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Section 4: General Accounting

Year-End Closing and Accounting

Effective Date:

05/19/11

Approved By:

Lenora Chapman, Associate Vice President for Financial Affairs

Last Revised On:

05/18/17

For Assistance Contact:

Assistant Vice President, Financial Affairs and Controller

PURPOSE/SCOPE

To provide guidance for financial year-end closing activities.

AUTHORITY


UNIVERSITY GUIDELINES

Table of Contents

A. Year-End Workshops and Calendar

The University of Texas at San Antonio (UTSA) fiscal year is September 1 through August 31. Year-end closing activities are performed each fiscal year to help provide an accurate and complete set of financial records to use as the basis for UTSA's annual financial report. During the months of June or July the Controller holds year-end workshops to communicate deadlines for year-end activities and to discuss the closing process, including any changes to business processes. A year-end calendar showing the deadlines, the date of the final August check run, and other year-end closing activities, is posted to the Controller's website.

B. Closing Activities

UTSA uses accrual basis accounting as required by GASB Statement No. 35 and UT Systemwide Policy UTS142.8. Accrual accounting matches expenses with the revenues that fund them by recording revenues in the fiscal year in which they are earned regardless of when payments are received, and expenses in the fiscal year in which they are incurred, regardless of when payments are made.  Consequently August is left open for the first few days of September. During this time departments may make additional August entries to ensure all activity is reflected in the correct fiscal year and avoid excessive accruals.

After August is closed an accounting period between the prior fiscal year (the year being closed) and the new fiscal year is used by Financial Affairs for year-end closing entries and other adjustments. Accrual entries are subject to a threshold, typically $3,000 or greater.

The fiscal year is then closed after all closing entries and other adjustments are recorded and the annual financial report has been finalized. This fiscal year closing normally occurs in the first week of October.

Closing entries made by Financial Affairs may include, but are not limited to, the following:

 

1. Expense Accrual

Expenses greater than $3,000 incurred by the receipt of goods or services in the prior fiscal year but not recorded before the August close are accrued (recorded) before the final annual close.

Methods of identifying such expenses include, but are not limited to:

  • Review of departmental records and reconciliation of the August Monthly Financial Report - see UTSA Financial Management Operational Guideline (FMOG) - Monthly Financial Report Reconciliation Process. Departmental records should be reviewed to identify goods/services received but not recorded (no invoice received, or invoice received but no voucher has been processed) before the August close. Departments should notify Disbursements and Travel Services (DTS) of such items once identified.
  • Review of service dates and receipt dates on vouchers – If the date of service or receipt of goods occurred prior to August 31, but the payment was recorded after that date, then that transaction is accrued if it is greater than $3,000.
  • Identification of transactions entered after the August close that apply to the prior fiscal year. These transactions are identified by DTS through reports.

These expenses will be accrued as appropriate. To avoid double counting accrued expenses, the accrual entry is automatically “reversed” in the new fiscal year. The new fiscal year will then have two entries: the actual payment which records an expense, and the accrual reversal to remove it. The net effect is zero in the new fiscal year because the cost of the item was expensed in the prior fiscal year.

Expenses incurred in the prior fiscal year but not reflected in departmental records nor recorded in either the prior or new fiscal year (unrecorded liabilities) are also accrued as appropriate.

For assistance with identifying expenses that may need to be accrued, contact Accounting Services.

2. Revenue Accrual

Revenue earned in the prior fiscal year but recorded after the August close is subject to accrual in the prior fiscal year. Examples include goods or services provided to external customers, and interest on investments.

To avoid double counting the revenue, the accrual entry is “reversed” in the new fiscal year. The new fiscal year will now have two entries: the actual cash received which records revenue, and the accrual reversal to remove it. The net revenue recorded in the new fiscal year is zero since it was recorded in the prior fiscal year.

Various reports are used to identify these revenues and departments are contacted at year end by Accounting Services in order to accumulate this information. For assistance with identifying revenue that may need to be accrued, contact Accounting Services.

3. Prepaid Expenses

In some cases, all or a portion of a payment may apply to future fiscal years. Examples include maintenance contracts, facility rentals, insurance policies and software license agreements that span more than one fiscal year.

The portion of the payment that applies to future years is recorded as “pre-paid.” The prepaid portion of the payment is not yet an expense because it relates to future periods. It is treated as an asset (prepaid software license, prepaid insurance, etc.), that will be “used up” over a period of time. The portion that is used during each fiscal year is recorded as an expense for that year, and the prepaid asset is reduced by the same amount until the entire asset is used up.

