If you receive a refund against a prior year obligation that is still available, you should ...

If you receive a refund against a prior year obligation that is still available, you should ...

• A. Apply as normal to existing year
• B. Record the refund as an off-setting collection
• C. Put into suspense account
• D. Return to Treasury

Answer: (B)

When a refund is received for a prior-year obligation that is still available, the correct treatment is to record it as an off-setting collection. Off-setting collections are receipts that offset budget authority or outlays rather than being treated as revenue. Since the obligation from the prior year remains available, the refund simply reduces the amount of budget authority tied to that obligation rather than being added to current-year funds or treated as ordinary income. This keeps the linkage to the original appropriation intact and avoids shifting funds into the wrong year. It’s not about applying the funds to the current year, nor is it appropriate to park the money in a suspense account for a known, applicable refund. Returning it to Treasury would imply there’s no applicable appropriation to offset, which isn’t the case here—the refund corresponds to an already available obligation. In short, the proper action is to record the refund as an off-setting collection against the applicable appropriation.

When a refund is received for a prior-year obligation that is still available, the correct treatment is to record it as an off-setting collection. Off-setting collections are receipts that offset budget authority or outlays rather than being treated as revenue. Since the obligation from the prior year remains available, the refund simply reduces the amount of budget authority tied to that obligation rather than being added to current-year funds or treated as ordinary income.

This keeps the linkage to the original appropriation intact and avoids shifting funds into the wrong year. It’s not about applying the funds to the current year, nor is it appropriate to park the money in a suspense account for a known, applicable refund. Returning it to Treasury would imply there’s no applicable appropriation to offset, which isn’t the case here—the refund corresponds to an already available obligation.

In short, the proper action is to record the refund as an off-setting collection against the applicable appropriation.