Effective date: July 1, 2023
Functional Owner: Division of Business Services, UW–Madison Controller
Contact: UW–Madison Controller, David Honma (david.honma@wisc.edu)
Contents
I. Background
Definition
Clearing account: a temporary place (e.g., fund, department identification (DeptID), account code, project ID, etc.) to hold revenues or expenses until the appropriate place where the revenues or expenses should be distributed is determined, and the clearing account should be reconciled to zero at some point.
Clearing accounts are utilized to deposit funds to or pay bills from when the correct funding string may be unknown, or an allocation will be made to various funding strings. The goal for using a clearing account is to ensure timely deposit to the state treasury and prompt payment to a supplier.
II. Purpose
The purpose of this document is to provide guidance on the accounting and reconciliation of clearing accounts.
III. Procedure
Clearing account reconciliations should be prepared for all clearing accounts at least semi-annually. A formal reconciliation should be prepared annually for fiscal year-end balances. The reconciliation must be signed and dated by a preparer and reviewer, and either prepared or reviewed by an individual not involved with processing the transactions in the clearing account.
No formal template needs to be followed, but the reconciliation should contain a screenshot of the ending balance from WISER. If there is an ending balance, the reconciliation must include details and supporting documentation of the open items.
A listing of clearing accounts and balances will be provided to the Dean’s/Divisional Business Offices twice per year (after December close and fiscal year-end close). The clearing account listing is based on the following criteria, and the listing may not be all inclusive:
- Department IDs with “Clearing” in the department description
- Project IDs with a UW Project type of NS_15 Suspense/Clearing
At least two attempts should be made to determine the correct funding string for any deposit. After two attempts, the unidentified revenue can be transferred to a funding string for use at the discretion of the applicable division.
For expenditures, the expense should be transferred to the funding string identified by the department or division. It will be the responsibility of the division that owns the clearing account to obtain the correct funding string for the expense. At least two attempts should be made to determine the correct funding string for an expense by June 30 of the current fiscal year. It will be at the discretion of the division that owns the clearing account if they prefer to keep the expense in the clearing account for continued reconciliation and follow up, or transfer the expense to a funding string of their own.
Items outstanding more than 180 days should be reviewed to determine if those funds should be transferred elsewhere.
Clearing accounts should be periodically reviewed to determine if the account is still needed. If an account is no longer needed, it should be closed.
The UW–Madison Controller can grant an exception to the above stated procedures on a case-by-case basis.