Year End Close Part 2 of 2: Year End Close Processing Munis Financials: General Ledger

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1 [MU-FN-5-B] [MU-FN-11-B] Year End Close Part 2 of 2: Year End Close Processing Munis Financials: General Ledger CLASS DESCRIPTION The day has come - you ve completed all of your Year End Close Preparation and you are now ready to close the Current Year and Open the New-Year in Munis. This class will examine everything you ll need to know to begin the Year End Close Process in Munis. Topics will include the best practices for reconciling control accounts, reviewing the results of the Year End Close in your database after the New Year is open, the Budget Completion Journal and some trouble shooting tips should you run into any issues along the way. 1

2 Preparing for Fiscal Year End Processing You have come to the point where you are going to start reconciling accounts and getting the database ready to close the year. The following steps will go over what needs to be done before you can run the Close Fiscal Year program. 1. Always preform a backup of the MUNIS database, spool directory, forms and database prior to starting the year-end process. These backups should be held onto for at least a year incase auditors need to review prior year data. NOTE: When performing these backups, please verify that all users are out of Munis or the backups may not complete and be invalid. 2. Verify that you have all MIU updates loaded, particularly any which pertain to the YEC process. 3. Run a Comprehensive Table Validation Report and current all current year errors Financials>General Ledger>End of Period>General Ledger Table Validation When clearing errors from the report, work your way from the bottom up. Clearing errors from the bottom of the report will generally clear errors at the top of the report. 2

3 4. Verify that all entries have been posted from the proof programs (Req. entry, PO Entry, Invoice Entry, etc.). Hint: Don t forget to make a special check of modules that are newly implemented, as they are the ones most likely forgotten. These entries would be identified on a table validation as well. 5. Use the Unposted Find search option in Journal Inquiry/Print to search for any journals that are posted but not yet closed out to a period. When doing a search for these journals, use just the Year field. For any results that pull in, please use the Month End Processing program to re-close those periods listed. These same results will also appear on the Table Validation guide as Unprocessed Journals Exist in Prior Periods. NOTE: Don t forget to check the Post Summary Journals program on the Journal Entry/History Menu for entries from other modules that post to the General Ledger. These entries would identified on a table validation as well. Any journal entries in the hold file will need to be closed prior to performing the year end close. If there are any improper journal entries in the hold file, one option is to use the Journal Reversal option to make the necessary adjustments. You could also create another journal to bring the improper one into balance. Don't forget to re-run monthly reports for any months including and after the month that is adjusted, and if balanced, reclose the periods affected. 3

4 6. Run an Account Trial Balance in (S)ummary for (B)alance sheet accounts and (A)ll accounts. They must both be in balance prior to closing. If the trial balance reports are not in balance, you must make the necessary corrections before proceeding with the closing. The most common reason for this situation is that one, or both, of the Control accounts does not equal the sum of the subsidiary ledger accounts in its category. If this is the case, the "A"ll accounts report would be in balance and the "B"alance sheet only report would be out of balance. The full table validation should show all errors that could contribute to the trial balance being out of balance. Financials -> General Ledger -> Journal Entry/History -> Account Trial Balance. 7. Verify that there are no open requisitions for the year being closed. These entries would be identified on a table validation as well. Financials ->Purchasing -> Purchase Order Processing -> Requisition Entry. 8. Verify that all open purchase orders in the system are either C urrent or N ext year, and are indeed valid and coded to the correct fiscal year. Cancel and/or re-enter any purchase orders that are not appropriately coded. Use Purchase Order Maintenance to verify the status. No current year POs should be in proof. Financials ->Purchasing -> Purchase Order Processing -> Purchase Order Change Orders. NOTE: All Current Year Encumbrance issues MUST be corrected before closing the year. Encumbrance discrepancies cannot be corrected in prior years. 9. Verify that all open contracts in Munis are in a status of 8-Posted and that all change orders for contracts have been either approved and posted or rejected and deleted. The Contract Change Order program (Financials>Purchasing>Contract Management>Contract Change Orders) should be used to verify the statuses of all open contracts and change orders. Once all current year processing has been completed against open contracts use the Roll to NY button or Partial Roll to NY in Contract Change Orders. The Roll to NY can be done for all open CY contracts or only the contracts you want to carry forward to next year. This procedure creates a journal in the current year and/or next year depending on your carry forward method, to move the encumbered amounts forward and allows for NY processing to begin on these contracts. Munis includes a Partial Roll to NY option which provides a menu option in Contracts that allow users to roll a selected amount or a percentage of the remaining CY open amount to NY for all CY allocations on a contract. This allows for activity against the contract in both CY and NY during the holding CY open period. Once all processing has been completed in the Current year and the Year End Process is being completed, the Roll to NY option can be completed which would roll the remaining amounts to Next year. 4

5 NOTE: If using Contract Management, current year contract lines with an open balance may not have new fiscal year processing against them until they have been rolled to next year. NOTE: All Current Year Encumbrance issues MUST be correct prior to closing the year. Encumbrance discrepancies cannot be corrected in prior years. 10. Verify all accounts are set to Carry or Zero out Closing balances appropriately and that reference accounts are entered correctly in Account Master. Financials -> General Ledger -> Set Up/Chart of Accounts -> Account Master. 5

