for locals and regions (fplr). administration & fiduciary oversight regulatory requirements ...
TRANSCRIPT
FINANCIAL PROCEDURES
for Locals and Regions(FPLR)
Administration & Fiduciary Oversight
Regulatory Requirements Technical Tasks
Handbook Sections
2
FP 101: Survival!FP 102A: Need to DoFP 102B: Need to KnowFP 103: Best PracticesFP 104: Management Issues
Session Overview
3
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)
Session Overview, continued
4
FP 101Survival!
5
IEA dues- Pay monthly except SEPTEMBER/OCTOBER
Member reimbursementVendor bills
Pay the Bills
45, 506
Check supply
Types of checks
Record in checkbook/Accounting system
7
Bills, continued
IEA DuesTransmittal Policy
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
850
Employer dues checks◦Make sure you obtain and retain
supporting detail!
Other checks◦Keep copies and documentation!
Deposit Checks
9Appendix 6
Deposit slips- Ample supply
Deposit checks when received
Do NOT withdraw cash from deposit!
10
Deposit, continued
Taxpayer ID Number (TIN)Annual filing requirementNonemployee compensationUnrelated Business Income
IRS Issues
1126-33, Appendix 13
“Social Security Number” for associations and corporations:9 digits (xx-xxxxxxx)
Need when opening a bank account Need when filing IRS forms IEA has your number on file IEA will apply for numbers when needed
Taxpayer ID Number (TIN)
1227
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!
IRS Annual Reporting
1328, 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.
IRS Annual Reporting, continued
1428, 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
15
IRS Annual Reporting, continued
Must file if not required to file 990 or 990-EZ
“Simple” electronic submission
IEA files on your behalf
E-Postcard
1628, Appendix 13
Income not related to union business• Rarely occurs, examples:
• Rental income• Newsletter ads (not sponsorships)• Merchandise sales
Need $1,000 in UBI to incur a tax liability
Unrelated Business Income
1728, 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
Form 1099-Misc
1829-31, Appendix 13
Stipends: officers(W-2 vs. 1099)
Stipends: non-officersPayment of dues for officersUndocumented expenses: report even if under $600
Form 1099, continued
1929-31, Appendix 13
Form
1099—
Mis
c
2030
Form
1096
2131
You need to know if your local association is currently filing quarterly reports with the State Board of Elections.
If so, you need to continue to file them in order to avoid penalties.
Keep IPACE funds in separate bank account!
Political Funds
2234-35
There are some tips for new Treasurers on the IEA website
Click on RESOURCES Then FINANCIAL PROCEDURES
23
More Info for New Treasurers
FP 102ANeed To Do
24
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
Documentation
2552-57
Where fromWhat forDollar amountEmployer checks- Be sure to retain detailed list of dues deducted, etc.
Other Checks: Copy of check with notes/attachments
Funds Received
2652
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
Funds Disbursed
2753-57
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
Funds Disbursed, continued
2853-57
Sam
ple
Vou
ch
er “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 ________________
2954
Sample Travel Form
3057
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”
Record Your Transactions
3138-43
One size does not fit all•Size/complexity of organization
•Prior treasurer’s system•Current treasurer’s preference
Accounting Systems
3238-43
Your system needs to:•Record all transactions in sufficient detail
•Allow you to produce financial reports efficiently
•Provide a record that others can follow
Systems, continued
`
3338-43
Some possibilities• Checkbook/check stubs• Cash receipts and
disbursements journals• Excel/Access• Specialized accounting
software (Quicken, etc.)
Systems, continued
3438-43
Perform and document monthly
Detects errors by the bank and/or yourself
Bank Reconciliation
3545, Appendix 14
This is the link between “Documentation” and “Recording”
Should be able to look at any item on the bank statement or your accounting system and find the source document easily and quickly.
Filing
3658
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
Filing, continued
3758
FP 102BNeed to Know
38
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
Internal Controls
3917-18
List of controls, Appendix 6Please read the example on page 18!
