Year-End Internal Controls
The university Bookstore has eight different departments: new books (dept. 1), used books (dept. 2), clothing (dept. 3), supplies (dept. 4), gifts (dept. 5), computers/electronics (dept. 6), magazines/food ( dept. 8), and trade books ( dept. 9). Note there is no dept. 7 currently in use. A physical inventory count is conducted once annually on each of these departments. Not all departments' inventories are performed on the same date; the dates are staggered throughout the year.
The physical inventory values are communicated to Accounting Services in order to calculate and record an adjustment of the book inventory to actual inventory. If the difference between the existing inventory on the books and the physical count is greater than 2% of sales (standard for the industry), then Accounting Services investigates the difference to ensure that the reason for the variance is valid, or to determine if an error was made, or a transfer of inventories took place between departments prior to the count date.
Posting commitment carryforward amounts
As departments place purchase orders with vendors, the Purchasing department commits the funds from that department to be set aside to pay for those future purchases. Toward each fiscal year end, departments are encouraged to review their open commitments/encumbrances for validity. If the purchase order is no longer needed or has expired, the departments work with Purchasing to make sure their commitment has been released.
On the night of June 30th each fiscal year, a member of the SAP team (separate from Purchasing) compiles the list of open commitments/encumbrances that should roll forward to the next fiscal year. He/she provides this file to Accounting Services. The accountant then separates the file by fund type and then by cost center for two reasons: to determine how much of the remaining account balances at year end need to be held back for commitments, and to publish this information to the university community so departments will know the amount of their commitments.
Preparing annual financial statements
Each accountant is responsible for preparing the cost center detail reports for the annual financial statements of the funds for which they are responsible. The accountant starts preparing these financial statements as of April and May month end each fiscal year and provides them to the Associate Controller Financial Reporting for review. These interim periods of review allow for time to catch and fix any reporting errors before year end. The accountant prepares these financial statements again at year end. All financial statements are reviewed by the Associate Controller Financial Reporting and balanced to the SAP system.