Handbook of Business Procedures

2.4. BALANCE FORWARDS

A. Introduction

The University of Texas at Austin uses a balance forward process at fiscal year-end to move any funds and encumbrances remaining in an existing budget group from the prior fiscal year into the new fiscal year. The Financial Accounting and Reporting (FAR) team uses this process to bring forward object code balances for cash, assets, and liabilities. In early September, the FAR team performs the initial balance forward, which is based on the year-to-date ending balances as of the August month-end close. In October, an additional adjusted balance forward is completed to bring forward the effect of any 13th month transactions needed for the financial statement presentations. The result of these balance forward transactions is that the ending balance in the 13th month of the prior fiscal year is the same as the beginning balance in the 14th month of the new fiscal year.

B. Balance Forward Processes

The balance forward rule assigned to a budget group is listed on the *DEFINE CA3 account profile. The rule maps which accounts receive balances that are brought forward into the next fiscal year. There are generally three methods associated with balance forwards.

• Balance Forward to Income Subaccount
  
  Most balance forward rules bring the free balance of the budget group forward into the income subaccount. If there is more than one income subaccount, the balance will be brought forward to the lowest numerical income subaccount.
• Balance Forward for Education and General Funds
  
  The 14- and 20-accounts do not have income subaccounts. For those accounts, the balance forward process moves the balance in each subaccount into the same subaccount as the prior fiscal year.
• Balance Forward to Income and Expenditure Subaccounts
  
  Rule 50 allows all balances for an account to be brought forward to the same income or expenditure subaccount where they existed at fiscal year-end. It is an optional rule that can be applied to any 18-, 19-, 29-, or 30- budget group; a department may request that the balance forward rule on the budget group be changed to or from Rule 50 by following these steps:
  
   
  1. Send an email to FAR at oa.far@austin.utexas.edu and include the budget group number.
  2. Copy the email to a delegated manual signer on the budget group (as found on the *DEFINE GBS screen).

C. Summary of Balance Forward Rules

Note: Encumbrances and the funds to cover them are brought forward in every account group, regardless of the rule applied.

• Rule 01
  • Applies to 14- and 20-accounts
  • Brings forward the encumbrances and the reserve funds to pay for items ordered in the previous fiscal year but received in the new fiscal year
• Rule 02
  • Applies to 18-, 19-, 29-, and 41-accounts
  • Brings forward the budget group’s free balance and places it in the income subaccount
  • Brings forward the cash into the first income subaccount encountered, which is usually the lowest numbered income subaccount
• Rule 14
  • Applies to 14- and 20-accounts
  • Brings forward the free balances into the same subaccount
• Rule 26
  • Applies to 26-accounts (sponsored project funds)
  • Sponsored project funds are assigned for project periods that do not necessarily coincide with the university’s fiscal year
  • All balances for an account are brought forward to the same income or expenditure subaccount where they existed at fiscal year-end
  • Periodically, Sponsored Project Award Administration archives 26-accounts from *DEFINE, which means the account balances are closed and are no longer brought forward
• Rule 30
  • Applies to 30-accounts
  • Brings forward budget group’s free balance and places it in the lowest numerical income subaccount
  • Brings forward the cash into the same income subaccount
• Rule 50
  • At the department’s request, can be applied to 18-, 19-, 29-, and 30-accounts
  • Brings forward the free balance into the same income or expenditure subaccount
  • Brings forward the cash into the same income subaccount

D. Material Encumbrances

At fiscal year-end, Financial Accounting and Reporting (FAR) performs special balance forward procedures for the following types of encumbrances:

• Material encumbrances with object code 0200
  
  Material encumbrances are created by purchase orders and reserve funds to pay for items ordered in the previous fiscal year but received in the new fiscal year. The encumbrance retains the original purchase order information from the previous year.
• Travel encumbrances with object code 0500
  
  These are created using a *DEFINE VE5 document and reserve funds to pay for travel booked in the previous fiscal year but occurring in the new fiscal year. The encumbrance retains the travel code information from the previous year.

The FAR team performs the balance forward process for these transactions as follows:

1. The encumbrances are brought forward on the same expenditure subaccount as a lump sum amount using object code 0299.
2. The encumbrance balance forward entry then reverses the 0299 entry and puts the encumbrance back on the expenditure subaccount using the 0200 object code, which has the original purchase order number and departmental codes attached to it.
3. After the entries are completed, the 0200 encumbrance mirrors the outstanding purchase orders from the prior year, and the 0299 object code zeroes out.

Part 2. Fund Accounting - Table of Contents