YEAR-END PROCEDURES AND FINANCIAL REPORTING

1.0 Statutory References

CGS Section 3-115 4-89

2.0 Year-End Closing Overview

The purpose of year-end closing is to determine the final balances of appropriations, revenues, expenditures, assets, liabilities and fund balances needed to prepare financial statements and other reports on the results of operations and the financial condition of the State's funds.

3.0 Basis of Accounting

The basis of accounting refers to when revenues and expenditures, expenses and transfers - and the related assets and liabilities - are recognized in the accounts and reported in the financial statements.

3.1 Modified Accrual

The Modified Accrual basis of accounting is applicable in the governmental fund types and expendable trust and agency funds. Under the modified accrual basis of accounting, revenues are recorded when they are susceptible to accrual. In order for revenue to be considered susceptible to accrual it must be both measurable and available to finance current expenditures of the fund. Revenue is considered available when it is collectible during the current period and the actual collection will occur either during the current period or after the end of the period but in time to pay current year-end liabilities.

Expenditures under the modified accrual basis of accounting are recognized when the related fund liability is incurred. Exceptions to this rule are:

(1) principal and interest on general long-term debt which is recognized when due,

(2) obligations of an employee's vested annual leave and sick leave are recorded as expenditures when paid and

(3) inventories which may be considered expenditures when purchased.

3.2 Accrual Accounting

The Accrual basis of accounting recognizes revenue when earned and expenses are recognized when incurred. This accounting basis is utilized in the proprietary funds, non- expandable trust funds, pension trust funds and the higher education and university hospital fund. Exceptions to this rule occur in the higher education and university hospital funds, as follows: depreciation expense related to plant fund assets and accrued vacation and sick leave are not recorded.

3.3 Statutory (Budget) Basis

Connecticut uses a "Modified Cash" basis for budgetary enactments and legally required financial reporting. It is important in governmental accounting to report the results of operations and other financial information on a basis consistent with that used in budgeting in order to demonstrate legal compliance and to disclose the effectiveness of the budgetary process.

3.4 GAAP Basis

GAAP financial reporting uses accounting and disclosure conventions established by a national standards setting body (the Governmental Accounting Standards Board, GASB). GAAP financial reporting provides legislative and oversight officials, creditors and the citizenry with comprehensive financial reporting in a manner directly comparable with other States.

The Comptroller is committed to the preparation of a Comprehensive Annual Financial Report (CAFR) on a basis consistent with Generally Accepted Accounting Principles (GAAP).

4.0 Reporting Differences

4.1 Reporting Entity

The GAAP report includes organizations and funds not currently reported such as Treasurer's Trust Funds, Special Local Funds and Public Benefit Corporations which come under the State Reporting Entity.

4.2 Basis of Accounting and Assets and Liabilities

The GAAP report utilizes modified accrual and accrual accounting for revenue and expenditure items as well as incorporating many assets and liabilities not currently accounted for in the statutory financial statements.

 4.3 Format and Disclosure

Footnotes and statistical tables provide users with needed information for interpreting the financial statements and assessing the overall economic condition of the State. The format of the GAAP report differs from statutory reporting due to the unique reporting for Higher Education and other differences.

4.4 Agency Accounting and Reporting

GAAP reporting supplements rather than replaces statutory accounting and budgetary requirements; and GAAP reports are only generated annually. Therefore, it is not required that day-to-day accounting activities be on a GAAP basis as this would interfere with statutory appropriation and revenue compliance and/or internal management accounting needs.

Agencies are required, however, to maintain their financial records in a manner which will enable them to provide the required adjustments to legal balances and other information necessary for the Comptroller to prepare a GAAP annual report. This information must be in the format required by the Comptroller, in a timely manner consistent with the statewide closing schedule, and susceptible to audit and verification by the Auditors of Public Accounts.

5.0 Statutory (Legal) Closing and Reporting

5.1 General Information

Statutory (legal) closing refers to the recording of final balances of revenues, expenditures and appropriations on the budget basis.

General information is contained in each section of SAM for fiscal year-end procedures relating to its topic. Extensive supplementary information and exact cut-off dates are also published annually as Fiscal Year-End Instructions.

5.2 Schedule of Events and Reporting

1. May 1st - Fiscal Year-End Instructions Issued

2. June 1st - Notification to OPM by agencies of budgeted appropriations which qualify and are needed for continuance.

3. June (3rd week) - Cut-off for submission of commitments, expenditures and transfers. Exact dates will be published in the fiscal year-end instructions.

4. June 30th - Fiscal Year-End Final Deposits for Trust Funds

5. July 5th - Noon of - Deadline for submission of State Deposit Slips (CO-39) for all monies deposited in bank depositories on or before June 30th. Deadline for deposit of all monies received by agencies on or before June 30th. These monies are still subject to the 24 hour deposit requirements for amounts over $500 according to CGS Section 4-32. Deposit Slips (CO-39) should be immediately prepared and submitted to the Treasurer.

6. July 25th - Submission of Cash Held by Agencies - Reduced Expenditure Report. See the Reporting Section of SAM.

7. July 4th Week - Deadline for submission of agency corrections for old year expenditures and receipts.

Other reports which may be required of some or all agencies are described in the Reporting Section of SAM or agencies will be notified by the Comptroller.

