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Accounting for Consolidated Money Pools
In
Reply Refer To:
OED-DRAP
Docket No. AI02-2-000
August
1, 2002
TO
ALL JURISDICTIONAL PUBLIC UTILITIES, LICENSEES,
NATURAL
GAS COMPANIES, AND OIL PIPELINE COMPANIES
Many jurisdictional
entities that are members of a consolidated group enter into arrangements
to combine their cash in a money pool arrangement to manage their
working capital. The enclosed Accounting Release No. 17 provides
guidance on how jurisdictional entities shall account for money
pool arrangements and the types of documentation that shall be maintained
for these inter-company agreements. This Accounting Release will
provide consistency and uniformity in the accounting for these pooling
arrangements by jurisdictional entities and is effective August
1, 2002.
Authority to
act on this matter is delegated to the Chief Accountant pursuant
to § 375.303 of the Commission's regulations. This Accounting Release
constitutes final agency action. Requests for rehearing by the Commission
may be filed within 30 days of the date of issuance of this letter
order, pursuant to 18 C.F.R. § 385.713.
John
Delaware
Deputy Executive Director
and Chief Accountant
FEDERAL ENERGY REGULATORY COMMISSION
ACCOUNTING RELEASE NUMBER 17
Accounting for Consolidated Money Pools
Background:
Many jurisdictional
entities that are members of a consolidated group have arrangements
to pool their cash in a consolidated money pool to manage their
overall cash flow requirements due to differences in their cash
receipts and cash disbursements. Money pool arrangements can
provide the participants with greater financing flexibility
and a lower cost of borrowing than would otherwise be available
to an individual entity. These arrangements can help smaller
affiliates within the group to receive the same favorable borrowing
rates as larger entities.
Under money
pools, the participants may contribute their cash surpluses
to the money pool, and/or borrow funds from the pool as needed
to meet their working capital needs. Any excess funds, after
borrowing requirements are met, should be invested by the pool.
Interest is received on funds placed in the pool and interest
expense is paid by participants that borrow from the pool.
The Commission's
accounting regulations require that jurisdictional entities
keep their books of account, and all other books, records, and
memoranda which support the entries, so as to be able to furnish
readily full information as to any item included in any account.
Each entry shall be supported by such detailed information as
will permit ready identification, analysis, and verification
of all facts relevant thereto.1
Because money pools are arrangements among affiliated entities
directly or indirectly controlled by, or under common control
with parent companies, it is vital that jurisdictional entities
maintain appropriate documentation to support and verify all
of the facts related to the transactions under these arrangements.
Question:
What are
the proper accounting treatment and related documentation requirements
for money pool arrangements involving jurisdictional entities?
Answer:
Public Utilities
and Licensees, Natural Gas Companies and Oil Pipeline Companies
must account for money pool arrangements and maintain the following
documentation for these arrangements under the Commission's
Uniform Systems of Accounts as discussed below:
Public
Utilities, Licensees and Natural Gas Companies
Amounts deposited
with money pools are to be recorded in Account 145, Notes receivable
from associated companies, or Account 146, Accounts receivable
from associated companies, unless such amounts deposited are
evidenced by notes with maturities of more than one year from
date of issue. If the notes have maturities of more than one
year from date of issue, they shall be recorded in Account 123,
Investment in associated companies, or Account 123.1, Investment
in subsidiary companies.
Borrowings
from money pools shall be credited to Account 233, Notes payable
to associated companies, or Account 234, Accounts payable to
associated companies, unless such borrowings are evidenced by
notes with maturities of more than one year from date of issue.
If the notes have maturities of more than one year from date
of issue, they shall be credited to Account 223, Advances from
associated companies.
Interest
earned on deposits with money pools shall be credited to Account
419, Interest and dividend income. Interest expense incurred
on borrowings from money pools shall be charged to Account 430,
Interest on debt to associated companies.
Oil
Pipeline Companies
Amounts deposited
with money pools are to be recorded in Account 13, Receivables
from affiliated companies, unless such investments are evidenced
by notes with maturities of more than one year from date of
issue. If the notes have maturities of more than one year from
date of issue, they shall be recorded in Account 20, Investments
in affiliated companies.
Borrowings
from money pools shall be credited to Account 50, Notes payable,
or Account 51, Payables to affiliated companies, unless such
borrowings are evidenced by notes with maturities of more than
one year from date of issue. If the notes have maturities of
more than one year from date of issue, they shall be credited
to Account 60, Long-term debt payable after one year.
Interest
earned on deposits with money pools shall be credited to Account
630, Interest and dividend income. Interest expense incurred
on borrowings from money pools shall be charged to Account 650,
Interest expense.
Documentation
Requirements
All jurisdictional
entities participating in money pool arrangements shall maintain
supporting documentation for all deposits into, borrowings from,
interest income from, and interest expense to such money pools.
The written documentation shall include evidences of:
- individual
deposits with money pools, including the date of the deposit,
the amount of the deposit, the maturity date, if any, of the
deposit, and the interest earning rate on the deposit.
- borrowings
from money pools, including the date of the borrowing, the
amount of the borrowing, the maturity date, if any, of the
borrowing, and the interest rate on the borrowing.
- the security
provided by the money pool for repayment deposits into the
money pool and required by the money pool in support of borrowings
from the money pool.
- daily
balances of deposits with and borrowings from money pools
for each individual deposit or borrowing. Cash deposits and
borrowings may not be netted.
All jurisdictional
entities shall also maintain current and up-to-date copies of
the documents authorizing the establishment of the money pool
that specifies the:
- duties
and responsibilities of the money pool, its administrator
and the other participants in the money pool.
- restrictions
on deposits or borrowings by pool members.
- method
used to determine the interest earning rates and interest
borrowing rates by pool members.
- method
used to allocate interest income and expenses among the pool
members.
John
Delaware
Deputy Executive Director
and Chief Accountant
Effective:
August 1, 2002
1 See General Instructions-Records
under Parts 101, 201 and 352 of the Commission's Uniform Systems
of Accounts for Public Utilities and Licensees, Natural Gas Companies
and Oil Pipeline Companies.
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