Year End Close Part 1 of 2: Preparing for Fiscal Year End Close Munis Financials: General Ledger

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1 [MU-FN-4-B] [MU-FN-10-B] Year End Close Part 1 of 2: Preparing for Fiscal Year End Close Munis Financials: General Ledger CLASS DESCRIPTION Year End Close in Munis is an unavoidable process. The ease and success of the Year End Close process has a direct correlation to how prepared your database is prior to beginning the Year Close Process. This class will examine the ways in which you can prepare for a successful Year End Close. Topics during this class will include Effective Month End processing, General Ledger Table Validation Report and a number of system settings programs that will need to be addressed prior to performing the Year End Close process in Munis. Preparing for Fiscal Year End Through Out the Year Monitoring your general ledger throughout the year will help to ensure a successful year end close and will make preparing for fiscal year end close easier. Throughout the year, it should come habitual to: 1. Keep Munis up to date on code by loading work tickets from the MIU (Munis Internet Updater) on a biweekly or month basis. 2. Run and correct errors found on the General Ledger Table Validation Report. Financials>General Ledger Menu>End of Period>General Ledger Table Validation Guide The program will allow the user to choose the type of verification Munis should be completing and will provide a report of the errors found. Although the choices allow sites extensive flexibility when running the report, it is still recommended to run the report for the Comprehensive option on a monthly basis, except for the Rolled Contract check. That option should only be used AFTER contracts have been rolled to next year. 1

2 When clearing errors on the report, users should work their way from the bottom up as errors on the bottom of the report may clear errors found at the top. 3. Run and process the Diagnostic Utilities. (General Ledger Memo Balance, General Ledger Encumbrance, Requisition Amount, and Project Balance Check) These utilities should be run by an administrator and with no users in the system. There should also be a database backup of the system done prior to running the utilities. Financial Support also recommends that you process the utilities in the training database and verify the data prior to running in your live database. Financials>System Administration>Diagnostic Utilities 2

3 4. Keep the Munis database at optimum size by performing regular database maintenance. Develop a regular purge schedule for each department. 5. Create a calendar of events that should take place throughout the year and review with key employees involved with closing the fiscal year. 6. Create all new funds and/or accounts that will be needed in the next fiscal year. These accounts will not be Active for posting and are only available once the current year is closed and the next year opened. They are however available for use in budget projections. Financials>General Ledger Menu>Set up/chart of Accounts/Account Master 3

4 7. Successfully run the Month End Processing program for all periods to ensure that all months have been closed out. To verify all journals have been processed through the Month End Processing program, you can use the Unposted Find option in Journal Inquiry/Print. Click on the Unposted Find button and enter in the year you are currently in. This search looks for all journals that have not been processed through Month End. Any periods showing journals will have to be closed and/or re-closed. The Table Validation Guide also shows a similar error. Unprocessed Journals Exist in Prior Periods means there are periods that need to be re-closed to close out back dated journals. 8. Reconcile your General Ledger on a monthly basis to ensure that you are in balance. Reconciling should be done at each month s end to verify that all accounts are balanced and that Year End Close is not held up due to reconciliation issues. 9. Create a budget projection for the next fiscal year in Define/Start Budget Projection. Ensure departments are entering budget amounts for accounts using Next Year Budget Entry. 4

5 Preparing for the Next Fiscal Year The following section will provide a review of all areas that should be reviewed prior to the end of your site s fiscal year and to allow users to start entering entries for the new fiscal year. 1. Run a Full GL Table Validation Report and correct all current year errors. Financials>General Ledger Menu>End of Period>General Ledger Tables Validation Guide The program will allow the user to choose the type of verification Munis should be completing and will provide a report of the errors found. Although the choices allow sites extensive flexibility when running the report, it is still recommended to run the report for the Comprehensive option on a monthly basis, except for the Rolled Contract check. That option should only be used AFTER contracts have been rolled to next year. 5

6 When correcting errors on the report, users should work their way from the bottom up as errors on the bottom of the report may clear errors found at the top. 2. 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 now includes a Partial Roll to NY option. This enhancement provides a new 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. 6

7 Note: If using Contract Management, current year contracts lines with an open balance may not have new fiscal year processing against them until they have been rolled to next year. 3. Verify the settings of each fund in Chart of Account segments so that you are aware of how each fund will act during the year end close and open new year process. Only those funds that are the true multiyear funds should have the multi-year fund check box selected. If your multi-year funds are set to budget annually, please beware that the available balance will not roll forward and that these accounts will have to be budgeted through a budget projection. Any fund that DOES NOT have a check mark in the Standard Fiscal Year box will have to be closed manually with journal entries but it is rare that your site would have this set up. 7

