FINANCIAL PROCEDURES
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FINANCIAL PROCEDURES
For Locals & Regions
Administration & Fiduciary Oversight
Regulatory Requirements Technical Tasks
2
HANDBOOK SECTIONS
All local/region leaders need to be aware of financial concepts• Oversight• Emergency coverage
Treasurer needs to know in detail Following these guidelines helps you to
avoid problems and be more accountable
Note FPLR handbook page references at bottom of slides
(centered and green)3
WHY ARE YOU HERE?
DUES IPACE OTHER
FILING
CASHRECEIVED DOCUMENTATION BUDGET
BANK ISSUESHOW TO CHOOSETIN BOOKKEEPING FINANCIAL BOARDHOW MANY SYSTEM REPORTSHOW TO OPENIPACE
AUDIT
CASHSPENT OUTSIDE
AGENCIES
DUES TRAVEL IPACE OTHER
OVERSIGHT
LOCAL LEADERS REGULATORY AGENCIES PUBLIC MEMBERSINTERNAL CONTROLS IRSSIGNS OF FRAUD STATE BD OF ELECTIONS ONLINE REPORTS FINANCIAL REPORTSAUDIT DOLMONITORING OF DEADLINES, ETC. OTHER
IEA RESOURCESQUESTIONSONLINE RESOURCESLOCAL TRAINING
WHAT ARE “FINANCIAL PROCEDURES”??
DUES IPACE OTHER
CASHRECEIVED
BANK ISSUESHOW TO CHOOSETINHOW MANYHOW TO OPENIPACE
CASHSPENT
DUES TRAVEL IPACE OTHER
BASIC FINANCIAL TRANSACTIONS
How to choose a bank◦ Financial◦ Service◦ Location◦ Auditability
BANK ISSUES
44-45
Banks are required by regulation to collect various information
Every bank interprets these regulations in their own way: CALL FIRST!
You will definitely need: ◦ Drivers license for all signers◦ Taxpayer identification number of your localDO NOT OPEN AN ACCOUNT WITH SOMEONE’S SOCIAL SECURITY NUMBER, YOUR SCHOOL’S TIN, ETC.
OPENING A BANK ACCOUNT
9-Digit number assigned by the IRS Unless you are a new local, you already
have a number If you don’t know your number, contact IEA
Accounting If you are a new local, contact IEA
Accounting; they will apply for one Do NOT apply for a number yourself!
TAXPAYER ID NUMBER
27
We recommend that all bank accounts require two signatures
So you will want at least three and perhaps four-five people with the ability to sign
SIGNATURES
45, 76
You are an unincorporated, not for profit labor union
If the bank wants your articles of incorporation, you don’t have them
If they want your “IRS Determination Letter,” you don’t have one
If they want proof of your tax exempt status, IEA Accounting can provide this
OTHER NEW ACCOUNT ISSUES
See info in the book- pages 43-44 If you have IPACE funds, this requires a
separate bank account
HOW MANY ACCOUNTS DO YOU NEED?
43-44
Must be separate from regular checking account
Only deposits- From IPACE Only disbursements- For local political
expenses
IPACE ACCOUNT
35, 82
DUES IPACE OTHER
CASHRECEIVED
DEPOSITS
Make sure all checks are received Maintain supporting detail, e.g. dues
deduction registers and check stubs Deposit as soon as received! Someone needs to verify amounts
(Treasurer or Membership Contact)
DUES FROM EMPLOYER
51-52
Deposit into (separate) IPACE bank account Deposit as soon as received Keep documentation on file (copy of check,
check stub, etc.)
IPACE REBATES
35-36, Appendix 9, 16
IPACE is funded by member contributions
Locals can receive up to $15 per contributing member each year
Must be used for specific political purposes
16
IPACE REBATES
22-23, 35-36, Appendix 9, 16
Must be kept in a separate bank account May be state reporting requirements Members’ contributions are not tax-
deductible Unused funds can be returned to
IPACE, at the local’s discretion
17
IPACE REBATES
22-23, 35-36, Appendix 9, 13 &16
Deposit as soon as received Keep documentation on file (copy of check,
check stub, etc.) Five years from now, must be able to
demonstrate what each deposit was for (payee, reason for payment, etc.)
