Financial Management and Reporting
Agency Policies and Procedures
Issue Date: September 21, 1999 Policy Number: FMR-4B-01
Revised Date: Page: 1 of 2
Prepaid Expenses
Policy Objectives:
Agency policies and procedures for processing of prepaid expenses are designed to:
• Ensure consistent accounting treatment for prepaid expenses agency-wide,
• Establish when an expense will be considered incurred, and
• Guarantee that an expense is recorded as it is incurred.
Background Information:
Prepaid expenses are included as assets based on the concept of matching expenses with revenues. Expenses are
recognized when consumed, this will increase the usefulness of the financial statements by giving a more realistic
portrayal of the division’s operations.
These agency policies and procedures supplement the MAPS Operations Manual Policy and Procedures 0803-01,
paragraph S, Payment Requests, Preparation and Approval.
Authority:
• Minnesota Statute
M.S. § 16A.065 Prepay Software, Subscriptions, United States Documents – This statute authorizes the
commissioner of finance to allow an agency to make advance payments for specific goods or services that
are not cost effective to pay in arrears.
• MAPS Operations Manual Policy and Procedure 0803-01, specifies the state’s policies and procedures on
requesting, preparing, approving, and processing payments. In addition, this policy identifies the specific goods
and services that can be prepaid.
Business Risks:
• If expenses are not recognized in the correct period(s), a material misstatement of the financial position could be
presented.
Policies and Procedures:
1. Division personnel purchase goods and services in accordance with FMR-4A-01, Purchasing (Ordering,
Receiving & Payment Processing).
2. Division personnel authorize and process payments for goods and services.
