0101 Overview

This chapter establishes the Department of Veterans Affairs’ (VA) financial policies for reclassification transactions.

Key points covered in this chapter:

• Common VA nomenclature and terminology used in VA’s legacy accounting system erroneously identified several types of transactions (e.g., cost reallocations, cost sharing, cost transfers, or interstation transfers) as expenditure transfers. These types of transactions are not governed by Office of Management and Budget (OMB) Circular A-11, are not expenditure or non-expenditure transfers, and should not be referred to as such. Instead, cost reallocations, cost sharing, cost transfers, interstation transfers, etc. are considered reclassifications;
• Reclassifications will reference the original document number;
• Individually recorded reclassification transactions will be used to the maximum extent practical;
• Summary level transactions will not be recorded in the accounting system unless the volume of individual transactions makes it unfeasible to post transactions separately;
• Finance Offices should not use their own station vendor codes on reclassification transactions, as this leaves hanging balances and creates intragovernmental reconciliation issues; and
• Reclassification documentation must contain the transaction code to be posted. It is not a requirement to include the general ledger accounts.

0102 Revisions

Section	Revision	Office	Reason for Change	Effective Date
Various	New policy	OFP	Establish policy for reclassification transactions.	March 2025

0103 Definitions

Reclassification – A transaction that was paid by an organization within VA that is being transferred in part or wholly to another VA organization or organizations, or an adjustment transaction that corrects an accounting element in a previously recorded transaction. Examples of this type of transaction include cost-sharing, moving salary, travel, award payments for work performed outside of an employee’s normal organization, redistributing a cost or discount between programs, or correcting an accounting element like budget object code of a previously recorded expenditure. Commonly used FMS reclassifications include EB, EW, and ET. Commonly used iFAMS reclassifications include SEB, SEW, and PET.

Standard Voucher (SV) – A transaction that is used to enter, adjust, or correct accounting and financial information using a standard transaction code built into the accounting system where the debits and credits are pre-defined (e.g., transaction codes SV and RJ in FMS). SVs are used in defined processes that align to business needs (e.g., to record accounting transactions that are not included in any of the other financial system modules, such as accruals, recurring accounting reclassifications, and interfaces).

SV Form – Form used in the SV package to detail the transaction code and details for the entry.

SV Package – Documentation required to sufficiently support the transaction code, purpose, and need of the SV, evidence of the approvals, and verification that the transaction processed correctly. This serves as an integral part of the audit trail as key documents routinely examined by auditors as part of their audit procedures.

VA’s Accounting System – The central accounting system for all of VA. The legacy system used by VA is the Financial Management System (FMS), and the modern system used by VA is the Integrated Financial and Acquisition Management System (iFAMS).

0104 Roles and Responsibilities

Office of Budget (OB) is responsible for coordinating availability of funds for reclassification actions that impact multiple offices.

Finance Offices are responsible for recording and providing oversight and review of reclassification transactions to ensure transactions are documented sufficiently, and proper amounts are reflected in VA’s financial statements.

0105 Policies

010501 General Policies

1. In accordance with 31 U.S.C. § 1534, VA may reclassify transactions when amounts are available in both the appropriations and subject to limitations applicable to the appropriations.
2. To reduce the risk of incurring an Anti-Deficiency Act violation, reclassifications must be accomplished in a timely manner. Reclassifications should be processed within the quarter in which the need for an adjustment is identified and, to the extent practical, no later than the end of the fiscal year.
3. Administrations and Staff Offices will work closely with the Office of Budget to ensure that funds are available for the required reclassification and that an Anti-Deficiency violation does not occur.
4. Reclassification transactions:
   1. Are not intragovernmental transactions between VA and another Federal Government entity, (i.e., they are not buy/sell or fiduciary transactions).
   2. May occur within the same appropriation/fund or between different appropriations/funds.
   3. Adjust accounting elements of transactions that were previously recorded.
5. Common VA nomenclature and terminology used in VA’s legacy accounting system, such as cost reallocations, cost sharing, cost transfers, and interstation transfers, were erroneously identified as expenditure transfers. These types of transactions are considered reclassifications.

