Ask the Experts – Cash versus Accrual Method of Reporting - State and Federal Communications

April 5, 2011  •  

Ask the Experts – Cash versus Accrual Method of Reporting

Nola Werren
Nola Werren, Esq.

Q. If I receive an invoice from my contract lobbyist for services rendered during one reporting period, but I do not make payment on the invoice until the next reporting period, how do I know when to accurately report the payment?

A. You need to determine whether your particular state uses the cash or accrual method of disclosure.

The cash method is based on when money is actually transacted; in other words, when funds in point of fact change hands from client to contract lobbyist.  In direct contrast to the cash method, the accrual method focuses on the obligation to pay as opposed to when funds actually change hands. Essentially, when you receive the invoice from your contract lobbyist, you are obligated to pay.

So which date do you use for reporting purposes?  Is it the date you actually mail the check to the contract lobbyist, or the date you receive the invoice?  These rarely, if ever, occur on the same date and therein lies the issue:  what happens when these dates fall in different reporting periods?

Some states, such as Tennessee and Texas, specifically provide by statute or rule the method of disclosure that should be followed.  When the law is silent, the most prudent thing to do is call the disclosure office for that particular jurisdiction and get an answer.  Be sure to take the name and title of the person you spoke with and keep it in your records.  You may often hear, “It doesn’t matter; report the expense however you choose.”  This sounds great, but in reality is very frustrating. Whichever method you choose, be consistent. If you decide upon the cash method, document that and use it for all future reports.

When it comes to your contract lobbyists, be sure they are using the disclosure method required by law. This can be important in an audit when the state looks to see if your report aligns with the contract lobbyist’s report.  If the method is optional, discuss with your contract lobbyist which method they intend to use and be consistent.

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