CONTROLS, continued
4017-18, Appendix 6
Checks and cash should be deposited daily, with the date of the deposit indicated in the applicable records. The bank deposit slip totals should match the total in the books.
Cash should NOT be withdrawn when making a deposit
Controls, continued
41Appendix 6
All disbursements, except petty cash items, should be made by checks. Complete supporting documentation should be maintained.
Controls, continued
42Appendix 6
Checks should never be made payable to “Cash”.
Controls, continued
43Appendix 6
Checks should be paid from original vendor invoices.
Controls, continued
44Appendix 6
Two (2) signatures are recommended on all checks.
Controls, continued
45Appendix 6
Signing of blank checks should never be permitted.
Controls, continued
46Appendix 6
A person other than the treasurer should receive bank statements directly from the bank.
Controls, continued
47Appendix 6
Controls, continued
48Appendix 6
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
Dues Billing From IEA
4949-52
Include home e-mail addresses for your new members on their enrollment forms
Encourage all of your members to use the “My IEA Profile” portal to update their home e-mail addresses
50
MEMBERSHIP CONTACT RESPONSIBILITIES
IPACE is funded by member contributions
Locals can receive up to $10 per contributing member each year ($15 effective 2013-2014)
Must be used for specific political purposes
IPACE Rebates
5122-23, 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
52
IPACE Rebates (Cont’d)
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
State Political Reports
5322-23, 35-36, Appendix 9, 16
NEA Fund used for national initiatives
Fundraising rulesNo use of local or IPACE funds for contributions – including reimbursement to RA delegates
NEA PAC FUNDFund for Children and Public Education
(FCPE)
5436, Appendix 15
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!
Locals and Regions:Tax Exemption
5526-27
You can, AND SHOULD, make a “profit”• Only way to build up funds
• Must be used for exempt purpose
Not-for-Profit?
5626-27
DO NOT IGNORE!Seek helpCheck TINKeep copies/proof of delivery
IRS Notices
5732-33
Not likely, but . . .• Random audits• Reported by disgruntled members
IRS Audit
5832-33
Articles of incorporation, bylaws, IRS determination letter
Board/Committee meeting minutes Conflict of interest policy Copy of expense reimbursement plan General ledger, cash receipts journal, cash
disbursements journal
59
What Do They Ask For?
List of all bank accounts Copies of bank statements and cancelled
checks Credit card statements and receipts Invoices and receipts Schedule of donors to the organization All expense reimbursement requests,
including documentation
60
And…..
Copy of any contract of $5,000 or more Documentation of process to determine
compensation of officers, including committee minutes
Copies of Forms 941, W-2 and 1099-MISC List of officers Breakdown of dues received: IEA-NEA vs.
local Copy of two newsletters
61
And….
Copy of union handbook All workpapers used to prepare the annual
tax return (990-EZ) Charter Document retention policy
62
And…
Are regular Board meetings held? Describe. How often are dues paid to IEA-NEA? What portion of the dues are for political
activities? How are members notified that part of their
dues are used for lobbying activities? What geographic area do you cover?
63
And….
Describe your history and activities. Describe your internal controls over your
financial transactions. Do you have a budget? Is your 990-EZ shared with your governing
body? How large is your governing body?
64
And….
Do you have an annual general meeting of the membership?
Do you have an audit? If so, provide copies of reports.
Who maintains the books? Do you provide monthly financial reports?
What is in them? How are your officer stipends computed?
65
And…
How do you report stipends (W-2, 1099-MISC, etc.)?
What are your sources of income? How are your convention delegates chosen? How many delegates do you have? What do
they do? How long do they serve?
66
And…
Do you have special events, if so, describe. Do you give gifts? Describe. What is the length of your contract with
your employer? Do you track your valuable assets, e.g.
computers? Provide list.
67
And….
