finance best practices protecting assets & treasuries
Post on 04-Feb-2022
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FINANCE BEST PRACTICES
PROTECTING ASSETS & TREASURIES
FINANCE BEST PRACTICES
WHAT ARE THE GOALS?
ØTransparency and Accountability
ØSound Financial Management
ØCompliance
ØAdherence to and Advancement Toward Organization’s Mission
ØEvaluation and Governance
FINANCE BEST PRACTICES
WHERE TO BEGIN?
KNOW THE BYLAWS – both your Association’s and USATF’s
http://www.usatf.org/About/Bylaws---Operating-Regulations.aspx
“Get to know your organization!”
FINANCIALS STATEMENTS & REPORTINGØ ProvidereportingtoExecutiveBoardmonthlyandreviewwiththemtoensure
understanding.
Ø ExamplesofFinancialStatements:Ø BalanceSheet – Assets,Liabilities,Equity– DebttoAssetRatioØ IncomeStatement – Revenue,Expenses,NetIncome/Loss– tracktrendsØ BudgettoActualReport – RevenueandExpensecomparisonsØ CashFlowStatement – BeginningCashBalance,additions,subtractions,EndingCashBalance
- canbeassimpleasthemonthlybankstatementØ AnnualBudget – IncludebothRevenueandExpense
- shouldbereviewedandapprovedbytheBoardØ AuditReport&ManagementLetterfromindependentauditors
- shouldbereviewedbytheBoardwiththeauditorsindependentlyoffinancepersonnel
“It’snotpersonal!”
REQUIRED REPORTING & FILINGS
THE ORGANIZATION MUST COMPLY WITH ALL FEDERAL AND STATE LAW AND REQUIREMENTS
Ø Annual IRS Form 990 – file on time and must make available to the public
Ø Receipts to Donors – written acknowledgement of gifts and donationshttps://www.irs.gov/charities-non-profits/substantiating-charitable-contributions
Ø W9s/1099s - should require a W9 from all independent contractors (providing service)- 1099MISC forms must be issued if aggregate paid in a calendar year exceeds $600
“Compliance is a Must!”
CONFLICTS OF INTERESTPROPER HANDLING CAN AVOID PROBLEMS
Ø Definition – A conflict of interest is a situation in which a person or organization is involved in multiple interests, financial or otherwise, one of which could possibly influence the motivation or decision-making of that individual or organization.
Ø Disclose – any potential conflicts should be reported annually and updated as new situations or actual conflicts arise.Ø Recuse – ensure there is a clear policy to handle conflicts, typically the interested party recuses him/herself from the
decision-making process involving the conflict.
“An Ounce of Prevention is Worth a Pound of Cure!”
PROTECT ASSETS WITH SOUND INTERNAL CONTROLS
Ø SegregationofDuties
Ø ProperAuthorizationandApproval
Ø ProperDocumentationandAccurateReporting
Ø ProperPhysicalSecurity
Ø EarlyDetectionandPrevention
“Let’sgetspecific!”
SEGREGATION OF DUTIES
DEFINITION – A CHECK AND BALANCE SYSTEM TO PREVENT THEFT, FRAUD AND INACCURATE REPORTING TO THE GREATEST EXTENT POSSIBLE
Ø Promotes transparency
Ø Should be scaled to and appropriate for the size of the organization’s financial and human resources
Ø Examples:Ø Have someone other than the person responsible for the finances open the mail and log
the contents (checks, invoices, receipts)Ø Have bank statements mailed directly to or available online to specified board members
for verificationØ Require a second approval or signature on payments over a certain thresholdØ Avoid mixing charitable and business interestsØ Require someone other than the primary finance person to control petty cash or require
a dual approval
PROPER AUTHORIZATION AND APPROVALCLEARLY DEFINE AND DOCUMENT THE WHO, WHAT, WHERE, WHEN OF YOUR FINANCIAL TRANSACTIONS AND WHO HAS AUTHORITY AT EACH STEP.
EXAMPLES:Ø EstablishanannualbudgetofrevenuesANDexpensestobeapprovedby
theboardandconsistentlyreportactivitycomparedtothebudgettotheboard
Ø CreateapurchaseprocessforallpurchasesandrelatedapprovalsØ Setamaximumlimitonpurchaserequests,requiresecondaryapprovalØ DoaTaxpayerIDnumber(TIN)matchtoverifynewvendorsØ Requireabidprocesstoensureaccuratepricingandfaircompetition
PROPER DOCUMENTATION & ACCURATE REPORTINGTAKESTEPSTOENSUREALLTRANSACTIONSAREVALID,AUTHORIZEDANDCORRECT
EXAMPLES:Ø Requiredetailedinvoicesfromallvendors,consultantsandcontractorsØ RequirereceiptsforreimbursementofexpensesØ Limitfinancialandin-kindbenefitstovolunteersto:reimbursementforbusiness-related
expenses,minorfringebenefitsand/ornominalfeesforservices*Volunteerstipendsshouldnot betiedtonumberofhoursvolunteeredandmustberecordedasreportable(taxableincome)
Ø EnsureeverypaymentrequestandpaymenthasdocumentationattachedØ Alltransactionsshouldbereviewedbyasecondarypersononaregularbasis–
forexample– aboardmembercouldrevieweachdepositticketandcheckrun,etc.
PHYSICAL SECURITY
PHYSICAL SECURITY OF ASSETS IS ONE OF THE EASIEST AND MOST EFFECTIVE DETERRENTS AGAINST MISAPPROPRIATION
EXAMPLES:Ø Ensure only authorized persons have physical as well as indirect access to money, securities or
other valuable propertyØ Physically secure blank checks and preferably require a second person, without check signing
authority to control them/sign them outØ Use frequently changed passwords and other authorities to secure access to accounting
software, online banking and other records; HOWEVER, there should never be a case where only on person has access to a system or to physical assets
Ø Limit petty cash to a small dollar amount, keep it reconciled with receipts and have someone outside of finance count the cash on a regular basis
Ø Deposit receipts within 1 business dayØ Limit cash transactions as much as possibleØ Consider position bonds for those who handle money
EARLY DETECTION AND PREVENTIONTAKE STEPS TO DETECT FRAUD AND MINIMIZE THE OPPORTUNITY FOR ONGOING MISAPPROPRIATION BEFORE IT HAPPENS
EXAMPLES:Ø Requireaboardofficerotherthanthepersonresponsibleforthefinancestoreceive,
reviewandapproveallbankstatementsØ PerformmonthlybankreconciliationsforallfinancialaccountsØ Cross-trainotherindividualsincertainfinancedutiesandprovidethemawayto
reportinconsistenciesØ Allfinanciallyresponsibleindividualsshouldberequiredtotaketimeaway(vacation)
eachyear,requiringthebackuppersontoperformallregulardutiesØ HIGHLYRECOMMENDEDtoengageaCPAfirmtoconductanindependentannual
financialstatementauditØ MakesurethereisaWhistleblowerPolicyandproceduresinplaceforanyoneto
reportsuspectedmisconduct,financiallyorotherwise,withoutnegativerepercussionstotheonereporting
CONTACT INFORMATION
SaraReeseUSATFChiefFinanceOfficersara.reese@usatf.org
https://www.usatf.org/Home.aspx
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