8 4. 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 Menu > Set Up/Chart of Accounts > Account Master. 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. 5. Add any new accounts for the next fiscal year and code them as Next year accounts. Also make sure to select the Budgetary Flag so that when the Master option is selected, these new accounts get pulled into the budget projection. Note: Don't forget to run the Master option in Define/Start Budget Projection for the next year projection to get these accounts into the budget projection. Financials -> General Ledger -> Set Up/Chart of Accounts -> Account Master. 8

9 SETTINGS Preparing for Year End Close requires reviewing and updating a number of settings to ensure that entries made to the new year are not obstructed. There are some GL settings that should be reviewed as well during this process. The list below will review each of them. General Ledger Settings Financials > General Ledger Menu > Set Up/Chart of Accounts > General Ledger Settings or Financials > General Ledger Menu > End of Period > Roll Accounting Period. Verify all GL settings to ensure that they are correct and are updated to allow entries in the new fiscal year. Default Year / Period: UPDATE Update the default year/period to reflect the first period of the new fiscal year. This will default in each time on newly entered items. NOTE: It is not required to change the Default Year/Period however, it will default into a new entry as specified in this screen, if the default year is left at 2015 clerks should be advised to double check their entries. Using the default makes it faster for batch data entry; but the default is not a substitute for being careful. Especially at this time of year, clerks should pay particular attention to the year/period on the screen when making entries. Entries for the new fiscal year should be dated in the new fiscal year; entries for the old (unclosed) fiscal year should be dated back into that year. For example, if a clerk is entering a batch of invoices, some for this year and some for next, the clerk must enter the invoices in two separate batches with different posting dates. Current Year / Period: REVIEW This year and period are updated through the Month End Close Processing program and after all transactions have been properly recorded to the accounting month. At fiscal year-end these fields will be updated to the upcoming fiscal year and first accounting month when year-end processing occurs. Fiscal Year Date Range: REVIEW Check the Fiscal Year Date Range setting in the General Ledger Settings Table. This setting must accurately reflect the fiscal year yet to be closed in order for the payroll fiscal year-to-date accumulators to work properly. When starting a payroll, the month of the check date is compared to the first month of the fiscal year to determine whether to use the current fiscal year or next fiscal year. If you feel that this needs to be updated, please contact Financial Support. Holding Year Flag: Update This tells Munis that the previous fiscal year is still open but the next fiscal year is open for processing. This will also allow liquidation of purchase orders that are coded as Next Year. 9

10 Use Budgetary GL Control: Review The Use Budgetary G/L Control should be checked off if using budgetary control. Site will need to verify that they have all the proper control accounts established in Account Master and that each control account is properly labeled. Budgetary Carry Forward Method: Review Verify that the correct carry forward method is selected for your site. This setting tells the system how to act in relation to contracts, purchase orders, and accounts during the year end close process. Please see Appendix A for an explanation of the Carry Forward Methods Journal Number Control Financials > General Ledger> Miscellaneous Set Up > Journal Number Control Posting cannot occur in the next year if journal numbers are not established. To establish journal numbers for the next fiscal year, uses can either copy a previous years journal set up or can add the starting journal number and dates manually. 10

11 NOTE: If using contracts module and have a contract with future year lines, you will have to establish journal numbers for next year +1. Project Journal Number Control (if using Project Ledger) Financials> General Ledger Menu>Project Accounting>Project Ledger>Setup> Project Journal Number Control This program defines the next available journal number for Project Accounting journals. If your site uses the General Ledger Module, the date ranges in the Project Journal Number Control will match those defined in the General Ledger Journal Number Control. 11

12 Budget Settings Financials>General Ledger Menu>Budget Processing>Budget Settings Budget Preparation for: Display the correct year the budget is being prepared for. Default Projection # This is the default projection number that will default into Next Year Budget Entry when the program is opened. Default Account Description for budget Defines what year you are preparing the budget for. Prior to closing the year, this should say Next Year. After closing year and before posting the Budget Completion Journal, this should be changed to Current Year Purchase Order Settings Financials>Purchasing>Setup>Purchasing Settings Create Next Year Req and POs Only This limits the users that can enter requisitions and POs to entering in the next fiscal year only. 12

