agreement and when no reports detailing actual costs incurred are required by or provided to the customer. Also in FY 1996, Water cost centers discontinued the practice of closing out individual project accounts and began the practice of leaving surplus funding in accounts associated with fixed price agreements to cover deficits in other Coop Program project accounts. Cost centers bill the full agreement amount on fixed price agreements, which in some cases exceeds the expenditures distributed against the agreement and results in large advances. The FFS distributes account deficits to appropriations (via the default customer 0002X) but surpluses that are intended to cover these deficits appear in FFS as unspent reimbursable authority. In the past, OFM has processed a closing adjustment (at the customer type level) to move expenditures distributed to appropriation default to use some of this unspent reimbursable authority, but this adjustment did not impact project balances.

On April 5, 2002, OFM issued Instructional Memorandum (IM) 2002.01 reminding cost centers of the requirement to perform a monthly review of outstanding unbilled and delinquent accounts receivable and advance balances. The IM also required a comprehensive review be completed by all cost centers by June 1, 2002. The IM states, "when such advance balances exist for fixed-price agreements, the balance can be moved to another fixed price agreement as determined by the OFS/BFS".

The following is a simplified example of the problem. Both accounts are funded with fixed price agreements.

Funding Expense Balance Result

Account 1: 10,000 8,000 2,000 Unspent reimbursable authority

Account 2: 10,000 12,000 -2,000 $2,000 in appropriation default

Cost center closes to zero, but the fixed price agreement funding account 1 is under spent. The deficit of $2,000 in account 2 is distributed against appropriations. Both agreements are fully collected (for a total of $20,000). The agreement associated with account 1 is under spent and shows a $2,000 advance. The process to correctly reflect this is to move the funding by decreasing the FPCA record tied to account 1 by $2,000 and adding a new FPCA record for $2,000 to account 2 tied to the same agreement (that is funding account 1). The RA is not changed and the expenses are not changed. This change formalized what the cost center is intending-it uses the surpluses on one account to cover the overrun in another account. Once funding has been moved between accounts, PCAS will distribute the expenses to unspent reimbursable authority eliminate the advances, and reduce the amount distributed to appropriation default (0002X).

After adjustment the funding looks as follows:

Funding Expense Balance

Account 1: 8,000 8,000 -0-

Account 2:* 12,000 12,000 -0-

*Note: Account 2 now has two FPCA records tied to two different agreements.

To correct the outstanding advances for fixed price agreements for all active years, the following actions need to be taken.

1. Obtain a list of fixed price agreements for each fiscal year from files, AIS reports, or by querying the cost centers.
2. Review crystal Report 286A, which will be provided by Annette Kennedy, OFM, or FFS FPRJ Screen to determine the accounts that closed with significant surplus and deficit balances.
3. Using the crystal Report 286A or FFS FPRJ Screen, determine how much funding can be removed from accounts with surpluses and how much is needed to fund accounts with deficits. Select fixed price agreements in each account with surplus to adjust.
4. Adjust FPCA records on fixed price agreements by reducing amount in surplus account and increasing (or adding) FPCA records for accounts with deficits. Calculate the FPCA amount by taking the net amount of the deficit and adding the burden rate associated with the FPCA record being reduced. For example,
   Account 1 has a net surplus of $1,000 and one fixed price agreement. The FPCA record for the fixed price agreement has a burden rate of 85.185. The gross amount to be reduced is calculated by multiplying $1,000 x 1.85185 = 1,851.85. An FPCA record for 1,851.85 is added to a different Coop account (Account 2) with a deficit balance.
5. After the FPCA records are changed for a single agreement, the CALT record should be reviewed to ensure that the FPCA records total the agreement amount.
6. Fiscal Services offices should repeat step #4 until the deficit is eliminated or surpluses have been used.
7. When all cost center balances have been adjusted for a given fiscal year, the Fiscal Services office should contact the Office of Fiscal Services to coordinate the running of PCAS on that year.
8. After PCAS is run, reports should be examined to determine if the advance have been liquidated.
9. When a fiscal year has been confirmed as corrected, OFS will notify OFM and request that the closing entry to reversed.

Louie Pectol
Chief, Office of Fiscal Services