OTHER DEPOSITS
52
CASHSPENT
DUES TRAVEL IPACE OTHER
CHECKS/DISBURSEMENTS
Locals are billed at the beginning of the month: November-August
Bill is sent to “Membership Contact” Penalties for late payment Need to pay entire amount shown!! See Appendix 15 for “How to Read the Statement”
Some locals arrange for direct payment by employer
20
Dues Billing From IEA
49-52
21
DUES TRANSMITTAL SCHEDULE (Some Exceptions
Apply)November 1 10% of obligationDecember 1 20% of obligationJanuary 1 30% of obligationFebruary 1 40% of obligationMarch 1 50% of obligationApril 1 60% of obligationMay 1 70% of obligationJune 1 80% of obligationJuly 1 90% of obligationAugust 1 100% of obligation
50
Must be for local political purposes: See info from IPACE
Do not spend IPACE funds for local operations
Documentation is especially important
IPACE
Appendix 9, 13 & 16
For many locals this is their biggest expense Documentation is especially important due
to IRS issues Your local/region can set guidelines, but
these need to be based on IRS rules (your rules can be more restrictive, but not less)
Above all, travel expenses must be reasonable and necessary
TRAVEL
53-56, Appendix 8
NORMALLY YES: Hotel, mileage, airfare, meals at meeting location, parking, tolls, taxi, car rental
NORMALLY NO: Expenses for family members, gasoline (unless with car rental), gifts/clothing, entertainment, contributions to NEA FCPE
MAYBE: Tips, alcohol
TRAVEL
53-56, Appendix 8
Must be reasonable and related to your local/region’s status as a not for profit labor union
Beyond that, local rules may apply Again, local rules may be more restrictive,
but not less Documentation!
OTHER PAYMENTS
53-54
FILING
DOCUMENTATION
BOOKKEEPINGSYSTEM
ACCOUNTING/FILING
Every dollar that goes in or out of your bank account must be recorded
Permanent record• Future audits by IRS, etc.• Internal questions• Financial reporting
What system do you use: “It depends”
27
ACCOUNTING SYSTEM
38-43
One size does not fit all•Size/complexity of organization
•Prior treasurer’s system•Current treasurer’s preference
28
WHAT SYSTEM TO USE
38-43
Your system needs to:•Record all transactions in sufficient detail
•Allow you to produce financial reports efficiently
•Provide a record that others can follow
29
SYSTEM GOALS
`
38-43
Some possibilities• Checkbook/check stubs• Cash receipts and
disbursements journals• Excel/Access• Specialized accounting
software (Quicken, etc.)30
EXAMPLES
38-43
Every dollar that goes in or out of your bank account needs to be documented• Possible audit• Fiduciary duty: “Other People’s Money”
Proof of business purpose Proof of dollar amount Proof of date/place
31
DOCUMENTATION (GENERAL)
52-57
Where fromWhat forDollar amountEmployer checks- Be sure to retain detailed list of dues deducted, etc.
Other Checks: Copy of check with notes/attachments
32
MONEY DEPOSITED
52
IEA dues: Maintain copy of monthly statement
Member reimbursement• Travel: Use travel form with receipts attached• Other: Need original vendor bill, not a handwritten
note Outside vendors
• Detailed bill needed• No bill (stipends, scholarships, etc.): document in
minutes
33
MONEY SPENT
53-57
Forms:• Use some sort of voucher system (p 54)
Attach bills, etc. to vouchers• For travel expenses: USE A TRAVEL EXPENSE FORM!! Example on page 57 Label receipts and staple them to the forms No stapled envelopes with miscellaneous
random receipts!!• If travel funding is provided by another body,
make sure there is no duplication of reimbursement
34
PRACTICAL ISSUES
53-57
35
Sam
ple
Vouc
her “Sample” Expense Voucher
_____________________________ Association _ _ Date Check No. Amount Explanation: ______________________________________________________________________ ______________________________________________________________________
Approved for Payment ______________________ _____________________________ President Signature ______________________ Treasurer
(Attach to Receipt/Invoice)
“Sample” Expense Distribution Acct. No. Expense Classification ________________ 410 Office Maintenance ________________ 420 Administration Salaries, Expenses & Taxes ________________ 430 Negotiations ________________ 435 Mediation, Arbitration & Fact-Finding ________________ 440 Professional Rights & Responsibilities ________________ 450 Legislative ________________ 460 Public Relations – Membership ________________ 470 Instructional/Prof. Development ________________ 490 Miscellaneous ________________ 54
36
Sample Travel Form
57
Should be able to look at any item on the bank statement or your accounting system and find the source document easily and quickly.
37
FILING
58
Examples:• Cross reference vendor bills/vouchers with check numbers
• Attach bills to bank statements, or• File vouchers numerically (chronologically)
• No envelopes/sacks with miscellaneous random documents
38
PRACTICAL ISSUES
58
BUDGET
FINANCIAL BOARDREPORTS
AUDIT
OUTSIDEAGENCIES
FINANCIAL REPORTS
How much money do we have? How much income have we received? How much has been paid for expenses? How does this compare to the budget? How does this compare to prior years?
