NASA Procedures and Guidelines
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NPR 9060.1A Eff. Date: May 02, 2016 Cancellation Date:	Accrual Accounting - Revenues, Expenses, and Program Costs
| TOC | Preface | Chapter1 | Chapter2 | Chapter3 | AppendixA | AppendixB | AppendixC | AppendixD | AppendixE | ALL |

Chapter 2. Accrued Expenses and Program Costs

2.1 Purpose

2.1.1 This chapter provides requirements for recording accrued costs, also known as expenses. Resources consumed whether paid or unpaid, comprise NASA's cost of doing business. Cost is the monetary value of resources used, resources sacrificed, or liabilities incurred to achieve an objective, such as to acquire or produce a good, perform an activity, or acquire a service. Depending on the nature of the transaction, cost may be charged to operations immediately, i.e., recognized as an expense of the period, or to an asset account for recognition as an expense of subsequent periods. The period's expenses may be classified further into other categories, such as operating expense and program cost. Classification into categories supports the analysis of the efficiency and effectiveness of NASA's business. The operating expenses include the general administrative costs of the Agency while program costs include cost that can be tracked to individual programs.

2.1.2 Cost recognition at NASA also supports internal control of funds. NASA recognizes cost incurred before funds are disbursed to ensure prior to payment that the disbursed costs are within the purpose, time, and amount restrictions of the appropriation account to be charged.

2.2 Roles and Responsibilities

NASA is responsible for recognizing and reporting cost in a manner that provides assurance that resources are spent to achieve expected results and outputs, supports the comparison of alternative courses of action and analysis of the efficiency and effectiveness of NASA's business, and recognizes cost in the appropriate time period to ensure reported amounts accurately reflect the results of operations.

Note: See Chapter 1, Paragraph 1.2 for specific requirements.

2.3 Agency Requirements

2.3.1 NASA shall comply with the following requirements when recording applicable cost transactions.

2.3.1.1 The accrual method of accounting applies to the following costs however classified, deferred, or disposed of: current operating expenses, reimbursable costs, inventory costs, prepaid costs, and fixed asset costs.

2.3.1.2 Record costs within or as close as possible to the period in which they are incurred. Record estimated amounts of cost incurred within a period if the actual value is unknown. The estimated cost amount recorded may be adjusted when the actual value of work performed is determined by confirmation of the amount of resources used by technical personnel, actual cost reported by contractors, performance of contract audit, contract administration services costs, or approval of amounts presented on invoices for payment.

2.3.1.3 NASA shall recognize the constructive receipt of work performed to NASA contract specifications when recording contractor cost. Although formal acceptance of goods or services supports cost entries, it is not the determining factor for accounting recognition when cost is incurred on products that are not commercial items suitable for sale to the public. Estimated cost representing the constructive receipt of this type of work in process or performed may be recorded as of the end of the accounting period as accounts payable.

2.3.1.4 Technical personnel (e.g., Contracting Officer's Representatives, Resource Analysts, Cost Analysts and Accountants, and Project Managers, as provided in section 1.2) shall review, and where needed, develop cost amounts recognized in the core financial system. Technical review of cost is an internal control that ensures accruals are reasonable and appropriately cover all expenses incurred through the period.

2.3.1.5 NASA shall measure and report the full cost of its outputs and outcomes in the general purpose financial reports. Full cost includes resources consumed by each segment for the direct or indirect contribution to output and identified costs of supporting services provided by other reporting entities. This includes the recognition of inter-entity (imputed) costs when appropriate. Full cost is measured in order to determine the total operational costs and total unit cost of outputs.

2.3.1.6 Inter-entity costs involve activities or costs between two or more agencies, departments, or bureaus.

a. Costs Incurred by Other Entities for NASA. In order to comply with the requirement for full-cost reporting, NASA recognizes the full cost of goods or services received from other entities whether or not payment is provided in exchange, in accordance with SFFAS 4 and 30. The performing entity provides NASA with information on the full cost of its services through bills or other documentation. Recognition of inter-entity costs that are not fully reimbursed (non-reimbursed or under-reimbursed) is limited to material items that are significant and able to be directly identified as applicable to NASA. The recognition of non-reimbursed or under-reimbursed cost incurred by others is offset by the recognition of a financing source.

b. Costs incurred by NASA for Other Entities. When applicable, NASA will provide customer agencies with the full cost of NASA services whether or not the costs are to be reimbursed. When applicable, non-reimbursed or under-reimbursed cost incurred by NASA are financed by NASA's direct appropriations.

