How Your K-12 School Can Perform a Successful Year-End Close

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At the end of the year, your K-12 school needs to perform a successful year-end close. Completing your accounting year-end tasks is much more manageable when you know which steps to accomplish. A checklist and tips can help you get control of your educational institution’s accounting, so you’re ready for the new year.

Want to understand how to prepare an end-of-year financial report? Below, we cover what year-end accounting is and tips for a successful year-end close at your K-12 school, including payroll tips, accounts payable tips, donor management tips, and audit tips.

What Is Year-End Accounting?

Year-end accounting is the process of ensuring your K-12 school’s financial transactions are recorded accurately and up to date. You perform year-end accounting to balance and close your books for the past year. By doing so, you can run accurate financial statements and annual reports.

Additionally, the year-end accounting process can help you identify and fix any errors. Balancing and closing your books at the end of the year can ensure you’re adequately prepared for the tax season and start the new year fresh with your financial records in order.

For many school organizations, the fiscal year-end occurs on June 30 rather than the end of the calendar year. This timeline can vary depending on the state or district. Many organizations may also base their fiscal year on different factors, such as grant cycles, the program year, or the slowest season.

4 Tips for a Successful K-12 School Year-End Close

For a successful year-end close, you need to ensure all of your records are accurate and your school stays current with federal and state reporting requirements. Having the tips you need can help you navigate the year-end process successfully. Follow our tips below regarding payroll, accounts payable, donor management, and audits:

1. Payroll Tips

Year-end payroll processing involves accurately calculating compensation, taxes, and deductions that should be withheld from paychecks. You can use this time to ensure your organization’s taxes and payroll are compliant with the current local, state, and federal regulations. Complying with regulations can help you avoid regulatory costs and losing money to fees. 

1. List deadlines: Annual deadlines can be tight, so it may be helpful to list deadlines on a calendar. For example, note deadlines for when you should pay out bonuses, when managers will complete performance reviews, when new benefit plans will be in effect, and when you need to submit the final payroll. To develop realistic timelines, involve key people from various departments.
2. Run your final payroll: Depending on when your fiscal year-end occurs, you may send out final paychecks around the December holidays. If this is the case, you may want to adjust your payroll schedule to avoid bank holidays.
3. Update the tax tables: To remain compliant with current federal and state tax rates, you should update your tax tables before running the first payroll of your new fiscal year.
4. Address outstanding payroll checks: Request a list of uncashed employee checks from your finance team. These uncashed checks may belong to both current and former employees. Allow enough time to contact staff and determine whether a void or reissue is necessary.
5. Review and verify all W-2 information: Be sure to confirm all W-2 information. Pay close attention to new pay types or deductions in the appropriate boxes on the W-2 and ensure these boxes are flagged with the proper W-2 code.
6. Confirm institutional and employee information: Verify that your staff’s information is accurate and up to date. When it comes to your payroll best practices, you should know who you’re paying. Employees should review their personal information for accuracy, including their home addresses, social security numbers, and tax deductions. Remind staff about their options for delivery of their 1095 forms and W-2s, such as an electronic or paper version.
7. Review employee welfare and health deductions: You should also inspect every employee’s health and welfare deductions to make sure they were set up properly and subtracted throughout the fiscal year. Review medical, vision, dental, and imputed income. Since your educational institution needs to comply with Affordable Care Act reporting regulations, you must also confirm employer-paid benefits are mapped in the human resources information system, ensuring 1095 forms are accurate.
8. Apply updated pay types and deduction changes: After you run your final payroll for the fiscal year and update your tax tables, you should identify and apply any updated pay types and new deductions for the upcoming fiscal year.
9. Print W-2s: One of the final steps of your year-end payroll processing is printing your W-2s and generating the electronic files.
10. Prepare for the new year’s payroll: Once you’ve completed the payroll process for your fiscal year, you can prepare for next year’s first payroll. Develop and send out a new payroll calendar with updated deadlines, establish codes for new benefits and determine whether they’re pre-tax or post-tax, and set up new local or state tax codes. You must also ensure premium amounts and medical benefit deductions are accurate and update or reset limits for retirement plans, health savings accounts, and flexible spending accounts.

2. Accounts Payable Tips

For educational institutions, accounts payable involves payment of employee reimbursements other than payroll, vendor invoices, and account reimbursements in an accurate, timely manner. Accounts payable plays an integral role in the support of your school and has the responsibility of paying invoices.

Large school districts may have a dedicated department to handle the accounts payable process, while a smaller district may employ a single individual to handle the process. The purpose of your K-12 school’s accounts payable is to ensure every disbursement aligns with:

• State law
• Federal requirements
• Accounting practices set by the district
• Account code structure of the state and district
• Internal control procedures determined by district management

Accounts payable and accounts receivable have separate accounts to set up accruals for the fiscal year you’re closing. Current liabilities for accounts payable include amounts due for services or goods received on or before your fiscal year-end for which you haven’t yet made a payment. Common accounts payable include:

• Utilities
• Health insurance
• Prior year state aid
• Employee timecards
• Construction contracts
• Unpaid purchase orders
• Revolving cash reimbursement
• Current year state aid if the state overpaid
• Employee reimbursements for mileage and travel
• Short-term vacation accrual, including salary and benefits

School districts should accrue expenditures according to expenditure recognition rules that require expenditures to be recorded in the appropriate fiscal year. Expenditures are paid or unpaid charges incurred that are presumed to benefit the fiscal year. In school accounting, expenditures are recognized during the period in which the services and goods were received. Accounts payable assesses which fiscal year the invoice should be posted against.

