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Benevolent and Protective Order of Elksof the
United States of America
Subordinate LodgeAuditing & Accounting
CommitteeManual
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G R A N D L O D G EBenevolent and Protective
O R D E R O F E L K SU N I T E D S T A T E S O F A M E R I C A
A Fraternal Organization
— P R E F A C E —In order to administer the Business Management activities affecting the welfare
of our Order, the Country is divided into eight Areas. In each, the Grand Exalted Ruler, the Executive Head of our Order, is represented by a Grand Lodge Auditing & Accounting Committee Member. This member is there not only to protect the interests of the Grand Lodge, but also to give advice and help to all of the Subordinate Lodges in his Area.
Within each Subordinate Lodge there is a Lodge Auditing & Accounting Committee which has certain responsibilities. This Committee should study the Grand Lodge Auditing, Accounting and Management Manual in order to acquaint themselves with the Grand Lodge requirements; in addition, it would be to their advantage to also review the Secretary's Manual and any others which set forth the duties of the various Lodge Officers and Committees.
A good Lodge Auditing & Accounting Committee must be a dedicated group deeply interested in our Order, and especially their Lodge. The Members of this Committee should never attempt to dominate any of the individuals concerned in areas which are being reviewed; likewise, they should be diplomats, offering constructive suggestions, never being abusive, measuring all facets within the Lodge operations, to prescribed standards of performance.
Their scope of activity is to be found in the formal assignment given to the Committee by the Grand Lodge Statutes. Therein is a section with information relating to the Committee's responsibilities of conducting periodic reviews; (Grand Lodge Statutes, Section �3.040).
It is realized that no one publication can answer all of your questions, nor solve all the problems which will be encountered during the review; however, this presentation should assist the Subordinate Lodge Auditing & Accounting Committee in the performance of their duties. Revisions will necessarily be made, from time to time, and you can be helpful if you send the Grand Lodge Auditing & Accounting Area Member any comments or suggestions that you may have for improving our audit operations.
NOTE: The masculine words appearing herein shall include the feminine gender as circumstances require.
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— TABLE OF CONTENTS —Page
Chapter 1 — Accounting and Bookkeeping �-�0� General 3 �-�0� Internal Controls 3 �-�03 Objectives of Internal Control 3 �-�04 Auditing & Accounting Committee and the Financial Report 3Chapter 2 — Scope �-�0� Scope of Examination by Accountant 9 �-�0� Security 9 �-�03 General �0 �-�04 Questions for Lodge Auditing & Accounting Committee �0 �-�05 Areas of Involvement by Auditing & Accounting Committee �� �-�05a Uniform Chart of Accounts �� �-�05b Lodge Accounting Diagram ��Chapter 3 — Reporting 3-�0� Standard Reports �3Chapter 4 — Areas of Review 4-�0� Lodge "Entities" �5 4-�0� Voucher System �5 4-�03 Fund Raising Committees �8 4-�04 Transfer of Funds Between Accounts �� 4-�05 Checking, Savings Accounts, and Restricted Funds �3 4-�06 General Comments – Games �4 4-�07 The Budget Process �5 4-�08 Petty Cash – Imprest Fund 3� 4-�09 Club Management 33Chapter 5 — Taxes – Legislation 5-�0� General 35 5-�0�a Unrelated Business Income 37 5-�0�b Sales and Use Tax 38 5-�0�c Tax Filing Requirements 39 5-�0� Liability Insurance – Per Capita 40 5-�03 Royalty Relief Legislation 4� 5-�04 Americans with Disabilities Act 4�Chapter 6 — Auditing & Accounting Committee Operational Reviews General 4� 6-�0� Subordinate Lodge Year-End Check List 43 6-�0� Budget Review 43 6-�03 Board of Trustees 45 6-�04 Secretary 46 6-�05 Treasurer 48 6-�06 House Committee 50 6-�07 Liquor Liability Exposures and Controls – Insurance 53 6-�08 Petty Cash – Imprest Fund 54 6-�09 Bank Reconciliations 55 6-��0 Taxes 58Chapter 7 — Annual Financial Report 7-�0� General 59 7-�0� An Audit 59 7-�03 A Review 59 7-�04 A Compilation 59 7-�05 Engaging the Accountant 59 7-�06 Negotiating the Engagement 59 7-�07 Completing the Annual Financial Report 60 7-�08 Deadline for Filing 60 7-�09 Evaluation Report 60 7-��0 Separate Corporation 60 7-���a Annual Audit Checklist 6� 7-���b Annual Review Checklist 6�Chapter 8 — District Deputy's Internal Audit 63
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— CHAPTER 1 —
ACCOUNTING AND BOOKKEEPING1-201 GENERAL:The starting point in any review, is a thorough evaluation of the Lodge's system of internal control. This helps to determine the degree of reliability which may be placed on the system; which in turn determines the nature and extent of the auditing procedures to be employed, and the tests to be conducted by the accountant. Therefore, as an assist to the Accountant, the Lodge Auditing & Accounting Committee should be active throughout the year.
The Auditing & Accounting Committee should establish a good long range audit program. It is the Auditor's guide . . . it is the standards by which the Auditor will measure his accomplishments. In addition, it is a visible guide, and sign to the Lodge that the audit activity is under competent control. The long range program, by spelling out in detail the audit projects to be carried out, gives evidence of coverage of key functions at planned intervals. It also provides assurance that no significant auditable has been overlooked.
1-202 INTERNAL CONTROLS:Satisfactory internal controls have four general characteristics:
• A plan of organization that provides for separation of authorization, execution, recording and custodial duties involving the same transaction.
• Authorization and recording procedures that specify the way in which designated forms and other records are to be used in collecting, classifying and communicating financial data.
• Sound practices to ensure that adopted procedures are carried out.
• Personnel are capable and trained to carry out assigned duties.
1-203 OBJECTIVES OF INTERNAL CONTROL: A system of internal control having these four characteristics, extends beyond the accounting and financial operations. Such a system broadly seeks to accomplish the following:
• Assure reliability of financial data;• Safeguard assets from losses; • Promote operational efficiency among the various Lodge functions; and
• Encourage adherence to prescribed Grand Lodge and Subordinate Lodge policies.
Reasonable assurance recognizes that the cost of controls should be justified by the benefit derived. Benefits are reductions in the risk from errors and irregularities involving the financial statements or accountability for assets.
1-204 AUDITING & ACCOUNTING COmmITTEE AND THE FINANCIAL REPORT:Section �3.040 of the Grand Lodge Statutes requires of the Lodge Auditing & Accounting Committee:
a. EngageanaccountantwiththeapprovaloftheLodgetopreparetheAnnualFinancialReport(Audit,RevieworCompilation)inaccordancewiththeGrandLodgeAuditing,Accounting&ManagementManual.TheAnnualFinancialReportmustincludeallbooks, recordsandactivitiesof theLodge,Home,Club, separatecorporationandanyotherentityaffiliatedwiththeLodgeforthefiscalyearendingMarch31st.Theaccountant shall be one who is independent of the accounting and bookkeepingoperationsoftheLodgeoranyentitythereof,exceptasprovidedinparagraphj.
b. DelivertotheaccountanttheAnnualFinancialReportformsfurnishedbytheGrandSecretary.
c. ReceivefromtheaccountantanddelivertotheLodgebyJune15theaccountant'sreportwhichwillincludetherequiredstandardAnnualFinancialReportformswithbudgetcomparisonandapplicableFederalandStatetaxreturns,completeforallentitiesoftheLodge.
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d. SendonecopyoftheAnnualFinancialReport,priortoJune30,totheDistrictDeputyGrandExaltedRulerandtheAreamemberoftheGrandLodgeCommitteeonAuditingandAccounting.FailuretotimelysubmitthereportmaysubjecttheLodgetoafineofonehundred(100)dollars.PaymentofafinedoesnotrelievetheLodgeofthedutytofilethereportandcontinuedrefusalwillbeconsideredContumacy.
e. SecureafinancialreportofanyentityaffiliatedwiththeLodge,whichhasafiscalyearotherthanMarch31,withinsixty(60)daysafterthecloseofthefiscalyear.
f. RequiretheuseoftheUniformChartofAccountsprovidedinSection4.330.
g. ActonothermattersoffinanceastheLodgemaydirect.
h. The Members of the Committee shall continue with their duties until the AnnualFinancialReportiscompletedforthefiscalyearinwhichappointedandreportedtotheLodgeandfiledwiththeGrandLodgeashereindirected.
i. TheCommitteeshall,inthemonthsofJuly,OctoberandJanuary,reviewtherequiredrecord-keepingofthefinancialaffairsoftheLodgeandClubandcompliancewiththeapprovedbudget,andreportatthelastregularmeetingoftheLodgeduringthosemonths.
j. ASubordinateLodgemayapplytoGrandLodgeforpermissiontoprepareitsownAnnualFinancialReportusingin-LodgepersonnelunderthesupervisionoftheLodgeAuditing&AccountingCommittee.Minimumrequirementsforin-LodgepreparationofAnnualFinancialReportare:
�. LodgemustmakeapplicationunderguidelinespromulgatedbyGrandLodge.
�. LodgeapplicationmustbeapprovedbyGrandLodgeAreaSponsorsviatheirAreaMemberofGrandLodgeAuditing&AccountingCommittee.
3. Lodge receiving written approval must use Grand Lodge Chart of Accounts inconjunction with number placement recommendations contained in the GrandLodgeAuditing,Accounting&ManagementManual.
4. Lodge Federal and State Tax Returns must be prepared by a Licensed TaxProfessionalwhoisindependentoftheLodgeandindependentofpreparationoftheGrandLodgeAnnualFinancialReport.ThesamefinancialinformationusedtopreparetheAnnualFinancialReportmustbeindependentlyusedtopreparetheapplicableFederalandStateTaxReturns.
k. NoLodgeSecretary,Treasurer,TrusteeoranymemberoftheSupervisingorManagingBodyoftheClub,SocialParlororotherfacilityestablishedinconnectionwiththeLodgeshallserveasamemberoftheAuditing&AccountingCommittee.
A Lodge who feels the need to prepare its Annual Financial Report with in-house personnel should request the necessary form for applying from the Grand Lodge Auditing & Accounting Committee Member for the Lodge Area. Forms should be filed with the Committee Member no later than December 3�st, for the year to end the following March 3�st. This will allow for ample time for the Lodge to engage an accountant, should the request be denied.
To engage an accountant by your Lodge implies an accountant outside the regular employment of the Lodge. It is believed that your Lodge would find it beneficial to have an opinion by a qualified public accountant.
The Lodge Auditing & Accounting Committee should monitor all activities of the accountant to ensure that if a problem exists they can assist the accountant in resolving the matter. In addition, it is most important that the Committee ensures that the report is approved by the Lodge members in time to have the report delivered to the Grand Lodge Auditing and Accounting Area Member by June 30th.
Once the accountant is hired, it is most important that he become familiar with the records of the Lodge; therefore, it is suggested that the accountant be called in before March 3�st, to review the Lodge operations. In addition, if possible, it is suggested that the accountant participate in the taking of any year-end inventories; if not possible, the Lodge Auditing & Accounting Committee is to take a physical inventory and then prepare an "Inventory Certificate" (Ref. Page 7).[Section 1-204 continued on Page 8]
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EMPLOyMENT OF ACCOUNTANTCONTRACT TO PERFORM ANNUAL FINANCIAL REPORT
THIS AGREEMENT is made the _______ day of ______________, �0______ by and between
_______________________________________ Lodge # _____________ of the Benevolent and Protective
Order of Elks, a/an ______________ non-profit Corporation, herein referred to as "Lodge", whose
address is _____________________________________________________________________________________ and
_________________________________________________________________________________, whose address is
______________________________________________________________ herein referred to as "Accountant".
— ARTICLE I —
STATUS OF THE PARTIESLodge is a non-profit corporation, with principal offices in the city of ____________________,
State of ________________________, and is a Subordinate Lodge of the Benevolent and Protective Order of Elks of the United States of America.
— ARTICLE II —
EMPLOyMENT OF ACCOUNTANTLodge agrees to hire and retain Accountant in his capacity as Auditor, and Accountant
agrees to such employment on the terms and conditions herein set forth.
— ARTICLE III —
DUTIES OF ACCOUNTANTIt shall be the duty of Accountant to perform the annual financial report of the business
affairs of Lodge for the Lodge year �0____ - �0____, in full compliance with Section �3.040 of the Statutes of the Benevolent and Protective Order of Elks. Lodge promises to furnish Accountant with a copy of this Statute and Accountant agrees to perform his services in accordance with the requirements of said Statute including, but not limited to, completion of all standard financial report forms furnished by the Grand Lodge to Lodge.
Accountant also agrees to complete all necessary annual tax returns required by Federal, State and local agencies (if any), in a timely manner, and have the financial report delivered to the Lodge Auditing & Accounting Committee by June �5, �0____. If any extensions for filing are necessary, Accountant shall make the necessary requests to I.R.S., State or local taxing agency.
— ARTICLE IV —
COMPENSATION OF ACCOUNTANTLodge agrees to pay Accountant for such services as herein set forth the sum of $_________,
immediately upon completion of the financial report and filing of the necessary tax returns as described herein. Lodge also agrees to pay any reasonable necessary other expenses incurred by Accountant, such as filing fees, in the billing by Accountant to Lodge, but in no way to exceed the sum of $___________ as additional expense.
— ARTICLE V —
EMPLOyMENT OF ACCOUNTANTAll records and papers (including but not limited to, books, records, papers and other
documents that belong to Lodge) that Lodge delivers to Accountant with respect to Accountant's duties hereunder, shall remain the property of Lodge.
(Name of Accounting Firm)
(Name of Lodge) (Lodge No.)
(State)
(Street or P.O. Box No., Town, State and Zip Code)
(Street or P.O. Box No., Town, State and Zip Code)
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— ARTICLE VI —
CONFIDENTIALITy OF RECORDS AND PAPERSAccountant agrees that he will not at any time allow anyone to examine, make copies
of, or take possession of, the records and papers described in ARTICLE V.
— ARTICLE VII —
RETURN OF RECORDS AND PAPERS TO LODGEAccountant shall at once return to Lodge all the records and papers described in ARTICLE
V upon the occurrence of: �. Lodge's request that such records and papers be returned to it; or �. Accountant's violation of any commitment under ARTICLE VI; or 3. A request by anyone (other than the Lodge) to examine, copy or take possession
of any such records and papers; or 4. An attempt is made to serve upon the Accountant, whether successful or not,
any judicial administrative order, subpoena or summons having the purpose of requiring the production of such records and papers.
— ARTICLE VIII —
EFFECTIVE DATEThis agreement becomes effective on the date designated hereinabove.IN WITNESS WHEREOF, the part ies have executed this agreement at
____________________________________________, the day and year first above written.
____________________________________ Lodge # _____________ ______________________________________
by_________________________________________________________ ______________________________________
(Designate Place of Execution)
(Chairman of Board of Trustees)
(Accountant)
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EXAMPLE OF INVENTORy CERTIFICATE
Dear Sir:
In connection with your examination of the Balance Sheet of ____________________________,
Lodge #____________, B.P.O. Elks, as of March 3�, �0_____, the following is a summary of the
inventory which has been determined under our general direction and control:
�. Liquor ...................................................$____________
�. Mixers ...................................................$____________
3. Beer ......................................................$____________
4. Wine ......................................................$____________
5. Cigars and cigarettes ..........................$____________
6. Other Merchandise .............................$____________
7. Restaurant ...........................................$____________
The above amounts were determined by: Actual Inventory ______________; Estimated
Inventory______________. To the best of our knowledge and belief:
�. Inventory quantities are correct and were determined by actual count, except as follows:
____________________________________________________________________________________________
�. Estimated inventory was determined in the following manner:
______________________________________________________________________________________________
3. The goods and merchandise included in the inventory are the property of
______________________________, Lodge # ______________, B.P.O. Elks and none are
encumbered, or held on consignment from others, or subject to any liens, except
as follows:
______________________________________________________________________________________________
4. The inventory has been valued at:
Cost: ______________ Cost or Market, whichever lower: ______________ Other:
______________________________________________________________________________________________
(Obsolete, defective, old goods, etc., valued at $_________________________ are not
included in inventory at prices in excess of net realizable value.)
To the best of our knowledge and belief the amounts stated above are a fair and proper valuation
of the inventory for inclusion in the Balance Sheet, for period ended March 3�, �0_____.
Yours very truly,
_________________________ Lodge #________, B.P.O. Elks
By_____________________________________________________
________________________________________________________
________________________________________________________
(Chairman, Auditing Committee)
(Member, Auditing Committee)
(Member, Auditing Committee)
Date Signed:
____________________________
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In many Lodges, the accountant performs quarterly audits, and issues financial statements to the Lodge; this not only keeps the members informed about the financial status of the various entities within the Lodge, but also gives the accountant time to highlight any bookkeeping problems, and/or alert the Officers to any problems with the financial controls-operations.
It is the responsibility of the Lodge Auditing & Accounting Committee to ensure that the accountant does not perform a COMPILATION. He is a professional accountant and therefore should be requested to perform a review or an audit. However, if it is an initial audit, a compilation is acceptable.
As a reminder, the accountant is responsible to only the Lodge Auditing & Accounting Committee. All copies of the Annual Financial Report are to be delivered to them (and not to the Board of Trustees, the Secretary or the Exalted Ruler).
The contents and results of the findings of the accountant should be reviewed by him with the Lodge Auditing & Accounting Committee. The Lodge Auditing & Accounting Committee is to then report these findings on the floor of the Lodge, and request for Lodge approval of the Annual Financial Report. It is most important that the Lodge Auditing & Accounting Committee react to any recommendations made by the accountant, immediately. For your information, the District Deputy, when he makes his official visits, will want to know what action has been taken pertaining to the accountant's recommendations.
In addition to preparing the annual financial report, the accountant is to prepare Internal Revenue Service Forms #990 or 990EZ — "Return of Organizations Exempt from Income Tax", and (if applicable – and most important) Form #990T — "Report of Unrelated Income".
