FMPM 861 Annual Financial Statements

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Intent

This procedure sets out the requirements for the University’s annual financial statements (statutory accounts).  The annual financial statements are intended to fairly and truthfully represent the University’s transactions and performance for the financial year and financial position at the end of the year, and should reflect the efficient and effective use of the University’s resources.

The University must prepare its annual financial statements (and subsequently have them certified and audited) in accordance with:

Definitions

Accrual

Annual Report

Borrowing

Cash and Cash Equivalents

Employee Benefit Liability (Employee Entitlements)

Intangible Asset

Inventory

Investment

Materiality

Prepayments

Property, Plant & Equipment

Trade and Other Payables (Creditor)

Trade and Other Receivables (Debtor)

Use Code

Year End

Procedure

Planning

Each year the Financial and Business Services Office:

  • Prepares a year-end ‘planning by function’ schedule which details:

  • Conducts an information session in October/November for relevant stakeholders each year advising the timetable and schedule for end of year statutory accounts process and compilation;

  • Collates a Summary of Significant Accounting Policies to be included as Note 1 to the Statutory Accounts and provides it to Finance Committee (November meeting) for adoption and recommendation; and

  • Prior to the end of Period 14 each year, relevant Officers must:

Each year the Commercial Services Office:

  • Writes to Controlled Entities and other related areas (e.g. Bookshop and University Halls of Residence) to advise of their reporting requirements in order for the University to prepare consolidated financial statements.

After the finalisation of the statutory accounts (i.e. after audit sign-off, Council approval and compilation for the Annual report) a debrief meeting will be held with relevant stakeholders in order to refine processes, adopt required improvements and create an efficient platform for future statutory accounts compilation.

All Policies and Procedures in the Financial Management Practice Manual (FMPM) should be adhered to in order for the financial statements to be correct, compiled in an appropriate timeframe and be subject to an qualified audit.

Process Specifics

ASSETS

Cash and Cash Equivalents

Bank Audit Confirmation letters must be sent to each Banking Institution the University partners with in order to confirm year-end cash balances.

Refer to:

FMPM 210: Policy - Cash

FMPM 211: Procedure - Sub-Receipting

FMPM 212: Procedure - Receipting

FMPM 220: Policy - Bank Accounts

FMPM 221: Procedure - Bank Accounts

FMPM 230: Policy - Petty Cash Advances

FMPM 231: Procedure - Petty Cash

FMPM 232: Authorised Limits - Petty Cash

Trade and Other Receivables

The Accounts Receivable Officer must reconcile inter-company balances (JCU Bookshop, JCU Halls of Residence and all controlled entities) prior to year-end in order to certify correctness of balances.

Financial and Business Services will reconcile all advances and ensure any advanced funds are repaid where relevant.

Refer to:
FMPM 240 (Travel Advances)
FMPM 250 (Salary Advances)
FMPM 260 (Other Advances)
FMPM 270 (Accounts Receivable)

Inventory

A stocktake of all inventory should be undertaken as and when required or as directed.

All relevant documentation relating to the stocktake must be provided to Financial and Business Services by the due date.

Refer to:

FMPM 280 (Policy – Official Stores)
FMPM 281 (Authorised Limits – Official Stores)

Prepayments

Prepayments for goods and/or services (excluding travel related expenses) of less than $5,000 will be expensed directly to relevant Expense Use Codes and not apportioned over the time period for which the expense relates.

Prepayments for goods and/or services (excluding travel related expenses) greater than $5,000 will be coded to the Prepayments Use Code 1300 and not the relevant Expense Use Code.

In the subsequent year, those payments that are no longer considered as being “prepaid” are reversed by Financial and Business Services (Procure To Pay) from Use Code 1300 to the relevant Expense Use Code within the general ledger.

To assist in the ‘reversal’ process, invoices must also show the Use Code where the charge is to be expensed (i.e. in brackets, close to the ‘OK to Pay’ signature).

Prepayments should be limited and not of high value so as not to put the University at undue risk and exposure.

