PLANS OF FINANCIAL ADJUSTMENT - 8452-JUL-2018
A Plan of Financial Adjustment (PFA) is a plan proposed by a state 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 claim schedules for an invoice or payroll charge applicable to more than one fund or appropriation. See SAM section 8452.1 for preparation of a PFA and for requesting a new clearing program. See section 8452.2 for approval of a PFA.
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, throughout the month a department will use a disbursing account, such as a clearing account (also known as the clearing program 99) 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. Once a month, departments will submit a transaction request to transfer expenditures from the clearing program in accordance with the approved PFA. The clearing program must be able to support the PFA covered expenditures for the month.
The clearing program is established in the department’s primary appropriation and must be approved by the Finance budget analyst and SCO. Departments can seek approval to establish a new clearing program by adding language to the PFA letter. See section 8452.1.
At month end, the department will perform cost allocation/fund split and record the expenditures in the ultimate funds. The department will provide SCO a written request called the Transaction Request, Form CA 504 to transfer expenditures in accordance with the department’s approved PFA authority. Transfers should be for a one month period and months should not be combined. The transaction request should specify whether the transfer is for actual or estimated expenditures. The SCO will process the Transaction Request and issue a journal entry to the 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. Generally, financial adjustments are made on a monthly basis but could be more frequent if needed. 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 law and principles of governmental accounting, 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’s Office and SCO, Audits Division.