6 Remember, Expenditure and Revenue control accounts MUST close out to the Fund Balance Unreserved Control Account only. Also, Appropriation and Estimated Revenue Accounts for Multiyear funds should be set to Carry, while those same accounts for Annual funds should be set to Zero. 11. Add any new accounts for the next fiscal year and code them as Next year accounts. NOTE: Don t forget to run the Master option in the Define/Start Budget Projection program to ensure that any new budgetary accounts are pulled into the budget projection. Financials -> General Ledger -> Set Up/Chart of Accounts -> Account Master. 12. If MUNIS revenue modules are installed, optionally add charge codes for the new fiscal year using A/R Charge Codes. General Revenues -> Accounts Receivable -> Setup -> Accounts Receivable Charge Codes. 6

7 13. Finally, it is so important to enter the fiscal year end with verified information. There are three areas that we recommend proving. A. Prove Actual Balances. First, prove Revenue/Expenditure Control Accounts. Run the Account Trial Balance through period 13 by fund for Expense accounts only and then Revenue accounts only. These values should match their respective Expenditure or Revenue Control number, which can be obtained by running the Account Trial Balance for those specific accounts through period 13 and choosing the B alance sheet option on the report options. GL Tables Validation will identify discrepancies in these accounts as well. Any discrepancies should be corrected with a General Journal Entry to the specific period that is out of balance. NOTE: Be sure you do not have any G/L Account Restrictions that would prevent you from seeing the full set of account, and make sure everything is out of the proof and hold tables for the year to be closed. Next, prove memo balances to transactions by running the General Ledger Memo Balance program. This can be run under System Admin Diagnostic Tools. Before running this utility you should verify that you are the only Munis user. The first part of this utility is used to Select accounts for which a discrepancy exists between the memo balance value and the sum of the activity for that account, including transactions yet to be posted (e.g. invoices still in Invoice Entry Proof). After the utility has searched Last Year, Current Year and Next Year memo balance figures, a report is created which identifies accounts for which the existing memo balance by year does not match the associated detail for the account. An Update can then be done to update the memo balance number to equal the sum of the transactions. At this point the accounts listed on the report can be scrutinized further to determine if this is the balance desired for the account. B. Prove Encumbrance Balances. Verify all purchase orders and accounts payables batches have been output-posted. Verify all encumbrance journal batches have been output-posted. Verify all months have been closed in the reporting year. Run the Purchase Orders by GL Account report, selecting in the PO selection field Select Open at end of year/per below for period 13 of the year in question. Verify that this report accurately reflects the balance of every purchase order to be carried forth through year-end processing. Use Purchase Order Maintenance to affect any purchase orders as required, being very careful to put in the proper posting year. (If the site uses Contracts, select Both in the Include documents for field.) Run the YTD Budget Report for Period 13 for the fund and fiscal year in question. The 7

8 encumbrance balance on accounts with purchase orders should exactly match the Purchase Orders by GL Account report. For those accounts that do not match, verify the postings and make any necessary Encumbrance Journal Entries to the account in the year in question to reconcile the two reports. Run the YTD Budget Report for Period 99. Compare this report to the final one for Period 13 run in step #3. If these two reports do not reconcile, begin the process of auditing the accounts that do not match. Use G/L Account Table Maintenance to affect the encumbrance balance as required. This is the final balance to prove. If in your proving you discovered accounts that had auto-encumber encumbrance entries made during last fiscal year end's budget completion journal, verify this is correct. If not, first use Encumbrance Journal Entry to make a corrective entry to free the available budget. Second, use G/L Account Master to change those accounts that are incorrectly set. Once you have proved out the encumbrance values for individual accounts you should now reconcile the encumbrance control accounts. Compare the values from your final YTD Budget Report run for period 13 by fund to the values found when running the Account Trial Balance for the encumbrance control accounts through period 13 for the same fund. If there are any discrepancies make a General Journal Entry to the control accounts to correct the balances. NOTE: GLENCUTE has been created to assist in proving encumbrances however the utility should take the place of manually proving encumbrances if there are remaining questions or issues. NOTE: Encumbrance issues that occurred in the Current Year CANNOT be corrected after the year is closed. Be absolutely sure that ALL encumbrance issues in the Current Year are corrected before closing the year. C. Prove Budget Control Accounts Run the YTD Budget Report by fund for period 13 of the current year. The revised budget total for expenditures should match the Appropriations Control account total and the revised budget total for the revenues should match the Estimated Revenues Control account total for the fund. The Appropriations and Estimated Revenues totals are best obtained by running the Account Trial Balance through period 13. A General Journal Entry should be made to correct any differences between the totals. A General Journal Entry should be made to correct any differences between the totals. 14. The Fiscal Year End Process is very important and must be run in the proper steps at a specific time. 8