Refer to:

FMPM 290 (Policy – Prepayments)
FMPM 291 (Procedure - Prepayments)

Investments and Other Financial Assets

Bank Audit Confirmation letters must be sent to each Banking Institution and Fund Manager the University partners with in order to confirm year-end cash balances.

Refer to:

FMPM 300 (Policy – Investments)
FMPM 301 (Procedure – Investments)
FMPM 302 (Authorised Limits – Investments)

Property, Plant and Equipment

To ensure year-end balances are correct and capital and non-capital assets are being appropriately managed, Organisational Units must:

  • Complete all asset stocktakes and return all appropriate documentation to Financial and Business Services for processing (refer Finance Procedure 324 – Stocktake) in accordance with relevant timeframes (every two (2) years);

  • Ensure Portable & Attractive Registers are maintained and available for review when required;

  • Complete an “Asset Identification Form” (AIF) for all assets received prior to 31 December (refer Finance Procedure 322 - Acquisition of Plant and Equipment) and returned to Financial and Business Services by the due date.

Work In Progress (WIP) is to be reviewed prior to year-end to determine the appropriate classification of transactions at 31 December.  For projects completed by year-end, appropriate supporting documentation should be obtained prior to capitalisation.

Projects are to be reviewed on a period basis and advice provided to FIAC on the requirement for capitalisation.  This is done in conjunction with the Capital Project Manager and upon the receipt of the ‘Certificate of Practical Completion’.

Financial and Business Services will ensure that assets meeting the thresholds and requirements will be capitalised in accordance with relevant policies.

Refer to:

FMPM 320 (Policy – Property, Plant and equipment)
FMPM 321 (Authorised Limits – Property, Plant and Equipment)
FMPM 322 (Procedure – Acquisitions of Plant and Equipment)

FMPM 323 (Procedure – Disposal of Plant and Equipment)

FMPM 324 (Procedure – Stocktake)
FMPM 330 (Policy – Non-Capital Assets).

Intangibles

Refer to:

FMPM 350 (Policy – Intangible Assets)

LIABILITIES

Trade and Other Payables

The year-end ‘planning by function’ schedule details all deadlines, processing cut-off dates and payment run dates relevant to year-end.

These dates play a part in determining the end of year value for creditors and expenses.

All invoices not received by the due date will be paid in the first creditor’s run in the subsequent year once the outstanding orders have been rolled over into a new financial year.

It is imperative that every effort is made to ensure all documentation is prepared and delivered to Financial and Business Services prior to relevant deadlines to ensure complete and accurate financial statements.

The Accounts Payable Team Leader must reconcile inter-company balances (JCU Bookshop, JCU Halls of Residence and all Controlled Entities) prior to year-end.

See below for details about “accruals”.

Refer to:
FMPM 410 (Policy – Creditors)
FMPM 420 (Policy – Credit Cards)
FMPM 421 (Procedure – Credit Cards)

Borrowings

Bank Audit Confirmation letters must be sent to each Lending Institution, including Queensland Treasury Corporation, the University partners with in order to confirm year-end borrowing balances.

Book value confirmations can be obtained by visiting the relevant websites of the Lending Institutions.

Refer to:
FMPM 430 (Policy – Borrowings)
FMPM 431 (Procedure – Borrowings)

Employee Benefit Liability

The University’s liability for long service leave and annual leave need to be calculated and accounted for at the full value in the financial statements at year-end.

An analysis of the long service leave liability held in Finance One against the long service leave liability calculated from the Human Resource Information Management System (Alesco) is conducted prior to year-end.

The long service leave liability balance in Finance One is compared to the University’s calculated liability in accordance with AASB119.  This is also compared to the University’s legal liability.  The University’s liability is calculated by multiplying staff long service leave entitlement by the current inflation factor.  This value is then discounted and a probability factor is also applied in order to calculate the University’s liability.

An analysis of the annual leave liability held in Finance One against the annual leave liability calculated from Alesco is conducted prior to year-end.

