0401 Overview

This chapter establishes the Department of Veterans Affairs’ (VA) financial policies for the recognition, recording, and reporting of accounts and interest receivable.

Key points covered in this chapter:

• VA will comply with Statement of Federal Financial Accounting Standards (SFFAS) 1 accounting standards for accounts and interest receivable due to VA;
• VA will recognize, record, and report accounts receivable noting the underlying classification;
• VA will prepare an aging of accounts receivable, measure, and record allowance for potential losses, and identify and write off accounts receivable deemed uncollectible;
• VA will recognize, record, and report interest receivable due on investments and debt; and
• VA will, in accordance with Office of Management and Budget (OMB) Circular A-136, report accounts and interest receivable on the consolidated balance sheet and disclose required information in the accompanying notes.

0402 Revisions

Section	Revision	Office	Reason for Change	Effective Date
Various	Format, roles, definitions, and hyperlinks update	OFP	Full Review	April 2025
Various	Streamlined wording throughout	OFP	Working toward high-level plain language.	April 2025
0403, 040501, and 040503	Add Local Finance Office staff role and policy action; add record maintenance provision	OFP	Consistent facility responsibility	April 2025
0403 & 0404	Removed several definitions and roles	OFP	Terms not used in chapter text	April 2025

For a complete list of previous policy revisions, see Appendix A: Previous Policy Revisions.

0403 Definitions

Accounts Receivable – Claims against another entity. Accounts receivable may result from the performance of services, the delivery of goods, refunds due, or a court ordered assessment. Examples include, amounts due to VA for work performed, overpayments to vendors, employees, and beneficiaries, dishonored checks, and damages.

Allowance for Loss on Accounts Receivable – The estimated amount of uncollectible accounts receivable that allows VA to calculate and report a net realizable value (i.e., net estimate of receivables reasonably likely to be collected).

Allowance for Loss on Interest Receivable – The estimated amount of uncollectible interest receivable reported as an offset so that a net realizable value can be calculated and reported.

Collections – An inflow of funds (i.e., a payment for goods and/or services provided, debt collections, cash and checks from Veterans, returned benefit checks, intragovernmental collections, refunds, rebates, and other miscellaneous receipts).

Delinquent Receivables – Delinquency occurs when payment is not made by the due date specified in the initial billing notice. Delinquent receivables are aged from the payment due date.

Entity Receivables – Assets the reporting entity has authority to use in its operations. The authority to use funds in an entity’s operations means the entity management has the authority to decide how funds are used, or management is legally obligated to use funds, to meet entity obligations (e.g., repay loans from Treasury).

Interest Receivable – Interest income earned but not received as of the reporting date. The amount represents accrued interest charges on delinquent accounts receivable, loans receivable, and investment securities.

Intragovernmental Receivables – Claims of a Federal entity against other Federal entities.

Intragovernmental Transactions (IGTs) –These transactions result from business activities conducted by two different Federal Government entities. There are two types of IGTs: intradepartmental and intragovernmental. For the purposes of this chapter, business activities conducted between Federal entities whether inside or outside VA will be known as intragovernmental transactions (IGT).

• Intradepartmental transactions result from activity between trading partners within the same department.
• Intragovernmental transactions result from activity between Federal entities not within the same department.

Non-Entity Receivables – Amounts due to an entity that are not available for the entity’s use. An example of non-entity assets is income tax receivables, which IRS collects for the U.S. Government but has no authority to spend.

Penalties, Fines, and Administrative Fees Receivable – The amount owed representing fees charged on any portion of a debt (including employee debts) more than 90 days past due, fines imposed for violation of laws or regulations, and administrative costs of collection, which may be added to delinquent debt amounts along with late payment interest charges.

Recognize (or Recognition) – To record a financial transaction in the financial records of an entity.

Refunds – Returns of funds previously disbursed (payables) or collected (receivables).

Reimbursements – Fees collected to cover cost incurred for providing goods or performing a service.

Trading Partner – A Federal entity that is party to Intragovernmental Transactions (IGTs) as either the buyer or the seller.

Write-off – An accounting action that results in reporting the debt as having no value on the agency’s financial and management report. Write-off may occur before, concurrently with, or after the agency determines that collection action should be terminated. A write- off must be classified as either Currently Not Collectible (CNC) or as a close-out per OMB Circular A-129 guidance.

0404 Roles and Responsibilities

Local Finance Office staff are responsible for using internal controls and monitoring effectively to promptly recognize, bill, and collect accounts and interest receivable.

