Section: Financial Management Index: F - 02 Subject: Accounting … · 2015-09-29 · Depreciation All non-current assets with limited useful lives, including intangibles, shall be

Section: Financial Management Index: F - 02 Subject: Accounting for Assets Guideline Page: 1 of 3 Approved by: Board of Directors Date: Sept. 12, 2011

Purpose This policy establishes the fundamental guidelines and practices for properly recording and reporting assets on the Company’s Balance Sheet. An asset is an element of the financial statements constituting economic resources as of a certain date, and expected to benefit future operations i.e. land, buildings, work-in-process, inventory, and receivables. Assets are recorded on the Company’s Balance Sheet using the accrual basis of accounting. Increases in Assets are recorded as debits. FTND maintains a series of internal control checklists which help protect company assets. Persons reviewing this document should also review the internal control checklists. Capital asset purchases require authorization Asset disposals require authorization Responsibilities The Executive Director or designee is designated as the Fixed Asset System Coordinator and is responsible for ensuring:

o Administration and maintenance of the asset and property accountability and control system

o Developing systems which assure that assets are given proper care and

protection and are used for official business purposes only Individual employees are responsible for:

o The proper use, care and protection of company property

o Ensuring that company property is used only for the conduct of official company business

o Reporting any suspected fraud, theft, or embezzlement

Section: Financial Management Index: F - 02 Subject: Accounting for Assets Guideline Page: 2 of 3 Approved by: Board of Directors Date: Sept. 12, 2011 Capitalization Policy The Company will capitalize assets which have an expected useful life of more than one year and a value of $1,000 or more. Exceptions to this include certain office equipment. Expenditures on assets must be capitalized (amounts added to the carrying amount of the asset) when it improves the condition of the asset beyond its originally assessed standard of performance or capacity. This can occur through an increase in the annual service potential provided by the asset or increasing the useful life of the asset. Expenditures that do not meet the above criteria or merely restore the asset to its original function must be expensed as repairs and maintenance as incurred. Portable Assets Certain assets like personal computers, digital cameras, small tools, calculators, etc., which do not meet the capitalization threshold shall be assigned and tracked in order to prevent theft and loss. Depreciation All non-current assets with limited useful lives, including intangibles, shall be depreciated. Assets whose service potential does not diminish with time or use, like works of art, shall not be depreciated. Accurate depreciation methods and estimated useful life is critical in correctly determining company financial performance. Estimated useful lives shall be as accurate as possible and take into account physical wear and tear, technical obsolescence and commercial obsolescence, and conform to any government regulations Asset Valuation Assets are reported on the Balance Sheet using the following valuation methods

Section: Financial Management Index: F - 02 Subject: Accounting for Assets Guideline Page: 3 of 3 Approved by: Board of Directors Date: Sept. 12, 2011

Historical Cost Historical cost is the amount actually paid for the asset, as evidenced by checks and other documents. This is ordinarily adjusted over time for amortization, such as depreciation. Historical cost is the valuation measurement generally used for plant and equipment. The following table lists the Company asset categories, description, and valuation method.

Asset Category Description Valuation

Cash Cash deposited in accounts

with less than 120 days maturity

Replacement

Prepaid Expenses Unused or unexpired prepaid economic benefits Replacement

Accounts Receivable Funds earned but not yet received from customers Net Realizable Value

Equipment Amount paid for capital equipment Historical Cost

Equipment – Accumulated Depreciation

Contra account used to offset the depreciation charge.

Accumulated depreciation is the reduction of the carrying amount of the assets on the balance sheet to reflect the loss of value due to wear,

tear, and usage.

Allowance, created by a charge against

earnings, to provide for changes in the value of

a company's assets.

Section: Financial Management Index: F - 03 Subject: Journal Voucher Guideline Page: 1 of 2 Approved by: Board of Directors Date: Sept. 12, 2011 Journal Voucher:

Journal Vouchers are the transactions used to update the General Ledger. They may be postings of original transactions, adjustments, reversals, or corrections. Journal vouchers may be used to transfer amounts between General Ledger accounts and project cost codes in order to distribute charges, accrue, reverse, reclassify, or correct data. Entries may involve G/L account transfers within the same account or transfers between different accounts, projects and cost codes.

Procedure:

This procedure is designed to provide information on how to complete a Journal Voucher and how to document the Journal Voucher appropriately. Documentation of Journal Voucher transactions is critical to ensuring that journal entry information is identifiable.

Journal vouchers are entered in accordance with accounting period deadlines.

