Summer Leadership Conference

2007

Money Matters…A Lot!

Presented by:

Sue Kelly and Kim Toman

Course Overview• Basic Duties of the Treasurer• Helpful Toolkits• Setting Up Your Books• Establishing a Budget• Recordkeeping & Accounting

Systems• Reporting • BREAK!!!• Internal Controls and Fraud

Prevention• % Dues Update• What’s New?• Helpful Links• Q&A

Treasurers have a fiduciary duty to safeguard the assets

of the association.

FIDUCIARY DUTY

Financial and Operational Standards of the

Michigan Education Association And Local Affiliates

As leaders and staff, we are the entrusted fiduciaries of the Association finances. Members believe in us, support us and trust us with Association finances. We, the governance and staff of the Michigan Education Association, accept the responsibility to treat Association resources with the utmost of care and to adhere to the highest ethical standards. To that end, we acknowledge the principles that will guide us, the internal and external control activities we will use to protect the resources entrusted to us and our process to monitor those controls. Code of Financial Ethical Conduct

In fulfillment of our obligation we commit to:

1. Exercise appropriate fiduciary responsibilities over Association resources;2. Fully and fairly disclose and act appropriately in avoiding conflicts of interest;3. Comply with applicable rules and regulations of the Association and government

agencies;4. Respect confidentiality of information acquired in the course of our work;5. Provide Association members with information that is complete, accurate and

appropriate;6. Carry out activities professionally, with honesty and integrity;7. Not knowingly be a party to any illegal activity or breach of fiduciary responsibility;8. Report violations of this Code in accordance with all applicable rules of procedure;9. Institute due process policies for violations of this Code of Financial Ethics;10. Be accountable for adhering to this Code.

1. Deposit and record cash receipts on a timely basis.

2. Document expenditures and pay all bills timely, including the remittance of MEA/NEA dues.

3. Have bank statements reconciled monthly.

4. Report financial position to Executive Board.

How do I make sure I’m safeguarding our

assets?

– Update bank signature cards annually

– Verify membership dues billing with school district payroll list

– Prepare annual financial statements

– Prepare and file state & federal tax (and/or labor) forms

– Arrange for internal review by an independent person or audit committee

– Prepare budget for new year

Other Duties……..

PRACTICE GOOD INTERNAL CONTROLS OVER YOUR MEMBERS

ASSETS

MOST IMPORTANT………

Getting Started….

•Kits–Employer ID– Incorporate–Tax Exempt Status

Where to find your kits:

• go to: www.mymea.org

• Departments

• Finance

• Scroll to bottom of page

www.mymea.org

So…..You’ve got your IDYou’ve Incorporated, And your tax exempt……..

Now what?Now what?

NEXT,

• Checking Account•Verify it’s in your local’s name only!

• Develop and follow a budget• Establish an accounting system• Report as required• And practice good internal

controls!!

• Make sure your checks are:– Pre-numbered for making disbursements – Are signed by a minimum of two signers– Each check is supported by an approved

authorization for disbursing

• Make sure current signature cards are on file with the Bank

• By policy do not allow the use of an ATM card or counter checks

Checking Account

Establish a Budget

HOW DO WE DO THAT?

• Select a small budget committee– 6 members is ideal

• Establish a timetable & stick to it

• Develop a method for determining general desires and needs of your members

Budget Questions to Ask

• What are the local’s goals?

• How are we going to achieve these goals?

• What resources does the local have available?

For additional help:Visit: www.mymea.org

•Departments

•Finance

•Treasurer’s Handbook

Or

Visit: www.mea.org

•For Leaders

•Financial and Membership Information

•Treasurer Training Tidbits

Develop an Accounting System

• You will need:– Accounting software or a

spreadsheet application to record transactions

– A chart of accounts– Disbursement procedures

• An accounting software package will help you capture your financial data– When picking a system, base

decision on:• The size of your Local• How many transactions are processed

daily/weekly/monthly/annually• And your bookkeeping experience

– Examples:• Excel ($229)• Quicken ($59.99)• Quickbooks ($99.99)

Accounting Software

What is a chart of accounts?