Office of Financial Reporting is responsible for disclosing accounts and interest receivable on VA’s agency financial report.

0405 Policies

040501 General Policies

1. VA will comply with the following authorities for the accounting and reporting of accounts and interest receivable:
   • FASAB Statement of Federal Financial Accounting Standards (SFFAS) 1;
   • Office of Management and Budget (OMB) Circulars A-129 and A-136;
   • 31 U.S.C. § 3719; and
   • Treasury Financial Manual.
2. VA will establish an account receivable when VA holds a claim to cash or other assets from another entity.
3. VA is required to charge interest, penalties, and administrative costs in accordance with 31 C.F.R § 901.9, on debts owed to the Federal Government. Some compensation and pension benefit debts are exempt from these charges in accordance with 38 U.S.C. § 5315(a)(1). See Volume XII, Chapter 2 – Benefit Debts, for additional information.
4. VA intragovernmental accounts receivable with other Federal entities will not be eliminated from the Department’s financial statements as they will be eliminated on the Financial Report of the U.S. Government.
5. VA intragovernmental accounts receivable balances with a Federal trading partner must match the trading partners’ accounts payable balances.
6. VA will report Accounts and Interest Receivable on the quarterly Treasury Report on Receivables as required by 31 U.S.C. § 3719. See Volume XII, Chapter 19 – Treasury Reporting on Receivables, for detailed information.
7. VA’s Office of Financial Reporting will properly disclose accounts and interest receivable on VA’s agency financial report in accordance with OMB, Treasury, and other external guidance.
8. VA will maintain records of accounts receivable valuation and accrual estimates in accordance with National Archives and Records Administration requirement.

040502 Classifying Accounts Receivable

1. In accordance with OMB Circular A-136, VA will distinguish intragovernmental receivables and public receivables (also known as non-Federal or Other than Intragovernmental Receivables) separately because of the different legal and administrative requirements and concepts that apply to them.
2. Intragovernmental accounts receivable consists of amounts due from other Federal entities primarily for reimbursement of costs and lease payments receivable. See Volume IX, Chapter 5 – Intragovernmental Transactions, for additional information on transactions between Federal entities.
3. Public accounts receivable are amounts due from public entities and consist primarily of:
   • Amounts due for Veterans’ health care;
   • Amounts due for Veterans’ benefit program-related overpayments;
   • Employee debt managed by Defense Finance and Accounting Service for current employees; and
   • Other miscellaneous receivables due primarily for general fund advances, medical research, and criminal restitution orders.
4. In accordance with OMB Circular A-136, VA will further distinguish receivables as being either an entity or non-entity receivable.
   1. Entity receivables are amounts which VA is authorized by law to include in its obligational authority or to offset its expenditures and liabilities upon collection. Entity receivables result primarily from the exchange of goods or services to the public or other Federal entities.
   2. Non-Entity receivables are amounts VA is not authorized to obligate that are collected on behalf of the U.S. Government or other entities. Non-entity receivables should be reported separately from entity receivables.

040503 Recording Accounts Receivable and Related Payments

1. Local Finance Office staff will promptly recognize, bill, and collect accounts and interest receivable.
2. VA will establish and maintain accounts receivable records in a current status by classification, type of debt, and appropriation.
3. VA will support general ledger receivable balances with detailed records of each amount receivable from each customer. The detailed transactional data should include at a minimum, the date recorded, the Notice of Indebtedness (NOI), and date billed.
4. VA will maintain records with enough detail to readily identify the type of receivable (e.g., intragovernmental, public, employee, criminal, etc.).
5. In accordance with SFFAS 1, VA will record an account receivable from the sale of goods and services in the accounting period when earned.
6. VA will post payments, adjustments, or corrections to receivables promptly and within the accounting period when the adjustments or corrections occur.
7. In accordance with 38 C.F.R. § 1.915, VA will apply payments received from the debtor in the following order:
   • Penalties;
   • Administrative cost;
   • Interest; and
   • Principal
8. In cases where late payment charges have been waived or are prohibited by law, VA will apply the payment received to principal.
9. VA will calculate accrued receivables and record in the financial records at the end of each accounting period, reversing such entries on the first day of the subsequent period. Unbilled receivables should be billed in the next cycle or in accordance with the inter-agency agreement.