FINANCIAL REPORTS
47-48
Primary audience is probably your governing board (may be shared with general membership)
Get in the habit of doing a WRITTEN report every month
Include the budget Include explanations of large variations
from budget Line items depend on your local’s major
activities
FINANCIAL REPORT
47-48
MIDTOWN EDUCATION ASSOCIATION STATEMENT OF RECEIPTS AND EXPENDITURES
EIGHT MONTHS ENDED APRIL 30, 2005
ACTUAL 2004
ACTUAL 2005
BUDGET 2005
REMAINING BUDGET
BEGINNING CASH BALANCE SEPTEMBER 1 4,870 5,000 5,000 0 RECEIPTS: IEA-NEA Dues 16,500 17,000 28,000 11,000 Local Dues 1,280 1,300 2,000 700 Fundraisers 600 800 1,000 200 Interest 370 400 500 100 Total Receipts 18,750 19,500 31,500 12,000 PAYMENTS: IEA-NEA Dues 16,500 17,000 28,000 11,000 Mediation/Fact-Finding/Arbitration 0 0 300 300 Meeting Expenses 600 500 800 300 Newsletter 240 400 500 100 Office Supplies 335 400 600 200 Total Expenses 17,675 18,300 30,200 11,900 NET INCREASE (DECREASE) TO CASH 1,075 1,200 1,300 (100) ENDING CASH BALANCE APRIL 30 5,945 6,200 6,300 (100)
SAMPLE REPORT
47-48
Your budget should be included in your financial statements
Of course, this means that you should have a budget!
BUDGET
12-15, Appendix 2, 3, 4, 5
Why have a budget?◦ Ensures proper financial planning◦ Discussion of how to use members’ resources◦ Qualification for financial assistance
BUDGET
12-15, Appendix 2, 3, 4, 5
IEA policy provides for significant financial assistance, IF:◦ Local dues at least $15◦ Your budget includes a line item for Mediation,
etc. with at least $3/member budgeted This can mean thousands of dollars of
potential assistance
FINANCIAL ASSISTANCE FOR MEDIATION, ARBITRATION, ETC.
14-15
Check constitution/bylaws for requirements
Get Member InputSee Budget Training Video on IEA Website
46
BUDGET PROCESS: LOCALS
12-15, Appendix 2, 3, 4, 5
All but the smallest of locals should consider an annual audit
The audit should address the accuracy of your financial reports, among other things
More details under “Oversight”
AUDIT
9-11
990/990-EZ (IRS)◦ ~30 Large locals
LM-3 (Dept. of Labor)◦ Small number of higher ed locals
For these reports, your accounting system must report your transactions in the same line items as shown on the reports
OUTSIDE AGENCIES
Appendix 13
IRS Form 990-N (“E-Postcard”)• “Gross Receipts” under $50,000
“Gross Receipts” do NOT include IEA-NEA dues!
All except around 30 IEA locals file this form!
49
IRS ANNUAL REPORTING
28, Appendix 13
“Gross Receipts”$50,000-$200,000: IRS Form 990 EZ
“Gross Receipts”Over $200,000: IRS Form 990
Most locals pay a CPA to file these forms (complexity/public disclosure requirements)
50
IRS ANNUAL REPORTING
28, Appendix 13
If you tell us that you are filing the 990/990-EZ but fail to do so, after a period of time the IRS will take away your tax exemption!
◦ Serious financial consequences for your local◦ Significant time, effort and expense to get it back
51
IRS ANNUAL REPORTING
28, Appendix 13
Must report payments to INDIVIDUALS to the IRS, IF:
Over $600 in total for a calendar year
For Services: Not for products, supplies or expense reimbursements
Gifts and awards don’t count
52
FORM 1099-MISC
29-31, Appendix 13
Stipends: officers(W-2 vs. 1099)
Stipends: non-officersPayment of dues for officersUndocumented expenses: report even if under $600
53
FORM 1099
29-31, Appendix 13
54
Form
109
9—M
isc
30
55
Form
10
96
31
D-2 (State Board of Elections)◦ ~30 large locals registered with the State◦ More may be required to file due to increase in
the IPACE rebate amounts! Your financial system must produce reports
showing receipts and payments needed to complete the D-2
STATE BOARD OF ELECTIONS
Appendix 13
DO YOU HAVE TO FILE?• One-time threshold: $3,000 spent in any 12-month period
• Only certain expenses “count”• If you exceed the threshold, you must register as a PAC immediately and then file quarterly reports forever
Keep up with state due dates and requirements
57
STATE POLITICAL REPORTS
22-23, 35-36, Appendix 9, 16
Local leaders Regulatory agencies General public Members
OVERSIGHT
Internal controls Signs of fraud Audit Policies Monitor deadlines
LOCAL LEADERS
Checks/balances and separation of duties
Helps protect the organization from undetected fraud
Helps protect officers from potential embarrassment and liability
Protects the treasurer’s credibility
60
INTERNAL CONTROLS
17-18
List of controls, Appendix 6Please read the example on page 18!
