Universities and other not-for-profit organizations are required to use fund accounting as their method of accounting. Funds can only be expended in accordance with the regulation, restriction, or limitations placed upon the specific fund.
The purpose of fund accounting is to properly account for all resources, which are appropriated/received to carry on specific objectives. This is accomplished by placing the resources into a group of self-balancing accounts established for the fund (entity). Funds are established by statute or administrative action.
The state of Illinois uses the fiscal year convention. This is the legal period for budgeting and accounting. It is also the period of time an appropriation remains valid. Illinois' fiscal year runs from July 1st through June 30th. Funds budgeted for a fiscal year must be expended in that fiscal year, except for during the lapse period.
Explanation of Lapse Period
Section 25 of An Act in Relation to State Finance states: "Outstanding liabilities as of June 30, payable from appropriations which have otherwise expired, may be paid out of the expiring appropriations during the two-month period ending at the close of business on August 31st."
Expenditures occurring during the lapse period may only be charged to the previous year's appropriation when there is a liability incurred prior to July 1st. Goods must have been ordered or received, and services contracted for or performed, prior to July 1st.
Although the act states the University has until August 31st to process the lapse period expenditures, the University is required to send all vouchers to Springfield approximately 10 days prior to that time. This gives the state Comptroller's Office sufficient time to process the vouchers prior to August 31st.
The lapse period is used for these accounts:
- General Revenue accounts (10100, 10400)
- Agency accounts (107xx, 50701)
The lapse period is NOT used for these accounts:
- Bond Revenue (Auxiliary Facilities System) accounts (106xx)
- Service Departments accounts (105xx)
- Restricted/Grants & Contracts accounts – not including the Laboratory Schools (115xx, 116xx)
- Laboratory Schools portion of Restricted/Grants & Contracts accounts (117xx)