FUNCTIONAL ACCOUNTS

Generally, fictional accounts classify transactions according to the end use or purpose for which the obligation, expenditure, or collection is made. This classification provides the standards of detail required in various reports and a code number reference for specifying the content of reports. The fictional account is composed of a 5-digit number. The first digit of the account number designates the major heading for the 6 major series of functional account numbers. For example, 1 designates naval vessels; 2 designates ashore naval activities; 5 designates stores; and so forth. The second digit of the functional account number is combined with the first digit to designate the applicable heading for the secondary series. For example, 51 designates Navy stock account (NSA) and 52 designates appropriation purchases account (APA). Refer to chapter 4 of DFAS-CL (NAVSO P) 1000.2M, for more information about functional accounts.

OBJECT CLASS

The object class is used in submitting a budget request to the Office of Management and Budget. It is also used in reporting data whenever an analysis by object class is required. This classification is based upon the nature of the services, articles, or other items for which funds are expended as distinguished from the purposes for which such expenditures are made. This object class should be 000 unless the transaction affects the international balance of payment (see chapter 7 of DFAS-CL (NAVSO P) 1000.2M).

UNIT IDENTIFICATION CODES

The unit identification codes (UICs) are used to identify specific ships, air organizations, or activities to which an expenditure is chargeable as cost of plant, maintenance, or operation.

PROPERTY CLASSES

Property classes are used to segregate the records of plant property. They also provide data for analyzing the cost of manufacturing and of operating some activities. This classification is a refinement of the object classes.

ACCOUNTING CLASSIFICATION CODES

The accounting classification codes are also known as accounting data. They are made up of nine data elements. They are the appropriation, subhead, object class, bureau control number, suballotment, authorization accounting activity, transaction type, property accounting activity, and cost code. The accounting classification codes are required on all purchase requests and resulting obligations and expenditure documents.

DEFINITIONS

There are numerous terms and phrases that relate to funding, accounting, and reporting. A thorough understanding of these terms will help you understand the financial management functions. The following terms are used in financial management functions:

Administrative cancellation is a term that applies to the following transactions: (1) the financial cancellation of an unfilled order by the OPTAR holder with the accounting office without reference to or action by the supply system; (2) the completion of the below threshold unfilled order by the accounting office instead of establishing partial orders; and (3) the processing of credit unfilled orders.

Aged unfilled order is an unfilled order submitted by an OPTAR holder to the accounting office, held for 3 months in the files, and has not matched with a corresponding expenditure document and has not been Cancelled.

Appropriation subhead is a major subdivision of a budget activity of an appropriation. The subheads of the appropriation for the citation of the operating forces are structured to identify the major claimant, five-year defense program, or budget activity, and expense limitation holder.

Authorization accounting activity is the activity designated to perform the accounting for an operating budget.

Budget activity is the smaller part or segment of the appropriation that is identified by subheads.

Confirmed cancellation is the official notification from the supply system that the requisition is canceled and no other supply action will be taken.

Cost center is the subdivision of the responsibility center. A ship, squadron, or other operating unit having a unit identification code and incurring costs against an operating budget is classified as a cost center.

Credit transaction is a transaction that results in an increase in OPTAR balance. For example, the

confirmed cancellation of an unfilled order will result in a credit to the OPTAR.

Debit transaction is a transaction that results in a decrease of the OPTAR balance. For example, the amount of obligation (in an unfilled order) is less than the matching expenditure document forwarded by the issuing activity.

Difference is the adjustment value required to make the value of the unfilled orders and the matching expenditure to agree. A debit difference indicates an Underestimate and credit difference is an overestimate of an unfilled order (obligation).

Expenditure is a disbursement or payment of appropriated funds. For example, an expenditure occurs when the supply system issues material; the expenditure document is forwarded to the accounting office for matching with the unfilled order; the accounting activity charges the activity's funds.

Expenses are the costs of material or services that have been consumed or applied.

Expense authority is the budgeted amount within an operating budget approved for incurring expenses.

Expense element is a classification of expenses for cost accounting and reporting. The fund codes used on requisitions and purchase requests identify specific expense elements or subdivisions of expense elements.

Expense limitation is the financial authority issued by a major claimant (such as fleet commanders) to an intermediate level command (such as the type commander).

Filled order is a requisition, purchase request, or order that has matched with a related expenditure and is considered as financially complete.

Five-year defense program is the major financial plan of the Department of Defense for accomplishment within a five-year period.

Major claimant is any bureau, office, or command designated as administering offices under the operations and maintenance appropriations. Major claimants receive operating budgets directly from the Chief of Naval Operations.

Obligational authority is the budgeted amount within an operating budget approved in a fixed amount for incurring obligations or unfilled orders.

Operating budget is the annual budget and financial authority of an activity or command containing the resources to perform its mission.

Operating target (OPTAR) is the annual fund issued by the type commander (or other operating budget holder).

Reconciliation is the process of matching a requisition or other unfilled order with corresponding expenditure(s) performed by the accounting office.

Reimbursable OPTAR is a separate OPTAR granted by the type commander or other operating budget holder to a ship or activity for specific work or services. The work or services performed is chargeable to the reimbursable order accepted by the type commander or other budget holder.

Responsibility center is a command designated to receive and administer an operating budget. A type commander is classified as a responsibility center.

Supplies and Equipage (S&E) is a traditional phrase used to describe the purpose of OPTARs for the operating, organizational maintenance, and administrative requirements of a ship, staff, or other unit of the operating forces.

Threshold is the designated administrative money value ceiling.

Threshold charge is the process whereby the accounting office charges the unmatched expenditure documents of a value below the threshold without matching obligations (unfilled orders). This procedure is conducted only if the research failed to match the expenditure to an obligation on file.

Unmatched expenditure refers to the expenditure document that has not been matched with an unfilled order and has not been threshold charged nor direct charged in the reconciliation process by the accounting Office.