H04-057 Policy/Procedure

H04-057 – Policy/Procedure June 23, 2004

TO: Area Agency on Aging Directors FROM: Penny Black, Director, Home and Community Services Division Kathy Marshall, Director, Management Services Division SUBJECT: TERMINAL LEAVE PURPOSE: To notify Area Agencies on Aging (AAAs) of the rules for recording terminal leave. BACKGROUND: In January 2002, the Department of Health and Human Services (HHS) directed the state of Washington to change its policies and procedures related to the allocation of terminal leave, in order to comply with the Office of Management and Budget (OMB) Circular A-87. WHAT’S NEW, If terminal leave has been charged as a direct cost to the program that the CHANGED, OR employee had last worked in the past; this is not in compliance with OMB CLARIFIED Circulars A-87 (governmental units) and A-122 (non-profits).

OMB A-87, Attachment B, Paragraph 11.d (3), states: Payments for unused leave when an employee retires or terminates employment are allowable in the year of the payment provided they are allocated as a general administrative expense to all activities of the governmental unit or component.

OMB A-122, Attachment B, Paragraph 8(2), states: Actual normal turnover severance payments shall be allocated to all activities; or, where the organization provides for a reserve for normal severances, such method will be acceptable if the charge to current operations is reasonable in light of payments actually made for normal severances over a representative past period, and if amounts charged are allocated to all activities of the organization. ACTION: AAAs charging terminal leave as a direct cost to the program where the employee last worked must change their methodology to comply with the requirements in OMB Circulars A-87 and A-122. RELATED None REFERENCES: ATTACHMENT(S):

H04-057A1 Terminal Leave.doc double click on icon to open CONTACT(S): Teri Comstock, Finance Manager Telephone: (360) 725-2399 Email: [email protected]