Auxiliary Standard Operating Procedures


SUBJECT:

Closing an Indiana University Account

SOURCE:

Auxiliary Accounting, Financial Management Services

DATE ISSUED:

April 2005

DATE OF LAST REVISION:

May 2013

ASOP NO:

35.0

RATIONALE:

To provide guidelines explaining the appropriate requirements and procedures for closing a University account.

ASOP:

In the event an Indiana University account is no longer being used for its intended purpose, the account should be closed.

 

Before an account can actually be closed, the following needs to occur:

  • Remove/Move Encumbrance Balances
  • Approve or Disapprove Pending Ledger Entries
  • Remove/Move Asset and Liability Balances
  • Remove/Move Base Budget
  • Note:  Accounts cannot be closed between the period of July 1st and the date the balance roll forward process is complete.

The steps below will walk the user through each of the steps in detail.

  1. Identify Expiration Date:  Prior to closing an account, the user may elect to have the account expire. Expiration of the account will alert users in the routing that this account is being tagged as one to be closed shortly.  Expiration of an account is different from closing an account because expired accounts can still have entries posted to them, whereas closed accounts cannot.  To expire the account, an Account document must be done.  On the home screen in Kuali, under Chart of Accounts, select the lookup link for Account to find the existing account; then, use the “Edit” link in the search results to initiate the document to expire the account. Enter the “Account Expiration Date” as the date you are creating the document and routing the document. The user will not be able to enter in an account expiration that is in the past.
  2. Identification of Encumbrances on Account:  Prior to closing an account, any encumbrances on the account must be identified and either moved to another account or disencumbered altogether. Encumbrances will hit the corresponding expense object code and offset to fund balance (i.e. object code 9891, 9892, or 9893).
    1. Available Balances:  In order to search for encumbrance balances using the available balances lookup, the user will be required to enter in the fiscal year, chart code, account number, and select the “Consolidation Option:” of “Detail.”  Once there, you will see four amount columns:  Budget, Actuals, Encumbrances, and Variance.  The Encumbrance column will show any outstanding encumbrances by object code and sub-object code that exist.  If there are no encumbrances, then the Encumbrance column will show all zeroes and this step is complete.  If there are non-zero encumbrance balances, then they will need to be moved. 
    2. Open Encumbrances:  To use the open encumbrance lookup, the user will need to enter in the chart code, account number, and balance type.  Three separate searches should be done to ensure no encumbrances exist. These balance types include:  EX, IE, and PE.
  3. Removal / Movement of Encumbrance Balances:Two of the most common encumbrances are from Purchasing/Accounts Payable and Payroll.

    Purchase Orders with an open status will have encumbrances associated with them. Before taking further action, it is important to review any purchase orders to determine if the purchase order needs to be moved or can be released.

    For Purchasing-related encumbrances, departmental users cannot move encumbrances, rather they need to request that the Office of Procurement Services complete a PO Amendment to disencumber the remaining funds from the account being closed and re-encumber the funds on the new account.  If the department wishes to disencumber the amount altogether, then they can close the PO themselves in KFS.  Please contact the Office of Procurement Services Help Desk with questions by email at purhelp@iu.edu or by phone at (812) 856-5008.

    Payroll encumbrances are driven by the job funding in HRMS. In order to move payroll encumbrances, the user will need to initiate a job funding HRMS edoc and change the account from the one they are trying to close to a new account. This process will need to be done for each person that is paid on the account the user is trying to close. After the edoc(s) have been successfully routed, the encumbrances should automatically be moved to the new account after the next bi-weekly payroll run or the next time the encumbrance job runs for monthly employees. Note: By changing the job funding for each employee paid on the account you are trying to close, this also affects where future payroll accruals (9050) are posted.  If, after the payroll accrual has cleared, payroll-related encumbrances still exist on the account, then please contact your auxiliary consultant at auxacct@iu.edu

    Internal encumbrance balances other than salaries and compensation may also exist on the account such as Physical Plant work orders.  These internal encumbrances must be closed before the account can be closed.  Please contact your auxiliary consultant at auxacct@iu.edu if these exist.  

    Pre-Encumbrances can be done by departmental users and are not necessarily tied to specific University Administration processes (i.e. Purchasing, Payroll, etc.).  If these exist, then a KFS Pre-Encumbrance document can be entered to disencumber or move the pre-encumbrance. For additional information regarding the Pre-Encumbrance document, please go to Financial Transactions, Pre-Encumbrance line and click on the “?” icon for help.

    To check for encumbrances in general, there are two places to search in KFS:  Available Balances and Open Encumbrances.

  4. Identification & Approval / Disapproval of Pending Ledger Entries: In order to determine what pending entries exist on the account, select balance inquiries from the menu options and then select General Ledger Pending Entry. The user will need to enter the fiscal year, chart code, and account number.  If no records are returned, then there are no pending ledger entries and no further action is needed.  If, however, there are pending ledger entries, they must either be disapproved or fully-routed for approval and posted to the General Ledger overnight before proceeding. Once the pending ledger entries have been posted, the user may need to move additional asset & liability balances.

