ACCOUNTING POLICIES AND PROCEDURES MANUAL

Transcription

1 ACCOUNTING POLICIES AND PROCEDURES MANUAL Accounting Policies and Procedures Manual Page 1

2 Table of Contents Introduction... 3 Division of Responsibilities... 4 Board of Directors... 4 Executive Director... 4 Finance Administrator... 5 Chart of Accounts and General Ledger... 6 Cash Receipts... 7 Bank Transfers... 8 Cash Disbursements Credit Card Policy and Charges Accounts Receivable Debt Accruals and Prepaids Bank Account Reconciliations Property and Equipment Personnel Records Payroll Processing End of Month and Fiscal Year End Close Financial Reports Fiscal Policy Statements Petty Cash Procedures Accounting Policies and Procedures Manual Page 2

3 Introduction The purpose of this manual is to describe all accounting policies and procedures currently in use at Heart of the City Neighborhoods, Inc. and its affiliate, Cynthia Gardens Housing Development Fund Company, Inc., and to: ensure that the financial statements conform to generally accepted accounting principles; assets are safeguarded; guidelines of grantors and donors are complied with; and finances are managed with accuracy, efficiency, and transparency. All Heart of the City Neighborhoods, Inc. s staff with a role in the management of accounting operations are expected to comply with the policies and procedures in this manual. These policies will be reviewed periodically (at least annually) and revised as needed by the staff and approved by the Board of Directors. Accounting Policies and Procedures Manual Page 3

4 Division of Responsibilities The following breaks down the segregation of duties within the organization and includes a list of personnel who have accounting responsibilities: Board of Directors 1. Reviews and approves the annual budget 2. Reviews annual financial statements 3. Reviews the general operating monthly financial report 4. Three members of the board are appointed by the board to be authorized signers on the bank accounts 5. Reviews and approves all grants over $2,500 and all projects. 6. Reviews and approves all expenditures over the budgeted amount. 7. Reviews and advises staff on internal controls and accounting policies and procedures 8. Reviews completed monthly bank reconciliations (specifically, the Board Treasurer performs this task). 9. Determines whether the organization should have an audit and, if so, chooses and contracts with the auditor Executive Director 1. Reviews the monthly financial report provided by the Finance Administrator 2. Sees that an annual operating budget is developed annually 3. Reviews and signs all issued checks 4. Reviews and approves all projects 5. Approves all program expenditures 6. Monitors program budgets 7. Reviews and approves all grant submissions 8. Initiates all inter-account bank transfers 9. Makes bank deposits 10. Opens all bank statements and reviews for any irregularities 11. Reviews all payrolls 12. Reviews and manages cash flow 13. Reviews and approves all reimbursements and fund requests 14. Reviews all incoming and outgoing invoices 15. Monitors and manages all expenses to ensure most effective use of assets Accounting Policies and Procedures Manual Page 4

5 16. Monitors grant reporting and appropriate release of temporarily restricted funds 17. Initiates donor thank you letter acknowledgements Finance Administrator Division of Responsibilities (cont.) 1. Overall responsibility for data entry into accounting system and integrity of accounting system data 2. Processes invoices and prepares checks for signature 3. Processes payroll 4. Maintains general ledger and Chart of Accounts 5. Prepares monthly and year-end financial reports 6. Reconciles all bank accounts 7. Manages accounts receivable 8. Manages the petty cash fund 9. Complies with Generally Accepted Accounting Principles and organizational financial by-laws, policies and procedures. Accounting Policies and Procedures Manual Page 5

6 Chart of Accounts and General Ledger Heart of the City Neighborhoods, Inc. has designated a Chart of Accounts specific to its operational needs and the needs of its financial statements. The Chart of Accounts is structured so that financial statements can be shown by natural classification (expense type) as well as by functional classification (program vs. outreach vs. general operating). The Finance Administrator is responsible for maintaining the Chart of Accounts and revising as necessary. The general ledger is automated and maintained using our accounting software, Quickbooks. All input and balancing is the responsibility of the Finance Administrator with final approval by the Board Treasurer. The Board Treasurer should review the general ledger on a periodic basis, at least annually, for any unusual transactions. Accounting Policies and Procedures Manual Page 6