[Section 1-204 continued from Page 4]
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— CHAPTER 2 —SCOPE
2-201 THE SCOPE OF THE EXAmINATION, BY THE ACCOUNTANT, SHOULD INCLUDE, BUT IS CERTAINLY NOT LImITED TO:a. The verification of all cash, including examination of all bank accounts and statements,
stocks, bonds, and other tangible assets.
b. Examine the internal control of the accounting procedure of the Lodge, House and any other facilities of the Lodge. Recommendations for any corrective procedure to appear in the Section of the Grand Lodge Financial Report entitled "Accountant's Recommendations and Suggestions" Page ��. NOTE: It is most important that the accountant document his comments.
c. Reconciliation of the membership rolls and data, with dues, initiation and other fees collected, with a provision for the allocation of prepaid dues applicable to subsequent periods.
d. The exhibits in the financial report shall consist of, but not be limited to, a balance sheet of all Lodge funds, assets and liabilities. A separate statement for any other facility or entity of the Lodge. All to be combined in a consolidated balance sheet.
e. Separate operating statements and/or profit and loss schedules or exhibits are to be provided for the Bar, Restaurant, and any other operating activities. This also specifically applies to activities which may be classified as unrelated business by Taxing Authorities.
f. Method used in verification of all inventories appearing in the separate or consolidated balance sheet.
g. If additions are made to the fixed assets of the Lodge, or any of its facilities, verification should be made and examined, as to proper approval covering such expenditures. Amounts involved covering in such additions should be clearly set forth in the report. Also determine that any and all acquisitions have been made in accordance with the Grand Lodge Statutes. Expenditures in excess of $�5,000 must have Grand Lodge approval.
h. If additions, or disposal of investment funds of the Lodge, or any of its facilities are disclosed during the course of the examination, proper verification and disclosure should be made as to proper approval of such transactions.
i. Other comments should be disclosed in accordance with regularly accepted accounting procedures.
j. Footnotes should be used to set forth any special item appearing in the balance sheet or operating statements that requires a detailed explanation.
In addition to giving each account a name (per above), a number must be assigned from the mandatory uniform CHART OF ACCOUNTS.
2-202 SECURITY:It is essential that the Auditing & Accounting Committee ensure that a proper security system is in effect over all records, cash, etc., in the office of the Secretary and Treasurer; and that the Lodge provides adequate space for such offices in the Lodge building. Compelling either the Secretary and/or the Treasurer to maintain part, or all, of his records off of Lodge premises when the Lodge is able to do otherwise is negligence that will ultimately be detrimental to the functioning of the Lodge.
The Lodge Auditing & Accounting Committee is to ensure that both the Secretary and Treasurer are properly bonded; this also pertains to any of the individuals who are involved with the handling of funds.
The Lodge Auditing & Accounting Committee should also ensure that any Lodge funds — whether of the House Committee, Bingo Committee or any other group(s) — are under proper security and control regulations (Such as register cash, etc.).
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All records, files and safe, are under the control of the Secretary alone; no other member is to have access to the official files of the Lodge, without the knowledge of the Secretary.
2-203 GENERAL:Transactions arise from the events and conditions of the internal operations of a Lodge. A number of attributes concern the transactions when they enter the accounting process. We will review these attributes which relate to:
• Determination of when they occurred
• Who has the responsibility
• Documentation and its correctness; ensuring it is properly reviewed
• Controls over the financial elements and the related paperwork
The following sections will set forth the various areas relating to the business operations of a Lodge. Each section will be divided into two parts:
a. Procedures used by the individual concerned, or the responsibilities assigned to the area being written up;
b. And finally, recommended suggestions for the Auditing & Accounting Committee which are to be used as a guide in their performance of audit reviews.
2-204 qUESTIONS FOR LODGE AUDITING & ACCOUNTING COmmITTEE: 1. Are the Committee Members familiar with the requirements of Grand Lodge Statute
— Section �3.040 "DutiesoftheAuditing&AccountingCommittee"?
2. Have all of the Members reviewed the Grand Lodge "AUDITING, ACCOUNTING AND MANAGEMENT" Manual?
3. Does the Committee review all committee reports after they have been presented to the membership for approval, and to the Lodge Secretary? NOTE: In some areas the Auditing & Accounting Committee reviews the committee reports before they are presented on the floor to the membership.
4. Does the Committee give monthly/quarterly status reports to the membership concerning their reviews?
5. Does the Committee monitor House-Bar operations on a test basis?
6. Is the Committee responsible for taking House Committee inventories? (i.e. liquor, tobacco, food, etc.)
7. If the Lodge has a separate corporation or holding company, in conformance with Grand Lodge Statutes, Sections �6.0�0 or �6.030, does the Committee review the books and records of the corporation/company?
8. Is the Auditing & Accounting Committee familiar with the requirements of Federal Forms 990 and 990T?
9. Were Federal and State taxes filed properly and on time?
10. Is the Auditing & Accounting Committee familiar with the steps necessary to ensure that a satisfactory financial report is filed in accordance with Grand Lodge Statutes?
11. Did the Auditing & Accounting Committee negotiate for the hiring of an outside accountant? Did they ensure that they are the only individuals to work with the outside accountant and to process his financial report?
12. Did the Auditing & Accounting Committee ensure that financial statements were submitted for all entities within the Lodge?
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2-205A UNIFORm CHART OF ACCOUNTS:INTRODUCTION: Use of this Uniform Chart of Accounts is mandatory for all Lodges as stated in Sections 4.330 and �3.040 of the Statutes. It is designed to allow flexibility in the number of different accounts each Lodge will use and is adaptable for use in a computerized system. Each Lodge should prepare its own listing of the accounts it will use and distribute the listing to all concerned for use in classifying assets, liabilities, receipts and expenditures for entry into the accounting system. Use the minimum number of accounts that will satisfy the following requirements:
Accounts needed by Trustees and entity managers for budget comparison and financial management.
Accounts needed to complete Federal, State and local income tax returns.
Accounts needed to complete the annual Financial Report.
The Lodge listing should be updated annually by adding new accounts needed and eliminating those no longer used.
BASIC OUTLINE: �00-00 Series Assets �00-00 Series Liabilities and Equity 300-00 Series Lodge Income and Expenses 400-00 Series Bar or Social Quarters Income and Expenses 500-00 Series Dining Room Income and Expenses 600-00 Series 700-00 Series Use these series as necessary to record income and 800-00 Series expenses for bowling, golf course, swimming pool, etc. 900-00 Series
2-205 AREAS OF INVOLVEmENT BY AUDITING & ACCOUNTING COmmITTEE: • Secretary: Cash Receipts Book — Funds turned over to Treasurer; • Treasurer: Cash Receipts Ledger — Funds received from Secretary; • Comparison of Secretary — Treasurer Cash Receipts — monthly; • Vouchers — Processed and filed — comparison between Secretary's "Bills Against the
Lodge" and those approved for payment by Trustees (their minutes). • Deposit Slips — Bank Statements — Checkbook Balances • Committee Reports • Bar submissions to Secretary • Copies of receipts from all sources (Bar, dues, etc.) • Verification of dues postings to membership records • Disbursements Journal — General Ledger • Charitable donations — Restricted accounts • Contributions received, and how handled • Monthly financial reports by Treasurer • File of Lodge annual financial report and recommendations • Financial operations of House Committee — monthly reports, profit / loss • Lodge Budget • Record of Savings accounts — quarterly interest postings — review of Trustees
records • Fixed assets • Record of Special Accounts — corporations, etc. • Recommendations from Auditing & Accounting Area Member (evaluations) • Inventories • Bar / dining room pricing — purchasing functions — inventory controls, etc. • Review of labor operations — withholding, taxes, etc.
]
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EXPANDING CAPTIONED ACCOUNTS: The last two digits of most of the accounts listed will be "00". These may be expanded or further divided by using these last two digits as follows: �0�-0� Cash on Hand — Secretary's Office
�0�-0� Cash on Hand — Bar #�
�0�-03 Cash on Hand — Bar #�
�0�-04 Cash on Hand — Dining Room
�0�-05 Cash on Hand — Bingo
�0�-06 Cash on Hand — Etc.
2-205b LODGE ACCOUNTING DIAGRAm
Operating Income (400's & 500's)Operating Income is the regular gross amount of
receipts received in the normal course of business. If paid in cash, they are deposited to the bank cash account. If they are to be paid at a later date, they are posted to accounts receivable.
If the amount of income in an accounting period is greater than the expenses needed to generate it, we have a profit, if not, we have a loss.
Profits from these activities are not restricted and can be used to pay any obligation of the Lodge.
Charity Activities (200's)The largest of these is the Bingo. Profit from
these activities must be used to pay the obligations of the Liability call "Charity Budget" within the Current Accounting Period.
[Credits][Debits]
Balance SheetThe Balance Sheet is never closed out. Amounts in the accounts change. This change is analyzed to determine the health of the organization.
Liabilities (200's)Liabilities are things that we owe. Like Assets,
Liabilities have two types, Current and Long Term.Current Liabilities are due to be paid in the present
accounting period. They include amounts due to vendors, the costs of operating the facility and tax withholding from employees.
A special type of liability in an Elk Lodge is the Charity or Restricted Account. It is budgeted to be paid within the Current Period.
An example of a Long Term Liability would be the portion of the Mortgage not due this Current Accounting Period.
Equity (200's)Equity is simply the difference between Assets and
Liabilities. If the Assets are Greater than the Liabilities, we have positive Equity.
Assets (100's)Assets are things of value that we own. Assets are
divided into two types, Current and Long Term.
Current Assets also have two types, Cash and Liquid. Accounts at the bank (with the exception of restricted funds), operating funds and deposits in transit are examples of Cash Assets. Inventories and Accounts Receivable are examples of Liquid Assets: they are not currently cash, but exist to be turned into cash.
Long Term Assets are not meant to be turned into cash, but are needed to support the operation. Examples are the Building, Land, Equipment and Furniture.
The term Accounting Period is defined as April 1st through March 31st.
Operating Expenses (400's & 500's)Operating Expenses are the costs of conducting
business. They include the cost of purchasing inventory, labor costs, supplies and any other costs associated with doing business. In our Lodge the 400 series denotes Bar/Lounge and the 500 series is Dining.
Other Income / Expense (300's)These are items not related to normal operations.
They include Dues and Lodge Activities such as Men's Night, testimonials and special events such as an Italian Night. Profits are not restricted and can be used to pay any obligation of the Lodge.
Profit or Loss StatementThe P&L is closed out at the end of each accounting period with the resulting profit or loss being posted to Equity.
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— CHAPTER 3 —REPORTING
3-201 STANDARD REPORTS:a. Auditing & Accounting Committee
The Subordinate Lodge Auditing & Accounting Committee should be making reviews throughout the year. Each quarter the Chairman of this Committee is to prepare a formal report regarding his reviews performed and submit it to the Lodge Secretary. In addition, the Chairman is to report to the Lodge quarterly setting forth his accomplishments. The Secretary is to file these reports which will be available for: The DDGER Auditor; Accountant; and the Grand Lodge Auditing and Accounting Area Member.
b. Financial ReportingFinancial reporting of the results of the operations is a tool for management in conducting the activities for a Lodge.
We believe monthly statements of club operations are a must and should include at the least, a summary which will show the gross profit by the various sales classifications of the various departments along with operating expenses by line classification with each compared to the budget. This report should be presented to the membership by the Auditing & Accounting Committee, to keep them informed of Club operations. In essence, reported should be the Cost of Sales, Sales and Direct Expenses (Salaries and Wages, Payroll Taxes & Benefits, Music and Entertainment). Cost of Sales (Opening inventory, plus Purchases less closing inventory) divided by Sales will equal Percentage of Sales – Merchandise sold. It is important that this percentage be computed each month in order to ensure Club operation is making the proper profit.
The Treasurer should issue a monthly report regarding the General Fund operations. Simply, this should include, at a minimum, Fund balance at the end of the previous month, plus receipts (Cash receipts submitted to the Secretary / Treasurer) less Lodge expenditures (Payments made by the Treasurer).
c. Committee ReportsEach Committee is required to submit a formal report to the Secretary within one week after the affair was conducted. This report should set forth the Receipts (Tickets sold, raffles, donations, etc.) and Expenses (Cost of food, music, entertainment, ticket printing, etc.) . . . the Chairman of the Committee is to ensure that cash layouts are to be kept at a minimum . . . all bills, signed by the Chairman of the applicable Committee, are to be attached to the report — they will be processed through the normal voucher system. Please note that the report is to be given on the floor to the membership, and then the report is to go to the Secretary.
d. Board of TrusteesThe Board of Trustees are required to give monthly written reports to the membership, in detail, per Grand Lodge Statutes. However, they should give current reports to the membership regarding any investments made, review of bills against the Lodge which they recommend for payment, and any other pertinent information that the members should know about.
e. Budget ReportsGrand Lodge Statute Section ��.070 provides that the Trustees (or an appointed Budget Committee, other than the Trustees — where provided for in the Lodge By-Laws) shall present a segregated budget not later than the last regular session of the Lodge in April; making appropriations for each of the several objects for which the Lodge must or may provide out of monies known to be in the possession of the Lodge . . . or estimated to come into it during the ensuing Lodge year.
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THIS REQUIREMENT FROM THE STATUTE REQUIRES A BUDGET FOR EACH FUND, CORPORATION OR SEPARATE ENTITY OF THE LODGE. Please note: These budgets are to be reflected in the March, 3�st Annual Financial Report.
A budget is the guide for management indicating the goals and limitations placed on it by the membership.
As soon as possible after the year-end closing (March 3�st), information concerning the actual previous receipts and expenditures for each line item of each fund, corporation or entity of the Lodge, should be summarized on a budget worksheet.
Using the prior year information as a guide, giving consideration to factors which may affect the next year's amounts, complete the column for the proposed budget. New line items should be added where anticipated. Activities which generate income should have the estimated gross receipts shown and any necessary expenditures as a separate line item.
Please note: The items listed in the Budget should be in the same order as the Chart of Accounts.
f. March 31st — Annual Financial ReportAs required by the Grand Lodge, the Annual Financial Report, as of March 3�st, is to be submitted to the Grand Lodge Auditing & Accounting Area Committee Member by June 30th. (Thisreportisdiscussedindetailinanothersectionofthispresentation.)
Once this report has been accepted by the Lodge Auditing & Accounting Committee, the Chairman is to present the full report to the membership for their approval. The approval is to be so noted in the minutes of the Lodge.
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— CHAPTER 4 —AREAS OF REVIEW
4-201 LODGE ENTITIES:In all of our Subordinate Lodges, there exist many functional areas, which, although independently operated, are part of the over-all Lodge Business Management. Each one of these functional areas is known as a "Separate Lodge Entity". This encompasses such areas as: The Lodge, House/Club, Bingo/Beano, Lucky 7's, Bell Jar, Special Major Affairs — raffles, etc., and all corporations. Note: Although various Lodges have established corporations, they are a part of the Lodge, as such, therefore are to be considered an entity of the Lodge — there are no exceptions to this rule.
When the budget is prepared at the beginning of the Lodge year, it is the responsibility of the various committees (entities) to submit their budget to the Board of Trustees (or a Budget Committee), which will be incorporated in the over-all budget presentation to the Lodge. The Sections of the Annotated Statutes which cover this are: ��.070 (Lodge); �6.030 (Separate corporation); and �6.040 (House/Club and other facilities). Each entity is required to report to the Lodge membership on a monthly basis regarding actual receipts and expenses versus budgeted amounts.
In the Annual Financial Report, which is due June 30th of each year, each Lodge is required to present a separate financial statement, in detail, for each entity within the Lodge, including corporations. In this report, the revenue and expenses of each entity are to be included in the detailed portion of the report and also in the Combined Balance Sheet (All assets, liabilities and equity).
In order to get a true picture of any entity, Lodges are to distribute overhead costs to each entity, which should result in getting a more meaningful cost of operation. The procedure of charging only direct costs and operating costs to such entities as the House/Club, and then charging the overhead, or indirect costs as Lodge expenses, is misleading and at times works to the detriment of Lodge interests.
Therefore, it is important that Lodges, along with their accountant, work up a formula, percentage-wise, for the allocation of these costs. For your information some of the overhead costs include: Utilities, Officers' salaries, insurance, janitorial expenses, professional services, repair and maintenance, etc.
NOTE: The proper preparation of separate ENTITY statements, along with the allocation of expenses, not only gives the membership a true picture of each operation, but also enables Lodge Management to make decisions which will correct problem areas . . . this could result in the implementation of measures to reduce bar and dining room operations, review of inventory controls, cancellation of certain operations, etc., . . . all for the betterment of the Lodge.
4-202 VOUCHER SYSTEm:The purpose of a Lodge Voucher System is to not only establish a control over all bills, but also to establish a "Checks and Balances" system in the Lodge's financial operations. This will, in most instances, apply to both the Lodge and House accounts.
In general, all bills are to go to the Lodge Secretary, be it through the mail, as a submission from any Lodge Committee, etc. Under no condition are any bills to be submitted directly to the Treasurer, by an individual or committee, for payment.
The Secretary, upon receipt of any bills, is to ensure when applicable that the bills are properly approved and dated by the Committee involved, or by an individual concerned. Once this is accomplished, the Secretary is ready to prepare the vouchers.
The Secretary is to prepare a voucher (Ref. 4-�0�a) for each bill received, regardless of whether it is a recurring bill or not; also no monetary limit is to be placed on whether a bill should be vouchered . . . the governing rule is: VOUCHER ALL BILLS. Once the vouchers
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have been written, they are to be approved by the Secretary and the Exalted Ruler. Having the Exalted Ruler approve the vouchers permits him to review the bills before they are processed through the Lodge "approving cycle". The Lodge Secretary is to now submit the vouchers / bills to the Board of Trustees for their review.
