Question: What is the proper accounting treatment for expenditures made by the utility, resulting from employment practices that were found to be discriminatory by a judicial or administrative decree or that were the result of a compromise settlement or consent decree?
Answer: The Uniform System of Accounts provides that all charges to utility operating expense accounts must be just and reasonable. Expenditures of the nature mentioned above that can be readily identified and quantified should not be considered as just and reasonable charges to utility operations and should be classified to the appropriate nonoperating expense accounts.
Types of expenditures usually related to discriminatory employment practices may include but are not limited to, the following:
- fines or penalties related to judicial or administrative decree imposed by governmental authorities,
- legal fees reimbursed to the plaintiffs,
- in-house and outside legal costs in unsuccessful defense against charges of discriminatory practices,
- damage awards to plaintiffs,
- duplicate labor cost such as back pay, bonus or other pay awards to plaintiffs where other employees have already been paid by the utility for prior services, and
- cost of reporting, training and recruiting undertaken as a result of a court order, administrative decree or settlement which are in addition to those which otherwise would be incurred to assure continuing equal employment opportunity.
- Fines or penalties are to be recorded in Account 426.3, Penalties, and all other costs are to be recorded in Account 426.5, Other deductions.
L. H. Drennan, Jr.
Chief Accountant
Effective: February 1, 1980