Service dates are a critical factor in identifying these transactions. Departments are responsible for entering the correct service dates on their non-PO Voucher requests throughout the year. DTS enters the service dates for PO Vouchers.

This process records the actual expense for the item over the years in which it is used, even though the entire payment was made in the first year.

For assistance, contact Disbursements and Travel Services.

4. Deferred Revenue

Revenue is “deferred” (moved to a future fiscal year) when cash payments are received in the current fiscal year, but for services to be rendered in the following fiscal year. The best examples of this are (1) tuition and fees paid by students in August for the following Fall Semester, and (2) season tickets paid for in the current fiscal year for athletic events that will take place in the new fiscal year.

Such revenue is identified by using various reports or direct contact by Accounting Services with departments, depending on the nature of the revenue.

The portion of the revenue that relates to the new fiscal year will be deferred to that fiscal year.

5. Error Corrections and Other Adjustments

Departments should be regularly reconciling their Cost Centers and projects throughout the year, as specified in FMOG - Monthly Financial Report Reconciliation Process. If corrections need to be made, they should be sent to the appropriate department for processing by the first week in September. Subject to approval by the Director of Accounting, entries may also be made (1) to correct errors discovered through year-end closing activities, audits and other reviews; and (2) for estimates and adjustments based on current information.

6. Purchase Order (PO) Encumbrances and Requisitions

a. PO encumbrances created in the prior fiscal year that have not been fully expensed require an encumbrance to be established in the new fiscal year for the remaining balance (unexpensed portion) of the PO. The encumbrance rollforward process moves remaining balances forward into the new fiscal year while liquidating the expensed portion from the prior fiscal year. Criteria defining which PO encumbrances are eligible for rollforward are based on both the receiving and the payment status. Non-qualified POs require modification to be eligible for rollforward.

b. POs paid in full are closed before year end.

c. Departments may request that Purchasing close out any POs that are not needed in the new fiscal year.

d. Requisitions without an associated PO are closed before year end.

7. Department Budget Table (Position Funding)

Because the Department Budget Table (DBT) is a fiscal year table, funding for positions are set for each fiscal year. Funding must be set for a fiscal year prior to the last semi-monthly or monthly payroll for the fiscal year.

Funding changes after the last two payrolls of the fiscal year can only be made in the new fiscal year. This type of change is handled on an exception basis and must be evaluated to determine whether a journal entry is justified. Such requests involving grants must be initiated using the Cost Transfer Request Form and routed to the Research Service Center for approval, and non-grant requests are evaluated by Accounting Services.

Funding changes for a new fiscal year can only be entered after the new fiscal year DBT table has been created (usually around mid-August).

8. Salary Encumbrances

Salary encumbrances are based on a fiscal year amount. At the end of a fiscal year after the final monthly payroll is processed, any residual encumbrance is liquidated so that there are no remaining salary encumbrances in the fiscal year that is to be closed.

9. Budget Balance Rollforward

The process for rolling budget balances forward is handled by the Budget Office each year after Accounting Services has completed all final closing entries for the year. As part of the process, remaining balances in E&G Funds are lapsed to Designated Funds. Any exceptions are identified by the Budget Office. The disposition of balances is determined each year in consultation with each Vice President’s area or as directed by the President.

C. Management Certification and Fiscal Management Sub-Certification

Management Certification and Fiscal Management Sub-Certification are important year-end activities.  All Department Managers must complete the Management Certification and Fiscal Management Sub-Certification Survey annually for all of their Cost Centers/Projects IDs with $3,000 or more of activity by the date specified by Institutional Compliance. For detailed guidance, see the Management Assessment Tool and FMOG Fiscal Management Sub-Certification Work Plan


DEFINITIONS

Term

Description

Department Manager

An individual with fiscal responsibility including Monthly Financial Report reconciliation, and decision-making authority for UTSA resources who has approval access to commit funding using the institutional financial accounting system.

REFERENCES/LINKS

RELATED FORMS/WORKSHEETS

None at this time.


REVISION HISTORY

Date Description
05/18/17

Added budget-related material and other updates.

05/01/14

Updated DEFINE information for transition to PeopleSoft.

07/10/13

Changed all "University Advancement" instances to "External Relations."

09/18/12

Updated link to the Management Assessment Tool and updated verbiage.

07/12/12

Changed reference for object class codes from FMOG - Statement of Accounts (SOA) Reconciliation Process to FMOG - Chart of Accounts in the Encrumbrances section.

02/22/12

05/17/11

Published new guideline.


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