7 Cash Receipts Cash receipts generally arise from: 1. Grants 2. Direct donor contributions 3. Fundraising activities 4. Rental payments The principal steps in the cash receipts process are: The Executive Director opens, initials, and distributes the mail. The Executive Director prepares a deposit slip for any checks received and takes these checks to the bank for deposit. The Finance Administrator processes the deposit. The deposits are put in a file, next to the bank statement. All cash received will be counted, verified, and signed off by a Board member and the Finance Administrator. The cash will immediately be posted using the appropriate allocation. A receipt will be given to the paying party and a copy kept for recordkeeping. The cash will be kept in a secure location and deposited within 24 business hours. Accounting Policies and Procedures Manual Page 7

8 Bank Transfers The Executive Director monitors the balances in the bank accounts to determine when there is a shortage or excess in the checking accounts. The Executive Director makes the necessary transfers. The Finance Administrator is directed in writing when to record the transfer and in what amount. Accounting Policies and Procedures Manual Page 8

9 Cash Disbursements & Expense Allocations Cash disbursements are generally made for: 1. Payments to vendors for goods and services 2. Taxes 3. Staff training and development 4. Memberships and subscriptions 5. Meeting expenses 6. Employee reimbursements 7. Marketing/promotional materials Checks are processed weekly. Invoices submitted to the Finance Administrator by Wednesday will be processed and paid by Friday of the same week. Requests for cash disbursements are submitted to Accounting in two ways: 1. Original invoice 2. Employee expense report or reimbursement request All invoices must be approved by the Executive Director prior to being submitted to the Finance Administrator. Employees will be reimbursed in accordance with the established government per diem rate. Every employee reimbursement must be documented on the approved form with travel authorization, receipts, nature of business, program allocation, and funding source (if applicable) before approving for reimbursement as follows: Lodging - an itemized receipt from the hotel detailing all charges, the person(s) for whom the lodging was provided, and the specific business purpose. Meals and Entertainment - a receipt must be provided showing the cost of food, beverage, and gratuities, participants, and the specific business purpose. Other Expenditures - a receipt from the vendor detailing all goods or services purchased and the specific business purpose. The Executive Director reviews all requests for payment and: 1. Verifies expenditure and amount 2. Approves for payment if in accordance with budget 3. Provides or verifies appropriate allocation information 4. Provides date of payment taking into account cash flow projections Accounting Policies and Procedures Manual Page 9

10 5. Submits to the Finance Administrator for processing Cash Disbursements & Expense Allocations (cont.) The Finance Administrator processes all payments and: 1. Immediately enters them into the Accounts Payable module via Quickbooks 2. Prints checks according to the appropriate allocation and payment date 3. Submits checks, with attached backup documentation, to Executive Director for approval and signature. All checks in excess of $2,500 require a second signature from an authorized board or staff member; checks in excess of $2,500 must be authorized by the Board of Directors 4. Attaches a copy of the check to the invoice for filing 5. Delivers the checks to the Executive Director to be mailed, along with any appropriate backup documentation 6. Files all backup documentation in the appropriate file 7. Reviews all open invoices weekly in order to make sure they are paid timely Expense Allocations When entering invoices into the accounting system, each expense is categorized under the appropriate class. The expenses are classified this way for budgeting purposes and in order to maintain proper financial statement reporting. With respect to cost allocations related to funding, including all state, federal, and private funding, the organization will ensure that costs are allowable according to the terms of the grant. Accounting Policies and Procedures Manual Page 10

11 Credit Card Policy and Charges All staff members who are authorized to carry an organization credit card will be held personally responsible in the event that any charge is deemed personal or unauthorized. Unauthorized use of the credit card includes: personal expenditures of any kind; expenditures which have not been properly authorized; meals, entertainment, gifts, or other expenditures which are prohibited by budgets, laws, and regulations, and the entities from which Heart of the City Neighborhoods, Inc. receives funds. The receipts for all credit card charges will promptly be given to the Executive Director along with proper documentation. The Finance Administrator will verify all credit card charges with the monthly bank statements. The monthly bank statements will reviewed by the Board Treasurer. The Executive Director's credit card usage will be reviewed by the Board Treasurer, during his review of the monthly bank statements. Accounting Policies and Procedures Manual Page 11

12 Accounts Receivable Accounts receivable is generally comprised of grant awards and contributions that the organization is expecting to receive. A receivable will only be recorded when expenditures have been incurred in compliance with the grant restrictions. Receivables are charged to bad debt expense when they are determined to be uncollectible based upon a periodic review of accounts by the Executive Director and the Finance Administrator. Accounting Policies and Procedures Manual Page 12

