From the Shredded From the Shredded Files of Big Business Files of Big Business Assuring safeguards with Assuring safeguards with effective effective Financial Policies Financial Policies Pam Baker and Ernest Werstler
Dec 30, 2015
From the Shredded Files of From the Shredded Files of Big BusinessBig Business
From the Shredded Files of From the Shredded Files of Big BusinessBig Business
Assuring safeguards with effectiveAssuring safeguards with effective
Financial PoliciesFinancial PoliciesPam Baker and Ernest Werstler
Corporate Failures• ENRON, • WORLDCOM, • SUNBEAM, • TYCO, • RITE-AIDE• ??????
COMMON THREADS• Lack of oversight
– By board of directors– By Senior Executives– By Outside Professionals
Good Board Policies• Policies are Board action;
– Set minimum standard; reference law – Outlines what the Board expects and
what the board will do.– Allow procedures (how policy gets
converted to action) to be set by Administration
BOARDFINANCIAL POLICES
• Effective Guidelines for establishment of policy:– Affix responsibility (Board committee)– Role of administration– Role of solicitor– Frequency of review/revision
Fiscal Objectives• Board has the authority and
responsibility to prepare and adopt budget; approve bids, levy taxes and approve each expenditure of the District.
BOARDFINANCIAL POLICES
• FISCAL OBJECTIVES:– Outline what the Board expects as to
the fiscal program, reporting of the District• Adherence to laws and regulations• Empowerment of Administration• Methods for effective monitoring
(reporting, audits, etc)
Fiscal Objectives• Institute effective business
practices by Administration.
• Appropriate staff, equipment and technology as recommended by Administration.
Fiscal Objectives• Allow Superintendent and Business
Manager to take actions prior to approval by Board:– Enter into agreements/contracts that
are consistent with approved budgets and in compliance with bid requirements.
– To Pay:
Fiscal Objectives– Payments due under contracts which
have been approved by board– Payroll costs, personnel expense
reimbursement– Utilities – Invoices result of emergency situation– Invoices subject to discount or penalty
BOARD POLICY ON BUDGET PREPARATION• Outline how board wants
– budget presented, – timeline, – approval process, – public comments, – fund balance target.
BOARD POLICY FOR TAX COLLECTION
• Procedure in event of vacancy• Bonding requirements• Setting of salary and/or
commission for next term.
TAX COLLECTOR• Guidelines for Tax Collector
– When deposits are made– Monthly statements of taxes collected– Meet with Finance committee of board – Audit of office yearly– Delinquent tax certification and
submission to tax claim
BOARD POLICY ON DISTRICT AUDIT
• Annual audit by independent, certified public accountant.
• Auditor General’s office audit• Audit by special interest groups
not permitted.• Available to general public
BOARD POLICY FORINVESTMENT
• Objectives:– Legality – applicable laws of PA– Preservation of capital– Liquidity to meet operating
requirement– YieldReporting requirements
STUDENT ACTIVITY FUNDS
• Reference to PASBO guide• Funds raised by students and
expended for purposes related to the activity with student participation in decision in decision making process
• Internal Control and audit
BOARD POLICY FOR CAPITALIZATION
• Objectives:– Continuity of reporting– Adherence to accounting principles– Consistency between reporting
periods– Effective use of estimates
Auditor Expectations• Board oversight• Administration adherence to Board
policy• Documented accounting
procedures
Board Oversight• Existence of policy• Determined through
communication with finance/audit committee
• Tests of selected transactions (bid approvals, new hire approvals, etc)
Adherence to Board Policy
• Effectiveness of written procedures• Communication throughout
organization• Determined through tests of
transactions• Evaluation of integrity of
management
Documented accounting procedures
• Statewide accounting manual• Identification of internal control
cycles• Procedures to explain flow of
activity, including approvals and personnel involvement
Pitfalls• Uninformed
Board• Confusion within
organization• Audit issues• Unwanted
publicity