General Ledger Fiscal Year End

1. General Ledger Fiscal Year End Closing out 2004

2. WELCOME! To the Year End Workshop. During this workshop and presentation, references will be made to the “current year” and “next year” or “new year”. CURRENT Year will be the Fiscal Year beginning July 1, 2003 and ending June 30, 2004 (referred to as 2004) NEXT or NEW Year will be Fiscal Year beginning July 1, 2004 and ending June 30, 2005 (referred to as 2005).

3. This Presentation will cover the following: • Utility Billing • Annual Reports • Accounts Payable • Open Purchase Orders • Non-Encumbering Method • Encumbrance Accounting – Method 1 • Encumbrance Accounting – Method 2 • Any Type of Accounting Method

4. Utility Billing – Annual Reports: • The reports listed below are required at year-end - • Accounts Receivable Detail Report • Loan Report • Deposit Report • PREREQUISITE: All entries for the current year must be processed and updated. • PERFORMANCE TIME: These report must generated on the first day of the new fiscal year after all entries for the prior year and processed and updated and before any updates are made to the new fiscal year. This is a time critical operation and the information in the reports will not be what the auditors require if printed at a time other than what is described. • EFFECT OF EXECUTION: N/A • RUN MULTIPLE TIMES: The reports may be printed multiple times within the time span outlined in the performance time paragraph. • BENEFIT: N/A • SIDE EFFECTS: None if processed within correct time frame.

5. Accounts Payable Open Purchase Orders: Each site will have its own policy on cutting off purchases for the current year and this will affect the time you will perform the items listed below. Determine the status of the un-liquidated purchase orders and clean up the purchase order file. Print a report of the valid, open purchase orders and compare the value of the accounts payable purchase order report with the amount carried on the general ledger budget code for current year and/or prior year encumbrances. They should be identical. If the amounts are different - investigate and correct. It is not necessary to perform the purchase order year-end option found on the period end menu of Accounts Payable. The software will determine how to liquidate the purchase order by the date it carries. The entry to close current year encumbrances to the prior year can be entered manually in a pre-closing journal entry. Optionally, the transactions can be produced automatically by the year-end roll of balances if a closing account definition is in place. The entry to close prior year encumbrances to the fund balance can be entered manually in a pre-closing journal entry. Optionally, the transactions can be produced automatically by the year-end roll of balances if a closing account definition is in place.

6. Accounts Payable – Outstanding Purchase Orders Since most sites have a different policy on treating outstanding purchase orders at fiscal year-end, Local Government developed several methods for handling. The alternatives relate to what type of accounting practices each site uses. There is a method for non-encumbering sites, two methods for encumbering sites, and a method suitable for any site. Each of these methods will be discussed in the following slides. However, these are not the only methods used or accepted among your governing bodies. This section is designed to inform you of the possibilities available in the Zortec Accounts Payable Purchase Orders software. It is not intended to dictate the method used for handling outstanding purchase orders at fiscal year-end.

7. Non – Encumbering Method: If your site does not encumber purchase orders and wants the outstanding purchase orders shown as prior year purchases (invoice goes against last year's (prior year's) budget), the method outlined in the following text may be adaptable for your site. A large number of Local Government customers have their auditors create audit adjustments to handle their outstanding purchase orders. The auditor takes the outstanding purchase orders at year-end and expenses them to the appropriate accounts and then credits an account called "Expenditures Chargeable to Prior Year Purchases" (27700). During the year, as the prior year purchase order is paid or liquidated, the "Expenditure Chargeable to Prior Year Purchases" account is debited rather than the expense account.

8. Prior Year Encumbrance Expenditures Chargeable to Prior Year Purchases is a liability account and it must be created in the chart of accounts and added to the account control parameter for each fund in the Office Manager section of General Ledger. On screen 3 of the account control option, enter the account number in the field named "Exp to PY Encumb:". This is essential or the payment of an invoice against a prior year purchase order will not work correctly.

9. This allows the outstanding purchase orders to be expensed into the appropriate year's budget and the items on order to be received and paid for in the current year. If the auditor for your site is doing this type of manual audit adjustment, the following information will be helpful to you and your auditor.

10. Purchase Order Listing After all current year purchase orders have been entered and all current year invoices have been paid, run a "Purchase Order Listing”. To do this, selection option #02 – Purchasing from the Accounts Payable Main Menu.

11. Purchase Order Listing Select #24 – Purchase Order Listing, from the Purchasing Menu.

12. Purchase Order Listing Be sure to type “E” to EXCLUDE liquidated purchase orders from the report.

13. Review the list and determine which purchase orders should remain on the system and which should be liquidated.

14. Liquidate Purchase Order To liquidate the necessary purchase orders, select option #22 – Liquidate Purchase Orders, from the Purchasing Menu.

15. Liquidate Purchase Order After selecting the Purchase Order, the Question verifying you want to liquidate this PO will appear. If the screen is correct, type “Y”.

16. PO Listing by Ledger Next, you may want to print a listing by ledger. To do so, select option #25 – PO Listing by Ledger from the Purchasing Menu.