A listing of the titles or names of the various accounts, somewhat comparable to a table of contents. – Use your budget to help set up your

chart of accounts.– Accounts are classified into two

general groups:• Balance sheet – assets, liabilities and

net assets• Income statement – revenues and

expenses

Chart of Accounts

• Use disbursement request forms for ALL disbursements.

• Require back up documentation– Per the IRS:

• Receipts required for all hotel stays • Receipts required for all expenses of

$75 or more

• Information required for all meals: who the attendees are, amount, business purpose, place and date

Disbursement Procedures

Disbursement Procedures• Keep receipts for

supporting documentation

• If no receipt, develop one

• Get proper approval for all payments

RECEIPTS:

• You received a dues check from your school district:– Immediately stamp “For deposit only”

upon receipt– Record the receipt of the dues– Deposit the check in the bank – Do not co-mingle PAC dollars with

dues dollars!

Recording Transactions

DISBURSEMENTS:

• Sue Smith wants reimbursement for a conference she attended:– Verify the expenditure was approved– Have her completely fill out a disbursement

form, sign it and attach receipts– Have another officer review and approve

the disbursement form by initialing approval

– Write the check with two signers– Record the disbursement in your check

book and your accounting system– File the backup documentation

Recording Transactions

Workbook SampleWorkbook SampleWorkbook SampleWorkbook Sample

Direct Pay Your Dues•Save time

•Never have to remember to write that check•MEA initiated

•Shores up internal controls

•Saves money•No interest charges•No postage

•Never have to worry about RA seating

Contact the MEA membership department to sign up today.

Reporting RequirementsReporting RequirementsReporting RequirementsReporting Requirements

Internal Financial Reports

• Monthly Reconciliations• Monthly Financial Reports• Quarterly Financial Reports• Annual Financial Reports• Yearly Audit

• Update Annual Incorporation Info• File annual IRS 990, 990 EZ or

990N• Form 944, if necessary• Mail 1099’s and File w/IRS• Form LM-2, 3 or 4 if required

External Reports

Form LM-2, 3 or 4

• Labor organizations with total annual receipts of $200,000 or more must file the Form LM-2 for their fiscal year beginning before July 1, 2004. Labor organizations with total annual receipts of $250,000 or more must file the Form LM-2 for their fiscal year beginning after July 1, 2004.

• Labor organizations with total annual receipts of less than $200,000 and more than $10,000 must file the Form LM-3 for their fiscal years beginning before July 1, 2004. Labor organizations with total annual receipts of less than $250,000 and more than $10,000 must file the Form LM-3 for their fiscal years beginning after July 1, 2004.

• Labor organizations with total annual receipts of less than $10,000 must file the Form LM-4.

Every labor organization subject to the Labor-Management Reporting Disclosure Act must file a financial report each year with OLMS.

• Lobby Registration and Reporting Act– Is a member entertaining a

state public official?• Elections

– Is the local involved in any non-union elections?

• Raffles – Thinking of sponsoring a raffle

or giveaway?

Miscellaneous

Internal ControlsInternal ControlsInternal ControlsInternal Controls

EMBEZZLEMENTS HAPPEN!

FACT: MEA HAS HAD OVER 25 REPORTED EMBEZZLEMENTS IN THE LAST FIVE YEARS!

FACTS:

• Over 40 cases in 20 years

• Losses near $1,000,000

• Top of the list nationally – NOT GOOD!

Role of Internal Controls

• “Strong Internal Controls” are identified as the most effective measure in the prevention of fraud.

• To provide reasonable assurance regarding the achievement of objectives in three categories:– Effectiveness and efficiency of operations– Reliability of financial reporting– Compliance with applicable laws and regulations

• Safeguard assets of the organization

• Best Deterrent– Internal controls close the door on opportunity– Certified Fraud Examiners Report– Deterrent vs. elimination

What is Internal Control?

