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Chapter Finance Guidelines 2-08 Use SHIFT ENTER to open the ... Document Transcript

  • 1. Chapter Finance Guidelines Chapter Finance Guidelines This section on chapter finance is designed B. Treasurer to offer clear guidelines to chapter officers in The treasurer manages the chapter’s the key area of chapter finance. The financial affairs in accordance with the information included here is designed to chapter’s established financial policies outline essential financial decision-making and procedures. as well as to offer detail of special 1. Assumes responsibility in conjunction significance to the development and with the Finance Committee for budget management of financial systems. All preparation. officers will benefit from a review of this 2. Manages the chapter’s financial document. The chapter president, treasurer records and financial information and committees with fiscal responsibility – systems and recommends system the finance, audit and investment changes when indicated. committees – will find their areas of function 3. Recommends financial policy and addressed. The treasurer will benefit further procedure to the board. from the Chapter Treasurer’s Manual 4. Presents a written financial report to designed to serve as a handbook detailing the board at least quarterly and to the “how-to” information. It is available from membership annually. headquarters. 5. Works closely with the external auditor and/or an internal audit FINANCIAL RESPONSIBILITY, ROLES committee in the examination of the AND SYSTEMS chapter’s financial policies, procedures, records and status. I. Chapter Board of Directors, Officers 6. Initiates and prepares all chapter and Committees financial reports required by A. Chapter Board of Directors headquarters. The board of directors is ultimately 7. Prepares and submits all tax forms responsible for the wise and effective required by the state and federal management of the chapter’s financial governments. As of 15 November resources. To meet these 2008, this includes the IRS Form 990, responsibilities, the board performs the 990N, or 990EZ. following functions: 8. Serves as an ex-officio member of the 1. Adopts an annual budget consistent Finance Committee. with the chapter’s goals and its financial resources. C. The Finance Committee 2. Establishes written financial policies The Finance Committee advises the and procedures and reviews them at treasurer and the board of directors in least once a year. financial matters and is responsible for 3. Monitors the income and budgeting and monitoring the chapter’s disbursement of funds on a regular financial procedures and status. schedule. 1. Plans the budget in conjunction with 4. Makes investment decisions. the chapter treasurer based on 5. Assures an annual audit/review with chapter financial resources and an external audit commissioned at chapter goals. least biennially. 2. Recommends the proposed budget to the board for action. 6. Provides for annual financial reports to chapter members. 3. Monitors budget performance on a regular basis and analyzes 1
  • 2. variances in expense and revenue All bank deposits should be correctly from expected performance. and promptly recorded. The ledger 4. Reviews chapter investment policy must agree with (i.e., be reconciled on an annual basis and with) the bank account statement recommends desired changes in each month. Having a chapter officer policy and procedure. or Finance Committee member, in 5. Participates in the selection of an addition to the treasurer, check the auditor, reviews the audit report and reconciliation and sign to that effect recommends any corrective action provides a double check of the required. accounts and is a safeguard for 6. May function as an internal audit officers and the Finance Committee. committee at the discretion of the 4. General Ledger board. A general ledger lists all the chapter 7. Provides direct assistance to the accounts – checking, savings, all chapter treasurer in financial investment accounts, review and management functions when disbursements – by sources and needed. account number. It provides an organized way to record all receipts, II. Financial Management disbursements and transfer of funds, A. Financial Management and which should be entered in a timely Information System fashion, in chronological order, and The chapter’s financial management itemized by each individual and information system provides a transaction. Ledgers should be means of identifying sources of income summarized monthly and all bank and justifying and tracking expenditures investment balances must be in accordance with the approved reconciled (agree) with bank and budget. It permits reporting of the investment statements. current financial state of the chapter, 5. Financial Management System supports economic decisions, facilitates There is no specific format required budget projections and provides for a chapter’s financial evidence of responsible financial management system. Formats for management. All records of income and recording and summarizing income expense and support documents and expense by category are comprise this system. available in business supply shops 1. Deposits and Deposit Receipts along with forms for supporting Deposits should be made promptly documents like vouchers and to protect funds and take advantage receipts. Headquarters recommends of interest accrual. Bank deposit the use of an automated accounting records should be filed, retained and system. A growing number of checked against monthly bank chapters currently have an statements. automated financial system 2. Disbursements providing them with a budget format; All disbursements, except those a tracking system for checking, from petty cash, should be made by savings and money market check. Supporting vouchers for each accounts; quarterly and year-end disbursement indicating the payee, actual versus budgeted expense and the check number and the date of income statements; a year-end reimbursement should be issued balance sheet; and a year-end and retained. performance report of investments. 3. Checkbook Ledger Advantages of automated systems are many including ease of record 2
