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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, Financial Affairs

Last Revised On:

05/01/14

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 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 month of 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 System 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 old and new fiscal years is used by Financial Affairs for year-end closing entries and other adjustments. Accrual entries are subject to a threshold, typically $1,000 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.

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

 

1. Expense Accrual

Expenses 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 SOA - see UTSA Financial Management Operational Guideline (FMOG) - Statement of Accounts (SOA)  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 of such items once identified. 
  •   Identification of transactions entered after the August close that apply to the prior fiscal year. The transactions are identified by Disbursements and Travel Services 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 original transaction to record the 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 the Accounting Services department.

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. Such revenue is identified through SOA reconciliation, departmental records and reports, and accrued in the prior fiscal year as appropriate.    

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 original transaction to record the 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.

Revenue earned in the prior fiscal year but not reflected in departmental records nor recorded in either the new or the prior fiscal year is also accrued as appropriate.    

For assistance with identifying revenue that may need to be accrued, contact the Accounting Services department.

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. 

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) for payments received but not yet earned by August 31.  Such revenue is identified by either a Banner program or notification by 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.

EXAMPLE: A fall tuition payment is posted on August 15, but because the semester begins prior to August 31,the majority portion of the tuition applies to classes taught after August 31. The portion of the payment that applies to classes in the new fiscal year is “deferred” to the new fiscal year to recognize the revenue in the period in which it will be earned.

5. Error Corrections and Other Adjustments

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.

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 Statement of Accounts 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
05/01/14

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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