The Secretary of the Board of Trustees, upon receipt of the vouchers, is to verify that the vouchers submitted by the Lodge Secretary follow in numerical sequence; that is, the first voucher to be reviewed at the Board meeting follows in number the last voucher approved at the previous Board meeting. NOTE: In many Lodges the Voucher number assigned is also the check number.
Each voucher reviewed by the Trustees is to be approved in writing (Ref. 4-�0�b), by no less than three Trustees. The Secretary of the Board of Trustees is to record in his minutes book, all such vouchers approved, listing in numerical order (by voucher #), name of Vendor, what bill covers, dollar amount, etc.
Should the Board of Trustees decide not to approve a voucher, the Board Secretary is to inform the Lodge Secretary and the Exalted Ruler of the action taken. However, if the matter is not resolved, the Board Secretary is to so note in his minutes, and the bill is to be held over for further discussion.
Once the Board of Trustees' approving cycle is completed, the Board Secretary will return the vouchers / bills to the Lodge Secretary.
At the next Lodge meeting the Chairman of the Board of Trustees, under Reports of Committees, will report: "The Board of Trustees met, reviewed the bills against the Lodge, have approved them and recommend they be paid."
The Lodge Secretary, under "Bills Against the Lodge", is to read off the bills, in Voucher number order, in detail. Please note that the membership has the final approval of the bills — and at times, may turn down a payment. Subsequent to the meeting the Secretary is to list the vouchers, in detail, in the Lodge minutes.
The Vouchers / bills will then be given to the Treasurer for payment.
NOTE: At times, due to an emergency, bills have to be paid without the above noted approvals. However, when such an incident occurs, the Lodge Secretary is to contact the Chairman of the Board of Trustees (it may be by phone), get his approval to pay the bill and then note the approval on the voucher, with the date. The bill will then be given to the Treasurer to pay. However, once the check is written, all such bills are still to be processed through the approving cycle.
Once the Treasurer has issued the check; he is to note the check information on the bill and cancel same; the voucher / bills are now to be filed.
Attached herewith is a copy of a sample voucher; you are not restricted to this form, as long as any form you use contains the necessary data therein; also illustrated is a sample of an approval stamp to be used by the Trustees. Neither voucher forms nor the stamp shown are supplied by the Office of the Grand Secretary, since most Lodges adjust the design of these to their needs and preferences, especially wanting the Lodge's name and number, and since both items are easily available anywhere through small printing shops and office supply stores.
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BOARD OF TRUSTEESAPPROVAL
1. _______________________________
2. _______________________________
3. _______________________________
4. _______________________________
5. _______________________________
Set forth to the left, is a sample of an APPROVAL STAMP, which is to be used by the Lodge Secretary. Prior to presenting the Vouchers / Bills to the Board of Trustees, the Secretary is to place the "STAMP" on each Voucher . . . . if room will not permit the stamp to be placed on either the Voucher or Bill, place it on the back part of the voucher.
LODGE NO.B.P.O. ELKS - UNITED STATES OF AMERICA
ORDER ON TREASURER ______________________________________________20_________
PAY TO THE ORDER OF _________________________________________________________
________________________________________________________ DOLLARS, $ _____________ AMOUNT
TOTAL
_________________________________________________________________________________ EXALTED RULER SECRETARY
LODGE NO.B.P.O. ELKS - UNITED STATES OF AMERICA
ORDER ON TREASURER ______________________________________________20_________
PAY TO THE ORDER OF _________________________________________________________
________________________________________________________ DOLLARS, $ _____________ AMOUNT
TOTAL
_________________________________________________________________________________ EXALTED RULER SECRETARY
No.No.
DATE __________________ �0 ______
TO ______________________________
FOR _____________________________
__________________________________
RECEIVED______________________
$ ________________________________
No.
DATE __________________ �0 ______
TO ______________________________
FOR _____________________________
__________________________________
RECEIVED______________________
$ ________________________________
4-202a SAmPLE VOUCHER:
4-202b SAmPLE TRUSTEES STAmP:
No.
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4-203 FUND RAISING COmmITTEES:a. General Chapter 6 of the Grand Lodge Auditing, Accounting and Management Manual sets
forth the procedures, in general, to be used by Fund Raising Committees. However, for the benefit of the Lodge Business Management operations, this section sets forth the procedures in greater detail.
This section, which applies to revenue-producing committees, does not include such committees as: House, Bingo, Lucky 7's, Bell Jar, etc.
PROCEDUREb. Planning
When any committee is activated to conduct an affair, be it in the Lodge, or some outside location, the Chairman of the committee is to ensure that he appoints one of the committee members to act as Secretary. The latter is to keep detailed records of all preparatory work, meetings, rentals (which includes halls, equipment, etc.). It will be the responsibility of the Chairman to keep the Exalted Ruler informed, on a continual basis, regarding the activities of his Committee.
Although the Committee has the right to negotiate with caterers and musicians, it is suggested that if the Committee plans to commit the Lodge to a contract for either the caterer or the musicians, the contract should be reviewed by the Board of Trustees, or the Lodge Auditing & Accounting Committee. A copy of any contract is to be placed in the Committee's file (Note: Once the affair has been completed, the Committee Chairman is to turn the file over to the Lodge Secretary, who will keep it for the next year's committee).
In many cases, committees will require an advance from the Lodge to defray initial expenses. If this item is not in the budget, the Committee Chairman is to present his requirements to the Board of Trustees, and once approved will then place a motion on the floor for the funds. Please remember that when the committee's final report is made out, it is to include an item covering the "borrowed funds from the Lodge" . . . in some instances, the money is returned to the Lodge Secretary as soon as the committee has receipts (The Lodge Secretary is to issue a receipt to the committee, which will then become part of the final report.).
c. Accounting For Income and ExpensesWhenever the Committee meets, it is up to the Chairman to notify the Exalted Ruler. If at any time it appears that the Committee is not going to break even, or make a profit on the affair, consideration is to be given to either trying to raise additional funds or to cancel the affair.
The Chairman is to ensure that no cash payments are made by his committee. However, in some circumstances such payments may be made but only to cover small items — KEEP IT LIMITED. The musicians, or caterers, are to be informed in advance that they will be paid by check . . . it is the responsibility of the Chairman to ensure that the proper checks are prepared. Also, no help is to be paid in cash . . . all by check.
Should the Affair Committee need liquor or food from the Lodge House Committee, it is up to the Committee to negotiate prices; however, when the evening is completed, the Chairman of the House Committee is to submit a bill, for all goods and services furnished, to the Affair Chairman. When the Committee submits their report to the Lodge Secretary, the bill which is part of the report expenses is to be attached. The Secretary will, subsequently, process the bill through the Lodge voucher system for payment to the House Committee.
d. Final ReportThe Chairman of the Affair Committee is to ensure that his final report is ready for presentation to the membership within two weeks after the affair is held; it is up to the Exalted Ruler to see to it that the report is presented promptly (Ref. 4-�03a). The Committee Chairman is to submit a copy of the report, with all receipts and bills attached, to the Lodge Secretary. The Lodge Secretary will then issue a receipt for all funds submitted, which then becomes part of the Affair file.
The Lodge Treasurer is to act as Treasurer of all committees; however, under no circumstances are any funds to be remitted directly to the Treasurer — all receipts are to be submitted to the Secretary first.
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The Secretary is to post the receipts of the affair in his cash receipts book, and then turn the funds over to the Treasurer who will enter the data in his cash receipts journal, and make the necessary deposit. At this time, the Secretary is to start processing the submitted bills through the Lodge voucher system.
Note: Whenever, the Secretary turns funds over to the Treasurer, the latter is to issue a receipt to the Secretary (Ref. 4-�03b).
The Lodge Secretary is to ensure that he has blank copies of committee reports on file in his office. Whenever the Secretary receives a committee report, he is to file it for future reference for either the Lodge Auditing & Accounting Committee, the Accountant, or the next year's Committee Chairman.
Attached herewith is a sample "REPORT OF SPECIAL EVENT" (Note: forms not available from Grand Secretary, obtain locally).
4-203a REPORT OF SPECIAL EVENT:REPORT OF SPECIAL EVENT
(TO BE COMPLETED BY CHAIRMAN AND TURNED IN WITHIN TWO WEEKS OF EVENT DATE)
___________________________________________________________________ Lodge # _____________________________________
1. Event Title:____________________________________________________ Date:_____________ Hours: From_______To _______
2. Lodge Event?_______ Benefit of:_______________________________________________________________ Catered Event _____
3. Chairman:______________________________________ Facilities Used:__________________________________________________
4. Name of Band:____________________________________ Other Entertainment:__________________________________________
5. Open Bar? Yes____ No_____ Raffle? Yes____ No_____ Raffle Prizes:________________________________________________
6. Attendance limited to Elks and Guests? Yes_____ No_____ If No, Who Attended: _____________________________________
INCOME
7. No. of Tickets Sold ______________ @ $____________ Per Ticket ........................................... $__________________________
8. No. Raffle Tickets Sold ____________ @ $___________ Per Ticket .......................................... $__________________________
9. Payment Collected for Catered Event: ($___________ Per Person) .............................................. $__________________________
10. Other Income _________________________________________________________________ $__________________________
11. Other Income _________________________________________________________________ $__________________________
12. TOTAL INCOME ......................................................................................................................... $__________________________
EXPENSES
From Club Supplies Purchased
13. Band: $__________ Other Entertainment: $____________ $
14. Raffle License: $___________ Prizes: $_______________ $
15. Food (Including Coffee, Tea, Etc.)............................................ $ _________________________ $__________________________
16. Liquor: $_______ Beer: $_______ Sodas: $_______ .............. $ _________________________ $__________________________
17. Paper and Plastic Supplies ........................................................ $ _________________________ $__________________________
18. Other (List) ________________________________________ $ _________________________ $__________________________
19. _________________________________________________ $ _________________________ $__________________________
20. SUB-TOTALS $ _________________________ $__________________________
21. TOTAL EXPENSES ................................................................................................................................ $__________________________
22. PROFIT (Total Income Less Total Expenses) ......................................................................................... $__________________________
Distribution: Original to Lodge Secretary Copy for Committee File Signature__________________________________ Date:____________
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_____________________ 20_______
Received of Bro. _____________________________________________
SECRETARY_OF______________________________LODGE_NO.________________B.P.O.E.
__________________________________________________Dollars
$________ _ _____________________________ TREASURER
March 21 06 Charles Smith
0000000 xxx
FOUR HUNDRED XXXXXXXX
400.00
TREASURER'S RECEIPTNo. ___________
No._ _______
Date______________________ 20_______
To_ _______________________________
For________________________________
__________________________________
_ _ _ _ _ _ $______________
Received_________________________________
Code_5532
________________________________ Lodge_No._________BENEVOLENT_AND_PROTECTIVE_ORDER_OF_ELKS
_____________________ 20_______
4-203b SAmPLE OF SECRETARY / TREASURER RECEIPTS:
CASH RECEIVED By SECRETARy (posted to his cash book)wHO THEN ISSUED A RECEIPT . . . . . . . . .
TREASURER RECEIPTED CASH (posted to accounting records).
SECRETARY'S RECEIPTNo.________102
1061
No._ _______
Date______________________ 20_______
To_ _______________________________
For________________________________
__________________________________
_ _ _ _ _ _ $______________
Code_5529
102
March 21 06
Jim Jones
Entertainment Committee
Valentine Dance
400.00
Received of Bro. ____________________________________________
_____________________________________________________ Dollars
FOR _______________________________________________________________________________
$_________ _______________________________ SECRETARY
0000000 xxxx
March 21 06
Jim Jones
FOUR HUNDRED XXXXXXXX
ENTERTAINMENT COMMITTEE – Valentine Dance
400.00
1061
March 21 06
Charles Smith
Entertainment Committee
Dance – Valentine Dance
400.00
Jim Jones
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4-204 TRANSFER OF FUNDS BETWEEN ACCOUNTS:a. Purpose
The purpose of this form is to control all transfers between accounts, keep the membership informed of such transactions, and most importantly, have back-up documentation for both the Lodge Auditing & Accounting Committee and the outside Accountant (Ref. 4-�04a for sample of form.) NOTE: ALL SUCH TRANSFERS wILL REQUIRE PRIOR APPROVAL OF THE LODGE MEMBERSHIP.
b. Use of FormThis form is to be used for transfer of funds between:
• The General Fund and other Accounts (This will also require a voucher);• One savings account / investment and another; and• From a savings / investment account to the General Fund.
c. General Rules• The Chairman of the Board of Trustees (or Secretary of the Board) is to prepare
a Transfer Form for each transfer;
• Each such form will require the approval of all five members of the Board of Trustees; and is to be numerically controlled.
• A completed copy will:
• Become incorporated in the Trustee's minutes;
• Be filed by the Lodge Auditing & Accounting Committee (or Lodge Secretary) for use by the outside accountant, in his audit (monthly, quarterly or annually);
• All funds transferred from the savings / investment accounts are to be submitted to the Secretary for posting to his cash receipts books (He in turn will remit the funds to the Treasurer for deposit).
NOTE: Under no circumstances are any funds to be drawn out of an investment account and be given directly to the Treasurer to pay a bill, bypassing the Lodge voucher system. The Trustees cannot pay any bills directly either.
• The Board of Trustees are required to notify the membership of such completed transactions at the next regular Lodge meeting.
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Transfer No. ________
Date ______________
Transfer of Funds Between Accounts
Account: __________________________
Transferred To: ____________________
Date Check No. Item Value
Total Value
APPROVED — BOARD OF TRUSTEES: DATE: ______________
CHAIRMAN: ______________________________
MEMBER: _________________________________
MEMBER: _________________________________
MEMBER: _________________________________
MEMBER: _________________________________
4-204a SAmPLE OF TRANSFER OF FUNDS BETWEEN ACCOUNTS FORm:
– �3 –
4-205 CHECKING, SAVINGS ACCOUNTS, AND RESTRICTED FUNDS:
GENERALSection ��.060 of the Annotated Statutes requires that the Treasurer be:
• Custodian of all accounts; and
• Treasurer of all committees
This includes, but is not limited to:
• General Fund • Lucky 7's; Bell Jar
• House Committee • Raffles, etc.
• Bingo / Beano • All corporations
• Las Vegas
It is suggested that Lodges try and limit the number of checking accounts they use. The average Lodge should rarely need more than one checking account if it uses the Uniform Chart of Accounts properly.
NOTE: Under no condition is any individual / committee, other than the Treasurer, to have any control over Lodge checkbooks.
a. Checking Accounts
1. The Treasurer of the Lodge shall sign all checks unless the By-Laws also provide for a member of the Board of Trustees designated by the Treasurer to sign, and is approved by the Lodge. The Treasurer is initially to meet with the Lodge Officers, and select the individual who will be authorized to be the co-signer of checks. In addition, two alternates should be selected in case of illness. All such selections are to be approved by the Lodge.
2. The exception to �. above, is as follows:
The second signature on other than the General Fund and House Committee checks is to be that of the Committee Chairman; for instance: Bingo/Beano checks are to be signed by the Treasurer and the Chairman of the Bingo/Beano Committee.
3. The authorization cards will then be completed and be submitted to the applicable bank.
4. The Treasurer will never issue any checks from either the General Fund or House Committee checking accounts without first receiving a properly approved voucher (approved by the ER, Secretary and Board of Trustees).
NOTE: An exception to this rule is if there is discount or liquor bill involved; then the Secretary will contact the Chairman of the Board of Trustees for his approval and so note this on the Voucher — the voucher will then be given to the Treasurer who will write the check — the Voucher will then be given back to the Secretary who will then process it through the normal approving cycle.
5. Bank statements are to be reconciled on a monthly basis.
6. The Lodge is to establish a maximum amount of funds which may be in either the General Fund or the House accounts. All excess Funds from the House Committee will be transferred by means of a voucher to the General Fund; the latter excess funds are to be transferred to the Trustees, by means of a voucher, to be invested. The Membership is to be notified of this action.
7. No checks are ever to be made payable to cash; In addition, any checks issued from Bingo, Bell Jar, etc. are to be made payable to a specific person (not a member), firm, partnership or corporation with the purpose specified on both the check and check stub. NOTE: In some instances they may be payable to the Lodge General Fund.
8. No checks are ever to be pre-signed by the Lodge Treasurer.
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b. Savings Accounts1. All investment of a Lodge's funds are to be made by the Board of Trustees, under the
direction of the Lodge membership. The Board is required to notify the membership of any investments and/or changes, before any action is taken.
2. The Board of Trustees is to keep a record of all investments which shall show original cost, the due dates, and amounts of deposits made by it and the dates and amounts of drafts drawn from the bank by order of the Lodge.
NOTE: If the investment firm issues monthly detailed reports, covering the above items, this will suffice; however, separate records should be kept concerning withdrawals.
3. As noted previously under Item a-6, all excess funds will be transferred by means of a voucher. Should the Lodge need to transfer funds from the Savings / Investment accounts to pay Lodge bills, the Board is to draw up a Transfer of Funds Form (Ref. 4-�04a). The funds will then be transferred directly to the General Fund through the Secretary who is to post the data to his cash receipts book and then turn the funds over to the Treasurer for posting and deposit.
NOTE: Withdrawals from Savings Accounts should never be used to pay bills directly.
c. Restricted FundsThese funds represent money collected and held in trust to be used for the sole purpose for which it was intended. It is up to the Treasurer to set up such accounts in his books of account, and ensure that these funds are only used for the intended purpose and not by the Lodge.
1. Examples of restricted accounts are: National Foundation, Major Project, endowments, etc.
2. Whenever funds are required from the restricted account, the Chairman of the Committee is to present a letter to the Secretary explaining the need. A voucher will then be drawn up, with the letter attached, and then go the normal route of the voucher approving cycle. The Chairman of any such Committee is to let the membership know of any such action and why.
3. The Treasurer when reporting "Receipts of the Session", is not required to report the funds in the restricted accounts; the Committee Chairman should take care of this.