9 ***After you have completed all of these preparatory steps, your Live database should be copied to your Training database so that you can perform the Fiscal Year End Close in your Training database. This procedure will help you root out any discrepancies and ensure a successful Year End Close in your Live database. Users need only be out of the Training database at this point. *** ***The process MUST be run when no users are in the MUNIS system.*** Processing Year End If you have successfully prepared for closing the year, it should only be four steps. Financials>General Ledger Menu>End of Period>Fiscal Year Processing 1. Close the Fiscal Year 2. Run Year End Trial Balance 3. Open the New Year 4. Post ALL Budget Projections NOTE: If after closing the year, opening the new year and posting ALL Budget Completion Jouranls, if there are funds or accounts that did not receive a budget completion journal that should have, a new budget projection can be created for these accounts and posted in the current year. Do NOT Post to Master for Reports. If Post to Master for Reports is completed, the Budget will be visible in Next year and will remain in Next Year. It WILL NOT be cleared just by posting the Budget Completion Journal. If the process is completed out of sequence and the Post to Master is processed, the site will need to create a second Budget Projection for the accounts with Budget at zero dollars and the Post to Master for Reports would need to be completed a second time, thus clearing out the Next Year values. 9

10 Trouble Shooting Tips When accessing the Close Year program MUNIS displays a reminder that a Backup of is STRONGLY recommended and that all contracts should have already been rolled. In addition to all contract marked as To Be Rolled having been rolled, there also cannot be any unposted Purchase Order or Contract Change Orders. Unposted Journals Exist: This error will occur if there are Unposted journals in Period 1-13 in the Current year. 1. The four Proof programs: General Journal Entry Proof, Encumbrance Entry Proof, Budget Transfer and Amendments and Fixed Asset Journal Entry Proof should be reviewed. All Current year journals should be posted or deleted. 2. Review Unposted Journals in Journal Inquiry/Print for the Current year. Reclose all periods where journals are found to be in Status J/E. 10

11 Running a Full Table Validation will display all database issues. All Current Year errors MUST be clear before closing the year. Re-Closing Current Year Months Month End Processing The new Month End Processing program has the links to the reports needed to have a successful month end process build right into the program. You can now launch, Table Validation, Account Trial Balance and Balance Sheet from the Month End Processing program. Once you have reviewed those reports you can then select the correct Process Period and then Load Journals. Run Month End then process the journals, and if selected, rolls the current period to the next one. 11

12 Not all Contracts flagged to be rolled have been rolled: The Contract Roll to Next Year button will not display in Contract Change Orders until the Holding flag is set, and only displays for users with full Contract permissions. If not all contracts marked as To Be Rolled have been rolled, the Close Current Year program will display this error. Munis now has a program that will tell you what contracts have not been rolled to the next fiscal year. Print Contracts (Financials>Purchasing>Contract Management>Print Contracts) can be run to show all Rolled and Partially rolled contracts. 12

13 Close current Fiscal year must be successfully run first: If after Closing the year the Open year process is attempted and this error displays the Closing Current Fiscal Year may not have completed successfully or some settings may need review. Please contact Financial Support for assistance. A restore of Live from the backup may be necessary. 13

14 Errors found in the Budget Completion Journal: The error is typically Master is complete, which occurs when the account has already had a budget completion journal posted. Multi-year accounts can only have one budget completion journal posted to them for the life of the accounts. 1. Review each account listed on the report in Account Inquiry. Click on the Detail Button on the left hand side and search for BUC source journals. 2. All accounts found to already have a Budget completion journal will need to be deleted from the Budget Projection in Next Year Budget Entry. Conclusion If you have reached this point then congratulations, you have successfully closed your fiscal year. The next step from here is to do some spot checks and run some reports to verify your start of year balances. This step is important to verify after the open new-year process to ensure that the right amounts were brought forward from the prior year and that accounts have the correct beginning balances. Once everything looks good, you can continue with processing in the new- year. 14

15 Appendix A: BUDGET CARRY FORWARD METHODS The Budget Carry-forward method can be reviewed in: Financials -> General Ledger -> Set Up/Chart of Accounts -> General Ledger Settings 1. GAAP Open POs at year-end create a carry-forward budget amount for each expense account, which effectively is a budget adjustment in the new year to cover the expense that will occur in the new year. The original PO expense accounts stay with the PO. The account remains encumbered until expenses are received in the new year, at which point transactions are charged as an expense to that account. The actual year-end processing steps are: 1. The open purchase order amounts are added to the account s Carry Forward Budget. This increases the account s Revised budget for the new year, but as the two values are stored in ACCOUNT MASTER, it is clear what amounts are current year appropriations versus prior year (Carry Forward). 2. Payments made against these purchase orders are processed as current year expenses. 2. Budgetary At year-end, all open POs (except N ext Year POs) are liquidated and expended to the accounts listed in their detail. They are re-encumbered in the new year with their expense accounts replaced by the "Prior Year Encumbrance" (liability) account. Since this is a balance sheet account, the encumbering and subsequent expenditure (liquidating the PO and creating an invoice) does not affect the new year s budget. The Budgetary method works as follows: 1. At year-end: for each expense account on all open purchase orders, the encumbrance is automatically liquidated and an expenditure is recorded so that the expense appears with the year it was budgeted for. 2. The purchase orders remain open, but the expense accounts on the POs are all converted to a userspecified Prior Year Encumbrance liability account: Fund Balance Reserve for Encumbrances. When the purchase order is received in the new year, payment is made against the Prior Year Encumbrance liability account. There would be one Prior Year Encumbrance account per fund. 3. GAAP/Budgetary Combined This option provides features from both the GAAP and Budgetary options described above. Its methodology is the same as GAAP during Year End Processing: when prior year POs are liquidated in the new year, the expense posting also updates a special Current Year from Prior Year expended field on the Account Master F/M to allow budgetary reporting. Budgetary reporting of the current-year backs out all prior-year and carry- forward activity, providing a clean current year analysis. The details at yearend are: 1. The GAAP method is followed for open purchase orders at year-end. The purchase orders remain open in the new year and the dollar value of the open purchase order is entered as a Carry Forward Budget. 15