  • 3. keeping, ease of transfer to chapter funds. In considering a incoming treasurers and uniformity fidelity bond, it is generally true that of the system over time. There are a the greater the assets that the number of automated accounting chapter holds, the greater the need systems that have been identified as might be for such insurance. If bond user-friendly and comprehensive. is desired, all officers with the power to manage the chapter’s money – B. Protecting Chapter Assets sign checks, withdraw money, make Financial trust is a major chapter investments– should be bonded. leadership responsibility. This trust Fidelity bonds can be obtained from requires careful attention to policies and insurance agencies and brokers. procedures designed to protect the Note that costs can vary widely. chapter’s assets. It requires that board More information is available from members become conversant with the headquarters if needed. chapter’s system along with the 3. Financial Reporting and Budgetary methods for safeguarding funds. Control Regular reports from the treasurer along The Finance Committee should with the opportunity to monitor budget review the status of the budget on a performance are basic to reasonable regular basis, examining actual understanding. In general, good versus budgeted income and business practices should guide the expense and analyzing significant board of directors. variances as well as ensuring that 1. Internal Accounting Safeguards IRS Form 990, 990N, or 990EZ is Certain financial policies and submitted by the chapter treasurer procedures must be in place to each year on 15 November. The ensure that chapter funds are board of directors should also review secure. Among financial safeguards budget performance on a regular requiring board direction through schedule, taking into account the policy and procedure are: signatory Finance Committee analysis and authority for those persons initiating corrective action when authorized to accept money; indicated. Quarterly reviews are approve disbursements and sign recommended as a minimum for checks; approval of those persons both the Finance Committee and the authorized to place an order or board of directors. Many chapters purchase goods and services; how a schedule a financial report at each petty cash fund is to be handled; board meeting. Appending written which financial transactions require financial reports to minutes of the dual signatures; provisions for a board is a wise plan. Further, an fidelity bond, if desired; and annual financial report to the acceptable and unacceptable membership is essential in fulfilling investment instruments. (See Policy the chapter’s financial trust. Development Section) 4. Record Safekeeping 2. Fidelity Bonds Certificates of deposit, treasury bills It is recommended, but not required and other official records of by Sigma Theta Tau International investment documents should be that the treasurer and other chapter retained in a safe place. All financial officers be bonded. Fidelity bonds, records must be retained in chapter however, are designed to protect the files for seven years. In addition to chapter against unwarranted ledgers and reports, registration financial loss through the actions of lists, vouchers and receipts must be a person authorized to handle saved. 3
  • 4. D. The Audit C. Budget Preparation Financial audits are performed primarily The budget is a financial management to determine if accounting procedures tool of many uses. It serves as a are fair, complete, objective and financial plan for carrying out the goals accurate. In addition to the audit trail – a and programs of the chapter and is the detailed examination of the recording of basis on which actual financial each financial transaction and support performance can be measured against documentation like vouchers and planned performance. Regular review invoices – the auditor looks for clear over the course of each year provides lines of decision making. The auditor opportunities to control costs and/or provides a written report of the audit expand programs. process and renders an opinion about 1. Biennial Budget the soundness of chapter procedures as It is suggested that chapters well as offering suggestions for construct a biennial budget. A two- improvements, if indicated. year budget plan offers greater 1. Audit Frequency continuity in support of chapter It is recommended that an external program goals and program audit be performed at the end of development. Ideally, a chapter each fiscal year. If once every two budget should begin in the first term years is elected by a chapter, an of the chapter president’s two-year internal audit (or review) is term of office. Chapter Bylaws recommended in the alternate year recommend staggered terms of with the external audit scheduled at offices and suggests that the the end of the treasurer’s second treasurer’s term begin the second year in office. In the event of an year of the president’s term. Such a every-two-year schedule for external plan allows time for orientation to the audit, the audit should cover the two- role of treasurer and time for year period. adequate planning for the next 2. External Audit biennium. An audit is only performed by a 2. Annual Budget certified public accountant (CPA) If a biennial budget is not prepared, who is completely independent of an annual budget should be the chapter. These individuals or prepared prior to the start of each firms are licensed and qualified to new fiscal year. If a biennial budget issue official opinions regarding the is in place, the second year plan fairness of the financial statements. should receive a thorough review, 3. Internal Audit/Review updating and board approval prior to An internal audit/review may be the beginning of the second year. performed by chapter members 3. Revenue Considerations appointed by the board. They may Addition of new programs requires be members of the Finance thorough identification of anticipated Committee or a special audit costs and the income necessary to committee appointed by the Board. cover these costs. The main source Internal audit procedures are of chapter income is typically designed to look at the same provided by membership fees. New variables as an outside reviewer member and renewing member would examine. They include: projections are essential in a. Evidence of clear lines of determining anticipated revenue. responsibility for decision- making regarding the recording 4