4-206 GENERAL COmmENTS PERTAINING TO BINGO/BEANO, BELL JAR, SEVEN-UPS, LAS VEGAS, ETC.:a. General
In order to prevent any problems with either the Grand Lodge or State/Federal governmental regulations, the Lodge Treasurer is to be Treasurer of all of the above mentioned Committees. In order to eliminate any questions, etc., if need be, it is suggested that the Treasurer become part of the Committees concerned; however, under no condition will he participate in any of the Committees' operations.
The financial records of all games are to be kept in the office of the Secretary / Treasurer; no individuals are to keep any of the records at home.
The Chairmen of the various Game Committees are to be in full charge of, and primarily responsible for, the proper utilization of all funds derived from all games. However, this is governed by the following:
• Adherence to state rules and regulations; and
• Conformance to budget requirements.
All checks issued are to be signed by both the Treasurer and the Chairman of the Committee involved. No checks are ever to be made payable to cash—they are to be made payable to a specific person (never a member), the Lodge, firm, partnership or corporation—and the purpose is to be specified on both the check and on the check stub.
– �5 –
b. ProceduresWhen operating any games the Committee Chairman is to ensure that strict controls exist over all cash operations at all times.
A strict accountability is also to be maintained over the following:
• Number of Bingo/Beano cards issued to any individuals, be it for the admittance table or to sell on the floor. At the end of the evening the total cash and cards turned in should match the total number of cards initially issued.
• Bell-Jar, Seven-Ups — an accountability is to be established over all tickets; this includes tickets issued, cancelled ticket winners, cancellations, etc. A log is also to be established reflecting all of this data. Under no condition are any tickets to be destroyed until the Lodge Auditing & Accounting Committee has reviewed the records concerned, or as state laws require.
NOTE: If there are any questions regarding any type of games, contact your District Deputy Grand Exalted Ruler; should it not be resolved, the District Deputy is to contact the Area Member of the G/L Auditing & Accounting Committee.
4-207 THE BUDGET PROCESS:4-207-1 Definition: The budget process is that phase of accounting dealing with planning
the activities of a Lodge in financial terms and comparing actual progress with the plan. It is a management tool that is most effective when actual revenue and expenses are compared to the budgeted amounts periodically during the year, and management decisions are made to adjust operations as needed. This enables the Lodge to manage its operations to attain a profit sufficient to finance the Lodge's fraternal and charitable objectives, to provide for growth and prevent year-end losses.
4-207-2 Statutory Requirements: A budget is required for every entity of the Lodge as expressed in Sections ��.070 (Lodge), �6.030 (separate corporation) and �6.040 (Club and other facilities). These Statutes also require that each entity report to the Lodge monthly their actual progress as compared to the budget. Budgets must be presented to the Lodge for approval no later than the final regular meeting of the Lodge in April.
4-207-3 Preparation of the Budget: The initial action should be the Exalted Ruler-elect requesting from each of his Committee Chairmen their best estimate of fund-raising income and a detailed estimate of their anticipated expenses. The Secretary, Treasurer and Trustees should commence early to assemble estimates of those budget line items that do not require prior year actual data, such as dues and fees income, mortgage principal, interest expense, insurance, etc. With an effective accounting system, where postings are kept current, the General Ledger should provide actual income and expense data for the prior year within a short time after March 3�st. The Trustees and other entity managers convene a budget meeting or series of meetings and develop the best available estimates, giving consideration to the Exalted Ruler's plans, the committee estimates and prior year experience. The following should be considered:
- Prepare worksheets in advance. Examples are shown in Illustrations 4-�07a – 4-�07e.
- Budget by same line items that are used to record income and expenses.
- Prepare income section first on the theory that you should not spend more than you expect to receive. Be realistic and conservative.
- When preparing the expense sections, estimate fixed and semi-fixed expenses first, i.e., those over which the Lodge has little or no control.
- Prepare separate schedules where more detail is desired, such as a detailed list of charity donations to be made.
- When budgeting activities which generate income, such as bingo or fund-raising events, always budget gross receipts and expenses, never the net income.
Rev. 3/95
– �6 –
- Do not overlook capital items which are not "expenses", such as purchase of equipment, mortgage principal, bond redemption, etc.
- Budget may include an amount for contingent purposes to cover unforeseen emergencies. Expenditures therefrom require a two-thirds affirmative vote of the Lodge.
- It is not good business practice to prepare a deficit budget. Keep expenses within the limits of anticipated income.
- It is advisable that the Lodge Trustees coordinate the various budgets to prevent overlapping and duplication.
4-207-4 Financial Operations: It is of extreme importance that the members recognize that each entity of the Lodge is to be financially self-sufficient adhering to their own budget; understanding that the funds from the Lodge are NOT to be used to maintain, or support, any other entity of the Lodge; such as the Club (Bar and Dining Room); Swimming Pool; Bingo; Tear Tickets; Corporation, etc.
The only exception to the above will pertain to the institution of an entity wherein a bank is required; however, in this case the funds transferred from the Lodge will only be considered as a “LOAN” and are to be returned to the Lodge as soon as possible.
– �7 –
301-00302-00305-00307-00
330-00331-00334-00335-00337-00339-00
LINE
No.
W O R K - S H E E TB U D G E T F O R L O D G E
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PRIOR YEARBUDGET
ACTUAL BUDGETREQUESTED
NEWBUDGET
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INCOMEDuesFeesRentInterest etc. etc. TOTAL INCOME
EXPENSESAccountingAuditBulletinKey Card ExpenseConvention ExpenseDepreciation etc. etc. TOTAL EXPENSES
PROFIT (LOSS):
SUMMARY — NEW BUDGET INCOME EXPENSES PROFIT (LOSS)LodgeBarDining RoomBingoSwimming Pool SUB-TOTALMortgage PrincipalNew Beer CoolerNew Oven and Grill
GRAND TOTAL
Illustration 4-207a
INITIALS DATE REFERENCE
PREPARED BY
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APPROVED BY
– �8 –
401-00402-00403-00
415-01415-02415-03415-04
405-00407-00
420-00424-00425-00431-00
INITIALS DATE REFERENCE
PREPARED BY
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APPROVED BY
W O R K - S H E E TB U D G E T F O R B A R
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INCOMESales, Liquor / Wine " , Beer " , Sundries / SodasTotal Sales:Purchases, Liquor / Wine " Beer " Bar Supplies " Sundries / SodasTotal Purchases:
Cost of Sales (Line 10 divided by Line 5)
GROSS PROFIT (Line 5 - Line 10)
Recreation Room IncomeMachine Income etc. TOTAL INCOME:
EXPENSESAdvertising / PromotionAuto ExpenseRecreation Room ExpenseCleaning Supplies etc. etc. TOTAL EXPENSES
PROFIT (LOSS):
Illustration 4-207b
% % % %
– �9 –
501-00
515-00
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520-00524-00525-00531-00
INITIALS DATE REFERENCE
PREPARED BY
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APPROVED BY
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INCOMESales, Food
Purchases, Food
Cost of Sales (Line 4 divided by Line 2)
GROSS PROFIT (Line 2 - Line 4)
Other Income etc. TOTAL INCOME:
EXPENSESAdvertising / PromotionAuto ExpenseDining Room SuppliesCleaning Supplies etc. etc.
TOTAL EXPENSES:
PROFIT (LOSS):
% % % %
Illustration 4-207c
– 30 –
Illustration 4-207d
601-00602-00
610-00611-00612-00613-00614-00615-00
INITIALS DATE REFERENCE
PREPARED BY
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APPROVED BY
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(2)(1) (3) (4)
INCOMECard Sales - BingoOther Income etc. etc. TOTAL INCOME:
EXPENSESPayouts - PrizesBingo SuppliesDepreciationInsuranceLicense - FeesPublic Service & Charities etc. etc. TOTAL EXPENSES:
PROFIT (LOSS):
– 3� –
INITIALS DATE REFERENCE
PREPARED BY
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W O R K - S H E E TB U D G E T F O R S W I M M I N G P O O L
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INCOMEMember Dues - PoolDaily ChargesRefreshment StandPool Parties etc. etc. TOTAL INCOME:
EXPENSESSalaries & WagesPayroll TaxesEmployee BenefitsDepreciationInsuranceUtilitiesPool SuppliesRefreshment Stand SuppliesPool Party Expenses etc. etc. TOTAL EXPENSES:
PROFIT (LOSS):
Illustration 4-207e
701-00702-00703-00704-00
710-00711-00712-00713-00714-00715-00716-00717-00718-00
– 3� –
4-208 PETTY CASH — ImPREST FUND:a. Petty CashAll Petty Cash Banks established in a Lodge, regardless of the area, require the approval of the membership. Such funds are to be limited in nature with restrictions set as to their use. The Lodge Secretary/Treasurer are to ensure that the proper expense accounts for Petty Cash are established (use the Grand Lodge Chart of Accounts).
1. Areas which may use Petty Cash Funds:• Secretary's Office• House Committee
2. Uses of Petty Cash Funds:• The Lodge Secretary is to limit the use of his Petty Cash Funds to the purchase of
stamps, and like minor items.
• The House Committee is to limit the use to the purchase of minor items for the bar operations (limes, lemons and the like).
• The Petty Cash Fund is to be restricted to the above mentioned areas, and is not ever to be used by any other Lodge Committees (Such Committees are to follow the procedures set for their operations).
At any time purchases are made, a receipt is to be obtained and be placed with the balance of the Petty Cash funds.
Under no condition is the Petty Cash Fund ever to be used to pay hired help (Such payments are to always be made by check, regardless of the amount involved).
3. Replenishment of Funds• Any area requiring a replenishment of funds is to prepare a voucher; attach the
necessary receipts and then have the voucher processed through the Lodge / House Voucher System.
• Whenever the Treasurer issues a check for the replenishment of the Petty Cash Fund, the check is to be made payable to the "Secretary", "House Committee", and not to an individual.
NOTE: The Treasurer is to set up a Petty Cash File for all such payments; this file will be made available to the Lodge Auditing & Accounting Committee and the Lodge Accountant.
b. Imprest FundAn Imprest Funds is to be restricted as to its use, and is to be considered as a checking account. In most cases, this account is to be only used in areas where cash payments are required on delivery of certain alcoholic beverages. Whenever a cash payment is made, a receipted bill is to be obtained and at that time, the individual who is responsible for the Imprest Fund is also to receipt the bill.If a Lodge needs to establish such a fund, the individual concerned is to meet with the Board of Trustees for their approval. Once this is accomplished, a resolution is to be presented to the membership, specifying the following: • Maximum authorized amount of the fund.
• Person(s) who will operate the fund and who will be held responsible for either the cash advanced or receipts for purchases made.
• Kind of purchases authorized, as well as those prohibited, in specific terms.
• Authorization for the Treasurer to re-establish the Fund on the first day of the Lodge new fiscal year (April �st).
NOTE: Under no condition is this account to be used for the purchase of fixed assets. In addition, this account is not to be used by any other committee.1. Replenishment of Funds
Follow Section a-3 as set forth previously under Petty Cash.
NOTE: As in the case of Petty Cash, the Secretary / Treasurer are to ensure they set up the proper account code numbers, separate from Petty Cash (using the Chart of Accounts).
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The procedure described permits proper accounting for expenses involved, and provides the required "checks and balances". Under no condition is the House / Club supervising or managing body ever to have its own checking account for paying bills which is in violation of Sec. ��.060 of our Annotated Statutes. All bills not under the Petty Cash / Imprest Fund operations are to be paid by check going through the proper Voucher System procedures.The Imprest Fund is to be closed out at the end of the fiscal year by having the individual in charge of the fund turn in to the Secretary / Treasurer the remaining receipted bills and the balance of cash on hand. The Treasurer, based on the Lodge giving the proper approval initially, will issue a check on April �st re-establishing the Imprest Fund.
4-209 CLUB mANAGEmENT:GOVERNMENTSection �6.040 provides, "The Club, social parlor or other facility established in connection with the Lodge, whether the Lodge is incorporated under the provisions of Section �6.0�0 or is unincorporated, shall be managed, supervised and controlled by one of the following methods (To be determined by Subordinate Lodge By-Laws): a. By the Exalted Ruler, Esteemed Leading Knight, Esteemed Loyal Knight, Esteemed
Lecturing Knight and the Trustees of the Lodge (sometimes known as "Board of Directors"); or
b. By the Trustees of the Lodge; or c. By a House Committee (of not less than 3 or more than �3) to be appointed by the
Exalted Ruler of the Lodge. (The exact number must be set forth in the Subordinate Lodge By-Laws).
It is the responsibility of this selected group to supervise any and all of the activities of the club, social parlor or other facilities established in connection with the Lodge.
MANAGEMENTThe manager in a small Lodge might be the Exalted Ruler, Chairman of the Board of Trustees or Chairman of the House Committee. In larger Lodges it is probable the manager may be a professional hired by the House Committee.
DUTIES OF MANAGERThe duties of the manager are many and varied: selecting the staff; providing internal controls of funds and assets; establishing competent record keeping; supervising purchases, receiving, operations of the grill and restaurant; in addition he is responsible for the maintenance of equipment, sanitation and quarters.In accordance with Grand Lodge Statute �6.040 it shall be the duty of the supervising or managing body of the Club, Social Parlor or other Facility, to present to the Lodge for approval on or before the first regular Lodge meeting in May of each year, a separate and comprehensive budget for the proposed operation of the Club, Social Parlor or other Facility.Each supervising or managing body shall submit a monthly written report to the Lodge showing the financial condition of the Club, Social Parlor or other Facility, with a comparison to each budget item.
INTERNAL CONTROLSIt is well known that constant attention must be paid to the entire operation of the bar and dining room due to careless employees, employees who are not trustworthy and those who are inefficient. Any of these may cause spillage, over-pouring of drinks, free drinks to friends, disappearances, improper recording of cash received, poor accounting practices and theft. Each of these create losses which could be avoided with proper internal controls.Each club should have a recording cash register, with sufficient flexibility to record all sales by product creating a numbered continuous tape locked within the cash register. Someone other than the waitress or bartender should be the only one with access to the locked tape.These tapes should be checked with cash receipts turned in by the employees, and eventually be submitted to the Lodge Secretary.
BEVERAGE COST CONTROLCost of goods sold in the bar must be controlled; steady portions sold, proper pricing, avoidance of over-pouring, spillage and proper purchasing. It is recommended the cost of goods sold does not exceed 35% of gross income.
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All purchasing should be under the direct control of the manager; payment of purchases should only be paid as authorized by him. The exception would be when the vendor requires cash on delivery. If this is the case, then the person paying the bill must have an itemized statement, compared with the delivery to determine if all items charged for are received; then a copy marked "paid" and signed by the delivery person.
The inventory stockroom should be controlled by someone other than the bartender. It should be securely locked at all times and only one person should have access for the purpose of storing and issuing the merchandise. A requisition in duplicate should be required for all merchandise issued.
A perpetual inventory record should be maintained and physical inventory should be taken at least monthly to be compared with the balances shown on the inventory cards. These inventory cards should be checked by the Subordinate Lodge Auditing & Accounting Committee periodically and without advance notice.
LABOR COSTSSalaries and wages in the bar should never exceed 35% of gross sales. This can be controlled by a study of the hours the bar is open and the non-productive periods having a minimum of employees on duty.
ENTERTAINMENT COSTWe feel the cost of entertainment should be an expense where it is used. If you hold a dance and the Lodge receives the proceeds, then the cost should be charged to the Lodge.
Entertainment in the bar should be charged to the bar as cost of goods sold and should not exceed 6% of the gross income. If it is in the dining room, then it should be charged to the dining room, and again never more than 6% of the gross income.
FOOD SERVICEDining Room service is probably one of the most controversial and potentially financially dangerous of all the operations from a profit and loss standpoint.
A Lodge should not enter this field without first making a thorough survey and evaluation before entering the food business. Is there a sufficient demand for these services? Are there enough member customers to provide a profit or at least a break-even? Have you sufficiently checked the cost of entering this new venture? Would competition of local area restaurants affect the dining room or the Lodge in any way? Should we consider a full menu or just fast-food type service? Are physical facilities adequate? Can we pass local sanitation requirements and have we sufficiently studied licensing regulations if such exist?
If your survey indicates food service may be profitable, you must realize an efficient operation requires planning and very close supervision.
Close attention must be paid to the menu; DO NOT TRY TO SERVE EVERYTHING. Keep your menu small with a minimum number of items. Prices must be developed to provide a profit and yet be attractive enough to bring your members in to dine with you.
It is very important that a monthly inventory be taken with a complete comparison between purchases, sales and ending inventory to be assured nothing is being given away or stolen.
Monthly reports of income and expenses with a strict inventory comparison should be presented to the House Committee and reported to the Lodge. Prices must be adjusted as well as portions served to insure a profit in the dining room. Strict inventory control is a must if you are to have a profit.
Proper purchasing is a must, then you must be assured you have received what you ordered, that you receive what you are charged for and that it is stored properly to avoid spoilage. You must have someone in charge who is knowledgeable about food service; someone who will purchase quality merchandise at a favorable price. The grade, size, pack and quality must be proper and satisfactory for you to serve quality food.
As in the bar, cost of goods sold should never exceed 35% of gross sales and your labor should also not exceed 35%. Volunteers should be utilized whenever possible.
If you find your dining room is constantly losing money, then consideration should be given to closing your food service. Those who continually lose money are fooling themselves when they say they keep the dining room open to increase attendance in the bar!