040504 Allowance for Loss on Accounts and Interest Receivables

1. In accordance with OMB Circular A-136, VA will document factors and criteria considered regarding the methodology to estimate receivable losses.
2. VA will maintain accounts receivable until they are collected or determined to be uncollectible. To the extent that collection of the full amount of the receivable is not probable, an allowance for the uncollectible amount (allowance for loss) will be established. FASAB Technical Bulletin 2020-1 clarifies SFFAS 1 by providing that recognition of potential losses through an allowance applies to both intragovernmental receivables and public receivables.
3. VA will establish an allowance for loss to the extent that collection of the full amount of the receivable is not likely to be collected. An allowance for estimated uncollectible amounts should be recognized to reduce the gross amount of the receivable to their net realizable value.
4. VA will recalculate and adjust the allowance account at least annually or when information indicates that the latest estimate is no longer correct. Losses due to uncollectible amounts should be measured through a systematic methodology based on analysis of both individual accounts and groups of similar accounts.
5. VA will write-off delinquent debt that has not been collected within two years of delinquency unless documented and justified to OMB in consultation with Treasury. As required by OMB Circular A-129, all write-offs must be made through the allowance account. Debts will not be written off directly to expense. See Volume XII, Chapter 16 – Suspension of Debt Collection, and Volume XII, Chapter 17 – Termination of Collection Standards, for additional information, delegation of authority, and reporting requirements.

040505 Interest Receivable

1. VA will recognize and record interest receivable, to include interest receivable due on investments and debt, in accordance with SFFAS 1, 38 U.S.C. § 5315, and Volume XII, Chapter 8 – Interest, Administrative Costs, and Penalty Charges. See Volume V, Chapter 3 – Investments, for information specific to VA investments.
2. VA will charge the minimum annual interest rate equal to the U.S. Treasury’s Current Value of Funds Rate on delinquent debts. The rates are published annually by the Secretary of the Treasury in the Federal Register and are available on the Fiscal Service website. For further information regarding interest rate charges refer to Volume XII, Chapter 8 – Interest, Administrative Costs, and Penalty Charges.
3. The rate of interest will remain fixed for the duration of the delinquent debt. However, per 31 C.F.R. § 901.9, when a debtor defaults on a repayment agreement and seeks to enter into a new agreement, VA may set a new interest rate. Interest will be computed as follows: Interest = Principal x Annual Rate x Days Outstanding/360.
4. The following standards will be applied for recognition of interest receivable:
   1. Interest will be recognized as it is earned on investments in interest-bearing securities.
   2. Interest will be recognized on outstanding delinquent accounts receivable and other U.S. Government claims against persons and entities in accordance with provisions in 31 U.S.C. § 3717.
   3. VA will not recognize interest receivable on Federal accounts receivable.
   4. Interest will not be charged on accrued interest and administrative costs.
   5. In accordance with SFFAS 1 interest will not be recognized on accounts receivable or investments that are determined to be uncollectible unless the interest is actually collected. However, until the interest payment requirement is officially waived, or the related debt is written off, interest accrued on uncollectible accounts receivable will be disclosed.
   6. All or any part of the interest and administrative costs assessed are subject to consideration for waiver under 38 U.S.C. § 5302(a).
      1. VA may forbear collection of interest and administrative costs.
      2. VA may terminate further assessment of interest and administrative costs when the collection of such interest and costs are determined to be not in the Government’s best interest.

040506 Reversal of Invalid Accounts and Interest Receivable

1. VA will review receivables for completeness and accuracy on a monthly basis.
2. Any account receivable found to be erroneous, invalid, or unsupportable will no longer be classified as collectible. If it is determined the debt was never owed (e.g., a duplicate name and VA records reflected the wrong person) and should not have been classified as a receivable, the entries which established the receivable will be reversed.
3. VA will reverse erroneous, invalid, or unsupported accounts receivable in the period in which the determination was made.
4. Normally when debts in excess of $600 are forgiven, a 1099-C will be generated and sent to the debtor and the IRS. In the instance where there was never an official debt, an IRS 1099-C report will not be generated.

040507 Canceled (Closed) Appropriations and Collection Activities

1. On September 30 of the 5th fiscal year after the period of availability for obligation of a fixed appropriation account ends, the appropriation account will be closed and any remaining balance in the account shall be canceled (closed)(31 U.S.C. § 1552).
2. Canceled (closed) appropriations will not relieve VA of the responsibility to pursue collection or recovery of debt and additional charges and the associated accounting.
3.  VA financial system annual close processes move the accounts receivable to the Department of the Treasury’s (Treasury) Miscellaneous Receipts Account 3200, Collections of Receivables from Canceled Accounts.
4. Regardless of whether the appropriation has been canceled (closed), VA will continue its collection activity.
5. Collections received after the appropriation is canceled (closed) will be credited to the 3200 Treasury account.

