NA Year-End Closing (YEC)for 2017 – Stage 2 (January 8, 2018)

Prepared By: Steve L. Seawall, CPA

Copyright 2017 Custom Micro Works. All Rights Reserved.

Objective of YEC Process

  • The primary objective of the YEC process is to allow you to properly close books on 2017 and provide the auditor with financial statements, including supporting financial information, for use in conducting the audit of the city.
  • Keep in mind: A great deal of the work you are doing would otherwise have to be done by the auditor. You can significantly reduce the work required by your auditor by following our suggestions. Several of the cities now using NA have went through the audit process and required no adjustments to their financial statements. There is no reason why your city could not be one of them.

Where are you at in the YEC timeline?

  • At this point do not be concerned about where you are at. There is still plenty of time to get all of the work done. Preferably I would like you to try to finish up by the end of January.
  • Your timeline will depend on when your auditor wants to get started with the audit. If your auditor wants to start the audit in early February, or even earlier, that should not be a problem. We can help you along. All you need to do is ask for help.

Have you done the following?

  • Tied beginning cash and beginning unencumbered cash balances as of 1/1/2017 to the ending balances in the 2016 audit report (as of 12/31/2016)?

Beginning cash and beginning unencumbered cash in NAas of 1/1/2017 must tie for each fund to the 2016 audit report. We will check for cash basis and budget law violations when we get to the final phases of this process. This cannot be done unless we can rely on the beginning balances!

  • Replenished petty cash fund as of 12/31/2017?
  • Reconciled bank accounts and fund summary statements as of 12/31/2017?
  • Reconciled the Payroll Clearing Fund as of 12/31/2017?
  • Entered Budget Information (Fund Totals and Detail)?
  • Updated payroll tax rates and other rates such as for retirement?

Clean Up Outstanding (Un-Cleared) Checks

Why do we want to clean up outstanding checks? Outstanding checks themselves do not present any problem from an accounting standpoint. The problem comes when it becomes necessary to void a check that was issued in a prior year. The problem arises because the cash disbursement has already been recorded in the books as of the end of the prior year and you cannot go back and change the ending cash balance if the books have been closed.

Few accountants understand the complexity of voiding a check issued in the prior year. Most will just advise you to enter a cash receipt and be done with it. That might be okay, but NA has a very sophisticated and deliberately designed procedure for such a transaction. For that reason, I suggest you look closely at outstanding checks before the books are closed.

  • Review the report of outstanding checks for every bank account as of year-end.
  • Consider voiding checks that have been outstanding more than a few months or so. Pay particular attention to checks for small dollar amounts and checks issued to employees. Some due diligence should tell you enough to make a decision.
  • Be sure to void the check as of December 31, 2017.

Paying Bills in January

  • Invoices that are required by law to be charged to budget year 2017 should be dated 12/31/2017 (date to be charged to the budget). Refer to the download document Year-End Closing for more details on how to pay bills in January.
  • All checks printed and issued in 2018 should be dated in 2018. NO January checks should ever be dated in the prior year!
  • If you need help getting bills paid in January give us a call.
  • Payroll checks should be created and printed in the normal manner. Have you changed the KPERS rates for 2018? We will discuss payroll encumbrances as of 12/31/2017 at a later date.
  • Do not be concerned about outstanding purchase orders at this time.

Publish Treasurer’s Annual Report.

  • NA will print your Treasurer’s Annual Report (BA/Reports/Fund Summary (Monthly Statements).
  • Report should be published by January 31st.
  • Report includes accounts payable (unpaid invoices) at 12/31/2017 in the column “Unpaid Bills.”
  • Including long-term debt in the report is optional. NA allows you to include long-term debt at your option. If you wish to include debt in the report you should summarize it by 1) GO Bonds, 2) Revenue Bonds, and 3) Other Debt. Other debt might include, but is not limited to, loans and capital leases. If you need help on this please give us a call.
  • When to Publish? Because the Treasurer’s Annual Report is a cash basis report, as opposed to your audited financial statements which are budgetary basis, the main part of the report (beginning and ending cash) will not change after 12/31/2017. That is, after you have reconciled 12/31/2017, ending cash balances should not change.

However, because the report also shows unpaid bills and ending unencumbered cash as of 12/31/2017, I would suggest you wait as long as you can to get it published. In late January you should have most or all of your “Unpaid Bills” in the system.

Customer Utility Deposits

  • Customer utility deposits present accounting complications that, for the most part, can be avoided or at least minimized.
  • If you have customer utility deposits and would like to discuss how to account for them in the financial statements, please give us a call.