In accordance with AASB119 the liability for annual leave employee benefits is recognised at the amount expected to be paid when the liability is settled.  All annual leave is considered to be a current liability in accordance with AAS101.  Long service leave is split between current and non-current liability based on detailed historical analysis and predictions.

Refer to:

FMPM – Appendix B – Accounting Policies

Other Liabilities

An analysis of other provisions and/or liabilities will be undertaken by Financial and Business Services prior to year-end to determine if a liability should be recorded.  This includes incorporating any known contingent liabilities.

Generally, income received in the current financial year that relates to the following year (i.e. income received in advance), is recorded as a liability at year-end and not revenue, (e.g. student fees paid in December that relates to future year’s tuition fees).   Revenue is brought to account (i.e. recorded in the general ledger) in the subsequent year when the entries are reversed in Period 1 of the following year.

Contingent Liabilities

Each year, Financial and Business Services:

  • contacts the University’s Registrar to discuss the latest quarterly report on the University’s material contingent liabilities provided by the University’s lawyers;

  • determines from the information provided if there are any material contingent liabilities; and

  • discloses, by way of note to the statements, whether there are any material contingent liabilities.

Each year, Governance and Corporate Services:

  • forwards a letter to the University’s lawyers requesting their confirmation of the latest quarterly report and notification of any additional contingent liabilities.

Refer to:
FMPM 490 (Policy - Contingent Liabilities)

INCOME

Income Recognition

All “Invoice Request” forms for goods/services supplied by the University to external customers (including reimbursement of expenditure) must be submitted to Financial and Business Services by the relevant year-end cut off dates as this income needs to be brought to account in the relevant year.

Sub-Receipting

At the end of each year, all sub-receipt books must be returned to the Central Cashier for auditing. Upon completion of the audit the books are returned to the sub-receipting location.

Refer to:

FMPMs (600 – 699) - Revenue

EXPENDITURE

Payroll and Clearing Accounts

The payroll cut-off deadlines at year-end will be communicated by Human Resources Management and are highlighted in the year-end planning calendar.

To ensure that the University’s salary and related oncost is complete and accurate at year-end, it is essential that these dates be adhered to.

Internal Charges

All internal charges must be entered and processed by the due date stipulated in the year-end planning calendar.  If any internal charges were unable to be processed prior to this date, these charges can be entered in the subsequent year when the financial system is made available for use in the new financial year.

However, it is University policy that internal charges incurred in one accounting period must be processed by the end of the next accounting period. The onus is on the charging department to ensure these charges are processed within this timeframe. If this timeframe is not met, then the authority to charge the internal charge will lapse.

Refer to:

FMPM 890 (Policy - Internal Charges)

Travel

All outstanding travel acquittals (i.e. Part II of the Travel Requisition) must be cleared prior to year-end.

All outstanding travel advances must be acquitted prior to year-end.

Refer to:

FMPM 741 (Procedure - Travel)

FMPM 240 (Policy – Travel Advances)

Petty Cash

All petty cash floats need to be replenished with the University Cashier by the due date stipulated in the year-end planning calendar.  All petty cash transactions after this date will form part of the subsequent year’s accounts.

OTHER

Accruals

Where the Director, Financial and Business Services has determined that a particular class of transactions or accounts require an accrual to be recognised at year-end, this will be accounted for if deemed material (i.e. greater than $10,000).

Organisational Units (in conjunction with Financial and Business Services finance and procurement teams) are responsible for:

  • ensuring the validity of the information that relates to purchase orders, travel commitments and creditors; and

  • advising the Director of Financial and Business Services of transactions that need to be accrued that are not identified by a purchase order, travel commitment or have not yet been extracted from the expense management system (corporate credit card transactions).

Financial and Business Services is responsible for:

  • determining whether salary accruals will be necessary at year-end.  Special consideration is given to:

  • analysing major creditor expenditure (includes audit fees, electricity, telephones, rates, water) and where significant, accruing the expenditure in the relevant year.

  • identifying unpaid invoices for accounts to be consolidated (i.e. JCU Halls of Residence, other entities) and accruing any material expenditure in the relevant year.