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— CHAPTER 5 —TAXES AND LEGISLATION
5-201 GENERAL:a. General: This Chapter is not intended to provide complete and comprehensive advice on payment of all Federal, State and local taxes or rendering all tax returns. Rather, it is intended to provide a guide with suggestions and ideas to help Lodges insure compliance with the tax laws. Lodges must be careful to maintain a reputation of being a law-abiding organization and not act to jeopardize our income tax exemption.
b. Expert Advice: The most effective way for a Lodge to stay out of trouble with taxing authorities is to seek advice of a qualified public accountant or tax attorney. Do this when you have questions or are in doubt. At the time of the annual financial report, ask the accountant to review your practices for compliance with tax laws and regulations. It is suggested that the Secretary keep up-to-date in this area, maintain a file of pertinent publications, and be the point of contact for questions that arise. (See SECRETARY'S MANUAL—Code 5�0800, available from the Grand Secretary.)
c. Obtaining Publications: Internal Revenue Service publications and forms may be obtained from the IRS Forms Distribution Center for your State. Also, they may be obtained by calling toll-free 800-8�9-3676. State and local publications should be obtained from the State income tax or sales tax office and the local alcoholic beverage control office.
d. Payroll Taxes: Every Lodge that has employees must use IRS Publication #�5, Circular E, "Employer's Tax Guide", which contains tax withholding tables and instructions for withholding, paying taxes, rendering returns and recordkeeping. Additional pertinent instructions are contained in IRS Publication #937, "Business Reporting, Employment Taxes, and Information Returns." Taxes must be paid and returns filed within specified due dates to avoid serious penalties and interest. Following are deficiencies most frequently noted by the accountant:
- Failure to withhold and pay income and social security taxes for part-time employees, "casual labor", "outside labor", "extra help", etc. Regardless of what the Lodge may call this expense, the taxes must be paid whether the employee works full- or part-time.
- Failure to withhold and pay such taxes for the Secretary and Treasurer and others who are Officers receiving compensation.
- Failure to require employees to report tips of $�0 or more in a month and failure to withhold and pay taxes on tips.
- Failure to pay Federal Unemployment Tax (FUTA) and State unemployment taxes on a timely basis.
e. Federal Income Tax Returns: It is advisable to have returns prepared by experienced professionals. Following is a brief of filing requirements:
1. Filing Not Required: A Lodge that normally has annual gross receipts of $�5,000 or less is not required to file Form 990 but may be required to file Form 990T. Gross receipts are the total amount received from all sources during the year without subtracting any costs or expenses.2. Form 990 or 990EZ: All other Lodges are required to file one of these returns by August �5th each year. Form 990EZ, the short form, may be used when gross receipts are less than $�00,000 and total assets are less than $�50,000 at end of year. Returns should be prepared at time of annual financial report and forwarded with the Annual Financial Report. If a return is filed late, the Lodge could be assessed a penalty of $�0 a day, not to exceed the lesser of $5,000 or 5% of the gross receipts. There are provisions for requesting an extension of time to file using IRS Form �758. The following frequently-noted deficiencies should be given special attention:
- Always report gross receipts and expenses; never just net income. - When listing Lodge Officers in the return, include all Officers, whether they receive
compensation or not. - On front of Form 990/990EZ, indicate that the Lodge is exempt under 50�(c)(8); indicate
that it is a separate return filed by a group affiliate; and enter Group Exemption No. ��56. Use of 50�(c)(7) or 50�(c)(�0) is discouraged. These are more restrictive and require an individual letter of exemption. (See Sec. 5-201g following.)
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3. Form 990T: This return must be filed by each Lodge that has gross income from an unrelated trade or business of $�,000 or more. An unrelated trade or business is any trade or business that is regularly carried on, and that is not substantially related to the exempt purposes of the Lodge, other than the need for funds. Gross income is gross receipts less cost of goods sold and/or operations. Unrelated business income must be included in Form 990/990EZ. Lodges should obtain IRS Publication #598, "Tax on Unrelated Business Income of Exempt Organizations" as an aid in understanding what is, and what is not, unrelated business income. Typical examples of such income are rental of debt-financed property (property subject to a mortgage), and regularly operating a commercial parking lot. Although catering events that are open to other than Elks and guests has previously involved unrelated business income for many Lodges, compliance with the provisions of Section �4.�30 of the Statutes will eliminate most of this.
f. Employer Identification Number: Each Lodge must have an EIN which is assigned to that Lodge after application by the Lodge to the appropriate local IRS office. This is a nine digit number arranged as follows: 00-0000000, see IRS Publication #�5, Circular E. The correct number should be used on all returns and other documents, and use only one number for the Lodge. A separate corporation may have a separate EIN and would use that number on their returns. Each Lodge's EIN Number is set forth in the Subordinate Lodge Directory. It is the bracketed figure noted after the Annual Dues amount.
g. Exemption From Federal Income Tax: Grand Lodge has been issued a group exemption for all Lodges under Section 50�(c)(8) of the Internal Revenue Code. The exempt number assigned to the B.P.O. Elks is "1156". The basis for this exemption is that our exempt purposes are charitable and fraternal as expressed in the Preamble to our Constitution, and that our Order provides tax-qualifying benefits to Lodge members. Lodges should always act to preserve this important exemption. Any question raised by an IRS agent concerning the Grand Lodge group exemption must be referred to Grand Lodge officials for response, and therefore must be promptly referred to the Sponsoring Past Grand Exalted Ruler.
Grand Lodge is required to furnish the IRS each year a list of additions to, and deletions from, the list of Lodges included in the exemption. Therefore, Grand Lodge must have accurate information on correct EIN numbers. This is updated each year from the Directory Information Forms that Lodge Secretaries must furnish to Grand Lodge. Secretaries should verify that the EIN for the Lodge is entered correctly each year.
h. Information Returns: Most Lodges are required to file one or more of these returns each calendar year. Instructions are contained in IRS Publication #937, "Business Reporting, Employment Taxes and Information Returns." Quite frequently when an accountant audits a Lodge, he will refer to errors of omission in this regard. Some returns most frequently involved are:
- Payment of interest of $�0 or more to holders of member bonds or notes — IRS Form �099-INT.
- Payment of $600 or more for nonemployee compensation, such as accountants, attorneys, bands, etc. — IRS Form �099-MISC.
- Payment of $600 or more in winnings from raffles or drawings — IRS Form W-�G.
- Payment of $�,�00 or more in winnings from bingo, slot machines and other legal games of chance — IRS Form W-�G.
i. Federal Special (Occupational) Tax: Each Lodge that sells alcoholic beverages is subject to this tax of $�50 a year as a retail dealer. A Special Tax Registration and Return, Form ATF 5630.5, must be rendered annually to the appropriate office of the Bureau of Alcohol, Tobacco and Firearms, Treasury Department. The tax must be paid prior to July �st for the year July � thru June 30. A Special Tax Stamp, Form 5630.6, is issued to the Lodge as receipt for payment, and must be either on display or at least available for examination at the location where the alcoholic beverages are sold. There are substantial fines, penalties and interest for failure to pay. For forms or more information, contact ATF Distribution Center, 7943 Angus Court, Springfield, VA ���53.
j. State and Local Income Tax Returns: Each Lodge should consult with its accountant, tax attorney or appropriate local officials to determine what returns are required. In some States, if the Lodge pays income tax on unrelated business income, it is also required to pay State income tax and provide a copy of the IRS Form 990T.
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k. State and Local Sales Taxes: It is the responsibility of the Lodge to know and comply with the requirements for collection and payment of such taxes and rendering required returns. Generally, a Lodge can obtain a copy of the law and regulations by contacting the appropriate taxing authority. Advice on accounting for sales taxes is contained in Sec. �-��4a of the Grand Lodge Auditing, Accounting and Management Manual.
5-201a UNRELATED BUSINESS INCOmE: I. General A Lodge is exempt from income tax on profits earned from those activities directly
related to and used for those exempt purposes allowed under IRC 50�(c)(8).
Pressures from non-exempt businesses such as restaurants, bookstores, etc., have caused the IRS to subject IRC 50�(c) corporations such as ours to an "Unrelated Business Income" tax when we conduct business activities in competition with non-exempt corporations — usually evident when we sell goods or services directly to the public (non-members).
IRS does not prohibit us from earning "unrelated business income." When earned, it will simply be taxed exactly as the income of a non-exempt corporation is taxed. However, if the "unrelated business income" becomes the major profit of our Lodge business operation, IRS may cancel our exempt status!
To avoid this dilemma, deal only with members and their guests. Presently a major exception to this rule is bingo games. Profit from such games are not"unrelated".
Lodges which use paid employees in the sale of goods and services are suspect of "unrelated business income" from the activities' earnings. The very nature of our tax-exempt status suggests our workers are unpaid, that our activities are performed by volunteers.
II. BulletinsFINAL REGULATIONS EFFECTING NONPROFIT ADVERTISING IN 3RD CLASS MAIL
On May 5th the United States Postal Service (USPS) published revised regulations affecting restrictions on advertising in nonprofit third class mail. These regulations will take effect on Sunday, September 4, �994.
Listed below are the major provisions on these new regulations, which will become part of the Domestic Mail Manual (DMM):
1) To qualify for nonprofit third class postage rates, all products or services which are advertised, promoted, offered, or for a fee recommended, described, or announced, must be “substantially related” to the exercise or performance by the organization of one or more of the purposes constituting the basis for the organization’s nonprofit mailing permit.
2) To be “substantially related” the sale of the product or provision of the service must contribute importantly to the accomplishment of one or more of the qualifying (for the nonprofit permit) purposes of the organization.
3) Standards established by the Internal Revenue Service and the courts with respect to �6 U.S.C. 5�3(a) and (c) of the Internal Revenue Code will be used to determine whether products or services, whether offered by the nonprofit organization or third party, are “substantially related”.
4) If the advertisement or other offering is for a product or service that is not “substantially related”, the publication is not mailable at nonprofit rates.
5) Publications which contain advertising for numerous products or services, one or more of which are not “substantially related” are not mailable at nonprofit rates.
6) If the organization pays Unrelated Business Income Tax (UBIT) on the proceeds of the sale of a product or service, that activity is by definition not “substantially related”. Not paying UBIT, however, does not necessarily mean that a product or service is “substantially related”, because other criteria may exempt the organization from payment.
7) Public service announcements, e.g. “Support the Red Cross Blood Drive”, for which no consideration has been paid, are mailable at nonprofit rates.
8) Announcements of activities of nonprofit organizations, such as bake sales, car washes, charity auctions, oratorical contests, wherein substantially all the work is performed without compensation, by members or supporters of the nonprofit organization, may be mailed at nonprofit rates. Such activities are considered to be “substantially related”.
9) Advertisements for products or services, substantially all of which have been contributed or donated to the nonprofit organization, may be mailed at nonprofit rates. Such products and services are considered to be “substantially related”. This includes prizes and premiums.
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10) Ads, promotions, and offers for periodical publications, which publications are qualified to be mailed at second class nonprofit rates, may be mailed at third class nonprofit rates.
11) Listings of individual or organizational supporters of nonprofit organizations, publications or activities may be mailed at nonprofit third class rates, if the listing is not larger than 7 square inches (the approximate size of a business card) and appears in a portion of the publication titled “Sponsors”, “Contributors”, “Donors”, or a similar designation.
12) These products are mailable at nonprofit third class rates: a) Low cost items (within the meaning of �6 U.S.C. 5�3(h)(�) of the Internal Revenue Code). Currently, “low
cost” is the cost to the organization of not more than $6.39. “Low Cost” is adjusted each January �st, for the cost of living.
b) Items donated or contributed to the nonprofit organization, whether or not they meet the low cost test. Such items are considered to be “substantially related”.
c) Periodical publications without advertising or other non-qualified material. Periodical publications are defined as those which meet the standards to be mailed at second class rates. Therefore, to be mailed at third class rates, a periodical must be eligible for second class rates.
Numbers �, �, 3, 4, 5, 7, 8, 9, and �� will directly affect our Lodges and their publications.
Any ad for a party in the Lodge bulletin must spell out the purposes for which the proceeds will be used. An ad for a Western Nite with proceeds to benefit the State Major Project or the National Service Commission would be considered “substantially related” and your bulletin could be mailed at the nonprofit rate. An ad for a New Year’s Eve Party with no designation on how the proceeds are to be spent would disqualify the bulletin from being mailed at the nonprofit rate because it would be considered not “substantially related”. Keep in mind that any monies raised for a specific program must be spent on that program. To do otherwise would place the Lodge in danger of disciplinary action from the IRS and USPS.
Any article in a Lodge bulletin advertising a trip of any type, e.g., a cruise for the Brothers and their Ladies using a specific travel agency would be considered not “substantially related” and your publication could not be mailed at the nonprofit rate.
NO MAILING WHICH CONTAINS RAFFLE TICKETS OF ANY TYPE IS ALLOWED TO BE SENT AT THE THIRD CLASS RATE.
When acknowledging the sponsors who make the printing and mailing of your Lodge bulletin possible, be sure you closely adhere to the qualifications that they be no larger than the standard business card. They must also be listed under a specific heading.
It is a brave new world regarding nonprofit postal regulations. Hopefully this will help you make the required changes a little easier and also help your Lodge save some money.
5-201b SALES AND USE TAX:(Governed by State Laws)
I. Q. Is an Elks Lodge exempt from the sales tax when purchasing supplies, tools, etc. for the Lodge?
A. NO! Elks Lodges havetopaythesalestaxoneverydayitems.
II. Q. Is an Elks Lodge ever exempt from the sales tax?
A. yES! Not because they are a sales tax exempt organization, but because they purchase something not subject to tax regardless of who buys it:
1. Capital Improvement. Such purchases usually become part of your Lodge property, increase its long-term value and are not something your Lodge could or would take with if they moved. Examples are paying an outside contractor to build a Lodge addition, fencing the property or installing wall-to-wall carpet over new-rough flooring. You are required to give your vendor a "Certificate of Capital Improvements".
2. PurchasesforResale. Elk hats, shirts, jewelry, etc. purchased by the Lodge for resale to Members is not taxed by the vendor when purchased. You are required to give the vendor a "Resale Certificate".
a. Whenever an item intended for resale is not sold, but instead given away, the Lodge must pay a use tax based on the item's original non-taxed cost.
3. BulkFood. Food items, when purchased in the market, are never taxed to the buyer. However, if your Lodge sells this food, a sales tax must be computed based on the selling price of the meal(s) and added to the bill as a separate item.
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III. Q. when is the Lodge required to pay a use tax?
A. There are three (3) situations which require the Lodge to compute and pay a use tax on an item(s) purchased (for certain states):
1. Out-of-StateVendor. Often an out-of-State vendor does not add your Lodge's required State sales tax to the invoice.
2. VendorOmission.
a. On occasion a vendor will erroneously not add the sales tax to your invoice. When this happens, you should request a corrected invoice from the vendor which will include a charge for your sales tax liability.
b. If you cannot obtain a corrected invoice from your vendor, you should compute and pay the use tax.
3. ItemsPurchasedforResale—NotSold. Items meant for resale when converted to the use of the Lodge are subject to use tax. (See II.�.a. preceding.) Beverages, both non-alcoholic and alcoholic, given away for use of Elks are subject to the use tax.
5-201c TAX FILING REqUIREmENTS:The Internal Revenue Service issued a memorandum concerning fraternal organizations' tax requirements, — whether organized as a corporation or as a tax-exempt (non-profit) organization.
The requirements are set forth as follows:
• Filing Form ���0 (corporation) or Form 990 (tax-exempt) — the latter pertaining to the Benevolent and Protective Order of Elks.
• Employment Taxes:
Filing quarterly Form 94� and related requirements:
- Income tax withholding
- Backup tax withholding
- Employer portion of Social Security and Medicare taxes
- Employee portion of Social Security and Medicare taxes
- Depositing employment taxes timely
- Employer: Report actual employee tips on Form 94�
- Employee: Responsibility for reporting tips
- Issuing Form W-�
Filing annual Form 940 for Federal unemployment tax
• Filing Form �099-Misc for payments of $600 or more per year to individuals for services and rents.
Note: The latter pertains to Officers of the Lodge receiving compensation from the Lodge; musicians, winners of raffles; games; caterers; "outside" hired labor, etc.
• Compensation paid to Secretary/Treasurer cannot be considered in any way as a Lodge expense.
Failure to comply with the above tax filing requirements may result in additional tax, interest, and penalties upon audit.
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OFFICE OF THE GRAND SECRETARYBenevolent and Protective Order of Elks
JACK M. JENSENGrand Secretary
2750 N. Lakeview Avenue, Chicago, IL 60614-1889
MEMORANDUM
TO: LodgeSecretaries
FROM: JackJensen
SUBJECT: LiabilityInsurancePerCapita
This office has had inquiries as to whether it is possible to pay the Grand LodgeMasterLiabilityInsuranceper-capitaonapro-ratedorinstallmentbasis.
Please be advised that the Laws of the Order, Section 16.010 provide that the Lodge Secretary shall furnish an Annual Report to the Grand Secretary on or before May 1st of each year. This report shall be signed, sealed and transmitted with payment in full of the per-capita fees, which include theLiabilityInsurancepayment.
By rules established by the Grand Lodge there can be no exception to payment of the Insurance per-capita on the due date, because the full payment must be transmitted to our insurance carrier based on the April 1 membership figures obtained from the Annual Report.
Opinion 02, under Section 16.010 states: "A Subordinate Lodge must pay Grand Lodge Assessments on delinquent members until they have been formally dropped from the rolls." Therefore, a Lodge is not excused from making payment to Grand Lodge because they have not received the annual dues from a member.
This memorandum should clear up any questions as to the intent of the Laws of the Order pertaining to payment of Grand Lodge Liability Insurance.
DATED: This the 28th day of January, 2006.
5-202 SAmPLE mEmO
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5-203 CONGRESS ENACTS ROYALTY RELIEF LEGISLATION:Relief for the Lodges of the Order from the costly requirements of the Copyright Act of �976 was enacted by the United States Congress on October �, �98�, and later signed by the President. This was done by an Amendment adding the following new paragraph to Section ��0 of Title �7 to the United States Code:
"(10)...notwithstandingparagraph4above,thefollowingisnotaninfringementof copyright: performance of a nondramatic literary or musical work inthe course of a social function which is organized by a nonprofit veterans'organization or a nonprofit fraternal organization to which the generalpublic isnot invited,butnot including the inviteesof theorganizations, ifthe proceeds from the performance, after deducting the reasonable cost ofproducingtheperformance,areusedexclusivelyforcharitablepurposesandnotforfinancialgain."