17. PO Listing by Ledger Type the Date Ranges and Ledger Ranges as necessary. You can get totals in the report by placing X’s in the correct fields in the “Ledger Totals” parameter. In the example here, the report will show totals for Fund and Departments.

18. Before the next step, two items must be verified: (1) The proper ledger numbers have been added to each fund's chart of accounts using the file maintenance option and (2) the account control parameter includes these account numbers in the "Exp to PY Encumb:" field.

19. Verify Ledger Numbers Select option #01- Inquiry from the General Ledger Main Menu. Search for the “Expenditures Chargeable to Prior Year Purchases” account. If it does not exist, use option #02 – File Maintenance to create the correct account. NOTE: Be sure to verify for EVERY Fund!

20. Verify Account Controls To verify the account controls are set correctly, select option #50 – Office Manager from the General Ledger Main Menu.

21. Verify Account Controls Select option #08 – Account Control from the Office Manager Menu. Choose “I” to Inquire from the prompt.

22. Verify Account Controls Once you select the correct field and fund, go to the third screen and verify the correct account number is in the “Exp To PY Encumb” field. If it is not, switch to Update mode and add the account number. NOTE: Be sure to verify/update this field for every fund necessary.

23. Using the “PO Listing by Ledger” report previously generated, create a packet consisting of journal entries that will debit the expense accounts involved in the outstanding purchase orders with a corresponding credit to the account named "Expenditures Chargeable to Prior Year Purchases".

24. Creating Packet To create the packet entries, select option #12 – Packets, from the General Ledger Main Menu.

25. Creating Packet Select option #01 – Add Packet Entries, from the Packets Menu. Contact Zortec Support Staff if you have any questions or need assistance.

26. The final step is to flag these purchase orders as Prior Year Purchase Orders.

27. PO Flagging Select option #07 – Period End from the Accounts Payable Main Menu.

28. PO Flagging Select option #12 – Purchase Order Year End from the Period End Menu. NOTE: You may need to actually type “12” to access this option.

29. PO Flagging Type the Issue Date range and PO Number range as necessary. NOTE: This must be done or the payment of an invoice against a prior year purchase order will not be done correctly.

30. These steps cover all the requirements to prepare purchases to be receipted as "prior year purchase orders" using non-encumbering accounting.

31. Let's describe what happens as the purchase order is liquidated by the payment of an invoice. • The invoice is entered for payment in Accounts Payable, Invoices, File Maintenance, using the same steps as you normally do. • When the check is cut, the software will debit the account "Expenditures Chargeable to Prior Year Purchases" instead of the expense account. • The system detects that we have flagged this purchase order as prior year and makes the debit to the liability account set on the account control of the funds involved in the payment transaction. • These entries will reduce cash for the amount of the invoice and reduce the liability set up for prior year purchases. • The expense accounts involved were taken care of in the prior year by the auditor's adjustments included in the packet created manually by user. This invoice will have no effect on the current year's budget.

32. Encumbrance Accounting Method 1: If your site uses encumbrance accounting and determines the outstanding purchase orders at fiscal year-end should be shown as prior year encumbrances in the new year, the following method may be suitable for your site. This method is parameter driven and does not require journal entries or running a utility to add a prior year purchase order flag to the outstanding purchase orders at fiscal year-end. This method will move the outstanding encumbered amount at year-end into an account called "Reserve for Encumbrances Prior Year", (27600). As prior year purchase orders are liquidated throughout the new year, the account for "Expenditures Chargeable to Encumbrances Prior Year" will be debited for the amount liquidated. Both the "Reserve for Encumbrances Prior Year" and “Expenditures Chargeable to Encumbrance Period Year" are closed to the fund balance account at fiscal year-end. If your site is interested in this method and is not currently using it, contact the Support Center to schedule a time to set up the General Ledger office manager parameters. NOTE: When using this method, the outstanding purchase orders from previous steps never hit an expenditures account (prior year or current year).

33. Encumbrance Accounting Method 2: If your site uses encumbrance accounting for purchases and decides that outstanding purchase orders at fiscal year-end should be shown as current year encumbrances in the new year (expensed against the new year budget), then the following method may be suitable for your site. This method moves the encumbrance from the prior year account budget to the current year account budget. A utility has been designed in the General Ledger system to reverse the encumbrances of outstanding purchase orders in the old fiscal year and place them in the new fiscal year. If you want to try this method, please contact the Support Center at 1-800-439-4504 for assistance.

34. Any Type of Accounting Method: Cash, accrual, or encumbrance accounting methods do not regulate the method discussed in the following text. Using this concept, all outstanding purchase orders would be liquidated at fiscal year-end and re-issued in the new fiscal year. The expense is shown in the year that the purchase orders are issued against. Some auditors like this method because it does not allow misuse of unspent budgeted monies. It does not allow an individual to issue a purchase order at year-end to use up any leftover budget monies. Any outstanding purchase orders are deleted out of the prior year budget and re-issued against the new year's budget.

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