16 2. In addition, two new fields (used only by the Combined approach) are utilized: Current Year - Prior Year Encumbrance and Expenditures. The encumbered amount at year end is copies into this field. Thus, the account will show an actual encumbrance and a CY-PY encumbrance, both carried from the prior year. Payments made against these purchase orders in the new year will be posted both as an actual expense and as a Current Year - Prior Year Expense (another field on the ACCOUNT MASTER used by the Combined method in the CWFD window). To illustrate this, the following example reviews the activity of an account with a carry forward budget, a current year actual budget, and no expenses in the current year. Before the payment relating to a prior year Purchase Order Original Budget 500 Carry Forward 100 Revised Budget 600 Encumbrances 100 CY-PY Encumbrances 100 Actual 0 CY-PY Actual 0 After the payment relating to a prior year PO ($100 payment) Original Budget 500 Carry Forward 100 Revised Budget 600 Encumbrances 0 CY-PY Encumbrances 0 Actual 100 CY-PY Actual 100 In addition, when the Combined method is utilized, a prompt on the GENERAL JOURNAL ENTRY and Accounts Payable INVOICE ENTRY detail screens will allow the user to specify whether the transaction is a Current Year of Prior Expense. Prior year expense entries will post to the Actual and CY-PY Actual fields. This will accommodate those payments that are prior year expenses but do not tie directly to an open purchase order created in the prior year. (You may need to manually make a Carry Forward budget entry to cover the expense if your environment requires that each line item expense be covered by budget approval.) The Current Year - Prior Year fields on the ACCOUNT MASTER allow MUNIS to produce financial statements in three formats: 1. GAAP Format: All inclusive Report Budget = Current Year + Carried Forward Actual = All Current Year Expenses + Encumbrances 2. Current Year Report Budget = Current Year Only Actual = Current Year Only (Act. Exp. + Enc.) - (CYPY Exp. + CYPY Enc.) 3. Carried - Forward Report Budget = Carried 16

17 4. Transfer Forward Actual = CYPY Expenses + CYPY Encumbrances All encumbrances from the prior year are transferred to other Prior Year expense accounts normally located within the Org of the original expense accounts. This is accomplished through the use of the Reference Org/object found on the ACCOUNT MASTER. 1. Each GL account may be established with a Reference account. (Example: the reference account may be Prior Year Expense and can reside in the same Org or a separate Org.) The Reference account is typically entered at the same time the original account is created, although can be added later. The ACCOUNT MASTER stores both accounts. 2. The Year-End Open Purchase Order processing routine transfers the encumbrance from the original expense account to the Reference Account. The Purchase Order General Ledger Detail accounts are also changed to the Reference Account. The purpose is to show these amounts in a separate section of the financial statements. 3. Payments made against the purchase order would be posted as an expense in the current year but to an account for prior year expenses. This account could be excluded as desired from a current year report. NOTE: The budgetary carry-forward method is established at the time of database set up. Changes to the carryforward methods are not typically recommended and require extensive review and data conversion. Please contact Munis Financial Support for assistance. 17

18 Appendix B: CONTROL ACCOUNTS Control accounts can be reviewed in: Financials -> General Ledger -> Set Up/Chart of Accounts -> Chart of Account Segments -> Fund or Financials -> General Ledger -> Set Up/Chart of Accounts -> Account Master Fund balance, unreserved, undesignated: REQUIRED Generally posting to this account occurs at year-end. The amount posted is the difference between revenues and expenditures control. This account normally has a credit balance. Revenues control: REQUIRED When a journal entry containing a revenue account is posted, credits are made to both the revenue account specified and the revenue control account. In MUNIS, an asterisk on the detail line of the journal entry inquiry screen indicates the control account posting. This account normally has a credit balance. Expenditures control: REQUIRED When a journal entry containing an expense account is posted, debits are made to both the expense account specified and the expenditure control account. In MUNIS an asterisk on the detail line of the journal entry inquiry screen indicates the control account posting. This account normally has a debit balance. Fund balance-reserved for encumbrances: REQUIRED This account is credited at year-end if open encumbrances exist which are to be liquidated in the new fiscal year. It represents a reservation of fund equity. This account normally has a credit balance. APPROPRIATIONS: REQUIRED This account represents the total expenditure budget. If Budgetary is checked off, it is updated by the Budget Completion Journal and Budget Amendment & Transfers programs. This account normally has a 18