Sleep well: Keep your books and other documentation in order, and follow the rules
Seek help
Let us know
68
IRS Audit
FP 103Best Practices
69
Regions - Annual Budget is Required in Order to Receive Rebate
Locals - No Specific Requirement, but a Budget . . .• Ensures Proper Financial Planning• Discussion of How to Use Member
Resources• Qualification for Financial Assistance
Budgeting
7012-15
Check constitution/bylaws for requirements
Get Member InputSee Budget Training Video on IEA Website
Budget Process: Locals
7112-15, Appendix 2, 3, 4, 5
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
Annual Audit
729-11, Appendix 1
TO: ____________________ President (or Region Chair) ____________________ Education Association (or Region) We have performed the procedures enumerated in the checklist for review
of financial records. Based upon completion of those procedures we have satisfied ourselves that the Association’s (Region’s) cash basis transactions for the twelve‑month period ending ____________ ____, 20__, are accurately and reasonably recorded in the books and records, are adequately documented, and were for authorized purposes.
_______________________________Audit Committee Chair _______________________________Date
Sample Committee Report
7311
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 funding
R.A. Delegates
7421-22, 55-57, Appendix 8
Should produce monthly Statement type and detail depend on the size of your organization, but• A verbal report or just a report on the bank balance is never sufficient
Should include a comparison to budget
Share with broad audience
Financial Reports
7547-48
Sample Financial ReportMIDTOWN 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)
7648
FP 104Managemen
t Issues
77
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
Fraud/Malfeasance
7818-21, Appendix 7
The “Fraud Triangle”
7918-21, 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
Signs of Possible Fraud
8018-21, Appendix 7
One person does all of the work related to financial and membership matters. Worst case is someone who serves as president, membership chair and treasurer.
Signs . . .
81Appendix 7
No oversight over the person with the checkbook (controls such as dual signatures are missing, there is no monthly financial reporting, etc.).
Signs . . .
82Appendix 7
Deficiencies in documentation for disbursements:• No documentation• Use of copies instead of originals• Multiple erasures/whiteouts on any kind of financial records (checks, deposit slips, invoices, etc.)
Signs . . .
83Appendix 7
Checks written to “Cash”Cash withdrawals from the local’s bank account
Cash deducted from bank deposits
Signs . . .
84Appendix 7
The local is consistently behind in paying its IEA-NEA dues.
Signs . . .
85Appendix 7
No annual review of the books/records by an outside body.
Signs . . .
86Appendix 7
Signing of blank checks.
Signs . . .
87Appendix 7
Bank statements are not reviewed by someone other than the treasurer.
Signs . . .
88Appendix 7
How much cash to maintain?• Plan for worst case scenario• May have to phase in the increase or decrease as part of annual budget
Investment of funds-look at alternatives• Liquidity• Net income (interest minus fees)
Cash and Investments
8915-16
List of Common Items(provided by NEA)
Call for Items Not on List
Record Retention
9024, Appendix 12
Be familiar with constitution, bylaws, other governing documents• Administrative requirements(budget, audit, fiscal year, etc.)
• Accounting requirements(check signing, reporting, etc.)
Governing Documents
919, 38
Avoid perception of personal gain from role as local/region leader
The organization must come first
Conflict of Interest
9221
Treasurer candidates should be “qualified”
“Full Disclosure” of job requirements There should be an orderly transition of treasurers• Demonstration/Instruction• Written procedures/Calendar• Books/Records in good order
More info in FPLR handbook and on the website
Transition Issues
9358-59
IEA Website www.ieanea.orgFinancial Procedures for Locals
and Regions handbookFinancial procedures videoMembership processing videoBudget video
NEA online treasurer training
Resources
95
IEA Website
CLICK “RESOURCES”
96
IEA Website
CLICK “FINANCIAL
PROCEDURES”
97
IEA Website
CLICK here for the handbooks
CLICK here for workshops & webinars
98