1. Year-End Accruals The University of Texas System Administration

2. 2 Overview Presentation Objectives: To explain the basic principal of accrual accounting To demonstrate why we do accrual accounting To review end of year deadlines To review the new Accrual Portal

3. 3 Accrual Accounting Accrual accounting follows one of the main principals of accounting, which is the matching principle - matching of revenues and expenses in the period earned and incurred. The goal is to match revenues to expenses in the same fiscal year. The University of Texas System is undergoing external audit by Deloitte & Touche. One of the issues that was raised by the auditors is the payment of vouchers in the new fiscal year that should have been paid or accrued in the prior fiscal year. This violates the matching principle. At the end of fiscal year 2005, System Administration accrued $1.5 million from 305 accrual forms submitted.

4. 4 Accrual Accounting To illustrate the matching principle: A department has an invoice for goods or services received in August, but the invoice does not get paid until September. This can change the financial statement presentation. An invoice for $500 was received August 25 th. The department didnt submit it for payment until after the cutoff, so their office would have extra budget (or a profit) at the end of the year. If the invoice had been paid in the period it should have, then the office would have used its entire budget for the year. Invoice paid in SeptemberInvoice Paid in August Revenues $40,000Revenues $40,000 Expenses 39,500Expenses 40,000 Remaining Budget500Remaining Budget-0-

5. 5 Accrual Accounting Another issue that arises from not following the matching principle is that the financial statements are incorrect. Using the previous example of the invoice that is not paid until September, on the Balance Sheet, Accounts Payable is understated by the $500 that was not included. This makes the financial position appear to be better than it really is. Understated by $500

6. 6 Accrual Accounting The income statement is also incorrectly presented. Expenses are lower than actual, so it again appears that the financial position is better than reality. This income statement is overstated by the $500 which would not have been included had the invoice been paid in the correct fiscal year. Understated by $500

7. 7 Due Dates September 5 th – DEFINE closes for August September 7 th – Reimbursement requests due to APS by 5 p.m. September 12 th – Rollback of prior period vouchers September 14 th – All accruals due to Controller via the portal by 5 p.m. September 17 th – DEFINE closes for 13 th month

8. 8 Accrual Portal Received over 300 manual forms which had to be manually input into database Request for Payable Accrual form was created on the accrual portal $500 minimum expense for accrual Each department will be able to electronically enter and submit their accrual forms to the Controllers Office (backup will need to be sent manually)

9. 9 Accessing the Portal List anyone who would need to have access to the portal Sherill Boline will create members and send a email to the members with access information Website is: https://portal.utsystem.edu/financialreporting/YearendAccrual/default.aspx

10. 10 Portal Home Page

11. 11 Select New Item to create a new accrual

12. 12 Enter the information and hit Save and Close.

13. 13 Here are some samples of the form we are using to gather the accrual information. The electronic version of the form as well as a copy with the backup is due to the Controllers Office by 5 p.m. Thursday, September 14 th.

14. 14 Sample #2: Originals will be submitted to APS for payment following the usual procedure. Please indicate the date that the originals were submitted to APS. This field may be blank if the invoice has not been received.

15. 15 Sample #3: Note the expense should relate to the period 9/1/2005 through 8/31/2006 and should meet the $500 minimum for an individual expense.

16. 16 QUESTIONS? Technical Portal Questions Sherill Boline x4558 sboline@utsystem.edu Accrual Questions Tracy Schumacher x4458 tschumacher@utsystem.edu