  • reviewing all identified payment requests received subsequent to year-end and accruing any material expenditure in the relevant year.

  • reviewing all purchase orders (all goods, services and major capital works) relating to the relevant year that had goods delivered/received in that year but for which an invoice had not yet been received.

All accruals are reversed by Financial and Business Services in Period 1 of the subsequent year.

Corporate Credit Card Transactions

University staff who hold a corporate credit card are required to acquit transactions in accordance with FMPM 421 – Corporate Credit Cards.

Unacquitted transactions at year-end are reviewed and assessed for materiality.  If material, an accrual of the transactions is prepared Financial and Business Services.

Journals

All journals must be received by the date stated in the year-end responsibility schedule if they are to be processed to the current year accounting ledger.

Journals submitted and received after this date will be reviewed to determine if they are “material” and if so, will be processed in the current accounting ledger.  If not, they will be processed in the following year.

Reconciliations

Assets and Liabilities – all ledger balances as at 31 December must be reconciled.

Income and Expenditure – nominated ledger balances as at 31 December must be reconciled.

The reconciliations procedures include performing a review of the nature of each reconciling item and taking the appropriate corrective action.

Reconciling items must not simply represent a cumulative list of accounting anomalies – they must be cleared on a timely basis.

Reconciliations should be undertaken on a regular basis (i.e. period, quarterly) as specified and in accordance with the ‘reconciliation master schedule’.

Reconciliations will be reviewed and approved in a timely fashion.

Consolidation of Accounts

The University’s reconciled balances are consolidated with JCU Bookshop and JCU Halls of Residence balances to form the Parent Entity.  Further consolidation occurs with the Controlled Entities resulting in consolidated balances in the University’s annual financial statements being reported.

Internal Interest Distribution

Interest on Restricted Funds and certain Capital Projects must be distributed at least annually.  This normally occurs prior to year-end.

Refer to:

FMPM 510 (Policy - Internal Interest Distribution)

Property, Plant and Equipment Revaluation

Land, buildings, infrastructure and cultural assets (including the museums and art, and rare books) are revalued every five (5) years in accordance with Queensland Treasury’s Asset Policy and are included in the financial statement at revalued amounts.  Interim revaluations of assets valued at fair value are performed using relevant indices or other reliable measures.

Refer to:

FMPM 520 (Policy - Asset Revaluation Surplus)

Remuneration of Executive Officers

The Human Resource Management Office is responsible for providing the details and commentary for this section of the statutory accounts (notes to account).

Commitments for Expenditure

Major building projects – capital commitments

Financial and Business Services, in conjunction with the Estate Office, will review all purchase orders to determine relevant accruals for capital expenditure.

Operating lease commitments

If any purchase orders relating to operating leases are raised, Financial and Business Services will maintain a database to capture current payments (those made during the year) and future commitments.

Other commitments

Any other known commitments need to be bought to the attention of Financial and Business Services who will review the details and determine relevant accruals for the expenditure.

Related documents, legislation or JCU Statutes

Auditor General Act 2009

Financial Accountability Act 2009

Financial and Performance Management Standard 2009

Financial Reporting Requirements for Queensland Government Agencies (including Accounting Policy Guidelines)

Financial Statement Guidelines for Australian Higher Education Providers

James Cook University Act 1997

Non-Current Asset Policies for the Queensland Public Sector

For enquiries in relation to this Finance Procedure please contact farp.finance@jcu.edu.au

Approval Details

Administration

Approval Details

Policy Sponsor

Deputy Vice Chancellor, Services and Resources

Approval Authority

Deputy Vice Chancellor, Services and Resources

Date for next review

09/2018

Revision History

Version

Approval date

Implementation date

Details

Author

15-01

09/09/2015

10/09/2015

Policy Sponsor and Approval Authority updated to reflect the approved Policy and Delegations Framework

Quality Standards and Policy Unit

13-01

27/09/2013

30/09/2013

ED FaRP authorisation

 

02-01

08/2002

08/2002