Print/Copy Mail Services Vice President FAThe BAO Financial Services Department has developed this guide to assist Service Centers with making the necessary year end adjustments. This guide has been separated into two sections, Prior to Closing and After Closing the fiscal year. We have tried to provide examples of each possible scenario and samples of the journal voucher adjustments that may be needed. If you have questions about this information please contact the BAO Financial Services Department at 6-3524.
PRIOR TO CLOSING OF FISCAL YEAR
Below you will find a description of these issues along with the applicable journal vouchers that may need to be processed.
Storeroom Inventory Adjustments
Service Centers that maintain storeroom inventories may be required to maintain a storeroom inventory reserve. There are two types of storeroom inventories (organized storerooms and departmental storerooms). A perpetual inventory system for maintaining property records is required for organized storerooms and recommended for departmental storerooms (FASOM 08.04 C4). Service Centers using a periodic inventory system for departmental storerooms will still make the same year-end inventory adjustments noted below as do organized storerooms.
The accounting procedures include two year-end adjustments to be made prior to the close of the fiscal year: adjusting inventory to physical count, and adjusting the inventory reserve balance. Each type of adjustment is addressed below in detail.
Adjust Inventory to Physical Count
Departments with storeroom inventories are required to perform an annual physical inventory count of their storeroom inventories (FASOM 08.04 D3). The physical count is then to be reconciled with the inventory balance (acct code A4002) in the Banner system. If these values agree, then no adjustment is required. If these values do not agree, then an adjustment to write-off the difference is required.
Sample adjusting journal vouchers:
Increase the inventory balance to match the physical inventory count.
Debit acct code A4002 - Inventory
Credit acct code 28723 - Inventory Write-off
Decrease the inventory balance to match the physical inventory count.
Debit acct code 28723 - Inventory Write-off
Credit acct code A4002 - Inventory
Transfer Code Transactions (9xxxx account codes)
By definition Service Centers should be self-sufficient and therefore should not require transfers in or out of funds to support operations. When a transfer occurs it is important to classify the funds as contributed capital and not include these funds in fund balance when measuring compliance. However, there are instances when a transfer is appropriate and no contributed capital adjustment is required (i.e., funding equipment reserves). If you are ever unsure whether a contributed capital adjustment is needed, please contact the BAO Financial Services Department at 6-3524.
The Service Centers should perform at least an annual review of all transactions using transfer account codes (9xxxx). The review should include making a determination whether the transfer will require a contributed capital adjustment (See UO Operating Policy for definition of contributed capital). Below are sample transactions and the necessary contributed capital adjustments.
Transfers In
Funds transferred in to a service center fund from an external source are considered contributed capital (See OUS Policy 05.713: Service Center Working Capital for complete definition and examples). The Operating Policy continues to state that contributed capital must be fully documented and tracked using account code D0110. (NOTE: transfers related to inventory and its associated reserve use account code D0101.) Therefore, journal vouchers transferring funds into a service center should have a corresponding entry to contributed capital.
Sample Journal Vouchers:
Transfer of funds to Service Center from external source (lines 3 and 4 are the contributed capital adjustments)
Debit Outside Fund acct code 92001 - Transfer Out
Credit Service Center Fund acct code 91001 - Transfer In
Debit Service Center Fund acct code D0010 - Fund Balance
Credit Service Center Fund acct code D0110 - Contributed Capital
Transfers Out
Transfer out transactions include the transfer of funds to an equipment reserves fund (typically uses account code 92007), and returning funds previously transferred from an outside fund to the original contributor. Equipment reserve transfers do not require contributed capital adjustments, however when funds that were previously transferred to the service center are returned to the original contributor then an adjustment to contributed capital will be needed. NOTE: A service center can only return funds to the original contributor when the adjusted fund balance (line 5 on compliance worksheet) is greater than or equal to zero, and contributed capital (D0110) is greater than zero.
Sample Journal Vouchers:
Transfer of funds back to the original contributor
Debit Service Center Fund acct code D0110 - Contributed Capital
Credit Service Center Fund acct code D0010 - Fund Balance
Debit Service Center Fund acct code 92001 - Transfer Out
Credit Outside Fund acct code 91001 - Transfer In
AFTER THE FISCAL YEAR IS CLOSED
After the fiscal year has closed, each service center will need to perform three steps to ensure that they are in compliance with Circular A-21 and OUS Policy 05.713 Service Center Working Capital.