  5. Identification of Assets & Liabilities to Remove / Move
    1. All remaining asset and liability balances must first be identified before they can be dealt with appropriately.  The easiest way to do this is to run a Balance Sheet by account to see them all on one report. 

    2. It is beneficial to separate the asset and liability object codes into two categories:  system-generated object codes and nonsystem-generated object codes.  Creating this separation will determine how to proceed with moving the amounts off of the account.  System-generated object codes (8000, 8118, 8160, 8163, 86**, 89**, 9041, 9042, 9050, 9056, 9058, 9060, 9065, 9120, 92**, 96**, and 98**) may require assistance from other administrative offices within the University.  Nonsystem-generated object code balances will be able to be moved by the auxiliary department themselves.  If you have a question regarding whether an object code is either system-generated or nonsystem-generated, then please contact auxacct@iu.edu before proceeding.

    3. Note regarding Object Code 8000 (Cash): Even though entries to object code 8000 (Cash) are defined as system-generated, the auxiliary organization is still responsible, when closing an account, to transfer any excess cash (object code 8000) to another account via a Transfer-of-Funds (TF) document.

  6. Removing / Moving System-Generated Assets & Liabilities off of the Account:  Movement of system-generated balances off of the account will likely require direct contact between your organization and a University Administration office. Below you will find a list of the system generated object codes and the appropriate administrative office contact information.  Please send an email to the department you are working with to remove the system-generated balance. It will be helpful to include the following information within the email: the account number you are wishing to close, the balance in the object code of the asset/liability you are trying to move, and a transaction listing that makeup that balance.  Please contact your auxiliary consultant at auxacct@iu.eduif you need assistance with the transaction listing.  

    8001

    Revolving Fund Cash:  FMS Cash Control

    Brian Keleher (keleherb@iu.edu), Financial Analyst.

    8118

    KFS Accounts Receivable: Non-Student Accounts Receivable

    Accounts Receivable Supervisor (nonstdar@iu.edu)

    8160, 8163

    Bursar Accounts Receivable: Office of the Treasurer / University Bursar

    For Bloomington Campus, Leann Maners (lchristm@indiana.edu), Bursar Accounts Services Supervisor.  For other campuses, Susan Cote (scote@indiana.edu), University Bursar first.  Then, individual Campus Bursar’s Office if necessary.

    9060, 9065

    Bursar Accounts Payable: Office of the Treasurer / University Bursar

    For Bloomington Campus, Susan Cote (scote@indiana.edu), University Bursar.  All other Campuses should contact Susan Cote first, but if she cannot help, then their Campus Bursar’s Office.

    86**, 89**, 96**

    Capital Assets

    capassets@iu.edu

    9041

    Purchasing/Accounts Payable Module: FMS Accounts Payable or Office of Procurement Services

    Questions regarding open encumbrances or open purchase order should go to the Purchasing Help Desk (purhelp@iu.edu) or (812) 856-5008.  Questions regarding Accounts Payable invoices or payments should go to FMS Customer Service (fmscustr@indiana.edu).

    9042

    Invoices Payable / DV:  FMS Accounts Payable

    http://www.fms.indiana.edu/support/support_form.asp

    9050

    Accrued Payroll: FMS Payroll/Customer Service

    Wait for accrual to clear and/or, contact your auxiliary consultant (auxacct@iu.edu).

    9056, 9058

    Accrued Vacation/Sick Liability:  FMS Financial Reporting

    Wait for the end of the fiscal year for this process to take care of itself.  Contact fmscustr@indiana.edu for further questions.

    92**

    Bond Payable Level: Office of the Treasurer / Capital Finance

    treasury@iu.edu

  7. Removing / Moving Nonsystem-Generated Assets & Liability Balances off of the Account:

    All nonsystem-generated asset and liability balances need to be moved by the organization who is trying to close the account.  This can be done via Auxiliary Voucher (AVAD) or a Distribution of Income/Expense (DI) document.  Please note that if cash needs to be moved that a DI must be used.  An Auxiliary Adjustment Voucher (AVAD) will not move cash. 

    Note regarding moving nonsystem-generated object code balances

    It is not necessary to clear the account of amounts in Income, Expense, or Fund Balance object code balances. Income and Expense balances close to fund balance (9899) at the end of the fiscal year through the automated year-end closing process and will be cleared from the account at that time.

    Example of  Removing / Moving Nonsystem-Generated Balances off of the Account:

    Account 60-449-07 must be closed. The organization made the decision to move the necessary balances to account 60-449-00.  The 60-449-07 account currently has balances as follows:

    Object Code

    Object Name

    Amount

    1500

    Sales and Services

    $500 (CR)

    5000

    Miscellaneous Expense

    $200 (DR)

    8000

    Cash

    $1,000 (DR)

    8119

    Accounts Receivable

    $3,000 (DR)

    9000

    Accounts Payable

    $2,000 (CR)

    9899

    Fund Balance*

    $1,700 (CR)

    *Note:  Fund Balance is carried forward from the prior year.