0406 Authorities and References

• United States Code (U.S.C.)
  • 31 U.S.C. § 1552, Procedure for Appropriation Accounts Available for Definite Periods
  • 31 U.S.C. § 3717, Interest and penalty on claims
  • 31 U.S.C. § 3719, Reports on debt collection activities
  • 38 U.S.C. § 5302, Waiver of Recovery of Claims by the United States
  • 38 U.S.C. § 5315, Interest and Administrative Cost Charges on Delinquent Payments of Certain Amounts Due the United States
• Code of Federal Regulations (C.F.R.)
  • 31 C.F.R. § 901.9, Interest, Penalties, and Administrative Costs
  • 38 C.F.R. § 1.915, Interest, Administrative Costs, and Penalties
• FASAB Handbooks by Chapter
  • SFFAS 1, Accounting for Selected Assets and Liabilities
  • Technical Bulletin 2020-1, Loss Allowance for Intragovernmental Receivables
• OMB Circulars
  • A-129, Policies for Federal Credit Programs and Non-Tax Receivables
  • A-136, Financial Reporting Requirements
• Treasury Financial Manual
  • Treasury Current Value of Funds Rate
• National Archives and Records Administration
• VA Financial Policy Publications
  • Volume V, Chapter 3 – Investments
  • Volume IX, Chapter 5 – Intragovernmental Transactions
  • Volume XII, Chapter 2 – Benefit Debts
  • Volume XII, Chapter 8 – Interest, Administrative Costs, and Penalty Charges
  • Volume XII, Chapter 16 – Suspension of Debt Collection
  • Volume XII, Chapter 17 – Termination of Collection Standards
  • Volume XII, Chapter 19 – Treasury Reporting on Receivables

0407 Rescissions

Volume V, Chapter 6 – Accounts and Interest Receivables, June 2021

Appendix A: Previous Policy Revisions

Section	Revision	Office	Reason for Change	Effective Date
Various	Reformatted to new policy format and completed five-year update	OFP (047G)	Reorganized chapter layout	June 2021
0603 Definitions	Updated Allowance for Loss on Accounts Receivable	OFP (047G)	Rescission of policy prohibiting recording of Loss Allowances on Intragovernmental Receivables (September 15, 2017)	June 2021
0604 Roles and Responsibilities	Removed OFP Roles and Responsibilities from Chapter. Added OFR to reflect reporting responsibilities	OFP (047G)	Alignment of tasks to specific offices	June 2021
0605 Policies	Updated Policy Statements	OFP (047G)	To properly reflect VA’s accounts and interest receivable accounting and reporting requirements per updated guidance	June 2021
0606 Authorities and References	Added new FASAB Technical Bulletin	OFP (047G)	FASAB Technical Bulletin 2020-1, Interpretation of Federal Financial Accounting Standards 9, Loss Allowance for Intragovernmental Receivables	June 2021
Appendix A	Moved revisions prior to June 2021 to Appendix A	OFP (047G)	Functional placement	June 2021

Section	Revision	Office	Effective Date
Vol V Ch 6 Accts Receivable & Ch 6A Interest Receivable	Merged chapters and updated information as needed. Chapter focus revised to the accounting aspect rather than the administration of debt and authority for interest. References to other chapters included.	APPS (047GA1)	January 2013
Ch 6 & Ch 6A 0601 Overview	Detailed information moved into appropriate policies and procedures sections. Reorganized information.	APPS (047GA1)	January 2013
Ch 6 Accts Receivable	Deleted sections related to TROR, and IRS reporting deleted. Reference to other chapters included.	APPS (047GA1)	January 2013
Ch 6 Accts Receivable	Write-off and close-out updated to clarify difference. Authorities for approval of termination and close-out deleted. Reference to other chapters included.	APPS (047GA1)	January 2013
Ch 6A Interest Receivable	Deleted reference for 1992 decision for not charging interest on compensation and pension debts.	APPS (047GA1)	January 2013
Ch 6A Interest Receivable	Deleted detailed authority information for interest. Reference to Vol XII Ch 1, Interest, Admin Costs, and Penalty Charges included.	APPS (047GA1)	January 2013