Reimbursable Order Without an Advance
A defense accounting office accepts an Economy Act order from another federal agency for $2.4 million of laboratory testing. The customer's appropriation expires 30 September. No advance has been received; the customer says it will pay after acceptance. The lab has incurred $600,000 in direct costs and recorded $2.4 million as revenue when the order was accepted. The order document lacks a certification of funds and a point of contact. At year-end, the customer has not paid, and the lab's unpaid reimbursable costs are $1.9 million. The comptroller must decide whether to continue work, how to record the order, and what to report. The performing activity's own appropriation has only $300,000 remaining.
1. Should the lab have accepted the order and recognized $2.4 million of revenue at acceptance? Explain the funds-control and accounting treatment.
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The order should not have been accepted without a funded document or an approved advance determination. Under the Economy Act, the customer must certify that it has a bona fide need and available funds, and the performing activity must determine whether an advance is required. Recognizing $2.4M of revenue at acceptance is incorrect: revenue is earned as work is performed. At acceptance, record the order as an obligation and an unfilled customer order; after $600K of work, recognize $600K in revenue and an unbilled receivable, leaving $1.8M unfilled. The customer's expiring appropriation is a red flag: the customer must obligate before expiration, and the lab cannot use its own $300K to perform another agency's work without authority. The missing funds certification and point of contact are control failures. Work should be suspended until the order is validated, funded, and documented.
2. What should the comptroller do at year-end when the customer has not paid and $1.9 million in costs are unrecovered? Include options and reporting.
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At year-end, the comptroller must determine whether the customer validly obligated funds before its appropriation expired. If yes, the lab has a valid receivable and should bill promptly; if no, the lab may have performed work without a funded order and may have an ADA or abnormal-balance issue. The $1.9M of unrecovered costs should not be hidden in an unbilled balance. Options include: obtain payment from the customer's current authorized funds if legally available; seek fiscal-law counsel on whether the customer can still pay; record a receivable only if collection is probable and legally supportable; and report any potential ADA violation. A write-off requires authority and documentation. To prevent recurrence, require a funds certification, an advance or credit-risk determination, and monthly unbilled reconciliation before work begins.