Policy References:

GASB Statement No. 16 - Accounting for Compensated Absences

GASB Interpretation No. 6 - Recognition and Measurement of Certain Liabilities and Expenditures in Governmental Financial Statements

Process and Document Preparation:

GASB Statement No. 16 - Accounting for Compensated Absences, and GASB Interpretation No. 6 - Recognition and Measurement of Certain Liabilities and Expenditures in Governmental Financial Statements, establish accounting and reporting standards for compensated absences. Generally, a liability should be accrued as employees earn the right to the benefits for compensated absences that are attributable to services already rendered and that are not contingent on a specific event that is outside the employer's and employee's control. Recognition and measurement criteria pertaining to vacation leave is discussed below. Sick leave is now accounted for under Other Post-Employment Benefits (OPEB) (see Section 4.M - Other Post-Employment Benefits (OPEB) of this Chapter).

VACATION LEAVE

Statement No. 16 requires us to accrue a liability for vacation leave benefits earned by employees if both of the following conditions are met:

1. The employees' rights to receive compensation are attributable to services already rendered and;
2. It is probable that the employer will compensate the employees for the benefits through paid time off or some other means, such as cash payments at termination or retirement.

Interpretation No. 6 requires leave balances that will be liquidated with expendable available financial resources (current liabilities) be accrued and reported as a governmental fund liability and expenditure.

Governmental funds report a liability for compensated absences only when there are pending payments of unused leave owed to employees separated from active service as of the end of the reporting period. (Per paragraph 14)

In accordance with Statement No. 16, the full liability will be accrued and reported in the Government-wide financial statements (the current portion should be estimated.)

Additional costs incurred by the employer related to vacation leave must also be considered if they are directly and incrementally related to vacation payments. After review of retirement benefits which included discussions with representatives from the Office of the State Comptroller and Division of the Budget, it was determined that only the State’s share of social security and medicare taxes (FICA) should be accrued.

Guide to Financial Operations

REV. 01/01/2017