An AFE (or Authorization for Expenditure) is a detailed budget for a specific project. Oil & Gas Operators use the Pak Accounting AFE system to:

• Project or budget project costs.
• Create a cash call (or AFE request for payment) to the partners in the project.
• Track actual costs versus the budget and report on the same.
• Track the cash call receipts.
• Automatically apply the prepayments to the partner’s accounts receivable when the actual charges are billed out.  
• Track the amount of unused prepayments for each partner’s project.

An AFE is a request to participate in an upcoming project. Note that the AFE request (or cash call) does not automatically create a journal entry. The first entry into the system is when the payment is received.

Pak Accounting tracks the receipt and the automatic application of prepayments via the use of AFEs.  An AFE in itself doesn't require the investor to prepay.  Generally, prepayments are always associated with some specific project and/or drilling program.  However, prepayments can be received and, if applied manually to an investor's account, don't require an AFE. (Warning:  Prepayments can not be applied on multiple active AFEs for a specific property within a cycle.)

NOTE: See Investor AFE Tracking to be able to track AFEs without the Revenue/ Billing module.

Setup and Features

• One-time setup – Company options and AFE Templates
• AFE Maintenance screen - Establish your Budget for the Project
• List Owner or Office Copy – Generate your Cash Calls
• AFE interface with other modules - Deposit Entry and Accounts Payable
• AFE Reports  -  including AFE Comparison (Generate a current Cost vs. Budget report) and Payment Status Report
• Billing Cycle Features – Owner Prepayment status and application

One Time Setup:

1. You will need to set up a specialized General Ledger Account for Prepayments in the Liability section of the Chart of Accounts, for example, #2400 Prepayments. The new account needs to be assigned to a Sub-Table for Owners, for example, #101.
2. You will also need a Journal setup for AFEs in Journal Maintenance.
3. In the Revenue/Billing > Company Maintenance screen:
   1. Accounts tab - at the bottom of the screen, in the Prepayment Collection Acct (Sub by owner) field, enter the prepayment Account
   2. Jrnl #/Sub Tbl tab, in the Journal, when applying Prepaid to AR field, enter the new AFE Journal.  
4. If an entry is not coded to a specific AFE, it’s called an Operation cost. This means that the item will not be covered by Prepayment funds and will need to be paid separately.
   Pty Susp/Net tab > Netting Option >  AFE/Operations field, use the drop-down to select the netting options. This determines how we want the system to treat (and present) the AFE prepaid funds (the last three options only). See Netting Options - AFE/Operations for examples.

AFE Maintenance Screen:

1. Before you can set up your AFE, you must set up:
   1. Property: (Revenue/Billing > Master File Maintenance > Property)
      Multiple decks allow for separate DOIs for the same property during the same billing period. This could be used if there are different sets of owners or different percentage breakouts for different stages simultaneously.
   2. Division of Interest: (Revenue/Billing > Master File Maintenance > Division of Interest).
      Make sure your DOIs are set up—if they haven't already been created. Don’t forget to set up your owners first.
2. Creating the AFE/Cash Call on the AFE Maintenance screen (Revenue/Billing > Billing Maintenance > Authority for Exp). This is where you create and maintain your AFE budgets.  
   1. Click Add in the lower left-hand corner of the screen.
   2. Select the option to Create a new Template, Create a new AFE, or Copy from an Existing Template or AFE.
      Notes on creating AFE’s:
      • Creating a Template can make it easier to create new AFEs in the future.
      • After saving the template, it can be copied to an AFE using ADD / Copy from the existing Template or AFE. On the main Maintenance Form, select [Add], then select Copy from Existing Template or AFE (including existing dollars).

List Owner or Office Copy

1. To Print the AFE/Cash Call, select the List button on the menu bar of the AFE Maintenance.
2. Select the Owner or Office Copy.
3. See AFE Reports for more information on the report options.

Enter in PrePay and Expenses

• Entering Expenses through A/P
  When entering AFE Charges via Accounts Payable invoice entry or General Ledger and you use an active Billing Account from the AFE, it will pre-fill the AFE Number, Deck, and Stage.  The system will automatically code to the correct AFE and stage as long as the AFE Number / Stage / Account Number is active.
  NOTE: If the Expense Account is not associated with the AFE, the AFE#, Stg, and Deck fields will be grayed out.
• Receiving and posting prepaid dollars, tracking of returns
  When entering a Prepayment received (a deposit) through Deposit Entry or General Ledger Entry, use the AFE Liability Account (ex. 2400). You must enter the related AFE number.

AFE Reports (R/B > Reports > AFE tab) There are several reports to track which owners have/have not paid, what has been Billed vs the Budget, and how much of an Owner’s Prepayment has/has not been used.

Billing Cycle Features – Owner Prepayment status and application

• Any unused prepayments automatically offset the current month's AFE Billing Charges. In effect, the A/R is credited when charges occur, not when the Prepayment is received.
• Owner Settlement Statement shows a reconciliation of unapplied Prepayment for each AFE that the owner has any participation.
• Owner Detail of Charges accounts for all costs charged to the AFE.
• Operating Costs (charges not associated with the AFE) will be separated out.

See AFE advanced features.