19 credit balance. ESTIMATED REVENUES: REQUIRED This account represents the total revenue budget. If Budgetary is checked off, it is updated by the Budget Completion Journal and Budget Amendment & Transfers programs. This account normally has a debit balance. BUDGETARY FUND BALANCE UNRESERVED: REQUIRED This account represents the difference between budgeted revenues and expenditures. If Budgetary is checked off, it is updated by the Budget Completion Journal and Budget Amendment & Transfers programs. If revenues are anticipated to be under expenditures, this account would be debited. If expenditures are anticipated to be under revenues, this account would be credited. This account normally has a debit balance. ENCUMBRANCES: REQUIRED When an encumbrance is created through the purchase order system this account is debited. When the purchase order is liquidated, this account is credited. This account normally has a debit balance. BUDGETARY FUND BALANCE - RESERVED FOR ENCUMBRANCES: REQUIRED This account is created through the purchase order system when an encumbrance is created. When encumbrances control is credited, this account is simultaneously debited. When the purchase order is liquidated, the account is debited. This account normally has a credit balance. A/P Cash: REQUIRED This is the account from which cash is drawn to pay account payable invoices. In many cases this is the central depository cash account. This asset account normally has a debit balance. Accounts Payable: REQUIRED This is the holding account that the system will post to when an invoice has been approved and posted. This liability account normally has a credit balance. Direct Disbursements Cash: NOT REQUIRED This account is optional and is used only as the default cash account during direct disbursements. The only time a site would want to use this would be if their direct disbursements were drawn off an account other than their A/P cash account. This asset account normally has a debit balance. Checks Payable: NOT REQUIRED This account is optional and is used only when cash is not updated when checks are issued but instead when they clear the bank (during Check Reconciliation). This liability account normally has a credit balance. Use Tax: REQUIRED IF USE TAX IS SET UP This account is used by sites that use the sales tax feature in the Accounts Payable module. This control account stores accumulated use tax amounts to be paid to the state. When the state is paid, the amounts are taken out of the control account, and the use tax is expensed to the purchasing accounts. 19

20 Payroll Liability: REQUIRED This account allows you to defer cash movement to the second period when splitting payroll journal posting across two periods. Rather than moving cash in the first period, a liability exists and the control account allows each fund to specify a liability account. This is an account type 14 and the description is PR_LIAB. ACI Liability: REQUIRED IF ACI IS SET UP This account is used with the Active Card Integration payment method. Journal records are created to debit the Accounts Payable Account and credit the ACI Liability account. This is an account type 15 and the description is ACI_LIAB. AP Retainage: REQUIRED IF AP RETRAINGE IS SET UP This account is used by sites that use the retainage feature in the Accounts Payable module. This control account stores accumulated retainage amounts to be paid out to the predetermined party at a later time. When the transaction is complete, the amounts are taken out of the control account, and accounted for in the accounts Payable account or a site specified account. NOTE Budgetary accounts are displayed capital letters to conform to Governmental Accounting, Auditing and Financial Reporting (GAAFR) manual. 20

21 Appendix C: Fiscal Year-End Processing Steps: Detail Close current year verification 1. Checks the hold file (gljehold) for any unposted transactions for the given year being closed. Prior to closing the current fiscal year, all months within the year must be closed. Therefore, the program will check to see if there are any journals in the hold file (gljehold) that have not gone through monthend processing. If this condition exists, the program will exit. To correct, process any unprocessed journals through month-end. However, thoroughly research the journal prior to processing. Once all months have been closed, rerun any reports and prove balances. 2. Checks the history file (glhistry) for any journal entries with the source journal "YEC" for the given year being closed. The Close Current Fiscal Year program can only be run once. Therefore, the program will check the journal history file (glhistry) for a previous close: source code YEC. The program checks the glhistry file because the journal is written immediately to history; it does not stop in the gljehold. If this condition exists, the program will exit. If you believe the previous close was done in error, consult MUNIS support. 3. If using budget control, verifies that each fund has the three control accounts to which it will make its year end entries (APPROPRIATIONS, ESTIMATED REVENUES, BUDGETARY FUND BALANCE). The program will check the second screen of Fund Attributes (glfundat) for Budgetary Control Accounts, if the Use Budgetary Control field is checked in GL Settings The program will be making postings to these accounts: steps 5 and 6. Note: it does not verify that the account specified exists in Account Master (glmaster); the GL Tables Validation will do that. If this condition exists, the program will exit. To correct, specify the correct Budgetary Control Accounts on the second screen of Fund Attributes. 4. For each fund, verifies that each fund has the three control accounts to which it will make its fund balance entries (EXPENDITURES CONTROL, REVENUE CONTROL, FUND BALANCE UNRESTRICTED). Similar to 3, the program will check the second screen of Fund Attributes (glfundat) for Control Accounts. The program will be making postings to these accounts: steps 9 and 10. Note: it does not verify that the account specified exists in Account Master (glmaster); the GL Tables Validation will do that. If this condition exists, the program will exit. To correct, specify the correct Control Accounts on the second screen of Fund Attributes. Closing budgetary accounts 5. Zeros out Appropriations and Estimated Revenues Control Accounts by calculating balances in revised budget in expense and revenue accounts and making matching journal entries. 6. Calculates Budgetary Fund Balance by closing Appropriations and Estimated Revenues Control Accounts and making the appropriate journal entries. After verifying that the control accounts are in the Fund Attributes table: step 3, the program can now post to the Budgetary Control accounts: step 5. For each fund, a journal entry to the Appropriations and Estimated Revenues Control Accounts equal to the sum of all expense and revenue revised budget 21