STEP 1: Review, Sign & Return the Compliance Calculation Worksheet.
The BAO Financial Services Department will issue Calculation Worksheets to all service centers. This will occur after closing of Period 10 of each fiscal year. You will need to review the worksheet before advancing to step two..
STEP 2: Identify which scenario applies to you.
To assist service centers in performing the necessary adjustments, we have outlined four possible scenarios and the appropriate action steps for each below. You will need to review you compliance calculation worksheet and identify which of the four scenarios is applicable.
Scenario #1 - Standard Service Center - no contributed capital.
Scenario #2 - Service Center with contributed capital.
Scenario #3 - Service Center with excess working capital.
Scenario #4 - Service Center with a deficit in working capital.
STEP 3: Take appropriate action.
Based on the answers to the questions in Section IV: Compliance Analysis, review the necessary action steps for the scenario matching your service center. To assist you, we have included sample journal vouchers where applicable.
If you do not find a scenario below that matches your situation, or you wish to submit an exception to the policy, please contact the BAO Financial Services Department at 6-3524.
The service center should perform an annual review of rates to ensure that individual rates are inline with the costs of doing business. Use the three step process outlined above to assist in setting rates. If there is excess working capital, rates need to be reduced. If the service center is in a working capital deficit , needs to pay back contributed capital, or fund equipment or building reserves then rates need to be increased.Scenario #1 - Standard Service Center - no contributed capital
Is line 9 negative?
YES - Go to scenario #4.
NO - Answer next question.
Is line 18 positive?
YES - This is your excess working capital. Go to scenario #3.
NO - No action required.
Scenario #2 - Service Center with contributed capital
Is line 9 negative?YES - Go to scenario #4.
NO - Answer next question.
Is line 18 positive?
YES - This is your excess working capital. Go to next question or scenario #3
NO - No action required.
Is line 20 greater than zero?
YES - This requires no action, however the service center may elect to return contributed capital to the original contributor. NOTE: The service center should perform an annual review of rates to ensure that individual rates are inline with the costs of doing business. If a service center chooses to return contributed capital, then the following journal voucher should be processed:
Transfer of contributed capital funds back to the original contributor
Debit Service Center Fund acct code D0110 - Contributed Capital
Credit Service Center Fund acct code D0010 - Fund Balance
Debit Service Center Fund acct code 92001 - Transfer Out
Credit Outside Fund acct code 91001 - Transfer In
NO - Go to scenario #1.
Scenario #3 - Service Center with excess working capital
If line 18 is positive, there are four options for this type of service center.
Option A: Return Contributed Capital
Transfer of contributed capital funds back to the original contributor
Debit Service Center Fund acct code D0110 - Contributed Capital
Credit Service Center Fund acct code D0010 - Fund Balance
Debit Service Center Fund acct code 92001 - Transfer Out
Credit Outside Fund acct code 91001 - Transfer In
Option B: Fund or Create Reserves, if Necessary
See Building & Equipment Reserve policy. http://baowww.uoregon.edu/FinMgt/BuildingEquipmentReserves.htm
Option C: Reduce Rates
The rates charged for services can be adjusted downward to reduce the excess working capital. This can also be accomplished by a refund to users. Contact BAO Financial Services at 6-3524 if this is the desired action.
Option D: Some Combination of Options A, B, & C.
Scenario #4 - Service Center with a deficit in working capital
Is line 9 negative?
YES - This requires action to eliminate the deficit. Choose Option A or B.
Option A: Is working capital in a deficit position equal to 5% or less of annual expenses? Or is line 9 between line 17 and zero?
YES - This requires action to eliminate the deficit. You must either
- Increase rates
- Transfer in of funds (contributed capital) to eliminate the deficit.
NO - Go to Option B.
Option B: Is working capital in a deficit position greater than 5% of total annual expenses? Or is line 9 in a greater deficit than line 17?
A transfer of funds prior to fiscal year-end closing, sufficient to bring the deficit equal to 5% or less of total annual expenses. Any remaining deficit will be carried forward to the next fiscal year as an increase in rates or additional movement of funding in the future year. See OUS Policy 05.713 Service Center Working Capital. http://www.ous.edu/cont-div/fpm/acco.05.713.php