61
CONTROLS, continued
17-18, Appendix 6
Don’t think “It can’t happen here”• Numerous cases at IEA locals in past few
years• Usually involves people in positions of trust
Pressures/Opportunities• Many factors can induce someone to
commit fraud• Lack of good controls presents an
opportunity
62
FRAUD/MALFEASANCE
18-21, Appendix 7
63
The “FRAUD TRIANGLE”
18-21, Appendix 7
If you see the signs . . .• DON’T ASSUME THE WORST!!!• They could just signify substandard practices
• Check with your UniServ director• Don’t ignore the signs; doing so can end up reflecting on you
64
SIGNS OF POSSIBLE FRAUD
18-21, Appendix 7
Having an “independent” person or group examine the financial records is a good internal control◦ Deters shenanigans◦ Catches honest mistakes ◦ Shows your members you are concerned about
safeguarding their money\ Don’t create a false sense of security!
AUDIT
9-11, Appendix 1
Large Organizations: Outside CPA• “Audit” vs. “Review”
Smaller Organizations: Audit Committee• Independent of Governance• Start with a Checklist(Sample on page 62)
• Final Report to the Board Share Report with Members
66
ANNUAL AUDIT
9-11, Appendix 1
Have a written policy on documentation and reimbursement• Overall expectations• What is covered/not
All expenses must be documented (detail on 53-56)
Donations to FCPE are not reimbursable
Region vs. Local funding67
R.A. DELEGATES
21-22, 55-57, Appendix 8
Having a calendar with all significant deadlines, and having this monitored by your governing body, ensures;◦ Reporting deadlines, with possible financial
penalties for noncompliance, are not missed◦ Promotes awareness of what goes on at the local◦ Everything gets done!
MONITOR DEADLINES
REGULATORY AGENCIESIRSSTATE BD OF ELECTIONSDOLOTHER
REGULATORY AGENCIES
If you are required to file reports, ◦ They will be reviewed and followed up on ◦ If you miss a filing date it may be costly◦ The reports may be audited
These agencies can also audit other areas within your operation, for compliance with laws
They may send you “Notices” requesting information
Solution: KNOW THE RULES; GOOD RECORDKEEPING!
REGULATORY AGENCIES
DO NOT IGNORE!Seek helpCheck TINKeep copies/proof of delivery
71
IRS NOTICES
32-33
Federal/State/Local Income Tax-EXEMPT
Sales Tax - NOT EXEMPT Exemption requires that your funds are spent for your “Exempt Purpose”
You must be able to demonstrate this if audited, hence the importance of documentation!
72
TAX EXEMPTION
26-27
You can, AND SHOULD, make a “profit”• Only way to build up funds• Must be used for exempt purpose
73
NOT FOR PROFIT?
26-27
990s, 990-EZs, LM-3s, and virtually all info filed with the State Board of Elections are available online to anyone
Anyone can walk in and demand a copy of your 990 or 990-EZ, and you are legally required to provide it
Anything you post on the Web is fair game
GENERAL PUBLIC
Financial reports Budget They are part of the “General Public”
MEMBERS
Failure to remit IEA-NEA dues will result in scrutiny and possible audit
Regions must follow protocol in submitting budgets and other documentation
Random audits of regions
IEA
Questions Online resources On-Site training
IEA RESOURCES
Randy Welchrandy.welch@ieanea.org
Al Llorensal.llorens@ieanea.org
Annual training sessions78
RESOURCES
IEA Website www.ieanea.orgFinancial Procedures for Locals
and Regions handbookFinancial procedures videoMembership processing videoBudget videoNEA online treasurer trainingTips for new Treasurers
79
RESOURCES
80
IEA WEBSITE
CLICK “RESOURCES
”
81
IEA WEBSITE
CLICK “FINANCIAL
PROCEDURES”
82
IEA WEBSITE
CLICK here for the handbooks
CLICK here for workshops &
webinars
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