Can funds be used in the current FY to cover an expense in the next FY?

Can funds be used in the current FY to cover an expense in the next FY?

Technically an agency should not be expending funds in the current year for an event in the next fiscal year.  Some agencies have tried to put funds in an escrow account or pre-pay the expense and don't realize that just because cash goes out the door does not mean it's an expense - it's a balance sheet item (prepaid asset) and does not affect their budget. It doesn't matter if they have encumbered their funds by signing a contract to pay in the next year either.  Unfortunately, Accounting 101 states you recognize an expense in the year you received the good or service. So if they want to use funds in the current budget for an event in the next fiscal year they have two options -
(1) if they have nonlapsing authority, they can roll (non-lapse) the funds to the next year for spending or
(2) if they don't have nonlapsing authority, they can work with their LFA to re- appropriate the funds in the next year.
Usually if they can demonstrate they have a contract or some other project, the LFA's will just re-appropriate the money in the year it's going to be spent. Option #2 happens a lot actually.

(Contact Patricia Nelson with questions)

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