Fiscal Year Closing - What's It All About?

What is Fiscal Year Closing (at the departmental level)?

Fiscal year closing is the process of closing the financial records for the year, so we can take a reading on financial condition (profit, loss, etc.) at one standard point in time (fiscal year end).   

What are the main objectives of Fiscal Year Closing at the departmental level?

To ensure all the financial records are in "reportable condition", so that financial statements prepared with the information are complete and accurate, and so that conclusions drawn and decisions made based on that  financial data and statements lead to successful outcomes.

To prepare budget adjustments (BEA's)  to cover (& explain) budget variances, and close out (zero) the expenditure and income accounts to clear them for next year's data, and move financial balances into BC 75.

What is "reportable condition" for self-supporting operations?

  1. Financial records are in accordance with Generally Accepted Accounting Principles (GAAP), UC policies, and relevant state, federal, and other funding agency policies.
  2. Expenses and revenues are recorded  COMPLETELY and ACCURATELY in the appropriate FAU code.   (All ledgers have been reviewed for completeness, correctness, and reconciled for accuracy.)

    All the costs to run a department for that fiscal year (and any revenues earned in that year) are  recorded in that fiscal year's ledgers in the appropriate departmental FAU. 

    Capital type expenses (e.g., inventorial equipment purchases, facilities renovations) are appropriately recorded in funds OTHER than the operating fund  (e.g., asset acquisition fund)
  3. Appropriate accruals and deferrals are used      
    • expenses are recorded in year incurred to produce revenue (rather than merely the year the check was cut to pay for the expense)
    • revenues are reported in year earned (rather than year received)
    • adjusting entries (e.g., accruals and deferrals) are used at year end to match revenues with the expenses incurred to generate that revenue within the same fiscal year (MATCHING PRINCIPLE)
  4. Budget adjustments (BEA's) have been done to cover and EXPLAIN variances from budget in each of the Budget Categories,  so that Financial balances (budget minus expenditures) in all Budget Categories are cleared to zero, except for BC 75 where the profit/loss is recorded.