Preparing for a Successful Fiscal Year-End Close

David Alvey, CPA, Audit Partner, Maze & Associates

• Develop a comprehensive closing manual that someone can pick up and follow if there is staff turnover.
• Work backward from when the report is expected to go to the governing body to ensure that there is enough time and staff availability to meet that date.

Jonathan Foster, CPA, Partner, Davis Farr

• Revisit prior year adjusting journal entries – Take a look at entries posted by either yourself or detected by the auditors from the prior year audit and ask yourself if any of these entries may be repeated in the current year. Some common areas that pop up may include the following:
  • Adjustments to cash and investments – auditors will obtain confirmations from your banking institutions and reconcile the fair value reported by institution to amounts recorded in your trial balance.
    • If not already requested by your auditors, consider preparing a reconciliation of cash and investments by institution (with amounts reported at fair value) that reconcile to amounts reported in your general ledger.
  • Adjustments to capital assets – Review your capital outlay accounts at year-end and ensure these projects are reflected in the capital asset schedules. One of the most common adjustments are missing capital projects or CIP additions that were not reflected in the capital asset records.
  • Missing accruals – Look at any accounts that had a missing accrual and examine if the same could occur again. Which leads to the next suggestion!
• Consider performing year-end procedures to detect misstatements and adjusting journal entries.
  • Perform your own analytical review. Auditors regularly detect misstatements by comparing current year account balances to prior year. It is good practice to perform this exercise prior to the start of the audit and investigate any discrepancies in your accounting data. This tool can identify adjustments such as missing accruals or coding errors for example. Ideally you can group the accounts to match the grouping of the financial statements if you do not already do so.

Kelly Telford, CPA, Partner, LSL

• Plan early and plan in writing. Have a checklist with clear assignments and due dates of each task that needs to be completed.
  • Your checklist should be a living document/tool that is updated as needed or as new tasks are identified throughout the year.
  • Discuss and document processes early on and regularly review opportunities to streamline processes throughout the year. Consider areas to automate existing processes to mitigate potential for errors (as applicable).
  • Ask for the PBC (Prepared by Client) list from your auditors early to get more time to assemble the documentation you need.
• Document any changes during the fiscal year that may affect the audit. It’s difficult to remember the whole year, especially if you have new auditors that don’t know your agency’s history.
• Always have a backup person that can help coordinate the audit on the government agency side in case there are staffing issues or unforeseeable incidents.
• Make sure to tie out beginning fund balance to the prior year ACFR.
• Set up a meeting with your auditors to go over changes for the year and the audit plan.
• Don’t wait until year-end to have that be your only period close. Implement and optimize regular period closes, such as a month-end close process, to ensure a smoother year-end close. Achieving deliverables month-by-month also provides more time in the year-end close process to address unanticipated problems that may arise.
• Communication among the finance team and with departments on their roles in the close is critical. Start as early as possible.