010502 Recording Transactions

1. Reclassification transactions are generally initiated by either the VA organization which initially paid the expense, including centralizing accounting services (e.g., Veterans Benefits Administration (VBA) Administrative & Loan Accounting Center (ALAC), VBA and National Cemetery Administration (NCA) Finance Centers, and Veterans Integrated Services Networks (VISNs) with centralized accounting) or the Financial Services Center (FSC).
2. The initial obligation and expense must be recorded, before processing a reclassification transaction.
3. In accordance with 31 U.S.C. § 1301, appropriations shall be applied only to the objects for which the appropriations were made except as otherwise provided by law. However, for ease of processing, VA may record transactions that temporarily charge one VA appropriation for an expenditure benefiting another VA appropriation, as long as amounts are available in both appropriations at the time of obligation and the accounts are reclassified to reimburse the appropriation initially charged by the close of the fiscal year.
4. Reclassifications should be completed within the same quarter as the original expense transaction. This will mitigate risks associated with potentially not reserving sufficient funds for transactions or an appropriation not having sufficient time to utilize the funding originally obligated for the transaction.
5. Certain reclassifications, due to their nature, may be performed after the quarter has ended (e.g., Toxic Exposure Fund (TEF) – calculations can only be performed after quarter close).
6. Reclassification transactions will be recorded in VA’s accounting systems using specific document types. For more information, refer to Appendix B: Reclassification iFAMS Processing and Appendix C: Reclassification FMS Processing.
7. Individually recorded reclassification transactions allow full visibility of the accounting for each transaction, and therefore will be used to the maximum extent practical.
8. In the limited instances where reclassifications are performed that involve a large number of transactions to be processed at the same time (e.g., moving GL balances between GL accounts, or correcting accounting elements (such as Budget Object Class Codes)) and individually moving each transaction is not feasible, a summary level Standard Voucher Form must be prepared.
9. “Miscellaneous Vendor” (or a similar variation) in the Vendor Field is not permitted unless a transaction is moving funds from one account to another, and an approved special vendor code has been authorized (in iFAMS) or the system required field is limited (in FMS).
   1. Summary level reclassifications may use a special vendor code specific to the type of transactions being processed. Examples include payroll interface, salary, and Medical Community Care (MCC) reclassifications. Payroll interface and salary reclassifications do not use employee vendor codes.
   2. If there is not a special vendor code, the vendor must be identical to the vendor on the original referenced transaction.
   3. Due to system limitations in VA’s legacy accounting system, vendor codes using “MISC” are the only options available for fund-to-fund transactions. These are approved special vendor codes.
10. Finance Offices must not use their own station vendor codes on reclassification transactions as this leaves hanging balances and creates intragovernmental reconciliation issues.
11. Examples of acceptable reclassification transactions include, but are not limited to the following:
    1. Refunding one VA appropriation for costs that were initially charged to it for the full cost of an acquisition which jointly benefits several VA organizations (e.g., procurement involving volume discounts).
    2. Refunding an organization that gave an award to a VA employee who works in another VA organization and the employing organization has already obligated and expended the award.
    3. Transferring costs associated with an employee’s activity (e.g., travel) from one organization on behalf of another organization if the costs have already been obligated and expended by the employing organization.
    4. Correcting payroll accounting errors made when employees transfer between offices particularly in those instances when organizations are funded by different appropriations.

010503 Documentation Requirements

1. Reclassification transactions must be properly documented. Documentation requirements are the same as for processing a standard voucher (SV), see requirements in Volume II, Chapter 1B – Standard Vouchers.
2. The SV Form is used as a cover sheet containing the required information, transactional details, and signatures. If the SV Form does not meet an organization’s needs (e.g., need to detail numerous transactions on the form), then a cover sheet with the required information and signatures can be used. For example, the FMS Macro-7 Voucher Template is a macro-enabled cover sheet that can be used to streamline processing. See Appendix D: FMS Macro-7 Voucher Template.
3. Supporting documentation should validate the reason why the reclassification was created/authorized. This may include, but is not limited to, emails, reports, spreadsheets or screenshots from applicable financial systems. Data can be obtained from single or multiple sources such as, FMS, iFAMS, Financial Reports System (FRS), VHA Support Service Center (SSC), and Power BI F827 Dashboard. For examples, see Appendix E: Supporting Documentation Examples for Reclassifications.
4. When a summary level Standard Voucher Form is used for a reclassification:
   1. A report that reconciles to the transaction level detail may be used as supporting documentation. The line-item transaction level detail referencing the original document number of the individual transactions must be stored electronically (i.e., spreadsheet, accounting system report, etc.), allowing single transactions to be traced to ensure proper accounting and use of appropriate funds (i.e., a transaction to provide care associated with exposure to environmental hazards may be traced directly back to the expenditure of Toxic Exposure Funds, regardless of the reclassification of the transaction).
   2. Amounts moved on summary reclassifications cannot be arbitrary; they must be tied to actual transactions.
   3. Amounts for reclassifications must be fully supported in the transaction documentation. In instances where the full amount of the transaction isn’t transferred and only a portion is, the reclassification supporting documentation must contain sufficient explanation for how the amount of the reclassification was determined.
   4. Supporting documentation should:
      • Stand on its own and not require additional conversation or discussion to discern the purpose of the adjustment;
      • Be maintained for audit purposes; and
      • Be detailed and clear enough to withstand audit scrutiny.
   5. Administrations and Staff Offices utilizing iFAMS will attach the supporting documentation to the reclassification transaction in iFAMS.
5. All documentation related to reclassifications will be retained in accordance with the National Archives and Records Administration (NARA) General Records Schedule.