2.3.1.7 Record cost using funding obligated to purchase the specific goods provided or services performed within the documented period of performance. Cost related to Prompt Payment Act interest is recorded using available funds appropriated to the program that incurred the penalty. The incurrence of cost of an appropriately obligated acquisition may take place during the unexpired and expired phases of the contract's funding within the period of performance documented in the contract. Estimated cost amounts initially recorded during the receipt of goods or the performance of services may be adjusted during the five years of the fund's expired phase. An adjustment of estimated cost values is not recorded against funds in the canceled phase unless it meets the definition of a prior period adjustment recorded due to correction of an error or a change in accounting principle. In a canceled fund, the cost amount is recognized in the future funded expense account. Upon receipt of an applicable invoice the account is reduced by the amount of the invoice or to zero if the invoice is marked final. Disbursements are not permitted using canceled funds; therefore, the invoiced cost is recorded in an unexpired fund with the same purpose as the originally canceled fund to reflect the actual value of cost incurred.

Note: See NPR 9470.1, Budget Execution, for more guidance on the transactions allowed within specific phases of fund availability.

2.3.1.8 NASA shall monitor estimated cost accruals for accuracy, whether provided by the contractor or NASA's technical personnel, and, if analysis indicates that the estimates are usually significantly inaccurate, promptly take appropriate corrective actions to ensure that future estimates are reasonably accurate. NASA also monitors indirect cost estimates using provisional billing rates and actual indirect cost reported by contractors. Action is taken to prevent the recognition of indirect cost billed and recorded substantially higher than the actual cost reported.

a. Provisional billing rates provide a method for interim reimbursement of indirect costs at estimated rates subject to adjustment during contract performance and at the time the final indirect cost rates are established. Billing rates and final indirect cost rates are used to reimburse indirect costs on cost-reimbursement contracts and in determining progress payments on fixed-price contracts. Although contractors are required to provide NASA with indirect cost amounts based on both actual and provisional billing rates per NPR 9501.2, NASA recognizes the contractor's actual indirect cost rates in the core financial accounting system. An exception to this occurs only in the case of provisional billing rates required in order to process interim or progress payments. This may occur when costs get recorded using actual rates that are below the provisional rates included on invoices. The Contracting Officer is notified by the Cost Analyst and/or Resource Analyst when provisional billing rates are consistently and/or significantly different from actual billing rates, so that provisional billing rates may be adjusted to prevent substantial overpayment or underpayment of actual cost incurred.

2.3.1.9 Centers shall recognize properly incurred cost regardless of whether the cost exceeds available funding. Unfunded liabilities are recorded in accounts provided for that purpose, and current liabilities not covered by budgetary resources are disclosed. This requirement applies to all types of obligations for goods or services.

2.3.1.10 NASA personnel are responsible for managing all cost, including contract cost. Approval should not be given for contractor performance or the receipt of goods that exceed the cumulative amount obligated on the contract, to guard against a potential Antideficiency Act violation. Refer to NPD 9050.3, Administrative Control of Appropriations and Funds, and NPR 9050.3, The Antideficiency Act, for more guidance. Cost incurred by the contractor that is not allowed, not approved, or above documented ceilings is not proper, and Centers shall not record such cost, even in the situation where the original obligation is within funding limits.

2.3.1.11 Cost entries are allowed for upward adjustments that increase obligations in a properly chargeable account where obligations were previously unrecorded or under recorded. This may occur when, in a subsequent year, the price of goods or services increases and NASA is liable for the increase under a provision in, or within the scope of, the original contract. Upward adjustments that increase obligations to an amount that exceeds available appropriated funds violates the Antideficiency Act. In cases where incurrence of cost exceeds the cumulative obligations on a contract, Center personnel shall immediately:

a. Determine the nature of the disparity between the contract award and performance amounts.

b. Contact the Contracting Officer to determine what actions are needed to address the condition. The actions are dependent on contract requirements, contract type, or if the contractor has overrun the contract.

c. Take corrective action to remedy the situation and address the root cause.

Note: Upward adjustments of original contract funding are not permitted beyond funding ceilings in cost-reimbursement contracts for discretionary cost increases (see Principles of Federal Appropriation Law [Red Book] 5-36).

2.3.1.12 Centers shall record cost using the funding codes and symbols assigned by Treasury, the Office of Management and Budget (OMB), and NASA representing the appropriation account, general ledger account, work breakdown structure (WBS), or other coding provided for the specified financial or reporting purpose, such as the Treasury Account Symbol (TAS), WBS, Object Class, or other financial coding.

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