PLAN OF FINANCIAL ADJUSTMENT - PURPOSE - 8452
A Plan of Financial Adjustment (PFA) is a plan proposed by a state agency/department to allocate costs paid from one fund or appropriation to other funds or appropriations. The purpose of a PFA is to eliminate the use of multiple claims for an invoice or payroll charge applicable to more than one fund or appropriation. For instructions on preparing the PFA and requesting a new clearing program, see SAM Section 8452.1. For approval of a PFA, see SAM Section 8452.2.
Approved PFAs are used as the authority to transfer expenditures (financial adjustment) between appropriations of the same fund or between appropriations of different funds. For example, an agency/department will use a disbursement account (e.g., a clearing program) throughout the month to pay invoices, payroll, and direct transfers that are chargeable to multiple appropriations. The use of a single disbursing/clearing program eliminates the need for multiple claims.
The clearing program is established in the agency/department’s primary appropriation and must be approved by Finance and the State Controller’s Office (SCO). Agencies/Departments can seek approval to establish a new clearing program by adding language to the PFA letter. For examples of new clearing program requests, see SAM Section 8452.1 illustrations.
At month end, the agencies/departments will perform cost allocation/fund split and record the expenditures in the ultimate funds. Once a month, agencies/departments shall transfer expenditures from the clearing program in accordance with the approved PFA but could be more frequent if needed. The clearing program must be able to support the PFA covered expenditures for the month. Transfers should be for a one-month period, and months should not be combined. The transaction should specify whether the transfer is for actual or estimated expenditures.
Agencies/Departments deferred or exempt from using FI$Cal shall utilize the Transactions Request Intake System (TRIS) to transfer expenditures in accordance with the agency/department’s approved PFA authority. The SCO will issue a journal entry to the agency/department for the financial adjustment.
PFAs will not be used to provide working capital advances, overcome cash flow problems, or distort interest earnings between funds. Transfer of expenditures between funds will be made on an estimated basis when a material interest earnings loss will occur in the fund from which payments are made.
In accordance with the law and principles of governmental accounting, agencies/departments are required to maintain separate accountability for each fund and/or appropriation covered by the PFA. All PFAs, expenditure transfers, and supporting documentation are subject to audit by the California State Auditor and the SCO, Audits Division.