13 This setting only limits users to entering in next year if the permission in the user s role is also checked. System Administration>Security>Roles>Purchase Orders System Administration>Security>Roles>Requisitions Next Year Requisition and Purchase Order Numbers Allows the next number in line for requisitions and/or POs to default in when a new item is created in the new year. NOTE: If your site uses departmental requisition and purchase order numbers, you will need to establish NY requisition and purchase orders in the Purchasing Department Program. 13

14 Control Account Setup Verify that there is a Fund Balance Control account set up for each fund and that the appropriate control account(s) are set to zero out to this account in Account Master. Next Year Budget Entry Annual Funds The budget for the new fiscal year can be created at any time during the year. Only funds that are marked as annual funds in Chart of Accounts segments and multi-year funds that budget annually will you want to create a new projection for. To create a new budget projection, you can either use the Gen (Generate) button or the Import button in Define/Start Budget Projection (Financials>Budget Processing>Define/Start Budget Projection). Projections can also be copied from prior years to use prior year amounts for the new fiscal year projection. 14

15 After the budget projection is created in Define/Start Budget Projection, you can then start using the Next Year Budget Entry program (Financials>Budget Processing>Next Year Budget Entry) or Central Budget Entry to enter in budget amounts for the new year. 15

16 Once you entered in amounts for each level, you can use the Roll/Factor/Merge Projection program to roll amounts and access to the next level. Once the budget has been fully entered and the amounts have been rolled to the highest level, you will want to use the Post to Master for Reports program (Financials>Budget Processing>Post to Master for Reports). This program will do a soft post of your budgeted amounts to the respective accounts in order for users to have budget amounts to draw against when processing in the new year. This program needs to be run before the year is closed. If corrections are made to the budget in next year budget entry, you will need to re-run this program to have the amounts updated on the accounts. Once Post to Master has been ran, you will see these budgeted amounts appear as Original Budget when viewing the accounts in account inquiry. Multi-year Funds Changes have been made regarding the handling of Multi Year Funds within Munis, the information presented below is a small portion of the changes that the site should be aware of. Starting in versions 9.3 and up, there will be a new Life column in account inquiry that will track the entries made to this fund over its life span. 16

17 The process of managing multiyear funds has been altered. The Munis General Ledger application does not use Type 1 and Type 2 designations for multiyear funds. Instead, multiyear funds are defined as either budgeting for life or budgeting annually. All existing multiyear funds used by client sites are considered to budget for life. Multiyear funds are defined at the segment code level using the Chart of Account Segments program. When the Multi-Year Fund check box is selected on the Attributes pane, the pane expands to display a Budget Multi-Year Fund Annually check box. Multiyear funds are now only separated by a Default report view: Life to Date or Fiscal. Both types of funds will take the remaining available amount and move that forward as the original budget for the current year once the year is closed. There is no longer a Recalc process, and both types of funds can be reported on in a comprehensive and yearly view. The Budgeting Annually checkbox should be used with care, as it essentially changes the scope of how the funds work. Once the original budget has been established, no multiyear funds should ever be in a projection again. The Budget Completion Journal automatically removes the budgetary flag in Account Master for multiyear funds. As far as establishing original budget for new accounts, you can either set up a new projection, or add or import a budget amendment. If the multiyear accounts in the amendment have no budget activity, you will get a prompt asking if you are establishing the original budget. 17

18 If you answer Yes, or Yes to All, then instead of showing as a Transfer In, the Original budget field is now populated with this amount. The journal source for this entry will also be reflected different. Instead of showing as a BUA, it will reflect as a BUC. 18

19 Conclusion Preparing for Fiscal Year End Close is really a process that should be maintained year round. In the first section of this document, we went over steps that should be taken throughout the year to ensure that the database is kept as up to date as possible. Some of the key points to remember throughout the year should be: running the MIU on a frequent basis, running and correcting errors on the Table Validation guide on a monthly basis, running and processing the diagnostic utilities and reconciling all funds/accounts to ensure that you have balanced funds. If these steps are done throughout the year, Fiscal Year End should be a clean and easy process. 19

20 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 user-specified 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.

21 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 year-end 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. 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 21

22 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 Forward Actual = CYPY Expenses + CYPY Encumbrances 4. Transfer 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 is 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 carry- forward method are not typically recommended and require extensive review and data conversion. Please contact MUNIS Financial Support for assistance. 22