Auxiliary Standard Operating Procedures


SUBJECT:

Year End Closing Process

SOURCE:

Auxiliary Accounting, Financial Management Services

DATE ISSUED:

April 2005

DATE OF LAST REVISION:

 

May 2012

ASOP NO:

16.0 

RATIONALE:

To assist the auxiliary organizations in understanding the general aspects of the university fiscal year end closing process.

ASOP:

When the fiscal year end approaches, reporting and nonreporting auxiliary organizations are required to prepare year end financial entries in compliance with university policy FIN-ACC-I-350 in order to meet financial reporting standards based on accrual accounting principles.

 

Financial Management Services communicates the official year-end schedule each fiscal year once it is approved via FMS Newsletter.

 

Specific areas of interest:

  1. Payroll
    • Payroll Accruals (9050)

      Payroll accruals are system-generated. The purpose of the payroll accrual is to recognize payroll expense for work performed in a given month but not paid until the following month. The amount of payroll expense accrued is dependent upon the type of payroll an auxiliary organization has. See ASOP 9.0 Automated Payroll Accruals for details.

    • Vacation/ Sick Accruals (9056/9058)

      The vacation/sick accruals are system-generated annually for PA-PB positions. The liability is calculated based on the liability at the end of May.

  2. Auxiliary Accounting
    • Accrual Entries

      It is crucial for all Auxiliary and Service Center accounts to record their accrual entries by year end to comply with external university financial reporting requirements. All auxiliary voucher entries must be approved by the Auxiliary Accounting Department by July 20th prior to 3 p.m. See ASOP 14.0 Auxiliary Voucher Timeliness.

    • Required Balance Sheet Documentation

      All auxiliary organizations are required to submit detailed support for all balance sheet balances that are not system generated (see ASOP 44.0) at the object code level as of June 30th. Supporting detail for all balance sheet object codes must be received by the unit’s auxiliary consultant by July 31st to close the end fiscal year and begin the next fiscal year effectively. However, certain campuses have their own backup submission guidelines to follow i.e. Bloomington campus is required to submit backup documentation to their campus administrator before July 15th. Then the Bloomington campus administrator will send it to Auxiliary Accounting by the appropriate deadline.

    • Inventory

      According to Policy FIN-ACC-I-390, all auxiliary organizations are required to perform a physical count of their inventory for resale, at least annually, to ensure an accurate valuation is reflected on the balance sheet. After the physical inventory is completed, the inventory shrinkage estimate should be re-evaluated and adjusted prior to year-end. See ASOP 10.0 Inventory.

  3. Accounts Receivable (A/R)
    • KFS A/R Users - The KFS accounts receivable system does not allow invoices or credit memos to be posted to a previous fiscal year. All invoices and credit memos that should be posted to the current fiscal year must be created and approved prior to July 1. If the invoices and credit memos are not created in June, an accrual entry using an auxiliary voucher is required.  The A/R object code on the auxiliary voucher should be 8122 (KFS Accounts Receivable Unbilled.)

    • Non-KFS A/R Users - All Non-KFS A/R users are responsible for ensuring that the A/R balance on the department’s balance sheet at June 30th agrees with the total open invoices in the department’s approved independent accounts receivable system. The accounts receivable balance in the general ledger should reflect all outstanding billings as of June 30th.

    • Allowance for Doubtful Accounts - All units with average accounts receivable greater than $20,000 are required to use the allowance method in accordance with Generally Accepted Accounting Principles. At fiscal year–end, the allowance value should be re-evaluated for reasonableness. See ASOP 6.0 Allowance for Doubtful Accounts and Write-offs for Non-Student Accounts Receivable.

    • Write-Off of Receivables - Data for the write-off of accounts receivable will be collected and summarized for the Board of Trustees in the first quarter of the next fiscal year. Documentation is required to be submitted to the Office of the Treasurer, Accounts Receivable department and to your campus administrator detailing your write-offs.

  4. Accounts Payable
    • Invoices - The invoice date is used to determine the fiscal year in which an invoice is recorded, regardless of the year the purchase order is created. The invoice date is the date presented on the first page of an invoice that has been assigned by the vendor.  Since the university’s first closing generally occurs in the first week of July, all invoices received by the Accounts Payable Department up to and including the last day of first closing with an invoice date of June 30th or before will be processed in the prior fiscal year. Invoices dated July 1st or later will be processed in the following fiscal year. Invoices that should be entered by year end but do not meet the deadline must be accrued.
    • Disbursement Vouchers - All disbursement vouchers with a payment method of “check” must be fully approved two days prior to June 30th to be posted in the current fiscal year.  The DV charge is posted to the general ledger when the check is written. The check is written within two days of being approved.  DV's that have a payment method of wire transfer, ACH, or foreign draft create pending ledger entries upon approval of the document.  These documents need to be approved by June 30th to be posted in the current fiscal year
  5. Capital Asset Management (CAMS)
    • Capital Asset Documents - Auxiliary and Service Center accounts must approve their financial documents that impact capital asset object codes on or before June 30th.
    • Asset Inventory- All organizations that purchase or maintain capital equipment are required to complete a physical inventory of those assets every fiscal year. To complete a physical inventory, all Asset Retirement, Asset Transfer and Equipment Loan/Return Documents must be approved on or before June 30th. All Asset Transfer and Retirement documents processed after June 30th are held for final approval until after Final Closing. See CSOP 4.0 Capital Asset Physical Inventories.
    • Depreciation- June depreciation will run prior to Second Closing. July depreciation is delayed until after Final Closing. For further information contact your campus capital asset manager. Also, see CAMS Standard Operating Procedures.
  6. Contracts & Grants

    Contract and Grant accounts will be closed at First Closing (first week of July). All transactions after that date will be booked into the following fiscal year unless there is explicit approval from Contract and Grant Administration. All cost transfers for prior fiscal year involving grant accounts should be completed before the First Closing. See Grant & Contract Services.

  7. Cash

    Negative cash balances for all accounts are required to be covered prior to June 30th. This includes accounts that will be transferring Foundation funds to cover deficits

  8. Clearing Accounts

    All clearing account transactions older than 30 days should be moved prior to second closing. Any remaining income or expense balances in the clearing account will be closed out by Central administration to either a prepaid expense or deferred income object code during second closing. This entry will reverse in the beginning of the next fiscal year.

    Clearing accounts (68 accounts) are designed to be a holding area for funds when it is unclear which operating account is appropriate to use for a given transaction. It is appropriate for an item to remain in a clearing account for a period up to 30 days. This should provide sufficient time for each clearing account manager to identify the appropriate operating account for a transaction, and transfer the funds to that operating account.

  9. Travel

    To ensure travel expenses are included in the correct fiscal year, authorizations and/or reimbursements need to be approved before June 30th. Also, requests to cancel any trips that were previously authorized, but will not be taken, need to be received by Travel by the June 20th to be processed before June 30th.

CROSS

REFERENCE:

FMS Newsletter

Who is my auxiliary consultant?
Campus Administrator
ASOP 6.0 - Allowance for Doubtful Accounts and Write-offs for Nonstudent Accounts Receivable
ASOP 9.0 - Automated Payroll Accruals
ASOP 10.0 - Inventory
ASOP 14.0 - AV Timeliness
ASOP 44.0 - Balance Sheet Backup
CAMS Standard Operating Procedures
CSOP 4.0 - Capital Asset Physical Inventories
FIN-ACC-I-350 - Accrual Accounting
FIN-ACC-I-390 - Inventory
Grant & Contract Services

RESPONSIBLE

ORGANIZATION:

 

Auxiliary Accounting, Financial Management Services