For all practical purposes therefore, it will no longer be necessary for Lodges to obtain licenses from or pay royalties to ASCAP, BMI, and SESAC, unless they use live music for financial gain, or to which the general public is invited (should be restricted to members and their guests).
It is recommended that a simple record be maintained whenever live music is used, showing the income produced, the total reasonable costs of producing the performance, and the charity to which the remaining proceeds were contributed. That record can simply be included in the minutes of the Lodge, Officers or House Committee meeting at which a report of the event is made.
5-204 AmERICANS WITH DISABILITIES ACT (ADA):The Americans With Disabilities Act of �990 (ADA) was passed by Congress in July, �990
and became effective July, �99�. It sets forth prohibitions against discrimination of persons with disabilities in the following areas:
Title I Employment;Title II Public Services;Title III Public Accommodations;Title IV Telecommunications;Title V Miscellaneous Provisions.
Two areas have caused considerable concern to the Lodges with questions being raised by them. One is Title I — Employment. However, under Section �0�5 (B) Exceptions, "The term 'employer' does not include a bona fide private membership club (other than a labor organization) that is exempt from taxation under Section 50�(c) of the Internal Revenue Code of �986."
The other, Section 30�, provides as follows: "A. General Rule — No individual shall be discriminated against on the basis of disability in the full and equal enjoyment of the goods, services, facilities, privileges, advantages, or accommodations of ANY PLACE OF PUBLIC ACCOMMODATION *****".
Title III covers public accommodations and services that are operated by private enti-ties. Here are found requirements for elevators, handicapped-accessible restroom facilities and other areas that are very visible and costly. Specifically mentioned are activities that many Lodges are involved in including halls for rent or hire, restaurants, bars, places of education, gymnasiums, golf courses, senior citizen centers, and day care centers. Once again, however, there is an exemption. Section 307 states:
"The provisions of this title shall not apply to private clubs or establishments exempted from coverage under Title II of the Civil Rights Act of �964 (4� U.S.C. �000-a (e)) or to reli-gious organizations or entities controlled by religious organizations, including places of worship."
Those Lodges that are operating strictly in conformance with the Grand Lodge Statutes, and limit the use of facilities, services, etc. in accordance with the provisions of Section �4.�30 are exempt from the provisions of the Americans With Disabili-ties Act. The key to the application of this act is operating as a "PLACE OF PUBLIC ACCOMMODATION."
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— CHAPTER 6 —
AUDITING & ACCOUNTING COmmITTEEOPERATIONAL REVIEWS
BUSINESS MANAGEMENT — OPERATIONAL REVIEwS
GENERAL
THE FOLLOWING "QUESTIONNAIRE" REVIEWS ARE PRESENTED AS TOOLS TO ASSIST THE LODGE AUDITING & ACCOUNTING COMMITTEE IN THEIR BUSINESS MANAGEMENT — OPERATIONAL AUDITS.
THE LODGE AUDITING & ACCOUNTING COMMITTEE IS TO REPORT ON THEIR AUDITING PROGRAM — WORK PERFORMED TO THE MEMBERSHIP WHEN ANY REVIEW IS COMPLETE; HOWEVER, IT IS RECOMMENDED THAT THE COMMITTEE ONLY DISCUSS THEIR FINDINGS WITH THE EXALTED RULER AND THE INDIVIDUAL IN CHARGE OF THE AREA BEING REVIEWED.
DO NOT SEND A COPY OF THE REVIEWS PERFORMED TO ANY OFFICE OF THE GRAND LODGE OR TO THE GRAND LODGE AREA AUDITING & ACCOUNTING COMMITTEE MEMBER. ALL SUCH REVIEWS ARE TO BE FILED, AND BE MADE AVAILABLE TO THE LODGE ACCOUNTANT AND THE RESIDENT DISTRICT DEPUTY GRAND EXALTED RULER (WHEN DDGER MAKES OFFICIAL VISITATION).
SHOULD YOU ENCOUNTER ANY SERIOUS PROBLEMS, IT IS SUGGESTED YOU DISCUSS THEM WITH THE EXALTED RULER; AND IF NECESSARY, HAVE THE EXALTED RULER CONSULT WITH YOUR RESIDENT DISTRICT DEPUTY GRAND EXALTED RULER. IF NECESSARY, THE DISTRICT DEPUTY GRAND EXALTED RULER MAY CONFER WITH THE GRAND LODGE AUDITING & ACCOUNTING AREA MEMBER.
NOTE: EACH ITEM IN THIS SECTION IS SET UP SEPARATELY. WHEN AN AREA IS TO BE REVIEWED, THE AUDITING & ACCOUNTING COMMITTEE IS TO MAKE A COPY WHICH IS TO BE USED AS THEIR "WORK COPY".
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6-201 SUBORDINATE LODGE YEAR-END CHECK LIST:The following year-end check list is set forth to assist the Subordinate Lodges in preparing for the March 3�st closing, and budget preparation.
1. Did the Secretary receive the Grand Lodge Annual Financial Report Forms, and turn them over to the Chairman of the Lodge Auditing & Accounting Committee? .............................................................................................
2. Was the accountant selected well in advance of the March 31st closing date? ................................................................... 3. Was the accountant approved by the membership? ............................................................................................................. 4. Was the accountant furnished a copy of the Grand Lodge Auditing, Accounting & Management Manual? 5. Did the Lodge Auditing & Accounting Committee meet with the accountant regarding preparations
for the Annual Financial Report? ......................................................................................................................................... 6. Has the Auditing & Accounting Committee discussed with the accountant, the various audits that the
Auditing & Accounting Committee performed throughout the year? ................................................................................. 7. Has the accountant been called in by the Auditing & Accounting Committee to participate in year-end
inventories and cash counts? (All inventories and cash counts as of March 31st) .............................................................. 8. Is the Lodge using the Chart of Accounts and is the Budget set up according to the Chart of Accounts? 9. Are prepaid dues posted to an accrual account; and the funds not used until subsequent to April 1st? ..............................10. Has the Secretary posted all dues data to the membership records? ....................................................................................11. Does the Secretary have a record control over delinquent dues? ........................................................................................12. Were delinquent Members dropped for non-payment of dues? ...........................................................................................13. Are all books of record posted currently and closed out immediately after the March 31st date?
(No books are to be kept open after March 31st) .................................................................................................................14. Are bills not paid by March 31st listed for the accountants as accounts payable? ..............................................................
Have accounts receivable been set up? ................................................................................................................................15. Are proper preparations being made to formalize the budget? ............................................................................................16. Have the necessary budget worksheets been prepared? ......................................................................................................17. Did the Exalted Ruler contact all Committee Chairmen to get the Committees' budget requirements? .............................18. Is a budget being prepared for each entity? (Lodge, Beano/Bingo, Lucky 7, Las Vegas, Corp., House, etc.) ....................19. Is the Budget in balance (Receipts and expenses equal) ......................................................................................................20. Have the Secretary and Treasurer ensured that their cash receipts for March, and the year, are in agreement?21. Have all Committees submitted their final reports, funds, bills, etc. to the Secretary? .......................................................22. Do Trustees have a current inventory of Fixed Assets? .......................................................................................................23. Did the Trustees obtain an update, as of March 31st, on all savings/investment accounts? ................................................
And was this information given to the Treasurer? ...............................................................................................................24. Have all bank reconciliations been performed for the period ending March 31st? (copies for accountant)25. Are all March 31st statements, bank books for savings and investment accounts available to the accountant?
(Transfers between accounts, etc.) .......................................................................................................................................26. Did the Trustees review the Lodge insurance policies, and update policies when necessary? ............................................27. Have 1099s been issued covering the period January 1st through December 31st of the previous year?
(1099s are to be issued to anyone making over $600 — not covered under a payroll system — includes contractors, Officers, etc.) ......................................................................................................................................
28. Are the Secretary and Treasurer bonded? ............................................................................................................................29. Have all required taxes been paid (sales, payroll, etc.)? ...................................................................................................... Copies available for the accountant? ...................................................................................................................................30. Did the accountant submit the annual report to the Chairman of the Lodge Auditing & Accounting Committee?31. Were the findings and recommendations of the accountant reviewed with the Lodge Auditing & Accounting
Committee by the accountant? .............................................................................................................................................32. If required, were check signing authorization forms prepared for new bank accounts? ..................................................... Were unused bank accounts closed out? ..............................................................................................................................33. Did the Auditing & Accounting Committee present the Annual Financial Report to the membership,
for their approval — in time to get the Report to the Grand Lodge Auditing & Accounting Committee Area Member by June 30th? ................................................................................................................................................
34. Were copies of the 990/990EZ and 990T tax forms submitted to the G/L Area Member along with the Annual Financial Report? ....................................................................................................................................................
YES NO
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6-202 BUDGET REVIEW:
1. Was a budget prepared for all entities (Each Fund, Corp., Bingo, Lucky 7, etc.)? ..............................................................
2. Were the budgets prepared by the Board of Trustees? .........................................................................................................
3. Or was a special committee appointed? ...............................................................................................................................
4. Were the budgets prepared well enough in advance in order to be presented to the membership in May? ........................
5. Were proper budget work sheets prepared showing one or two back years of actuals versus budgets, along with the projected items for the current year? ............................................................................................................
6. Were the budgets prepared in detail, reflecting, when applicable, both revenue and expenses (not netted out)? ...............
7. Were the items in the budget set up in Chart of Account number order? ............................................................................
8. Did the Budget Committee (Trustees/Other) consult, through the Exalted Ruler, with the various Lodge Committees, Foundations, Corporations, etc., for their input to the Budget? ..........................................................
9. Was the prior year information used as a guide, giving consideration to factors which would/may affect next year's amounts? ............................................................................................................................................................
10. Were new items set forth, as anticipated? ............................................................................................................................
11. Were contingent purpose items set forth? ............................................................................................................................
12. Was the budget in balance, or at least reflect a net gain? .....................................................................................................
13. If a deficit budget was prepared, is action being taken to correct the problem? ..................................................................
14. Was the Exalted Ruler consulted before the Budget was finalized? ....................................................................................
15. Was the final budget approved in writing, by the entire Board of Trustees? .......................................................................
16. Was the Budget incorporated in the Trustees minutes? .......................................................................................................
17. Did the Board of Trustees present the Budget to the membership in detail? .......................................................................
And was it presented by a knowledgeable individual? ........................................................................................................
18. Was the budget approved by the membership? ....................................................................................................................
19. Was the budget incorporated into the Lodge minutes? ........................................................................................................
20. Does the membership understand that the budget is only to be used as a guide throughout the year? ...............................
21. Does the Treasurer understand that no budgeted expenditures are to be paid, without first being processed through the voucher system, and having the approval of the membership? .......................................................
NOTE: Forward a copy of the budget to your outside Accountant, and place a copy in the Auditing & Accounting Committee files.
Each month, select items and compare budget to actuals to ensure Lodge adhering to the approved budget.
YES NO
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6-203 REVIEW OF BOARD OF TRUSTEES' OPERATION:This guide is for the use of the Lodge Auditing & Accounting Committee in conducting reviews of the business management operations of the Board of Trustees (as specified, in part, in Sec. ��.070 of the Grand Lodge Statutes) . . . before proceeding with any review, the Auditing & Accounting Committee should read and achieve an understanding of the stated section.
yES NO
1. Does the Board of Trustees hold regular meetings? ....................................................................................
2. Are formal minutes kept of all meetings? ...................................................................................................
And are all vouchers/bills approved there for payment by the Lodge listed in the minutes in detail? ...........
3. Does the Board have a complete inventory of all Fixed Assets, and is the inventory kept current? ..............
4. Is a copy of the inventory filed off of the Lodge premises? ........................................................................
5. Does the Board control all investments, and monitor such investments for the benefit of the Lodge? ..........
6. Are all investments recorded under the name of the Lodge (and not the Trustees)? .....................................
7. Does the Board report to the Treasurer, on a quarterly basis, interest earned on such investments? .............
8. Does the Board fully understand that they do not have the authority for listing of Lodge real estate for sale and/or entering into any contracts without the prior approval of such actions by a majority vote of the Lodge? ..............................................................................................................................................
9. Does the Board report to the membership, at each meeting, concerning their activities? .............................
And issue formal reports monthly? .............................................................................................................
10. Does the Board present a segregated budget, to the membership, by the final meeting in April? .................
11. Did the Board include an item in the Budget for contingent purposes to cover emergencies? ......................
12. Does the Board fully understand that all of their activities are subject to the will of the Lodge? .................
13. Does the Board fully understand that they are not, under any circumstances, to have control over any Lodge/corporation/etc. checkbooks? ........................................................................................................
14. Does the Board understand that when the Exalted Ruler appoints a House Committee, they have no authority over this Committee?................................................................................................................
15. Are the insurance policies properly reviewed by the Board? .......................................................................
16. Did the Board record in their minutes receipt of the bonds of the Officers wherein the surety may be either personal or corporate (and in the amounts fixed by the By-Laws)? .................................................
17. Does the membership fully understand that no assets may be borrowed from the Lodge (House, etc.) without the approval of the Board of Trustees? ........................................................................................
18. Does the Board keep a formal record of all assets borrowed by the membership? .......................................
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6-204 REVIEW OF SECRETARY'S OPERATION:The Auditing & Accounting Committee is to review the Grand Lodge "SECRETARY's MANUAL" and Sec. ��.050 of the Statutes before any reviews are performed. This will give the auditor good insight as to the responsibilities of, and work performed by the Secretary.
NOTE: Review items listed below are to be used to assist the Lodge Auditing & Accounting Committee; The review is not restricted to these items.
1. Does the Secretary receive all Lodge mail? (The Exalted Ruler may pick up the mail.) ..................................................
2. Is it distributed properly? ...................................................................................................................................................
And is there a follow-up on any letters requiring a reply? ................................................................................................
3. Are all funds submitted directly to the Secretary? (This includes funds from all Lodge Committees, House Operations, Refunds, Bank Transfers, etc.) ............................................................................................................
4. Does the Secretary issue a receipt for all funds submitted to him? ...................................................................................
5. When the Secretary receives any cash, does he make the proper entries in his cash book, designating what the cash is for? ...........................................................................................................................................................
6. Are funds accompanied by a detailed report setting forth the accounts affected when submitted? ..................................
7. Does the Secretary submit funds to the Treasurer on a timely basis? ................................................................................
And does he when submitting funds, designate the accounts affected? ............................................................................
8. Does the Secretary properly report, in detail, "Receipts of the Session" at the Lodge meetings — using the Cash Receipts Book as the basis for the data? .............................................................................................................
9. Are all funds for dues remitted to the Secretary? ..............................................................................................................
10. When dues money is received and a membership card issued, is the proper information noted on the membership card stub? (Membership #, date paid, etc.; the stub information will be used as a basis for entering the data on the member's records)........................................................................................................................
11. Is the dues data posted properly, and on a current basis, to the individual Membership Records? (Whether manual or computerized system) .......................................................................................................................
12. Is the dues information posted correctly to the Secretary's Cash Receipts Book? ............................................................
13. Does the Secretary mail the dues notices as required? ......................................................................................................
14. Are notices from the Secretary concerning dues placed in the Lodge Bulletin? ...............................................................
15. Is a proper control placed over "Delinquent Members"? ...................................................................................................
16. Are Members who are 1-year delinquent since October 1st dropped for non-payment of dues before the following April 1st? ...........................................................................................................................................................
17. Does a proper system exist regarding contacting "Lapsed Members? . . . Is there a follow-up? ......................................
18. Does the Secretary use the Grand Lodge Work-Sheets to record monthly membership changes (New Members, Deaths, Dues Payments, Lapsation, etc.)? ..............................................................................................
19. When the Secretary receives bills, does he contact the responsible individuals to get their written approval on the bills? .........................................................................................................................................................
20. Does the Secretary prepare a numerically controlled Voucher for each bill received (regardless of the amount of the bill)? ............................................................................................................................................................
21. Do the Exalted Ruler and the Secretary approve each voucher prepared? ........................................................................
22. After ER and SECY approve Vouchers, are all bills then presented to the Board of Trustees for review and approval? (NOTE: ALL bills are to be vouchered including recurring expenses such as utilities, mortgage, etc.) ...................................................................................................................................................................
23. After the Vouchers/Bills are approved for payment by the Trustees, are the bills presented to the membership by the Secretary under "Bills Against the Lodge"? .......................................................................................
YES NO
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24. Are such bills presented to the membership in detail (Voucher #, amount, Vendor, What for)? .......................................
And is this information reflected in the Lodge minutes in detail? .....................................................................................
25. Does the Secretary receive all Committee reports with funds and bills attached, in a timely manner? (This includes Lodge Committees, House Committee) .....................................................................................................
26. Does the House Committee submit proper records to the Secretary relating to bar operations (Register tapes, proper allocation of all register readings, etc.)? .......................................................................................
27. Are copies of all Committee reports on file in the Secretary's office — available for the Lodge Auditing & Accounting Committee and the outside accountant? ......................................................................................
28. Does the Secretary have a good control over membership numbers and are the numbers assigned in proper order? ......................................................................................................................................................................
29. Does the Secretary maintain a complete list of the members and is it kept current? ........................................................
30. Is there a membership record on file for each member, past and present, since Lodge inception? ...................................
31. Are the records properly secured within the Secretary's Office? .......................................................................................
32. Is access to the Secretary's Office restricted? ....................................................................................................................
33. Is proper security exercised over all cash the Secretary receives? ....................................................................................
34. Is the Annual Membership Report submitted by the Secretary to the Grand Lodge on time? ..........................................
35. Does the Secretary keep proper minutes — accurate, full and complete? .........................................................................
36. Does the Secretary have knowledge about tax laws that affect the Lodge operations? .....................................................
37. Does a separate Inactive File exist over: Drops, Expulsions, Dimits Out, Deaths, etc.)? ................................................
And is this information so noted on the membership inactive records? ............................................................................
38. Does the Secretary work with the Lapsation Committee? .................................................................................................
39. Does a proper control exist over Life Members, and those eligible for same? .................................................................
40. Is there a program in operation to contact "Stray Elks"? ...................................................................................................
