PERAC Memo #21 - 1997: EXPENSE FUND ACCOUNTING FOLLOW-UP
EXPENSE FUND ACCOUNTING FOLLOW-UP
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This memo clarifies year-end accounting procedures for transferring funds from the Investment Income Account to the Expense Fund, specifying that only one closing entry (debit 4820/credit 4896) should be made annually on December 31st, and only after any prior expense fund balance has been fully spent down. Boards must also ensure Expense Fund budgets and any supplementary budgets are approved at least 30 days before funds are spent, with notification given to the governmental unit's legislative body, per Chapter 306, Section 36. Boards should update their accounting practices accordingly and follow the required approval/notification timeline for expense budgets.
Full Text
PERAC MEMO #21/1997 M E M O R A N D U M TO:All Retirement Boards FROM: Robert F. Stalnaker, Executive Director RE:EXPENSE FUND ACCOUNTING FOLLOW-UP DATE:June 16, 1997 There have been many questions asked regarding the accounting entries that will be required for transferring funds from the Investment Income Account to the Expense Fund. There will only be one entry per year on December 31st, to transfer, from Investment Income, (the monies expended from the Expense Fund). The entry will be a debit to investment income (4820) and a credit to the Expense Fund (4896). This entry will be a closing entry. Please keep in mind that in 1997 the monies that were in the Expense Fund on December 31, 1996 must be fully expended before any funds from Investment Income will be utilized. (See example below) Retirement Systems must also be aware that changes resulting from Section 36 of Chapter 306 require that the Expense Fund Budget and any subsequent supplementary budgets must be approved by the board at least 30 days prior to the expenditure of such funds and that notification must be made to the legislative body of the governmental unit of the current or former employees served by the board. The costs of funding the Expense Fund will be added to the annual appropriation upon update of the system’s funding schedule. Governmental Units, may at their option, separate from the retirement system appropriation, appropriate monies for the purposes of carrying out section 5B. EXAMPLE The XYZ Retirement System had a balance in their expense fund on December 31, 1996 in the amount of $35,000. During calendar year 1997, the XYZ Retirement System expended $80,000 from the Expense Fund. The $35,000 would be utilized first and on December 31, 1997 $45,000 would be transferred from investment income to the Expense Fund. p:\crab\fndactng