• Internal Controls are procedures that an organization puts in place that are designed to:– safeguard assets;– generate accurate accounting

data;– ensure efficient productivity;

– And PROTECT YOU!!!

Integrity of Internal Controls

1. A control environment founded on ethical values and technical competence;2. The identification and analysis of relevant internal and external risks that can

jeopardize Association finances;3. The implementation of control activities that mitigate each identified risk, with the

appropriate focus on prevention, detection and correction;4. The creation and maintenance of a communication structure by and between

governance and staff that captures, processes and transmits relevant internal and external information in a timely manner;

5. Systems of evaluation and assessment to monitor whether internal controls are adequate, effective and adaptive;

6. Adoption of, and adherence to, formal internal control policies and procedures and document their use;

7. Outlining the roles and responsibilities of governance and staff within the internal control structure;

8. Communicating with and education staff and governance on their internal control roles and responsibilities.

A strong internal control structure is fundamental to achieving Association goals. Internal controls must be designed to provide reasonable assurances regarding the safeguarding of resources against mistakes, fraud, abuse, reliability of financial information, continued commitment to compliance with Association policies, applicable laws and regulations, and the overall accuracy of financial records. Internal controls must be built on uncompromising integrity, sound judgment and a culture of good control practices.

In fulfillment of our obligation to maintain the highest standards of quality in financial reporting through effective internal controls, we support:

Internal Controls - THE BIG TEN

1. Dual Check Signers – OR Authorizations on invoices

2. Require supporting Documentation for all disbursements

3. Have bank statements mailed to someone other than the Treasurer

4. Issue monthly financial reports

Internal Controls - THE BIG TEN

5. Deposit Cash promptly6. Form a local independent

audit committee7. Submit IRS forms 8. Balance the checkbook

monthly9. Keep PAC funds separate10.Verify membership monthly

INTERNAL REVIEW

WHAT?

• An internal review is when an independent person or audit committee reviews the financial records of the local association.

WHY?

• Helps to ensure accurate records are being kept.

• Accurate records help safeguard assets.

• Safeguarding assets protects YOU from liability.

WHEN?

•Annually, or•When there is a change in Treasurer’s

WHO?

• An independent person who is familiar with accounting techniques – For Example:

•a business school teacher

•Another local treasurer

•An internal review committee

Things reviewed during an internal

review:

• Mathematical accuracy• Bank account

reconcilement• Disbursements • Basically everything you

do with an emphasis on what may have been missed!

When do I need an outside auditor?

• If your internal review report reveals unusual or suspicious activity

• If you or someone else suspects that embezzlement is occurring

• If you are a large local and required to file a 990 annually

REMEMBER…..Your members are counting on you to do the right

thing!

ALWAYS REQUIRE:

•TWO SETS OF EYES

•TWO SIGNERS

•SEGREGATE DUTIES

•RECONCILE

•REVIEW & REPORT

Percentage Dues Update

•Enhancements to the system

•What we’re doing now

•What you should be doing now

•Timelines

Percentage Dues Update

•Percentage dues information

•www.iammea.org/percentagedues/

•Read the MEA Voice

•www.mea.org or www.mymea.org

•Check with your local Uniserv Office

•Training

•Summer Leadership Conference

•Webinar

•On line manual

What’s New……

• 990 Update – form changes• 990N• Audit committees (part of

new 990 questions)• New auditing standards• Department of Labor audits• Taxability of cell phone

reimbursement

Helpful Links:

www.mea.org

www.mymea.org

www.iammea.org/percentagedues/

www.irs.gov

www.dol.gov/esa

www.toolkit.cch.com

Information Available on the Web

www.mymea.org•Treasurer’s handbook

•Treasurer’s tips

•Membership processing handbook

•Various kits, etc.

• MEA budget

•Etc.

Web Addresses

www.mea.org

www.mymea.org

www.irs.gov

www.dol.gov/esa

www.toolkit.cch.com

Questions

&

Answers