DEPARTMENT OF AUDITOR-CONTROLLER CONTRACT ACCOUNTING AND ADMINISTRATION HANDBOOK - Revision March 2014

Sep 4, 2026

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This handbook sets required standards for accounting, internal control, financial reporting, and contract administration for contractors doing business with Los Angeles County. It defines minimum required procedures and controls to be incorporated into a contractor’s accounting and financial reporting system, clarifying the roles of adequate staffing and alternative controls when staffing is insufficient. It also specifies how contractors select cash or accrual accounting, how accruals are recorded and reversed, and how financial journals and ledgers must be maintained for monthly postings.

LanguageEnglish

CategoryPaper Templates

FormatPDF

Pages99

Reading Time35 min

AccessFree to download

Purpose and scope

Accounting and internal control standards

Basis of accounting

Cash basis versus accrual basis

Accrual recording and reversal

Prepaid expenses

Accounting system requirements

Double entry accounting system

General Journal

Cash Receipts Journal

Cash Disbursements Journal

LINE ITEM BUDGET EXHIBIT C Office of Management and Budget (OMB) Title 2 Code of Federal Regulations (CFR) Chapter I, Chapter II, [Part 200 et. al](Part 200 et. al)[and 2 CFR 1.100](and 2 CFR 1.100) , Title 2, Part 1 These exhibits can be obtained via internet by accessing the US Government Printing Office’s home page at: [https://www.ecfr.gov/cgi-bin/text](https://www.ecfr.gov/cgi-bin/text) idx?SID=0b5dbf7c673a7f2cc48b1d49ecab500c&mc=true&tpl=/ecfrbrowse/Title02/2tab 02.tpl and [https://www.gpo.gov/fdsys/pkg/CFR-2017-title2-vol1/pdf/CFR-2017-title2-vol1.pdf](https://www.gpo.gov/fdsys/pkg/CFR-2017-title2-vol1/pdf/CFR-2017-title2-vol1.pdf) DEPARTMENT OF AUDITOR-CONTROLLER CONTRACT ACCOUNTING AND ADMINISTRATION HANDBOOK The purpose of the handbook is to establish accounting, internal control, financial reporting, and contract administration standards for organizations (contractors) that contract with the COUNTY. Revision: March 2014 AUDITOR-CONTROLLER COUNTY OF LOS ANGELES AUDITOR-CONTROLLER CONTRACT ACCOUNTING AND ADMINISTRATION HANDBOOK The purpose of this Handbook is to establish required accounting, financial reporting, and internal control standards for entities (CONTRACTOR) which contract with Los Angeles County (COUNTY) . The accounting, financial reporting and internal control standards described in this Handbook are fundamental. These standards are not intended to be all inclusive or replace acceptable existing procedures or preclude the use of more sophisticated methods. Instead, this Handbook represents the minimum required procedures and controls that must be incorporated into a CONTRACTOR’S accounting and financial reporting system. The internal control standards described apply to organizations with adequate staffing. Organizations withinsufficient staff to implement the internal controls as described herein must adopt alternative controls (e.g., use of appropriate alternative staff or Board Officers, etc.) to comply with the intent of the standards to ensure effective internal control systems are in place within the organization. The CONTRACTOR’S subcontractors must aIso follow these standards unless otherwise stated in the Agreement. A. ACCOUNTING AND FINANCIAL REPORTING 1.0 Basis of Accounting Unless otherwise specified by the funding source, CONTRACTORS may elect to use either the cash basis or accrual basis of accounting during the year for recording financial transactions. Monthly invoices must be prepared on the same basis that is used for recording financial transactions. The COUNTY recommends the use of the accrual basis for recording financial transactions. Accrual Basis Under the accrual basis for recording financial transactions, revenues are recorded in the accounting period in which they are earned (rather than when cash is received) . Expenditures are recorded in the accounting period in which they are incurred (rather than when cash is disbursed) . AUDITOR-CONTROLLER COUNTY OF LOS ANGELES Accruals Accruals shall be recorded observing the following: 􀁸 Recorded accruals must be reversed in the subsequent accounting period. 1.1 If a CONTRACTOR elects to use the cash basis for recording financial transactions during the year: 􀁸 Necessary adjustments must be made to record the accruals at the beginning and the end of each year of the contract and at the end of the contract. 􀁸 All computations, supporting records, and explanatory notes used in converting from the cash basis to the accrual basis must be retained. 1.2 Prepaid Expenses Prepaid expenses (e.g. , insurance, service agreements, lease agreements, etc. ) should only be expensed during a given Agreement year to the extent goods and services are received, or are applicable to that Agreement year. 2.0 Accounting System Each CONTRACTOR shall maintain a double entry accounting system (utilizing debits and credits) with a General Journal, a Cash Receipts Journal, a General Ledger, a

FAQs

What is the purpose of the Contract Accounting and Administration Handbook?

The handbook establishes required standards for accounting, internal control, financial reporting, and contract administration for organizations contracting with Los Angeles County.

How can contractors choose between cash basis and accrual basis accounting?

Unless specified by the funding source, contractors may elect cash or accrual basis for recording financial transactions, and monthly invoices must follow the same basis used for recording transactions. The county recommends using the accrual basis.

What accounting system and journals must contractors maintain?

Contractors must maintain a double-entry accounting system using a General Journal, Cash Receipts Journal, General Ledger, and Cash Disbursements Journal. A Payroll Register must also be maintained, with postings made at least monthly.

Sep 4, 2026

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