22 balances respectively, will be made. The detail should equal the balance on the Appropriations and Estimated Revenues, and therefore, should result in a zero balance. Note that this method closes the Control accounts using values derived from the detail postings to individual balances on the expense and revenue accounts. Therefore, you should have proven the detail against the Control Accounts prior to running the program. Then, in step 6, the difference between the revenue and expense revised budget totals will be netted to the Budgetary Fund Balance Account. In other words, any budgetary surplus or deficit will be written to Budgetary Fund Balance. The journal that is created, in steps 5 and 6, will be posted to period 13, written immediately to history, and have a journal source of YEC. Appropriations Estimated Revenues Budgetary Fund Balance DR CR NET The entry to the Budgetary Fund Balance Account will be a debit if there is a budgetary surplus (where Estimated Revenues are greater than Appropriations), or a credit if there is a budgetary deficit (where Appropriations are greater than Estimated Revenues). Processing open purchase orders 7. For sites using the Purchase Orders module, the fiscal year end close procedure liquidates current year open purchase orders in the fiscal year being closed. Then depending on the carry forward method in the parameter file, process that encumbrance. 8. Zeros out Encumbrances and Budgetary Fund Balance - Reserve for Encumbrances Control Accounts by calculating encumbrance balances from purchase orders and making the appropriate journal entries When a purchase order is created, it encumbers an expense account as well as affecting the Encumbrances Control Account and the Budgetary Fund Balance Reserve for Encumbrances Account. Expense Account (transaction type 4) DR Encumbrances DR Budgetary Fund Balance - Res For Encumbrances CR Step 7 will liquidate all outstanding purchase orders with a status of 8 Posted or higher. Then, in step 8, for each fund, a journal entry to the Encumbrances and Budgetary Fund Balance Reserve For Encumbrances Control Accounts equal to the sum of all encumbrances on open purchase orders will be made. The purchase order detail should equal the balance on the Encumbrances and Budgetary Fund Balance Reserve For Encumbrances accounts, and therefore, should result in a zero balance. Note: this method sums detail from the expense accounts. Therefore, you should have proven the detail against the Control Accounts prior to running the program. Expense Accounts (liquidate open PO) Encumbrances Budgetary Fund Balance - Res for Encumbrances CR CR DR 22

23 Also, in step 7, depending on the carry forward method, the sum of the encumbrances that were liquidated, needs to be accounted for. Budget Carry Forward Method 2 - Budgetary If using method 2, you expense the encumbrance in the year in which it was budgeted for. Expense Accounts (transaction type 1) Expenditures Control Fund Balance - Res for Encumbrances DR DR CR Normally, the credit would be to Accounts Payable. However, by debiting the Fund Balance Res for Encumbrances account, a liability is still created on the Balance Sheet. This liability needs to be reclassified according to the GAAFR Blue Book. Thus, another journal entry is made: Fund Balance - Res for Encumbrances DR Furthermore, the accounts are changed on the POs to the fund s Prior Year Encumbrance Liability account. Budget Carry Forward Method 1 GAAP, 3 Combined and 4 Transfer Processing contracts (Version 7.3 and Up) For encumbered contracts that have been Rolled to NY in Contract Maintenance. 9. Budget Carry Forward Method 1 GAAP, 3 Combined, and 4 Transfer Even though encumbrances have been liquidated, the program will eventually need to carry forward that amount into the new year. It has summed the detail amounts and will make a posting to reclassify that encumbrance: Fund Balance Unreserved Fund Balance Res for Encumbrances DR CR Closing revenue and expense 10. Zeros out the Expenditure and Revenue Control Accounts by calculating balances in expense and revenue accounts and making matching journal entries. 11. Calculates the Fund Balance by closing the revenue and expenditure control accounts and making the appropriate journal entries. For each fund, a journal entry to the Expenditure and Revenue Control Accounts equal to the sum of all expense and revenue balances respectively, will be made in step 9. Note that this method closes the Control accounts using values derived from the detail postings to individual expense and revenue accounts. Therefore, you should have proven the detail against the Control Accounts prior to running the program. 23

24 Second, in step 10, the difference between the revenue and expense totals will be netted to the Fund Balance, Unreserved account. In other words, any surplus or deficit will be written to Fund Balance. The journal that is created will be to period 13, written immediately to history, and have a journal source code of YEC. Revenue Control Expenditures Control Fund Balance, Unreserved DR CR NET The entry to the Fund Balance, Unreserved account will be a credit if there is a surplus (where revenues are greater than expenses), or a debit if there is a deficit (where expenses are greater than revenues). If the PROCESS step was successful, select OUTPUT-POST. Update these closing entries? (Y/N) 12. If the update is confirmed, this is the point where the system makes all journal entries. This message displays if the OUTPUT-POST was successful. The journals created as a result of completing the Close Current Fiscal Year program are written to period 13, immediately to history, dated using the system date, and have a journal source code of YEC. The program cannot be run again for the newly closed year. Open New Fiscal Year After selecting to PROCESS the Open New Fiscal Year program, the following screen messages appear: Open new fiscal year verification 13. Checks the history file (glhistry) for any journal entries with the source journal "SOY" for the given year being opened. The Open New Fiscal Year program can only be run once. Therefore, the program will check the journal history file (glhistry) for a previous open: source code SOY. The program checks the glhistry file because the journal is written immediately to history; it does not stop in the gljehold. If this condition exists, the program will exit. If you believe the previous close was done in error, consult MUNIS support. Processing open purchase orders 24

