Annual Year End Closing Process

Introduction
At the end of each year, standard accounting practice requires transferring that years
"YTD Net Change in Assets (on the Income Statement), to the "That years Net Change
in Assets" (on the Balance Sheet). The process to accomplish this is called the Year End
Closing procedure.
Furthermore, FHA has a major accounting firm audit our financial statements at the end of
each year. These audits are rigorous, and field offices are required to insure a high
degree of accuracy in their year ending reports, and to prepare numerous forms or
worksheets to facilitate the audit. Normally it takes a significant effort (and a long time) to
prepare the required forms, and to insure the accuracy of our year end financial
statements. If this work held up normal processing, most FHA field offices would be late
producing reports in the New Year.
Therefore, FHA has adopted the following year end related annual process:
1. Conduct a quick "Preliminary Year End Closing" (of the old year)
2. Begin normal processing (in the new year)
3. Prepare Year End Audit Package/Worksheets (Identify and correct material
errors along the way)
4. Conduct a "Final Year End Closing"
This insures the timely processing of financial statements in the new year, even when the
prior year statements have not had their final closing completed.

1. Preliminary Year End Closing Procedure

a. Process September accounting according to the normal monthly procedures. Make
sure that you have completed the normal month end reconciliation's of balance sheet
and income accounts outlined in the accounting manual. They are especially
important in September.
i. Check Prior Year Data
Run a Trial Balance for the year to be closed. For instance, if 2008 is the year
to be closed, the period should be 2008/012. The report is saved at
E:\04_Standard Reports and its name is Trial Balance.xls.
Please run report for the both, USD and Base currency. If nothing appears at
the bottom of the report with Total of beginning balance of Year for the both
report, , then you are ready to move on to the next step. If any amount appears
at the bottom of the reports either in USD or Base Currency, then either;

Some entries have been posted to a prior year in error.

Or, the prior year has not had a proper "Final Closing".
Determine if the prior year did have a final closing. If not, follow the "Final
Year End Closing" procedures for the prior year before proceeding. If the
prior year already had a final closing, then some transactions have been
posted to the prior year in error. Investigate and correct these errors before
proceeding.
ii. Pre-Closing Check
1. Print the following report. They are on E:\04_Standard Reports.
Run a Trial Balance for the first month after the year to be closed. For
example, if 2008 is being closed, run a trial balance for 2009/001. Again,
the report has three worksheets and you need pay attention on Base
currency and USD.
Run Country Standard Report and Country Standard Report by Base
Currency for September of the year you wish to close. If that year is 2008,
it should be 2008/012.
Run Year End Report for the entire year to be closed. If that year is 2008,
it should be from 2008/001 to 2008/012. The report will have figures both
in Base currency and USD, which is 2nd Base Reporting amount. Note
that it also has worksheet that will show you figures with LD9 code, incase
you are using LD9.
Inspect the "Year End Report". In some cases, the first category
appearing on the top of report will have no LD codes at all. This will only
appear if some income or expense transactions were processed without
the use of any LD code. However, all income and expense accounts
require analysis code input during data entry, in order to be processed.
except for one account, a/c 6099, which should be fully allocated both in
Base currency and USD. See How to allocate Vehicle cost.doc at
https://portal.fh.org/node/3694 for more details.
If you cannot eliminate the appearance of figures without LD codes,
contact your regional finance manager for assistance. Otherwise, go on to
the next step.

2. Compare the following amounts from the indicated reports both in Base
currency amount and USD amount.
Trial Balance:
Total Beginning Balance of Year.
Year End report: Total amounts, which will be in last row of the report.
Balance Sheet:
YTD Net Assets Change
If all of these numbers in two different currencies are the same, you are
ready to proceed with your "Preliminary Year End Closure". If they are not
the same, the differences must be investigated prior to doing the
"Preliminary Year End Closure". Contact your regional finance manger for
assistance.
b. Execute "Preliminary Year End Closure"
i. Ensure that the last period of the year to be close is opened by your RFM in
order for you to post YEC journal.
ii. Year End Report will have figures that you have to post into the last period
of the year. Please use Year End Closing Journal V1.0.xlt at E:\03_Journal
Templates.
iii. Ensure that you enter your Base currency code in to transaction currency
field, which is cell E21.
iv. Ensure that the period of the journal is the last period of the year to be
close. If that year is 2008, it should be 2008/012.
v.Then you can just copy figures and LD codes from Year End Report to journal
template. Transaction amount and Base Amount columns will have to have
Base amount from Year End Report and Reporting Amount will have to be
USD amount. Ensure that you are using the exact figures both in Base and
USD. Otherwise your YEC will not be done properly and either currency or the
both will have remaining YTD Net Asset Change even after the YEC journal
posting.
vi. Net Change in Asset account of the year to be closed (For instance a/c
2908 for 2008) should be debited or credited according to Year End Report.
And account YYYYYY should be used as off-set account. Please see the
template with example entries.
vii. You may have to increase Exchange rate tolerance in your currency setting
in order for you to post the YEC journal with the special rates, which you have
to use in YEC journal that will allow you to close year completely in the both
currencies.

viii.

Ensure the journal has been entered correctly, then post.

ix. Test the preliminary closing procedure.

Run two test reports to insure the preliminary year end closure has been
done properly.
Trial Balance
Run this report only for the first period after the year that has been
closed. (If you have just closed 2008, run the report only for
2009/001). No "Total Beginning Balance of Year" amount should
appear on this statement for both Base and USD. You will have
amount in Transaction currency Trial balance, which is not a problem.
Country Standard Report (run the first period after the year that has
been closed)
Net Change in Asset for the year to be close should have the same
amount that you get from Year End Report.

2. Processing in the New Year

Once the preliminary closing is completed, your new year report will have correct
beginning fund balances. No unusual steps are required. You simply follow the normal
monthly procedures.

3. Year End Audit Package Preparation

You will have to prepare Audit package as per instruction that you will be given.

4. Final Year End Closing

If any adjustments have been made in a year that has already had a "Preliminary Year
End Closing", then a "Final Year End Closing" is necessary. A "Final Year End Closing"
can only be done after you have received written instructions from ES finance indicating
that you are free to do so. FHA/IO will not give these instructions until they are in
possession of your "Year End Audit Package" and have had time to complete their review
of these materials. Final Year End Closing process will be the same as preliminary
closing, except that your YEC journal for the final will have to post changes of fund
balance that were made between preliminary and final. Contact your regional finance
manager and get advices.
Should you have any questions/concerns, please email sunsupport@fhi.net.
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