DOCUMENTATION REQUIRED

An explanation is required for all Journal Vouchers to ensure that any questions arising regarding a Journal Voucher can be answered by reviewing the transaction description and additional notes. Proper documentation is mandatory as it ensures that there is no need for individual recollection.

FTND requires that the documentation must provide enough detail to satisfy an auditor, internal or external. Detailed below is the minimum documentation expected to be included with the Journal Voucher:

• Accounting Period • Accounts • Debit/Credit • Amount • Codes • Notes • Approval Authority and Date

Section: Financial Management Index: F - 03 Subject: Journal Voucher Guideline Page: 2 of 2 Approved by: Board of Directors Date: Sept. 12, 2011

It is the responsibility of the individual entering the Journal Voucher to ensure it is entered in a timely manner and that adequate documentation is included. For a correcting entry, include from the original posting any reference number, code, the date originally posted, include an explanation of why the correction is necessary, and any calculation as to how the amount was derived. Remember that any questions may not come up until several years after the Journal Voucher is processed.

If the required documentation cannot be entered into FTND’s system, then paper documentation must be retained. FTND have implemented internal procedures that allow for the paper documentation to be accessible in the event the transaction is reviewed during an audit. When paper documentation is being retained, indicate in the Notes field of your system that paper documentation is on file.

The following are examples of why paper documentation may be necessary:

• System does not accommodate the necessary details and notes. • Extensive and complex calculations. • Extensive paper backup, such as phone bills. • Confidential Information.

Section: Financial Management Index: F - 04 Subject: Accounts Payable Page: 1 of 1 Approved by: Board of Directors Date: Sept. 12, 2011

Purpose

To spell out procedures that must be followed in paying the invoices on behalf of FTND. Procedures

• FTND receives invoices both electronically and in the mail. • Executive Director or designee reviews the hard copies of the invoice by doing three way

match. Three ways match is to verify the quantity and the price of the merchandise received is the same as the quantity and the price on the purchase order as well as on the supplier’s price list.

• Verify the authorization of the Purchase order. • To pay invoices in time and also to avoid duplicate payment:

1. Unpaid invoices are filed sequentially by date. 2. Only original invoice is paid. 3. Paid invoices are marked as paid.

• Executive Director or designee approves the payment and gives invoice to accountant or

bookkeeper for payment. • Payment cheque requires two signatories approved by the FTND Board.

• Individuals signing cheques must review the supporting documents before signing the

payment cheque.

• Cheques are stored in a locked area.

• FTND keeps a log of used cheques which is provided to the Treasurer every month.

• To avoid misuse of void cheques, void cheques are marked as void. Cheque signing Authorization Executive Director President Vice-President Treasurer Secretary

Section: Financial Management Index: F - 05 Subject: Authority to Sign Cheques and Page: 1 of 1 Negotiate Financial Instruments Approved by: Board of Directors Date: Sept.12, 2011

Purpose

To spell out procedures that must be followed in the signing of cheques and negotiation of financial instruments on behalf of FTND.

Procedures

• All cheques and other financial instruments must contain two eligible signatures.

• Eligible signatories are Board members or staff members who have been previously nominated and endorsed by the Board.

• Any two of the above have the authority to sign cheques.

• Signatories cannot sign a cheque made payable to themselves. • Any cheque or other financial instrument above $10,000 must have board approval.

• A list of all cheques issued each month will be provided to the Treasurer.

Authorization Any two of the following may sign cheques or other financial instruments. Executive Director President Vice-President Treasurer Secretary

Section: Financial Management Index: F – 06 Subject: Gift Acceptance Policy Page: 1 of 4 Approved by: Board of Directors Date: January 14, 2013 The purpose of this Gift Acceptance Policy is to establish a standard for the types of gifts we receive, as well as to publicize the process for gift acceptance, and demonstrate congruency and balance between donors’ wishes and the interests and priorities of Feed the Need in Durham. Part 1: Definition of a Charitable Gift The Canada Revenue Agency defines a charitable gift as a “voluntary transfer of property without valuable consideration.” A gift is made in any circumstances where these three conditions are satisfied.

a. Some property, usually cash, is transferred by a donor to a registered charity; b. The transfer is voluntary c. It is made without expectation of return. No benefit of any kind to the donor, or to anyone

designated by the donor, may result from the payment. Tax receipts will not be issued for contributions of services which by definition are not property. Gifts may be accepted for which official income tax receipts are not issued, provided the gift is consistent with this policy. Part 2: Monetary Gifts currently accepted by Feed the Need in Durham

a. Outright gifts An outright gift refers to a contribution of cash or property in which the donor retains no interest, thereby supporting the organization’s priorities and giving the organization permission to use the money as it sees fit and according to the organization’s publicly-stated mission.