010504 Approval Requirements

1. Summary level entries must be approved at a level no lower than the local Finance Office Chief Financial Officer (CFO) and must be approved in advance of posting to VA’s accounting systems.
2. For reclassifications less than $100 million, local finance offices within the Administration and Staff Offices are authorized to approve. Approval shall be obtained prior to the SV being recorded in VA’s accounting system. Additional approvals are required for reclassifications at the $100 million and $1 billion or greater thresholds. See Volume II, Chapter 1B – Standard Vouchers.

0106 Authorities and References

• United States Code (U.S.C.)
  • 31 U.S.C. § 1301, Application
• National Archives and Records Administration (NARA) General Records Schedule for Financial Management and Reporting Records
• OMB Circular A-11, Preparation, Submission and Execution of the Budget
• VA Financial Policy Publications
  • Volume II, Chapter 1B – Standard Vouchers
• FMS Macro-7 Voucher Template
• FMS Macro-7 Voucher Template Expanded Instructions
• iFAMS Special Vendor Codes

0107 Rescissions

None.

Appendix A: Previous Policy Revisions

None.

Appendix B: Reclassification iFAMS Processing

Applicable appropriation:	All VA appropriations/funds
Timing of the obligation:	Date the reclassification entry is recorded by the initiator of the transaction
Amount:	Transaction-level amount on the reclassification entry
Required Documentation:	Agreement or justification for the reclassification. This documentation will include adequate detail to support the cost, period of performance, and detailed information to describe the supplies/services.
Common Special iFAMS Document Types for Recording Transaction:	SEB for reclassifications between stationsSEW for reclassifications within a stationPET for reclassifications from one obligation to another, within or between stations.
Payment Mechanism:	Not applicable

Appendix C: Reclassification FMS Processing

Applicable appropriation:	All VA appropriations/funds
Timing of the obligation:	Date the reclassification entry is recorded by the initiator of the transaction
Amount:	Transaction-level amount on the reclassification entry
Required Documentation:	Agreement or justification for the reclassification. This documentation will include adequate detail to support the cost, period of performance, and detailed information to describe the supplies/services.
Common Special FMS Document Types for Recording Transaction:	EB for reclassifications between stationsEW for reclassifications within a stationET for reclassifications from one obligation to another within or between stations
Payment Mechanism:	Not applicable

Appendix D: FMS Macro-7 Voucher Template

1. Macro-7 is a tool created by FSC to assist employees in accomplishing all required steps of transaction processing and supporting documentation. This can be used in place of the SV Form to streamline processing with consistent results to successfully stand up to review. Whether Macro-7, the SV Form, or another cover sheet with the SV package is used, the SV Preparer and Approver are responsible for confirming that all necessary documentation and approval requirements are met.
2. Macro-7 can be used for the following reclassification transaction types: EB, ET, and EW
3. The FMS Macro-7 Voucher Template and the FMS Macro-7 Voucher Template Detailed Expanded Instructions are available on the VHA CFO Office of Financial Oversight SharePoint site.

Appendix E: Supporting Documentation Examples for Reclassifications

This is a reference guide containing common examples of supporting documentation required to justify reclassifications. Supporting documentation should validate the reason why the reclassification was created/authorized. This may include, but is not limited to, emails or screenshots of all applicable financial system screens (before and after). Data can be obtained from multiple different sources such as Financial Reports System (FRS), VHA Support Service Center (SSC), and Power BI F827 Dashboard.

Type/Category	Source Documentation Examples	Transaction Type / Transaction Code
Appropriation to Appropriation (i.e., A1 to B2)	FRS or F20D data pull with Line of Accounting to close out 2-year funding. Email or written request for expenditure transfer. Documents that support the reason the reclassification was needed.	EW 01
Salary cost transfer	Database or Human Resources Payroll Application Service (HRPAS) data supporting employees’ hours worked in alternate location. Program Office agreement/ Memorandum of Understanding (MOU). Line of accounting of employee as originally charged. Copy of email that indicates the numbers of hours worked to transfer to a different Salary Fund Control Point (FCP).	EW 56
Supplies/Materials	Copy of email, OBLH or OBLL table which shows the expended amounts, and invoice showing purchased supplies/materials for specific intent to be moved to supplemental funding.	EW 01
Payment moves within an Obligation	Copy of email identifying the problem. Invoice that caused the problem	ET 01
Transfer of assets, liabilities, or expenditures between stations	Copy of the original purchase order and receiving report from the purchasing station; or OBLL/OBLH which shows the expended amounts, with RT transaction from DXRF or RCHT. Documents that support the reason the reclassification was needed.	EB 01
Move payment to a different obligation Payment posting errorsDirect DisbursementAdvance Disbursement	An email from a FCP Official, Invoice Payment and Processing System (IPPS) Certifier or Contracting Officer’s Representative (COR) indicating that a payment was certified or was applied to the wrong obligation and indicating where the payment should be applied.  IPPS screen shot showing where the invoice was applied if possible.  DXRF screen shot showing the payment on the wrong obligation.	ET 01
GL Suspense Balances	Email from oversight requesting the roll forward. Data showing before and after GL balances at the time of the roll forward.	EW 03