25 14. For purchase orders open at the end of the previous fiscal year, the encumbrance to be brought into the new fiscal year is calculated. Note that this only applies to budget carry forward methods 1 - GAAP, 3 - Combined, and 4 - Transfer options as 2 - Budgetary purchase orders would have already been liquidated and brought into the balance sheet in the Close process. The encumbrance amount from the prior year is now brought forward into the new year. The Close Current Fiscal Year program reclassified the total encumbrance to the Fund Balance Reserve for Encumbrances account. The Open New Fiscal Year will now reverse that liability: Fund Balance - Res for Encumbrances Fund Balance Unreserved DR CR Processing open contracts 15. For purchase orders open at the end of the previous fiscal year, the encumbrance to be brought into the new fiscal year is calculated. Note that this only applies to budget carry forward methods 1 - GAAP, 3 - Combined, and 4 - Transfer options as 2 - Budgetary purchase orders would have already been liquidated and brought into the balance sheet in the Close process. The encumbrance amount from the prior year is now brought forward into the new year. The Close Current Fiscal Year program reclassified the total encumbrance to the Fund Balance Reserve for Encumbrances account. The Open New Fiscal Year will now reverse that liability: Fund Balance - Res for Encumbrances Fund Balance Unreserved DR CR Processing open contracts for NY 16. For contracts that contain next year lines, a COM source journal is created to period 1 of the next fiscal year to account for this entry. The encumbrance amount from next year (2011) now has a journal to period 1 for this contract detail line. Expense Account (Transaction type 4) DR Encumbrances DR Budgetary Fund Balance - Res For Encumbrances CR If the PROCESS step was successful, select OUTPUT-POST. Proceed with open year update? (Y/N) 17. If the update is confirmed, this is the point where the system makes all journal entries previously printed and "rolls" all balances in the G/L Account Master. The following messages will additionally be displayed: The journals entries previously printed and "rolls" all balances in the G/L Account Master. The following 25

26 messages will additionally be displayed: The journals created as a result of completing the Open New Fiscal Year program are written to period 00, immediately to history, dated using the system date, and have a journal source code of SOY. The program cannot be run again for the newly opened year. Rolling GL balances 18. Rolls the prior years' amounts back one year, discarding the 10th year, to make room for the new year balances. 19. Enters the rollover balance into current year SOY by clearing current year encumbrance and actual totals for period 00. For balance sheet accounts, puts the start of year balance into the actual for period 00. For multi- year funds, Inception to SOY is updated. The fields in glmaster that store year end balances are glma_actual_cy, glma_actual_ly1, glma_actual_ly2,, glma_actual_ly10. Step 15 will move the value in glma_actual_cy to glma_actual_ly1, as well as move the value in glma_actual_ly1 to glma_actual_ly2, etc. The glma_actual_cy field will then be populated in step 16. These fields display in Account Master. 26

27 Notice that the fields are labeled with the correct year (2013 Actual rather than ly1 Actual e.g.). Even though the program displays the year, the data is not stored by calendar year. Thus, you cannot change prior year amounts by simply changing the current year/period in GL settings. 20. Rolls the prior years monthly amounts back one year, discarding the 4th year, to make room for the new year balances. 21. Prepares accounts budgeted by appropriation process (included in the Budget Completion Journal) to receive a newly adopted budget by rolling budgetary amounts from current year to prior year, and so on. Current year monthly amounts can be seen on Amount screen, (go to the Current Year tab, CY Monthly Amounts sub-tab) of Account Master, or through the MONTHS side menu option in Account Inquiry. Last year monthly amounts can be seen on Amount screen (go to the Prior Years tab, LY Monthly Amounts sub-tab) of Account Master. Munis now makes a SOY journal for the amount being carried forward for balance sheet accounts. This 27

28 SOY journal will contain all balance sheet accounts that had an ending balance for the year being closed. Next year monthly budget amounts can be seen on Amount screen (go to Future Years tab) of G/L Account Master. This step in the fiscal year-end process will move the current year monthly amounts to the last year fields and the last year amount to the last year 2 fields, etc. 22. If using the Transfer method (carry forward method of 4), the account on the purchase order and/or contract is changed to the reference account. In Account Master, an expense account can reference another account. At year-end any encumbrance against this expense account will be transferred to the reference account in the new year (in step 20) if using budget carry forward method 4 Transfer. The account number on respective purchase orders will be changed here, in step 20, to reflect the reference account. Invoices made against the PO will be made against the new account, which is usually a Prior Year expense account located within the same Org as the original expense account. Encumbering purchase orders 23. For a budget carry forward method of 1, 3 or 4, updates the encumbrance amount for purchase orders being brought in from the prior fiscal year. The encumbrance amount being carried forward from the prior year is now re-encumbered in the new year: Expense Accounts (transaction type 4) Encumbrances Budgetary Fund Balance - Res for Encumbrances DR DR CR Activating open purchase orders. 24. Activates (by an appropriate code in the header file) purchase orders being brought in from the prior fiscal year. Prior year purchase orders will be changed to a status of 9-Carry Forward. Changing next year purchase orders to current year. Changing next year requisitions to current year. 25. Additionally, for sites using Requisitions and/or Purchase Order modules, once the year has been 28