b. Outright gifts of securities A gift of securities refers to an outright gift of property, which is marketable and valued. This includes publicly-traded corporations, bonds, GICs, mutual funds, etc. FTND reserves the right to sell the securities.

c. Life Insurance

The organization is named as a beneficiary of the proceeds of a life insurance policy after death. There are instances in which the organization pays the premium on the policy, and therefore, receives the entire amount of the settlement upon the death of the policy holder.

d. Bequests A bequest is a gift of cash or property by will, where the organization is named as a beneficiary.

Section: Financial Management Index: F – 06 Subject: Gift Acceptance Policy Page: 2 of 4 Approved by: Board of Directors Date: January 14, 2013

e. Designated gifts A designated gift refers to a contribution of cash or property in which the donor specifies use for donated money or property. Provided it is complimentary to the organization’s mission, the organization will act according to the donor’s wishes. Otherwise, the donor will be asked to revise their intention. Should this not be possible, the gift is to be returned to the donor with gratitude. Part 3: Principles of Gift Acceptance The following principles will be considered before a gift is accepted by the organization. The gift should:

a. Support the mission, vision and values of FTND b. Not have unreasonable restrictions for use placed upon it by the donor that are incompatible

with FTND mission, vision and values or the requirements of Canada’s Revenue Agency. c. Not be accepted from any individual or entity involved in illegal activities or activities directly

contrary to the mission, vision, and values of FTND. d. Not be accepted if FTND must accept unreasonable financial burden or risk.

Part 4: Basis of Receiptable Gifts:

a. Financial – cash, cheques, credit cards, gift cards or gift certificates, gifts of securities, bequests, and life insurance. Tax receipts may be issued for gifts such as these as the universal values assigned are legal proof of worth.

b. Gifts in kind: Capital – large and small equipment, and vehicles for use such as for

transportation of food or administrative use. Tax receipts may be issued for gifts such as these providing that a legal and independent assessment or appraisal has been conducted for items in excess of $1,000. The potential donor shall assume the cost of the evaluation. Items below $1,000 need to be supported by satisfactory evidence of reasonable valuation.

Non-Receiptable gifts include: Food – donations of non perishable food items by the public, and perishable and non perishable items by the food industry.

Section: Financial Management Index: F – 06 Subject: Gift Acceptance Policy Page: 3 of 4 Approved by: Board of Directors Date: January 14, 2013 Part 5: Policies and Procedures of Gift Acceptance

1. All gifts, including money, capital items, other real property, must be channeled through the organization through the Executive Director.

2. All gifts, where necessary, will be receipted, acknowledged, recorded for audit, historic and recognition purposes.

3. Donors are to be provided correct information and where necessary, assisted into making an informed decision regarding their donation. Donors will not be persuaded or forced into a decision that is contrary to their own needs or desires.

4. Donors are encouraged to discuss a proposed gift, particularly deferred gifts, with an independent legal and/or financial advisor, or with a representative of Canada’s Revenue Agency, before making a final decision.

5. FTND will maintain accountability and fulfill ethical responsibility to its donors by ensuring that funds are used for the purposes for which they were raised and/or according to the donor’s wishes. Records of donors’ designations are maintained for seven years.

6. The Executive Director is authorized to negotiate planned gift agreements where necessary with prospective donors, following guidelines established in this policy and consistent with the organization’s mission, vision, values, and activities. In cases where necessary, such as designated deferred gifts, the Board’s Resource Development and Communications Committee as well as the organization’s legal counsel may be consulted.

7. If the donor’s gift or designation requirement is inconsistent with the organization’s priorities, the donor will be asked to consider a re-designation. If the donor is unwilling or unable to make a change, the gift will be returned with an explanation and gratitude.

8. With regard to capital gifts i.e. equipment, vehicles etc., relevant information about the gift should be obtained including a copy of legal and authentic appraisal secured by the donor.

9. FTND does not accept gifts that do not directly further or extend its mission. This includes gifts of cultural property, shares of privately-held companies, livestock, etc.