Follow the tips below for your year-end accounts payable process:

1. Verify 1099 information: Be sure to review your 1099 organization information, vendor totals, and 1099 recipients. This final review will ensure you have all of the accurate, updated information and that your totals match.
2. Confirm federal tax ID number: One of the simplest but most critical payroll best practices is confirming that the employee identification number or federal tax ID number is accurate before you begin the year-end accounts payable process.
3. Review vendor types and 1099 IDs: Before you begin the reconciliation process, verify that every vendor is categorized properly with an accurate corresponding 1099 ID.
4. Verify accounts payable for services and goods: Confirm that accounts payable for services and goods are paid. Maintain supporting documentation if balances must be carried forward.
5. Set up your institution’s accounts payable accruals: For services or supplies that have been received but not paid for, set up your accounts payable accruals.
6. Reconcile 1099s and adjust balances as necessary: You can then reconcile your 1099s with receipts. If necessary, adjust any 1099 balances.
7. Print 1099s: Once you reconcile your 1099s with the receipts, print the 1099 reconciliation reports and your vendor history reports. After you make any necessary changes, print the 1099s and generate electronic files.

3. Donor Management Tips for Year End

The key to successful fundraising campaigns is establishing and maintaining strong donor relationships. To ensure your donor management is successful at year-end close, you need to reconcile your donor management database to your general ledger to make sure the two sets of data are consistent.

Fortunately, the right tools make managing your school’s donor relationships easy. With donor management software, you can solicit, manage, and gather donations through multiple fundraising channels and campaigns. You can also recruit potential donors and manage current donor sources.

With our donor management system at MIP®, you can collect data on volunteers and donors, such as the following:

• Names
• Addresses
• Gift amounts
• Real estate transactions
• Notes from communications
• How often they visit your website
• Online and social media presence 

Adapt your donor management to meet your educational institution’s needs as your operations change and your district grows. Consider customizing communication initiatives according to your donors’ interests and manage the success and progress of your campaign. Your school depends on these connections to donors, and with the right software, you can handle these relationships in a single application.

Follow our tips below for effective donor management:

1. Keep donors up to date: Keep donors updated on your campaigns, programs, success stories, annual reports, and community engagement. Send regular updates regarding online campaigns your donors have supported.
2. Show donors your gratitude: Develop a plan for how you’ll thank donors and demonstrate your gratitude for their support. For example, you may want to assign someone to thank every donor who gives an in-kind gift, while another individual may be tasked with thanking donors who give less than $50. Donors who give large gifts should receive special benefits, such as accessing the event early, receiving a special bag with marketing materials, or a personal call to thank them.
3. Personalize communication with donors: Donor management software for schools enables you to engage with donors regarding their unique interests. For example, if a donor expresses interest in events, you can add them to your email marketing list. For donors who show interest in volunteering for a specific program your school offers, you can send them updates about the program. Adjusting communications to meet each donor’s needs is essential, so be sure to personalize fundraising scripts, emails, thank-you letters, and appeal letters.
4. Involve donors in your fundraising campaigns: Some donors want to contribute both their money and their time. Donors who live in the community may want to volunteer to help your K-12 school reach its goals. With donor management software, you can easily reach out to donors who may be interested in volunteering.

4. Audit Tips

Finally, you need to perform your year-end audit. Begin looking for an audit committee early and run payroll audit reports before the last day of your fiscal year. You want to allow plenty of time to identify errors and make corrections. Before moving into the following fiscal year, you should resolve any issues with your payroll.

Best practices for auditing your payroll include running a report with each employee’s year-to-date totals and reviewing this information to ensure its accuracy. You should then evaluate every deduction category and pay attention to the limits set by tax agencies. Review the following:

• Whether 401(k) loan deductions were made according to schedule.
• Whether employees’ 401(k) or Roth contributions are beyond the allowed maximum.
• Whether flexible spending account and health savings account contribution limits have been exceeded.
• Whether the 401(k) employer match limits were met — if not, you should schedule and complete employer catch-up contributions.

Ensure your records are prepared for the audit. Be sure you have your meeting minutes for the year, the filed tax return and the final audited statement from the previous year, and current bylaws and standing rules that dictate the way financial transactions must be handled.

Follow the additional tips below to ensure a painless school audit:

1. Leverage technology.
2. Set and meet deadlines.
3. Keep in mind long-term assets and liabilities.
4. Review the terms of your arrangement letter.
5. Support your balance sheet with account reconciliations, accrued payroll reports, and supporting documentation.

When it comes to tackling your list of tasks before the audit, take your time and try to be thorough. Review every document thoroughly, delegate early and often, and prepare for an on-site visit if an auditor plans to visit your campus.

Request a Demo of MIP Fund Accounting

MIP offers accounting software and various services specifically designed to help schools manage complex accounting processes. You can make informed decisions, engage donors, and operate efficiently with fund accounting software for K-12 schools.

Designed with organizations like yours in mind, our solution is flexible, secure, and scalable, offering everything you need for school accounting and reporting. Contact us to learn more about financial reporting for schools or request a demo of MIP Fund Accounting when you’re ready to see MIP in action.