6.0 GAAP Closing and Reporting

6.1 General Information

A GAAP closing is the process of gathering the information needed to make adjustments and additions to the statutory accounting records required to produce a CAFR in conformance with GAAP. There are significant accounting policies governing the information that must be collected. The State has a detailed process that must be followed annually for compiling and auditing information.

6.2 GAAP Closing Schedule

The following is a general outline of the scheduled events necessary for a successful GAAP closing.

1. May - Distribution of Closing Package forms and instructions

2. May - June - GAAP Training for Agency Personnel

3. June 30th - End of Fiscal Year

4. September - Submission of closing packages by all agencies

Adherence to this schedule by all concerned is critical to a successful closing. Once closing packages are received, substantial effort on the part of the Bureau of Financial Analysis staff and the Auditors of Public Accounts will remain as packages must be analyzed, questions resolved, journal entries and footnotes prepared, preparation of the CAFR and audit of all information contained therein.

6.3 Annual GAAP Training for Agencies

A single non-mandatory training session in May or June will be made available to any agency that has new personnel to train or who has personnel who would like to refresh their knowledge. Additionally, certain key agencies will receive on-site training and assistance to ensure successful completion of their closing packages.

The purpose of the general training session is as follows:

- To review GAAP and the general process of GAAP reporting

- To explain any changes to GAAP since the preceding year and their impact on closing practices and forms

- To review in detail the closing packages and the manner in which they are to be completed

6.4 GAAP Closing Packages and Procedures

The link below will display the actual general closing package and instructions for all agencies which were used for the FY 2010 closing. Packages and instructions are updated annually for improvements in the forms and instructions and to incorporate any changes to GAAP effective for the year being reported on. http://osc.ct.gov/2010memos/fiscalyearend/fyeinstructions.htm

In addition to the general packages, special supplemental forms and instructions will be provided to those agencies with unique information requirements.

The current forms include a GAAP Forms Control Sheet and the following GAAP forms:

1. Cash in Bank

2. Investments

3a. Receivables

3b. Due from Other Governments

4. Deferred Revenue

5. Contractual Commitments and Retainages

6. Leases - State as Lessor

7. Compensated Absences

8. Other Financial Information

9. Other Assets or Liabilities

6.5 Comptroller GAAP Reports

The OSC Bureau of Financial Analysis staff generate several reports in Core-CT to facilitate the GAAP closing and minimize the amount of information to be provided by agencies. These reports are based on the assumption that the agency-entered information in Core-CT is accurate. For example, Accounts Payable staff must enter the correct Receipt Date to ensure that the Accounts Payable amounts as of June 30th are accurate.

Purchasing and Contracting staff must ensure that the dates on contracts, obligated amounts, and contract periods are accurate. Core-CT is an ERP system that can create many of the needed reports to reduce the reporting burden on the agencies, however, it is critical that the information is completely accurate.

6.6 Statewide Audit

The information submitted by agencies for the GAAP closing will be subject to audit by the Auditors of Public Accounts in order that they may certify the resulting financial statements.

Agencies must therefore prepare and retain for audit the necessary worksheets and other documentation necessary to provide an audit trail for any information submitted as part of the GAAP closing.

7.0 The Comprehensive Annual Financial Report (CAFR)

7.1 General Information

The GASB, in their Statement of Principle for Annual Financial Reporting, recommends that every governmental unit prepare and publish a CAFR. The CAFR is the governmental unit's official annual report which, in addition to financial statements, also contains introductory and statistical information. The financial, introductory, and statistical sections are intended to satisfy the information requirements of the many users of the CAFR.

7.2 CAFR Sections

7.2.1 Introductory Section

State Comptroller Letter of Transmittal

Connecticut State Organization Chart

Selected State Officials

7.2.2 Financial Section

Independent Auditor's Report

Management's Discussion and Analysis

7.2.3 Basic Financial Statements

State of Net Assets

Statement of Activities

Governmental Fund Financial Statements

Proprietary Fund Fund Financial Statements

Fiduciary Fund Financial Statements

Component Units Financial Statements

Notes to Financial Statements

7.2.4 Combining Funds Statements and Schedules - NonMajor Funds

7.2.5 Statistical Section

Completed CAFRs can be seen at: http://osc.ct.gov/reports/

7.2.6 Connecticut GAAP Accounting Policies

7.3 Reporting Entity

In conformance with Generally Accepted Accounting Principles, the Comprehensive Annual Financial Report (CAFR) of the State of Connecticut includes all departments, agencies and other organizational units over which the State exercises oversight responsibility.

The ability of the State to exercise oversight responsibility over agencies and other legal governments is determined after applying the following criteria:

A. Financial interdependency

B. Selection of governing authority

C. Designation of management

D. Ability to significantly influence operation

E. Accountability for fiscal matters

F. Source of revenues

G. Scope of public services.

8.0 Fund Accounting

The financial activities of the State are accounted for on a fund basis. The operations of each fund are accounted for with a self-balancing set of accounts comprised of assets, liabilities, fund equity, revenues and expenditures or expenses. Government resources are allocated to and accounted for in individual funds based upon the purpose for which they are to be spent and the means by which spending activities are controlled. These funds are classified into three broad categories: governmental funds, proprietary funds and fiduciary funds.

In addition to the fund types used in statutory accounting and reporting, a "fund type" has been established for GAAP financial reporting purposes only to account for Higher Education and University Hospital activities.