29 closed and "next" year becomes "current", the process converts requisitions and purchase orders coded as "N"ext fiscal year to "C"urrent fiscal year. Note: for sites using purchase order and/or requisition numbers by department, you must manually roll the next year numbers into current year on the department file. 26. Finally, the current Year/Period is advanced to the first period of the new fiscal year. Also, accounts coded as "Next" for next year are changed to status "Active" and are now eligible for current year posting activity. The YEAR on the fiscal date range is advanced and the holding year box is returned to a blank (no check mark.) Open Year processing is complete. Press any key to continue. 27. This message is displayed if the OUTPUT-POST was successfully completed. Note: please verify in the PO parameter file that the CY Next PO Number reflects the next PO number that you would like to use for your next year s PO (previously stored in NY Next PO Number). Budget Completion Journal 28. Formally opening the new fiscal year's budget through the "Budget Completion" process is a very important part of the fiscal year end processing. It cannot be done before the close as it needs the carry forward amounts produced by the close to properly adjust the new budget. Note: that for budget from appropriation process Multi-Year Funds, you only perform the Budget Completion Journal and Update for new accounts in the fund to load the original budget. Post Last Year Adjustments 29. If your final auditor's adjustments do not occur until months into the new year, you may want to close the year sometime in July or August. However, you still retain the ability to adjust the closed year at any later point in time with journal entries dated for the prior year. You would then use the option Post Last Year Adjustments on the End of Year Processing Menu to have these journal entries properly update both the prior year and current year. The date you enter for the transactions must be earlier than the current fiscal year (e.g. usually use last year/13). The posting date to use is generally the last day of the old fiscal year. The system will automatically take into account entries to Fund Balance and any other balance sheet account affected that would adjust the SOY balance for the new fiscal year. Note: the post prior year process will make journal entries to both period 13 of the prior year and period 00 (SOY) of the new fiscal year. When performing Post Last Year Adjustments several periods into the new fiscal year, remember to rerun any month-end financial statements previously run in the new fiscal year. The balances may have changed from the prior year adjustments. 29

30 Section 8 Payroll Fiscal Year-End Processing This section is offered for reference as a brief discussion of processing steps concerning payroll at the end of the fiscal year. Typically for schools that have teacher contracts that span the school year instead of the fiscal year, employees are paid in the new fiscal year with the budget of the year being closed. The examples below explore points to consider with the following scenario: a teacher contract is in effect from 9/2013 through 8/2014 with an FY2014 fiscal year end of 6/30/14. The assumption made here is that the fiscal year budget for FY2014 includes the budget for the two summer months of the current contract that calendar wise fall in the next fiscal year (FY2015). The concepts here can also be applied to other fiscal year end periods. These suggestions are by no means absolutes; verify with your auditor the proper procedure for your institution. If processing balloon payrolls, where the summer pay is distributed in a single lump sum to the employee, the payroll is generally processed and the checks dated to the fiscal year being closed (period 13 of FY2014). If the fiscal year is closed before running the balloon payroll, a journal entry to the closed fiscal year will need to be made to move the payroll expense into the prior year where the budget sits. If the school office is not open during the summer to generate period payrolls, it is common for all payroll runs to be accomplished before the end of the school year. The checks are then typically held and distributed at the appropriate pay period. In this case, it would be common to produce the payrolls before closing the fiscal year, posting them to period 13 of the year being closed (FY2014). As the check date crosses into the new fiscal year, it is common to produce a pair of corrective journal entries. The first, done to period 13 of the year being closed (FY2014), would debit the cash and credit a payroll liability withholding account to move the cash out of the old fiscal year. An equal and opposite entry would be made to the new fiscal year (FY2015) for the date of the checks to show the movement of cash in the new fiscal year. If the school office is open during the summer and generates payrolls in real-time, there are two common scenarios. The first is to keep the old year open and post the payrolls to the old fiscal year, making the pair of journal entries to reclassify the movement of the cash. The second is to post the payrolls in the new fiscal year and make an adjusting journal entry for the payroll expense to period 13 of the closed fiscal year (FY2014) as that year holds the budget for the contract. One final possibility exists for processing payrolls across fiscal years. The distribution journal allows the clerk the opportunity to post a portion of a payroll to the current fiscal year (FY2014) and a portion of a payroll to the next fiscal year (FY2015). The clerk identifies the percentage of the payroll to be placed in each of the two posting periods. If the payroll being processed cannot be split using a straight ratio, it would be easier to either create two separate payrolls (one for each year) or to post the entire payroll to one year and make a pair of reclassifying journal entries (one for each fiscal year). 30