  • 5. and monitoring of income and any desired consultation. Transition expense. information for incoming treasurers b. A system in place that facilitates should include a joint review of the the prompt and accurate budget and budget performance, a classification and recording of review of the financial information revenue received and expenses system, a review of the latest audit and distributed. the identification of any outstanding c. Evidence that all disbursements financial problems. of money are supported by documentation such as invoices. F. Consultation d. Evidence that those persons It is not unusual that treasurers come receiving and depositing income into their responsibilities with little and distributing chapter funds preparation for the role and modest are authorized by chapter policy experience with budgets and financial to do so. record keeping. The role of treasurer is e. Evidence that bank account full and time consuming, and experience balances are reconciled with has shown that the need for expert bank statements on a regular assistance is felt by the majority. The and timely basis. financial staff at headquarters is more f. Evidence that chapter cash is than pleased to offer assistance directly handled by authorized persons. and through referral to others who can An internal audit/review group help. should submit a brief report of their review and their findings to III. Policy Development the board along with any The board of directors holds both legal and recommendations they might ethical responsibility for the chapter’s have for improving financial financial management. Fulfilling this systems. responsibility is central to effective g. Evidence that federally required management of nonprofit organizations. The Form 990, 990N, or 990EZ is laws of both federal and state governments completed by chapter each year. speak to many aspects of nonprofit 4. Audit Cost organizations, granting both privileges and The cost of an external audit is restrictions in the protecting of these related to the scope of the audit, the organizations committed to the public good. amount and intensity of financial As guardians of the honor society’s mission, activity, ease of date retrieval, and the board works to assure the stability and overall time required. Therefore, growth of the chapter as well as meeting its audits will vary in cost so it may be a legal responsibilities for controlling and good idea to shop around. safeguarding the chapter’s assets. The board’s primary mechanism for fulfilling this E. Transitions in Office fiduciary trust is through policy development The chapter finance function is greatly and the monitoring of procedures and facilitated by a planned transition from practices designed to implement policy. treasurer to treasurer at the time of office turn over. Chapters with A. Financial Operations Policy and successful transition programs include Procedure such arrangements as a meeting There are several key areas in financial between incoming and outgoing board operations management in which board members, individual meetings for policy is recommended. They are in officers and a commitment from areas that deserve clear direction from outgoing officers to remain available for the board and, in turn, serve to protect 5
  • 6. members of the board and committees usually resides with the president as they carry out financial functions. and the treasurer of the chapter. Major recommended policy and/or 5. Reporting Requirements procedure areas are identified here. Expectations for reporting to the 1. Bank Accounts board of directors by the president or Bank accounts the chapter requires treasurer should be outlined in terms to do business should be identified of the content, frequency and format by type and function. For example, for the reports. Usually it is the board could state where bank recommended that there be a written accounts would be established by report provided for each board safety standards. A policy might meeting. read “All chapter checking and 6. Chapter Audit Procedures savings accounts will be established Chapter audits serve a very only in banks and savings important safeguarding function and institutions insured by the external audits are recommended by FDIC/FSLIC.” headquarters at least every two 2. Bank Account Limits years. A policy statement by the Setting bank account limits helps to chapter makes the commitment make decisions about when clear and establishes both a accumulating revenue should be calendar for audits and a redistributed to additional accounts mechanism. and, especially to accounts earning 7. Other Areas for Operations Policy higher than usual checking or Development savings account interest. Examples The board should address policy of policies might be “Only the development with the principles of amount of monies necessary to clarifying and safeguarding the operate the business of the chapter intention and direction of the board. for a specified period of time will be There is not an absolute list so that kept in a checking account. Other board judgment and discretion drive unrestricted income will be kept in these decisions. Other areas for savings accounts for redistribution to consideration are controls for: other accounts as indicated and handling petty cash; bonding and approved.” bonding levels; and budget 3. Checking and Savings Accounts calendars. Signatory