Uncategorized

Year-end accounting considerations for governments

Government Year End

Around June every year, the budget office sweeps back uncommitted funds. Agency executives anticipate this and assemble lists of projects to match up with the funding.

Governments that use a fiscal year often choose to end their accounting period during a low point in business activity. This presents opportunities for vendors that are well positioned to take advantage of it.

Costs

The year-end closing process provides the accounting information needed to prepare the State’s financial statements and other reports. This includes establishing final balances for appropriations, revenues, expenses, assets and liabilities. It also includes determining whether or not unobligated balances from the previous fiscal year will revert to the General Fund.

The fiscal year is the calendar that determines when federal tax forms are filed and audited, and that establishes when budgets are prepared and analyzed. It also determines when quarterly taxes are paid.

Businesses may choose to have a fiscal year that matches the business cycle of their industry. For example, some agriculture companies and retailers have their fiscal year end shortly after the peak revenue time of the year, typically in January or December. The federal government has a fiscal year that runs from October 1 through September 30. Similarly, some community-based organizations and non-profits that receive state funding have a fiscal year that starts in July and ends in June.

Time

Depending on the size of an agency, it can take several weeks or months to complete the government year end task. This process requires extracting period-to-date account balances, recording supplemental year-end closing journal entries and importing the journal entries into the general ledger. It also requires a review of all transactions to ensure they are recorded in the correct fiscal year and completing year-end accruals.

Many businesses use a fiscal year instead of a calendar year for financial reporting purposes. A fiscal year is typically defined by the company’s owners and may differ from the January – December calendar year. A company’s fiscal year may help with the scheduling of quarterly taxes and budgeting.

In the United States, the federal fiscal year, or FY, starts on Oct 1 and ends Sept 30 of the next year. This is different from previous years when the fiscal year began on July 1 and ended on Jun 30. This change was made in 1974 by the Congressional Budget and Impoundment Control Act.

Resources

Choosing the right fiscal year end can save staff time and effort. Many business and government entities choose a fiscal year-end that doesn’t coincide with the calendar year to avoid doing their year-end accounting during busy times such as the November-December holiday season or the summer festival season for not-for-profits.

Other factors that influence year-end choice include the fiscal year-end of major funders or debt covenants. For example, a not-for-profit that receives most of its funding from a government agency might want to align its year-end with the agency’s year-end to simplify grant reporting.

The Bureau of the Fiscal Service has created a comprehensive set of fiscal year-end resources to help agencies meet their statutory closing deadlines. Each section of the Closing Instructions booklet is designed for a specific topic and contains detailed information, instructions and exact cut-off dates. A table of contents is available to easily locate a specific section. Please contact the appropriate Bureau Directory with questions regarding a specific subject matter.

Risk

Governments have to plan for year end in order to meet financial and reporting obligations. It’s not just a matter of accounting for budgets and financial statements, but also the timing of events, including public holidays, historic occasions and climate impacts.

Some entities prefer to have a fiscal year end that differs from the calendar year. This may be a good practice for businesses that rely on seasonal business activities, such as agriculture and retail. They may find it easier to produce their annual financial statements and count inventory at a time when they are at the low point of their cycle.

Similarly, technology companies may want to end their fiscal year in late September, when they’re in the middle of their strongest sales season. This makes it easy for them to report earnings and the latest products on their websites. Other reasons for having a different fiscal year end include the needs of schools and program grant funding.

Continue for more insights

LEAVE A RESPONSE

Your email address will not be published. Required fields are marked *

Related Posts