     

    The income and expense balances (in object codes 1500 & 5000) will close to object code 9899 at the end of the fiscal year, so no entry is needed to move them. However, the asset and liability balances (in object codes 8119 & 9000) must be transferred to another account, as well as any remaining excess cash. 

    Two transactions must occur to facilitate the closing of the 60-449-07 account:

    • An initial transaction will be carried out via the distribution of income and expense (DI) document as follows:

    Account

    Object Code

    From

    To

    60-449-07

    8119

    $3,000 (CR)

     

    60-449-00

    8119

     

    $3,000 (DR)

    60-449-07

    9000

    $2,000 (DR)

     

    60-449-00

    9000

     

    $2,000 (CR)

    The system-generated offset to each of these line items is object code 8000 (Cash). After the DI above has posted, the new cash (object code 8000) balance in account 60-449-07 will be $2,000 ($1,000 original balance in object code 8000 shown above in the example + the $3,000 cash increase from the 8119 offset – the $2,000 cash decrease from the 9000 offset = $2,000 Ending Cash (object code 8000) balance.

    • A second transaction is required to move any existing/excess cash out of account 60-449-07 into the new account (60-449-00):

    This balance should be transferred via a transfer of funds (TF) document as follows:

    Account

    Object Code

    From

    To

    60-449-07

    9900

    $2,000

     

    60-449-00

    9915

     

    $2,000

    After the TF document above has posted, the only balances remaining in the 60-449-07 account will be Income of $500 (object code 1500), Miscellaneous Expenses of $200 (object code 5000), Transfers Out of $2,000 (object code 9900), and Fund Balance of $1,700 (object code 9899).  For those users using auxiliary financial statements, the net of the income and expense numbers above will be negative $1,700.  This will close to fund balance at the end of the year, resulting in no balances in 60-449-07 at June 30th.  No further entries are required by the auxiliary organization itself.

    Note regarding the final check of Fund Balance sub-categories

    • On the Balance Sheet you originally ran in Step #5, you will see in the fund balance section different sub-categories of fund balance (i.e. construction, operating, plant, replacement, net income, fund balance transfers).  The auxiliary organization should check the current balances in each of the sub-categories to ensure that the total of the sub-categories equals the org’s total fund balance per the Balance Sheet that you ran in Step #5.
    • The purpose of this step is to see that even after all Assets & Liabilities have been moved off of the account, and, all revenues and expenses have closed to fund balance, that the net of the debits and credits within fund balance are equal to $0 as well.  Net debits or credits to fund balance that exist at this point would generate cash offsets (i.e. debits or credits to cash).  If these are found, please go back to Step #5 and repeat the process.
  8. Moving the Base Budget:  Budgeted amounts must be moved prior to the account being closed.  Please contact Alicia Robertson (alirober@indiana.edu) in the Budget Office for assistance.
  9. Final Check of Actual & Budget:
    1. BudgetBase Budget (KFS Balance Type ‘BB’) should be $0 in Available Balances.

    2. ActualThe final check is to view Available Balances by Detail.  Check that no Assets or Liabilities exist.  And, check that the net of Income and Expense equals the total Fund Balance (i.e. 9897 & 9899).

  10. Financial Reporting (FMS) Year-End Closing Process: Auxiliary and Service units will have to wait until the Balance Roll Forward Process is run at year-end before the account will technically be closed. This process is done by Financial Management Services. 
  11. Actual Closing of the Account (Final Step):Once all of the above criteria have been met, the account can be closed by completing an Account document in the Kuali Financial System (KFS). This document is located in Document Group: Chart of Accounts Maintenance. The user will need to verify that the account expiration date is not in the future; as well as, check the “closed” box at the bottom left of the document. Once these steps have been completed the user can submit the document. After the document is fully routed, the account will officially be closed. If assistance is needed to complete the document, contact your chart manager or your auxiliary consultant.

DEFINITIONS:

Account – Identifying number for a pool of funds assigned to a specific university organization, for a specific function.

 

Balance Roll Forward ProcessThe process by which Revenue and Expense object codes are closed out to Fund Balance as a part of the FMS year-end closing process.  Revenue and Expense balances are then reset to a zero balance to begin the next fiscal year.   

 

Encumbrance – An accounting term used to describe funds that have been earmarked, or set aside, for a specific purpose.

 

General Ledger – The official repository for University financial transactions. The general ledger is updated nightly.

 

Pending Ledger Entries – Entries stored in the pending ledger until final approval of a KFS document is received, which triggers its transfer to the general ledger during the nightly batch cycle.

CROSS

REFERENCE:

 

ASOP 44.0 - Balance Sheet Backup for Year-End

RESPONSIBLE

ORGANIZATION:

 

Auxiliary Accounting, Financial Management Services