Authority It is important to define who can sign B. Investment Decisions and Policy checks, who can withdraw and Development transfer funds from checking and Investing chapter funds is the second savings accounts, under what major financial responsibility. The board circumstances dual signatures may of directors holds the accountability for be required and total amounts sound decision making in this important permitted to be deposited or aspect of financial development. withdrawn. This authority usually Chapters experience a wide range of resides with the president and the financial opportunity to build a financial treasurer of the chapter. base beyond the promise of chapter 4. Purchase Authority membership fees as the major source of It is important to define who holds income. Size of the chapter, the authority to make or commit the membership fee level, program and purchase of goods or services on fundraising activity, gifts and grants all behalf of the chapter. This authority play a role. For chapters fortunate enough to accumulate cash surpluses 6
  • 7. from their operating budgets and gifts or d. For dedicated funds restricted grants of money for general or to interest use alone, expert dedicated purposes, it is essential to consultation in investment develop clear policies to guide the strategy is required. investment function. Because this area 3. Acceptable Investment Instruments is often less familiar than the operating This policy should specifically state area, it is frequently wise to seek which investment instruments are consultation from persons with acceptable to the board of directors. specialized knowledge. Headquarters Acceptable instruments might staff can serve as a first line of contact include: for general assistance and referral. The a. Certificates of deposit offered information that follows is presented as by banks and savings and an aid in investment policy loans insured by FDIC/FSLIC. development. b. Government-backed issues 1. Authority to Invest (treasury bills, bonds, GNMAs) Generally, the board of directors is c. Money market funds offered assigned the overall authority to by banks invest the funds of the chapter, with d. High interest money market delegation of authority for funds depositing, withdrawing and e. Commercial papers A-1 rated transferring specific fund amounts to 4. Unacceptable Investment the treasurer, president or Instruments combination thereof. A policy should This policy should indicate which clarify who holds this authority and investments are not to be used. be written in specific terms. It should This will depend on the chapter’s include such safeguards as when investment strategy. Generally, single or dual signatures are stocks and/or utilities, real estate, required, total amounts to be junk bonds, instruments not invested in any one investment backed by the government, or instrument, and proof of signature rated “A” by Moody’s are excluded. procedures. 5. Investment Strategies 2. Purchase and Review In developing investment strategies, Where investments may be the major focus should be on what is purchased and place at what in the best interest of the chapter. automatic review procedures are to There is not one formula that would be used should be guided by policy. answer this question for all chapters. Sample policies might be: There are, however, some principles a. Investment instruments may that generally be purchased through local serve well. banks or insured certificate of a. Putting Surplus Cash to Work deposit pools. Surplus cash results from revenue b. Each $5,000 that accumulates exceeding expense. This results in a money market fund is to from a variety of reasons – good be reassessed for investment management of financial in a higher interest yielding resources, program and instrument. fundraising revenue exceeding c. Any investment coming to projection, and gifts of maturity should be reassessed discretionary funds to the chapter, for potential investment in a among others. It is wise to put this higher yielding instrument. money to work. b. Liquidity and Risk 7
  • 8. For surplus cash, high liquidity treasury bonds (30-year maturity), (immediate maturity) and very low GNMA, A-1 Rated Commercial risk accounts (NOW accounts and Paper. money market funds purchased e. Using Investment Consultants from insured banks) are It is recommended that chapters recommended. The Board might seek expert consultation and choose to have part of this cash assistance when considering any placed in a fund restricted for use investment beyond low risk, highly at its discretion only. In addition, liquid investments through worthy some organizations elect to and insured banks. Chapter provide a reserve fund equal to six financial goals and policies guide months of operating expense the investment function. invested with the same safeguards discussed above. Chapters have generally not determined a need for such a fund. Discretionary funds, just discussed, would serve the need for emergent financial problems. c. Less Liquidity and Higher Interest Beyond the need for discretionary funds that can be retrieved immediately, funds might be invested in instruments yielding higher interest, but with longer maturity rates. If this is elected, it is wise to stagger maturity dates. Relatively short-term instruments mature in 30, 60 or 90 days. Examples of these instruments are: repurchase agreements, certificates of deposit, treasury bills and commercial paper. d. Acceptable Instruments, Higher Interest, Longer Maturity For funds not needed for discretionary use on a rapid turnaround schedule, investment instruments yielding higher interest than shorter-term securities are available but with substantially longer maturity rates. These should be evaluated for the level of risk verses benefit. Safeguards exist like rating scales by Standard and Poor as well as Moody’s, which are guides to determine the investment quality of bonds, commercial paper, municipal notes and stocks. Examples of these instruments are treasury notes, 8