Financial Management Authority
Financial (GL)
The financial management system manages the accounting of the Treasury and government institutions. The system is used for:
preparing the State Accounts
providing financial information on government finances
recording assets
The asset register system is part of the financial management system. It manages fixed assets owned by government institutions. What does financial management show? Financial management can include information on:
income
expenses
assets
liabilities
savings
investments
Cashbook for government entities
A cashbook is a record of financial transactions made outside the government’s accounting systems.
Government entities must submit their cashbooks regularly to the Financial Management Authority.
The cashbook must include:
payments received
payments made
cash balances
bank account balances, where applicable
The cashbook helps ensure that financial transactions are recorded correctly and can be traced.
It also supports:
reliable financial reporting
oversight of public funds
accurate recording of financial transactions
The cashbook must be submitted to the Financial Management Authority by the 8th day of each month.
Send the cashbook to bokhald@fjs.is
Original supporting documents must be included with the submission.
Check the information before submitting
Before submitting the cashbook, make sure the following information is correct:
accounting codes
transaction types
posting codes
identification numbers
dimensions
descriptions
Responsibilities of government entities
Government entities are responsible for keeping their cashbooks up to date.
They are also responsible for submitting them to the Financial Management Authority in accordance with current rules and procedures.
Accrued vacation liability is the employer’s financial obligation for vacation time that employees have earned but not yet used. It appears as a current liability on the balance sheet because the company will eventually have to pay this amount when employees take time off or receive a payout at termination.
The change in vacation liability is posted in the financial module of Orri twice a month, on the 15th and 22nd of each month, or on the next business day.
If a period has already been closed in the financial module of Orri, the change in vacation liability is posted to the next open period.
How vacation liability works in accounting
The accrual of vacation increases the liability in the income statement.
Paid vacation reduces the liability when an employee takes leave or terminates employment.
Vacation liability is posted to the following accounts:
227671, 227672, or 227679.
This page outlines the main rules on the handling of bank accounts and custodial funds within government institutions. The rules apply equally to public sector employees and are intended to ensure transparency and accurate accounting.
Institutional Bank Accounts
All bank accounts held in the name and registration number of a government institution or office must be recorded in its accounts.
This applies without exception.
An institution must maintain a separate custody account when it holds funds on behalf of others, for example:
research grants
Nordic cooperation grants
international cooperation projects where the institution administers payments
Funds held in custody must:
be kept in a separate bank account (custody account)
be recorded using account type
12191
be offset against account type
22191
be registered with a dedicated
dummy identification number
on both account types
Information Required for a Dummy Identification Number
When creating a dummy identification number, the following information must be recorded:
bank code and bank account number
name of the owner of the funds
relevant details in the description field
All expenses relating to a project must be paid from that project's custody account.If an institution pays an expense on behalf of a project, it must:
record the expense in receivables account
121x
using the project's identification number
reimburse the amount without delay, either to the Treasury or to the institution's bank account, as applicable
Custody accounts must be reconciled monthly.
At the end of each month:
the balances of account types 12191 and 22191 must be equal
the balances must reconcile with the custody account bank statement
Interest Income
Interest income and any tax on interest income must:
be recorded between account types 12191 and 22191
not be recognised as income in the institution's operating accounts
Institutions that hold funds in custody must maintain written documentation describing:
why the funds are held
who owns the funds
the purpose of the arrangement
the expected custody period
the accounting treatment
the settlement process
Important Points to Remember
Funds held in custody are not part of an institution's operating funds.
A clear separation must be maintained between custody funds and the institution's own funds.
Accurate record-keeping and regular reconciliations support transparency and reliable financial reporting.
If you need further guidance, contact the accounting or finance department of the relevant institution.
A pay statement is a summary of payments made to an individual or a company during a calendar year. This may include salaries, grants, per diem payments, and contractor payments.
Pay statements are submitted to the Iceland Revenue and Customs (Skatturinn) at the beginning of each year for payments made in the previous year, in accordance with the deadlines published by the tax authorities.
Financial Management Authority (Fjársýslan) is responsible for processing and submitting pay statements for all salaries paid through the Government Payroll System.
As a general rule, each institution is responsible for preparing pay statements for payments it makes outside the Government Payroll System.
For institutions that receive accounting and payment services from Fjársýslan, pay statement processing is handled by Fjársýslan.
Institutions only need to report payments that:
are made directly by the institution,
are not processed through the Government Payroll System, and
are reportable to the tax authorities.
Pay statement processing in Orri is available to users who have access to post transactions in the Oracle General Ledger (GL).
Before processing pay statements, staff should review transactions in GL and verify that:
the correct posting code (BT) has been used,
the correct national identification number (kennitala) has been entered, and
the correct transaction type has been selected.
Accurate registration ensures that information is reported correctly on pay statements.
Reportable payments must be recorded using the following posting codes:
Posting Codes | Description |
|---|---|
1 | Reportable payments to individuals other than payroll-taxable salaries and contractor payments |
2/22 | Reportable contractor payments |
3 | Employee pension fund contribution |
4 | Supplementary pension contribution |
6 | Salaries and other payroll-taxable payments outside the withholding tax system |
7 | Tax withheld from salaries |
8 | Reportable payment that is not taxable |
Transactions recorded with posting code 0 or 9 on transaction types included in pay statement processing are not reported on pay statements.
Pay statement processing is completed through three main processes in the General Ledger (GL). A fourth process can also be run to publish pay statements to Ísland.is
1. Pay Statements GL – 1 Processing
This process:
retrieves transactions with valid posting codes,
creates a pay statement data file, and
prepares data for validation, review, and submission.
2. Pay Statements GL – 2 Statements
This process:
generates pay statements sorted by national identification number or postal code,
creates a summary report, and
displays the number of pay statements and field totals.
3. Pay Statements GL – 3 Tax Authority Submission
This process submits pay statement data electronically to Iceland Revenue and Customs (Skatturinn).
4. Pay Statements GL – 4a Ísland.is
This process publishes pay statements electronically to Ísland.is
Detailed guidance on pay statement processing in Orri is available on the Fjársýslan website.
Tax Return for Tax-Exempt Legal Entities (RSK 1.06)
Once pay statements have been submitted, all government institutions must submit form RSK 1.06 Tax Return for Tax-Exempt Legal Entities electronically to Iceland Revenue and Customs.
Institutions with Independent Accounting
Institutions that maintain their own accounting records are responsible for submitting the form through the Skatturinn service portal.
Institutions Receiving Accounting and Payment Services
Fjársýslan submits the form on behalf of institutions that receive accounting and payment services from Fjársýslan.