10. FTND does not currently serve as trustee of charitable remainder trusts.

Section: Financial Management Index: F – 06 Subject: Gift Acceptance Policy Page: 4 of 4 Approved by: Board of Directors Date: January 14, 2013 Part 6: Procedures for Deferred Gifts

a. Bequests A bequest is a deferred gift, left in a will, and naming an organization as a beneficiary or the main beneficiary. Donors are invited to provide information about their bequest provision by sending a copy of their will, or the relevant portion, to FTND. The trustee or legal counsel of the donor is responsible for the documents and disbursement of the will and its contents. FTND reserves the right to consult with legal counsel about the contents of the relevant portion of the will, particularly with regards to legal requirements that FTND must adhere to. FTND is responsible for ensuring that the donor’s wishes or designation desires are met in full. All processes and procedures for gift acceptance are also applied in this case.

b. Life Insurance A donor may assign an irrevocable paid-up policy to FTND. A donor may assign an irrevocable new or existing life insurance policy on which premiums remain to be paid by the donor. A donor names FTND as the primary or a successor beneficiary of the proceeds. When ownership is irrevocably assigned to FTND, the donor is entitled to a tax receipt for the net cash value and for any premiums subsequently paid by the donor. There are instances where a beneficiary organization pays the premiums on a life insurance policy in which it is named a donor. FTND reserves the right to evaluate its ability to do so on a case by case basis.

Section: Financial Management Index: F - 07 Subject: Investment Policy Page: 1 of 1 Approved by: Board of Directors Date: Sept. 12, 2011

Purpose

To spell out procedures that must be followed for the investment of cash or securities.

Procedures

• Cash for day-to-day operating purposes will be kept in a chequing account at a Canadian bank.

• Excess cash will be invested in a savings account or GIC. The cash should only

be invested for a short duration to ensure that the cash can be accessed when needed.

• No money will be invested in securities, mutual funds or other equity instruments.

However, if a donor donates such instruments to FTND, the instruments will be converted to cash as quickly as prudently possible.

Section: Financial Management Index: F -08 Subject: Petty Cash Page: 1 of 2 Approved by: Board of Directors Date: December 12, 2011

Policy: To communicate our responsibility for the effective use and security of Feed the Need in Durham’s petty cash funds. This policy informs all staff on the use of petty cash, their responsibilities in preventing loss and/or discrepancies in the balance of the petty cash fund, and satisfies financial audit requirements through compliance with established procedures. Rationale: The Board of Directors and the Executive Director has a duty to ensure that the organization is accountable for its performance to members, key stakeholders and the wider community. Procedure:

1. A set amount of $400 is established by withdrawing the cash from the bank and placing it in a separate locked box.

2. When cash is removed from the box, a voucher is filled out for the exact amount of cash and signed by the person removing the cash. This voucher amount and the remaining amount of cash in the box must total $100.

3. When the item is purchased, the receipt is placed in the in lieu of the voucher. If the box were audited, the auditor would find receipts, vouchers, and cash that equal $400.

(Note) Petty cash voucher slips must replace any money taken out of the safe. This system will act as the communication to ensure accounting regarding how the petty cash was spent.

4. The safe must be locked when not in use. 5. One board member, the Executive Director and one staff will be privy to the safe

combination. 6. The Executive Director holds responsibility for and control over Petty Cash funds

and the supporting documents and backup. 7. The Treasurer will review the petty cash process ongoing to ensure fiduciary

responsibility and report any concerns to the full board.

Section: Financial Management Index: F -08 Subject: Petty Cash Page: 2 of 2 Approved by: Board of Directors Date: December 12, 2011

Petty cash must not be used for any of the following: a) to pay salaries, wages, honoraria, etc.

b) to cash cheques

c) to grant loans

d) to pay travel expenses

e) to pay travel-related registration fees specified

f) to reimburse personal expenses (parking tickets, medical certificates, etc.)

g) to purchase liquor

h) to reimburse lunch, party, reception, flower and gift expenses

i) to buy coffee and soft drinks, except for official meetings with visitors.

Replenishment

1. When most of the petty cash is depleted funds will be replenished. This process is managed by withdrawing cash from the bank for the amount that has been depleted. For example, if $92.50 is withdrawn there must be $92.50 in receipts for expenses in the safe.

2. The petty cash must be replenished once a month and especially before the end of March and the end of April each year.

3. Petty cash should not be replenished with funds from other sources. Other funds must be deposited into FTND’s bank account.

Out-Of-Pocket Expenses Out-of-pocket expenses are not the same as petty cash expenses in that the money used for the expenses is personal money not business money. All out of pocket expenses are to be submitted as per FTND Travel and Expense Policy (B-13).