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6-205 REVIEW OF TREASURER'S OPERATION:The Lodge Auditing & Accounting Committee should read and achieve an understanding of Section ��.060 of the Statutes "Duties of the Treasurer", before proceeding with their review.
1. Are all cash receipts submitted to the Secretary and none directly to the Treasurer? .......................................................
2. Does the Treasurer issue a receipt to the Secretary for all cash receipts received? ...........................................................
3. Does the Treasurer maintain the books of record; Cash Receipts — Disbursement Journal and General Ledger? .................................................................................................................................................................
4. Are the books set up in accordance with the Chart of Accounts? ......................................................................................
5. Does the Treasurer get involved in the preparation of the annual budget? ........................................................................
6. Are the receipts, and disbursements for the year, along with the budget comparison presented to the Trustees (or budget committee), in Chart of Accounts order, for the budget preparation? ...............................................
7. Have the cash receipts, and cash disbursements, been posted in a current manner, and to the proper accounts? ............................................................................................................................................................................
8. Are separate controls set up for:
Unrelated Income activities? ..............................................................................................................................................
Restricted Accounts? ..........................................................................................................................................................
9. Does the Treasurer understand that the only individuals who can be involved with the Restricted Accounts are the appropriate Committee Chairmen? ........................................................................................................
10. Has Interest earned, as noted on bank statements, or from investments, been entered in the cash receipts journal? .................................................................................................................................................................
Does the Board of Trustees supply the interest earned to the Treasurer on a monthly/quarterly basis? ...........................
11. Do revenues from the following entries compare with source document and code number of the Chart of Accounts? and are they posted properly?
• Receipts from each fund-raising event, special or catered affair? ...................................................................................
• Rental of Real Estate facilities? (Not booked by Trustees) .............................................................................................
• Daily Bar and Lounge receipts (through Secretary)? ......................................................................................................
• Daily Dining Room receipts (through Secretary)? ..........................................................................................................
• Receipts from Bingo and machines? ...............................................................................................................................
• Receipts from Lucky 7's; Bell Jar? ..................................................................................................................................
• Other(s) peculiar to the Lodge (pool, Snack bar, etc.)? ...................................................................................................
12. Are bank deposits made promptly? ....................................................................................................................................
13. Do the deposits reconcile with both the Secretary and Treasurer's receipts? ....................................................................
14. Was the Cash Receipts Journal correctly totaled and balanced? .......................................................................................
15. Were entries from the cash journals correctly posted to the General Ledger? ..................................................................
16. Trace revenues entry to the General Ledger, to the entry in the Cash Journal, and to the bank deposit slip; was each entry correct? ..............................................................................................................................................
17. Count cash on hand for each authorized entity; does the amount reconcile with the recorded amount? ..........................
18. Is a voucher system used in authorizing expenditures by the Lodge? ...............................................................................
19. Do check amounts agree with invoices? ............................................................................................................................
20. Are all invoices marked "Paid" with the date and check number posted thereon? ............................................................
YES NO
– 49 –
21. Were payroll time cards/records approved properly; and were payroll checks computed correctly based on hours worked, taxes withheld? ......................................................................................................................................
22. Is the number of checking accounts kept to a minimum? ..................................................................................................
And if not are steps being taken to reduce the number? ....................................................................................................
23. Were the latest monthly Cash Disbursement Journals properly posted to the General Ledger? .......................................
24. Were the statements from each bank, or Depository, reconciled monthly? .......................................................................
25. Cash payments are not to be made: Were any made? ........................................................................................................
26. Were reimbursements for petty cash processed properly through the voucher system? ...................................................
27. Were Payroll taxes withheld on all employees? .................................................................................................................
28. Were all tax payments, payroll, sales, etc., paid when due? (Note section on taxes) ........................................................
29. Does the Treasurer make financial reports to the membership, on a monthly basis? ........................................................
30. Is a bookkeeper employed by the Lodge and does he/she report to the Treasurer? ...........................................................
31. Is the Treasurer custodian of all checking accounts? .........................................................................................................
And is he Treasurer of ALL entities (per G/L)? .................................................................................................................
32. Is the Treasurer bonded properly? ......................................................................................................................................
33. Does the Treasurer sign all checks? ...................................................................................................................................
And are two signatures required for each check? ..............................................................................................................
34. Are any checks pre-signed before properly-approved vouchers have been processed?
(Under no condition is the Treasurer to pre-sign checks) ..................................................................................................
– 50 –
6-206 REVIEW OF HOUSE COmmITTEE'S OPERATION:In general, members of the Lodge Auditing & Accounting Committee should familiarize themselves with procedures and manuals pertaining to the positions of:
• Secretary, Treasurer, Board of Trustees, and budget requirements.
In reviewing the House Committee operations, please keep in mind the basic purpose of your review of the House Committee operations is ultimately to provide reasonable assurance to the membership that:
• Cash assets are safeguarded against loss from unauthorized use or disposition,
• That transactions are executed as intended by the Lodge in a manner that will promote accurate financial statements; and that
• The House Committee utilizes the required budget process to control expenditures and prevent any losses.
1. Is a Voucher System used by the House Committee? ......................................................................................................
2. Is all incoming merchandise required to pass through a responsible individual? ............................................................
3. Does the House Committee Chairman approve all House-related bills? .........................................................................
4. Are inventories taken by individuals other than the bartenders, manager, steward or chef? ...........................................
5. Are recording cash registers used in handling cash receipts of the House operations (Bar, Dining Room, etc.)? ................................................................................................................................................
6. Are proper recap sheets prepared by the House Committee (Ref. 6-206a)? ...................................................................
7. Are all register receipts with the applicable tapes attached to a formal bar report turned into the Secretary? ................
8. Are cash receipts properly safeguarded — by adequate safes, or prompt deposit? .........................................................
9. Did the Lodge Secretary receive the House reports and post the information to his cash receipts book? ......................
10. Was the bank of the bartender / steward verified? ...........................................................................................................
11. Were proper controls set up on "unrelated income"? .......................................................................................................
12. Are Friday Nite dinners controlled by a Lodge Committee, and is the House Committee properly billing said committee? ....................................................................................................................................................
13. Any inventory sold at wholesale to anyone (NOT permissible)? ....................................................................................
14. Dinner checks issued controlled as to checks to cashier and number remaining in books? ............................................
15. Is Bar license on proper display? .....................................................................................................................................
16. Are payroll taxes being withheld on ALL employees? ....................................................................................................
17. Are all employees (full-time and part-time) paid by check? ...........................................................................................
18. Is the liquor storeroom under control of someone other than anyone related to bar operations (including manager)? .......................................................................................................................................................
19. Is a perpetual inventory maintained over liquor in stockroom? ......................................................................................
20. Did you review the House Committee Budget? ..............................................................................................................
21. Were profits transferred to the General Fund shown as an expense on the House Budget and income on the General Fund Budget? ...............................................................................................................................................
22. Was the Auditing & Accounting Committee involved in the year-end inventory?..........................................................
23. Did the Auditing & Accounting Committee price up the inventory at cost, and furnish the accountant with a certification statement? .........................................................................................................................................
24. Does the beverage (liquor, wine and beer) Cost of Goods Sold exceed 35% of the gross income? ...............................
25. If it does, what is being done to reduce percentage? — Is House Committee taking action? .........................................
YES NO
– 5� –
To compute Cost of Sales (Example):Inventory, April 1 $ 2,960Purchases 22,737
TOTAL: 25,697Less 3/31 Inventory (3,942)
Cost of Sales: $ 21,755RATIO: Cost of Sales divide by Total Sales = 38.53%Sales (Liquor, beer, wine) = $56,465
By following a step-by-step cash flow of the funds received by the House Committee, to the cash register, through to the Secretary/Treasurer and to the bank deposits, the Auditor will be able to report the efficiency and accuracy of those handling the Lodge funds.
The Lodge Auditing & Accounting Committee should maintain a file which should consist of the following:• Copy of budget approved by the Lodge• Copy of monthly report, and/or quarterly made to the membership• Copies of inventories taken• Copies of cash deposits reviewed — to bank or Secretary cash receipts book• Cash fund verification• Members list• House rules• File of suspended members• Sample taken of register tapes vs. deposits, etc.
NOTE: This file is to be made available to the District Deputy Grand Exalted Ruler/Auditor, and the Lodge Accountant.
– 5� –
DAILY SUMMARY OF BAR RECEIPTS
Date: ___________________________
Sales: Liquor ................................................................................. $ ____________________
Wine ................................................................................... _____________________
Beer .................................................................................... _____________________
Sundries .............................................................................. _____________________
Other: __________________________________________ _____________________
__________________________________________ _____________________
__________________________________________ _____________________
TOTAL: $ ___________________
Register Change Fund $____________________
Total Receipts, above + ___________________
To Be Accounted For $____________________
Cash Count $____________________
Cash Over (Short) $____________________
Tape Transaction Nos.:Beginning # _________Ending # _________
_____________________
_____________________
6-206a SAmPLE SUmmARY OF RECEIPTS:
A Daily Summary similar to this should be prepared by person, other than bartender, when cash is counted and tape is zeroed out and removed. Tape should indicate total sales by category.
Daily Summary, with day's cash receipts, are turned over to the Secretary. Secretary records receipts and turns over to Treasurer. For a computerized system, Daily Summary is used as input. For a manual system, Treasurer should prepare Monthly Summary, for end of month posting to General Ledger.
There may be a requirement of State or local law that the Daily Summary and cash register tapes be retained for a specified period in event of a sales tax audit.
– 53 –
6-207 LIqUOR LIABILITY EXPOSURES AND CONTROLS:Each Lodge that intends to have an event that includes furnishing alcoholic beverages needs to give early thought and planning on the issue of liquor liability. Although locations and events differ, these are some generic points which should be considered and used in planning these events.
GENERAL• Are the bartenders properly selected and supervised; do they understand their
responsibilities; have they received any training in recognizing a visibly intoxicated person; are they asked to check for proper age?
• In no instance should anyone bartending be allowed to drink alcoholic beverages.
• Are bartenders instructed on how to mix drinks correctly? (Do not have them putting an extra measure of alcohol into every drink requested).
• Make sure that there are non-alcoholic beverages available.
• Have plenty of food to eat, such as high-protein goods rather than sweet or salty foods. Push snacks, not the alcohol.
• The drinking should have a time limit so that the bar is not open all evening. For example, allow only 45 minutes for cocktails. Also bring out coffee early in the evening as a signal that drinking is over. The coffee will not "sober anyone up", but it will cut off drinking more alcohol. Never offer "one for the road". If the bar is open all evening, shut it down at least an hour before the event will end.
• Selected responsible persons should be in the general area monitoring drinking activities.
• Safe transportation should be promoted by providing alternatives for an intoxicated individual (A sign stating this policy should be posted).
6-207a GRAND LODGE INSURANCE:The Grand Lodge has established two excellent insurance programs for all Subordinate
Lodges. These are:
• Property Plus Insurance Program; and the
• Liability Insurance Program.
The Subordinate Lodge Auditing & Accounting Committee is to make sure that the Board of Trustees Review the Lodge's Property Plus Insurance on a yearly basis; this is to ensure that the Lodge has the proper coverage for their properties.
– 54 –
b. Imprest Fund Normally this type of fund is appropriate for a Club-type entity of Lodges located in
governmental jurisdictions that require cash payment on delivery of certain alcoholic beverages. However, the Auditor is to ensure that this is the only reason for which such a fund was established.
1. Was the fund approved by the membership? ......................................................................................................................
2. Is the imprest fund used? ....................................................................................................................................................
3. Was a maximum amount authorized? .................................................................................................................................
4. Is the responsibility for the fund invested in only one person? ..........................................................................................
5. Was a limitation established for the use of the fund? .........................................................................................................
6. Are all disbursements approved by a responsible individual? ............................................................................................
7. Are all disbursements adequately supported by receipted and approved bills? ..................................................................
8. Are vouchers, to replenish the fund, properly prepared and approved? .............................................................................
9. Are vouchers/bills marked "paid" to prevent duplicate payments? ....................................................................................
NOTE: No checks are ever to be cashed from this fund; if the fund is not being used as authorized, steps should be taken to have the account closed.
6-208 PETTY CASH / ImPREST FUND REVIEW:Obtain from the Treasurer the names of the individuals responsible for controlling any of the funds.
a. Petty Cash Petty Cash Banks are established for such areas as the Secretary's Office, House Committee,
etc., with the sole purpose of having funds available for the purchase of items limited in value. Under no condition is this fund ever to be used to pay for part-time help, etc. This fund should have a maximum value of between $�00 and $300 dollars.
1. Was the establishment of petty cash banks approved by membership? .............................................................................
2. Is the responsibility for each fund vested in only one person? ..........................................................................................
3. Are the petty cash bank fund amounts properly recorded in the books of the Treasurer? .................................................
4. Are petty cash disbursements adequately approved? .........................................................................................................
5. Is the petty cash bank properly secured? ...........................................................................................................................
6. Are vouchers properly prepared and approved for replenishment of funds? .....................................................................
7. Are reimbursement checks made out only to the custodian of the fund? ..........................................................................
8. Were any of the following paid out of the fund?
• Wages and salary advances, or for part-time help? .........................................................................................................
• Purchase of minor fixed assets? .......................................................................................................................................
NOTE: None of the above are permissible
9. Is the dollar value of the petty cash transactions reasonable? ...........................................................................................
NOTE: If the petty cash fund is not being used, recommend that it be closed out and that the funds be returned to the respective account.
YES NO
– 55 –
6-209 BANK RECONCILIATIONS:At the end of each month, your bank will mail you a monthly statement, which recaps an account — showing deposits, checks which were cashed and processed, and their balance in your account.
At the end of each month, the Receipts Journal (Cash Received) and the Disbursements Journal (Bills paid) are to be totaled. Prepare a work-sheet showing the following detail:
Dollar balance from previous month $4,�00.00 Receipts for current month (Cash received) �,000.00 Disbursements for current month (Bills paid) (�,000.00) Account balance at the end of month: $5,�00.00
The amount of $5,�00.00 will be the balance to be brought forward for the next month.
Open your bank statement envelope, and trace the enclosed checks to the bank statement to ensure that the enclosed checks were picked up properly by the bank. Check your deposits, made during the month, to ensure that all were properly picked up by the bank.
Trace checks (received from bank) to Disbursement Journal and place a check mark ( ) along side of check amount (shows check cashed) . . . If you are using a checkbook, do the same thing, place a mark ( ) along side of check stub check amount. Items not marked with the check mark are checks which you have issued that have not been cashed. Mark these with a (0) mark; List the latter by check number and dollar amount. Now to continue with the above dollar value which was the book balance at the end of the month:
Book balance at the end of the month $5,�00.00
ADD Outstanding checks (not cashed) 3,000.00
This should be the bank balance at month end $8,�00.00
If a deposit was made late in the month and it is not recorded by the bank, list deposit in transit (not picked up by bank).
This amount will reduce bank balance. (400.00)
Bank balance is now: (Per statement) $7,800.00
In some instances the bank will charge a service charge which is to be subtracted from your Account balance to reflect adjustment. For instance:
Account balance at the end of the month $5,�00.00
Service charge from bank: (�0.00)
Adjusted book balance at end of month: $5,�90.00
NOTE: The bank automatically adjusts for any charges.
THIS IS THE PREFERRED SySTEM TO USE IN RECONCILING BANK STATEMENTS.
On the following page is the reconciliation as set forth by the bank.
– 56 –
BANK STATEMENT
BALANCE SHOWN ON BANK STATEMENT ___________________
PLUS DEPOSITS NOT SHOWN ON STATEMENT ___________________
SUBTOTAL ___________________
SUBTRACT CHECKS NOT CASHED - NOT ON STATEMENT ___________________
TOTAL ___________________
BALANCE
(WHICH SHOULD AGREE WITH YOUR BOOK BALANCE) ___________________ _(A)_
CHECKBOOK:
BALANCE IN CHECKBOOK: ___________________
ADD ANY DEPOSITS
NOT ALREADY ENTERED IN CHECKBOOK ___________________
SUBTOTAL ___________________
SUBTRACT SERVICE CHARGES AND OTHER
BANK CHARGES NOT IN CHECKBOOK ___________________
BALANCE ___________________ _(A)_
_(A)'s_ SHOULD AGREE
Please understand that it is important to reconcile bank statements on a monthly basis; under no condition is one to accept the bank's balance as the "gospel" truth . . . banks make mistakes.
The Lodge Auditing & Accounting Committee should review the reconciliations monthly to ensure they are being done monthly.
AUDIT CHECK LIST:
• Are monthly bank reconciliations performed? . . . and are they done by someone other than one having access to cash?
• Does the person who receives the bank statement get it unopened?
• Examine paid checks for dates, payees, cancellation and endorsements, and account for numerical sequence.
• In regard to checks which have been outstanding for an undue period of time . . . investigate such items.
• On such outstanding items, is payment stopped and an entry made to restore such items to cash?
• Are bank reconciliations reviewed by the Auditing & Accounting Committee monthly; or by someone other than the preparer?
– 57 –
.................................................................................................................................................................................
.................................................................................................................................................................................
.................................................................................................................................................................................
.................................................................................................................................................................................
.................................................................................................................................................................................
.................................................................................................................................................................................
.................................................................................................................................................................................
NUMBER AMOUNT
..........................................
..........................................
..........................................
..........................................
..........................................
..........................................
..........................................
..........................................
..........................................
..........................................
.........................................
LODGE NAMEBANK RECONCILIATION
MONTH OF ______________________ �0 _________
BANK _______________________ ACCOUNT NO. ______________ PREPARED BY ______________
$GENERAL LEDGER BEGINNING BALANCE ..ADD DEBITS: $CASH RECEIPTS .......................................................TRANSFERS IN .........................................................OTHER: .....................................................................................................................................................................................................................................................
TOTAL DR. ....... $ $TOTAL AVAILABLE ...........................................................................................LESS CREDITS: $CHECKS WRITTEN ................................................TRANSFERS OUT ....................................................BANK CHARGE .......................................................OTHER: .......................................................................
TOTAL CR. ....... $ $GENERAL LEDGER ENDING BALANCE ..........
$BALANCE PER BANK STATEMENT ..................AS OF ........................................................ 20 ............ADD DEPOSITS IN TRANSIT: $.................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................TOTAL IN TRANSIT $ $TOTAL .........................................................................................................................LESS CHECKS OUTSTANDING:(See List Below) $
TOTAL ............... $BANK BALANCE - PER RECONCILIATION ...
COMMENTS
CHECKS OUTSTANDING
NUMBER AMOUNT
..........................................
..........................................
..........................................
..........................................
..........................................
..........................................
..........................................
..........................................
..........................................
..........................................
.........................................
NUMBER AMOUNT
..........................................
..........................................
..........................................
..........................................
..........................................
..........................................
..........................................
..........................................
..........................................
..........................................
.........................................
NUMBER AMOUNT
..........................................
..........................................
..........................................
..........................................
..........................................
..........................................
..........................................
..........................................
..........................................
..........................................TOTAL $
– 58 –
6-210 TAXES:The Lodge Auditing & Accounting Committee should meet with their outside accountant, at the time of the annual financial report, and have him review the Lodge's practices for compliance with tax laws and regulations.
It is suggested that the Lodge Secretary maintain a file of pertinent Internal Revenue Service tax publications. These publications, and forms, may be obtained from the IRS Forms Distribution Center in your state, or by calling toll-free: 800-8�9-3676. State publications may be obtained from state/local tax offices.
1. Are payroll taxes held for: full-time and part-time employees; "casual labor"; "outside labor"; extra help; etc.? ...................................................................................................................................................................
2. Are such payroll taxes being held for the Secretary and Treasurer? ...................................................................................
3. Are taxes withheld for employees receiving tips of $20 or more per month? ....................................................................
4. Are the Federal Unemployment Tax (FUTA) and State unemployment taxes paid on a timely basis? .............................
5. Were 990, or 990EZ forms filed by August 15th, and copy submitted with annual financial report? ................................
6. Are gross receipts/expenses reported on the tax forms, and not netted out? ......................................................................
7. Are ALL Officers listed (in 990), whether they receive compensation or not? ..................................................................
8. Did accountant note, on the 990 form, that Lodge is exempt under 501(c)(8)? .................................................................
9. Are proper records maintained by the Treasurer concerning "Unrelated Income"? ...........................................................
10. Does Lodge have an Employer Identification Number? (Ref. 5-201f) ...............................................................................
11. Was a 1099-INT issued to holders of member bonds, who received interest of $10 or more? ..........................................
12. Were 1099's issued for non-employees' compensation (i.e. accountants, attorneys, orchestras, etc.) ................................
13. Was an IRS Form W-2G issued to individuals who won $600 or more from raffles or drawings? ....................................
14. Was an IRS Form W-2G issued to individuals who won $1,200 or more from bingo, and other Lodge games of chance? ................................................................................................................................................................
15. Any Lodge that sells alcoholic beverages is subject to a Federal Special (Occupational) Tax per year (July 1st thru June 30th of the following year)…….was this tax paid? .............................................................................
16. Were state and local sales taxes paid when due? ................................................................................................................
17. Were federal/state/local income taxes paid when due? .......................................................................................................
18. Were all payments made properly for state taxes relating to bingo, games of chance, etc.? ..............................................
19. Are all persons handling money properly bonded? ............................................................................................................
20. Where applicable, was a 990T, Unrelated Income Tax Form prepared? (To be submitted when unrelated gross income of $1,000 or more as defined in section 1.6012-2(e) of the Income Tax Regulations) .................................
NOTE: It is important that the Auditing & Accounting Committee understand that the Lodge must be careful in maintaining a reputation of being a law-abiding organization and not act to jeopardize our income tax exemption.
YES NO
– 59 –
— CHAPTER 7 —THE ANNUAL FINANCIAL REPORT
(TakenfromtheAuditing,AccountingandManagementManual—Code510100)
7-201 GENERAL:Each member of a Lodge is entitled to the assurance provided by an audit that Lodge assets are being protected against waste, fraud and theft, and are being used only for the purposes intended. Section �3.040 of the Statutes places responsibility on the Auditing & Accounting Committee to obtain and file the annual financial report. The following advice, suggestions and recommendations are provided for carrying out these responsibilities. The word "audit" as used herein includes an audit examination, a review or a compilation as discussed below.
7-202 AN AUDIT:An audit is defined as a formal or official examination and verification of accounts. It results in a final report by the accountant setting forth his opinion. The laws of some States require that only a Certified Public Accountant (CPA) may perform an audit or state an opinion. An audit requires more work and is more costly than a review or compilation. An audit is appropriate for any Lodge, but more so for larger Lodges that have a complex organization or extensive assets.
7-203 A REVIEW:A review is an engagement performed by an independent accountant which is less expensive than an audit examination. The accountant determines whether material modifications exist that do not present financial information in conformity with generally accepted accounting principles. He makes this determination after conducting inquiries of Lodge personnel and performing analytical review procedures. The final report should include an unqualified opinion. A review is appropriate for all but the larger Lodges.
7-204 A COmPILATION:A compilation merely presents, in the form of financial statements, information that is the representation of Lodge management. A compilation is only to be prepared when the accountant determines that an audit review or audit is not feasible or economically practical because of inadequacies in Lodge records and procedures or similar circumstances. In addition, the accountant may prepare a compilation if it is his first report being prepared for a Lodge — however, in the following year either a review or an audit is to be prepared. However, under the two given examples mentioned, the report will not include an opinion or any other form of assurance that the financial information is in conformity with generally accepted accounting principles.
7-205 ENGAGING THE ACCOUNTANT:The accountant should always be a professional who does contract work for the general public and holds himself to be knowledgeable in the field of accounting; who has the privilege of signing as an "accountant"; and one who should have a complete awareness in the preparation of IRS Tax Forms. He should be one who is outside the regular employment of the Lodge in order to obtain an impartial examination. It is recommended that he be engaged early in the Lodge year so that he may become familiar with the accounting system and procedures followed in the various funds of the Lodge. Engagement of the accountant should never be postponed beyond January for the year ending the following March 3�st.
7-206 NEGOTIATING THE ENGAGEmENT:The Auditing & Accounting Committee should discuss with each prospective accountant the requirements and proposed terms of the engagement. Consider the following:
a. Show him Sec. �3.040 of the Statutes; copy of the Grand Lodge Auditing, Accounting and Management Manual; and copy of prior year's financial report.
– 60 –
b. If the Lodge has not already determined that it desires either an audit or a review, discuss with him the pros and cons and cost of each. Ask for his recommendation.
c. Express the desire for an assessment of internal controls, tax compliance and accounting procedures and his recommendations for corrective action.
d. Tell him when the books and records will be turned over to him. The target date should be not later than April 30th. Make certain that he will complete the report by June �5th.
e. Be responsive to any request to take a look at Lodge accounting records. If it is not practical for him to observe the end-of-year inventory-taking, an inventory certificate, such as the example set forth in Section �-�04, may be provided. Discuss procedures for verification of cash on hand. Verify that the accountant will prepare necessary income tax returns.
f. A suggested contract for the engagement of the accountant is included in Section �-�04. This contract was developed by a former Chief Justice of the Grand Forum with assurance that it would have universal validity.
7-207 COmPLETING THE ANNUAL FINANCIAL REPORT:An example of a completed Annual Financial Report is included in the Appendix of the Grand Lodge Auditing, Accounting and Management Manual as Exhibit E. The report must include all standard financial report forms as provided by the Grand Secretary, completed in accord with the guidance contained in the Grand Lodge Auditing, Accounting and Management Manual, together with a copy of each income tax return. The content and results of the findings of the accountant should be reviewed by the accountant with the Auditing & Accounting Committee. The Committee should report these findings at a regular session of the Lodge and obtain approval of the report. The Committee should complete all entries on the Transmittal Letter.
7-208 DEADLINE FOR FILING:This is June 30th as expressed in the Statute. The postmark date will determine whether a report is filed on time. If unable to meet this deadline, the Lodge Auditing & Accounting Committee should have the Secretary forward a request for extension of time to the Area Member of the Grand Lodge Auditing & Accounting Committee as far in advance of the deadline as possible, explaining the reasons for the delay and the date on which the report will be filed.
7-209 EVALUATION REPORT:After July �st, and wherever possible prior to the visit of the District Deputy, the Area Member of the Grand Lodge Auditing & Accounting Committee will forward a copy of the ACKNOWLEDGMENT OF RECEIPT OF FINANCIAL REPORT AND EVALUATION THEREOF, with his recommendations, suggestions and comments, to the Exalted Ruler, the Secretary, the District Deputy, and the Past Grand Exalted Ruler Sponsor(s). This report is to be read on the floor at a regular session of the Lodge, and is to be so noted in the Lodge minutes; and will be reviewed with the Officers during the visit of the District Deputy. An example is included in the Auditing, Accounting and Management Manual Appendix as part of Exhibit E.
7-210 SEPARATE CORPORATION:A separate corporation is an entity of the Lodge which owes its existence to that authorization granted in Section �6.030 of the Statutes for the Lodge to form a separate corporation. Grand Lodge has long held that the Annual Financial Report is to be a combined report and should include any separate corporation. The accountant engaged to audit the Lodge should also audit the separate corporation. The income and expenses of the corporation should be included in the Financial Report and the Combined Balance Sheet should include its assets, liabilities and equity.
– 6� –
7-211a ANNUAL AUDIT CHECKLIST:
MINIMUM_REQUIREMENTS_FOR_COMPLIANCE_WITH_AUDITING,_ACCOUNTING_&_MANAGEMENT_MANUAL,_CHAPTER_9,_SECTION_9-102.
Place_asterisk_(*)_in_box_if_item_“Not_Applicable”_to_your_Lodge.LODGE_NAME_ LODGE_NUMBER_ LODGE_YEAR_END
LODGE_MUST_PROVIDE_COPIES_OF_THE_FOLLOWING_INFORMATION_FOR_AUDIT:_ 1._ CURRENT_GRAND_LODGE_ANNUAL_FINANCIAL_FORMS.
_ 2._ CURRENT_FEDERAL_&_STATE_TAX_FORMS.
_ 3._ LAST_YEAR'S_FINANCIAL_REPORT.
_ 4._ GRAND_LODGE_AUDIT_EVALUATION_FOR_LAST_YEAR'S_REPORT.
_ 5._ NAME,_ADDRESS_AND_PHONE_NUMBER_OF_AUDITING_&_ACCOUNTING_COMMITTEEMEN_RESPONSIBLE_FOR_REPORT.
_ 6._ DISTRICT_DIRECTORY_OF_LODGE_OFFICERS.
_ 7._ REVISED_BUDGET.
_ 8._ BALANCE_SHEET_&_FINANCIAL_STATEMENTS_WITH_BUDGET_COMPARISONS/ALL_LODGE_ENTITIES.
_ 9._ CHART_OF_ACCOUNTS.
_ 10._ SECRETARY'S_YEAR-END_MEMBERSHIP_REPORT_TO_GRAND_LODGE.
_ 11._ AUDITING_&_ACCOUNTING_COMMITTEE'S_REPORTS_FOR_JULY,_OCTOBER_AND_JANUARY_AS_REQUIRED_BY_GLS_13.040.
_ 12._ INSURANCE_RECORDS_(LIABILITY,_PROPERTY_PLUS,_WORKERS_COMPENSATION,_ETC.).
_ 13._ PAYROLL_TAX_RETURNS_(FEDERAL_&_STATE)_FOR_QUARTER_ENDING_3/31.
_ 14._ SALES_TAX_RETURN_FILED_FOR_PERIOD_ENDING_3/31.
_ 15._ COMPLETED_RECONCILIATION_OF_DUES_AND_FEES_(PAGE_10_&_11_GRAND_LODGE_FINANCIAL_REPORT_FORMS).
_ 16._ FIXED_ASSETS_RECORDS.
_ 17._ DEPRECIATION_RECORDS.
_ 18._ BAD_DEBTS_REGISTER_THROUGH_PERIOD_ENDING_3/31_(LIST_BY_NAME_&_AMOUNT).
_ 19._ ALL_BANK_RECONCILIATIONS_FOR_PERIOD_ENDING_3/31.
_ 20._ ALL_SAVINGS_ACCOUNTS_THROUGH_PERIOD_ENDING_3/31.
_ 21._ INVESTMENT_RECORDS_THROUGH_PERIOD_ENDING_3/31.
_ 22._ REQUESTS_FOR_AND_GRAND_LODGE_APPROVALS_FOR_GLS_16.050_TRANSACTIONS.
IN_ADDITION_TO_THE_ABOVE_INFORMATION,_WE_WILL_WANT_TO:_ 23._ VERIFY__WORKING_FUNDS.
_ 24._ VERIFY_ALL_BANK_BALANCES.
_ 25._ CHECK__DATE_INSURANCE_RECORDS_REVISED.
_ 26._ CHECK__ADEQUACY_OF_INSURANCE_COVERAGE.
_ 27._ VERIFY_ADDITIONS_AND_DISPOSALS_TO_FIXED_ASSETS.
_ 28._ CHECK_APPROVALS_FOR_ADDITIONS_AND_DISPOSALS_OF_FIXED_ASSETS.
_ 29._ CHECK_INTERNAL_CONTROLS.
_ 30._ VERIFY_PREPAID_EXPENSES.
_ 31._ VERIFY_ACCRUED_EXPENSES.
_ 32._ CHECK_RESTRICTED_FUND_ACCOUNTS.
_ 33._ VERIFY_DATE_ACCOUNTING_FIRM_APPROVED_BY_LODGE.
_ 34._ CHECK_FOR_UNRELATED_BUSINESS_INCOME.
_ 35._ RECONCILE_PAYROLL_REPORTS_WITH_BOOKS.
_ 36._ RECONCILE_SALES_TAX_REPORTS_WITH_BOOKS.
_ 37._ VERIFY_ACCOUNTS_PAYABLE_BALANCES
– 6� –
7-211b ANNUAL REVIEW CHECKLIST:
MINIMUM_REQUIREMENTS_FOR_COMPLIANCE_WITH_AUDITING,_ACCOUNTING_&_MANAGEMENT_MANUAL,_CHAPTER_9,_SECTION_9-103.
Place_asterisk_(*)_in_box_if_item_“Not_Applicable”_to_your_Lodge.LODGE_NAME_ LODGE_NUMBER_ LODGE_YEAR_END
LODGE_MUST_PROVIDE_COPIES_OF_THE_FOLLOWING_INFORMATION_FOR_AUDIT:_ 1._ CURRENT_GRAND_LODGE_ANNUAL_FINANCIAL_FORMS.
_ 2._ CURRENT_FEDERAL_&_STATE_TAX_FORMS.
_ 3._ LAST_YEAR'S_FINANCIAL_REPORT.
_ 4._ GRAND_LODGE_AUDIT_EVALUATION_FOR_LAST_YEAR'S_REPORT.
_ 5._ NAME,_ADDRESS_AND_PHONE_NUMBER_OF_AUDITING_&_ACCOUNTING_COMMITTEEMEN_RESPONSIBLE_FOR_REPORT.
_ 6._ DISTRICT_DIRECTORY_OF_LODGE_OFFICERS.
_ 7._ REVISED_BUDGET.
_ 8._ BALANCE_SHEET_&_FINANCIAL_STATEMENTS_WITH_BUDGET_COMPARISONS/ALL_LODGE_ENTITIES.
_ 9._ CHART_OF_ACCOUNTS.
_ 10._ SECRETARY'S_YEAR-END_MEMBERSHIP_REPORT_TO_GRAND_LODGE.
_ 11._ AUDITING_&_ACCOUNTING_COMMITTEE'S_REPORTS_FOR_JULY,_OCTOBER_AND_JANUARY_AS_REQUIRED_BY_GLS_13.040.
_ 12._ INSURANCE_RECORDS_(LIABILITY,_PROPERTY_PLUS,_WORKERS_COMPENSATION,_ETC.).
_ 13._ PAYROLL_TAX_RETURNS_(FEDERAL_&_STATE)_FOR_QUARTER_ENDING_3/31.
_ 14._ SALES_TAX_RETURN_FILED_FOR_PERIOD_ENDING_3/31.
_ 15._ COMPLETED_RECONCILIATION_OF_DUES_AND_FEES_(PAGE_10_&_11_GRAND_LODGE_FINANCIAL_REPORT_FORMS).
_ 16._ FIXED_ASSETS_RECORDS.
_ 17._ DEPRECIATION_RECORDS.
_ 18._ BAD_DEBTS_REGISTER_THROUGH_PERIOD_ENDING_3/31_(LIST_BY_NAME_&_AMOUNT).
_ 19._ ALL_BANK_RECONCILIATIONS_FOR_PERIOD_ENDING_3/31.
_ 20._ ALL_SAVINGS_ACCOUNTS_THROUGH_PERIOD_ENDING_3/31.
_ 21._ INVESTMENT_RECORDS_THROUGH_PERIOD_ENDING_3/31.
_ 22._ REQUESTS_FOR_AND_GRAND_LODGE_APPROVALS_FOR_GLS_16.050_TRANSACTIONS.
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— CHAPTER 8 —DISTRICT DEPUTY'S INTERNAL AUDIT
8-201 DISTRICT DEPUTY'S INTERNAL AUDIT:The District Deputy Grand Exalted Ruler, with the assistance of an Auditor appointed by him, conducts this internal audit upon the occasion of his visit to the Lodge. This, in effect, is an internal audit conducted by corporate headquarters within its branch offices. The Exalted Ruler is expected to act affirmatively on recommendations made by the District Deputy.
Note: It is suggested that it would be very helpful if the Lodge's auditors could be present when the District Deputy conducts his audit.
Reference Auditing, Accounting and Management Manual — Chapter 9 for annual audit details.
— NOTES —
Code 5�0000 — Revised 9/�006