13 Debt Heart of the City Neighborhoods, Inc. debt usually consists of one or a combination of the following: 1. Revolving line of credit 2. Loan agreements 3. Credit Cards The Executive Director and the Board of Directors, together, have the authority to initiate and sign debt agreements. Monthly, the amounts reflected as current and long-term notes payable per the general ledger are reconciled to monthly statements provided by the lender, by the Finance Administrator. The Board Treasurer will review these reconciliations monthly. Unpaid interest expense will be accrued as a liability at the end of each accounting period. All debt agreements are kept in a secured location, only to be accessed by authorized personnel. Accounting Policies and Procedures Manual Page 13

14 Accruals and Prepaids To ensure a timely close of the General Ledger, Heart of the City Neighborhoods, Inc. may book accrual and prepaid entries. Some accruals and prepaids will be made as recurring entries. Accruals and Prepaids to consider: 1. Payroll and related liabilities 2. Employee vacation time 3. Health/Dental insurance 4. Property insurance/taxes 5. Utilities 6. Professional services 7. Monthly interest earned on bank accounts 8. Monthly interest incurred on debt balances In preparation for the year-end financial statement audit, all accrual and prepaid balances in the individual amount of at least $100 will be recorded. A periodic review of accrual and prepaid balances will be performed by the Finance Administrator in order to ensure completeness, accuracy, valuation, and existence of financial information. Accounting Policies and Procedures Manual Page 14

15 Bank Account Reconciliations 1. All bank statements are given unopened to the Executive Director. The Executive Director reviews the statements for unusual balances and/or transactions. 2. The Executive Director gives the statements to the Finance Administrator for timely reconciliation as follows: a comparison of dates and amounts of deposits as shown in the accounting system and on the statement, a comparison of inter-account transfers, a comparison of cleared checks with the accounting record including amount, payee, and sequential check numbers. 3. The Finance Administrator will verify that voided checks, if returned, are appropriately defaced and filed. 4. The Finance Administrator will investigate any checks that are outstanding over six months. 5. The Finance Administrator will attach the completed bank reconciliation to the applicable bank statement, along with all documentation. 6. The reconciliation report will be reviewed and approved by the Board Treasurer, by the end of the following month. Accounting Policies and Procedures Manual Page 15

16 Property and Equipment Property and equipment includes items such as: 1. Office furniture and fixtures 2. Office machinery and equipment 3. Building 4. Land improvements It is the organization s policy to capitalize all items which have a unit cost greater than five hundred dollars ($500). Items purchased with a value or cost less than five hundred ($500) will be expensed in the period purchased. The depreciation period for capitalized assets is as follows: Furniture & fixtures Machinery and equipment Building Land Improvements 5-10 years 5-10 years 39 years 15 years 1. A Fixed Asset schedule is maintained by the Finance Administrator including date of purchase, asset description, purchase information, cost/fair market value, donor/funding source, identification number, life of asset. 2. Depreciation is recorded annually. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets. Accounting Policies and Procedures Manual Page 16

17 Personnel Records 1. All personnel files contain the following documents: an application and/or resume, date of employment, position and pay rate, authorization of payroll deductions, W-4 withholding authorization, termination data where applicable, a Social Media acknowledgement, a Confidentiality Agreement, an At Will Employment agreement, a Non-Compete Agreement, and other forms as deemed appropriate by the Executive Director. 2. All employees will fill out an I-9 form and submit the allowable forms of identification to the Executive Director. 3. All personnel files are to be kept in a secure file cabinet and accessed only by authorized personnel. Accounting Policies and Procedures Manual Page 17

18 Payroll Processing 1. Timesheets are to be prepared by all staff on the approved form and submitted biweekly. 2. Timesheets are to be signed and dated by the employee before submission to the Executive Director. 3. Any changes to the standing information of the payroll register from the prior period including addition of new employees, deletion of employees, or changes in base pay rate must be accompanied the appropriate form and signed by the Executive Director before the change can be made. 4. The Finance Administrator will process payroll in a timely manner and record vacation time, holiday hours, sick time, and any other information deemed necessary to properly reflect time worked. 5. Employees may choose direct deposit to a designated bank account. Their paycheck is deposited directly into the designated account on the payroll date. The employee will receive a verification stub. 6. The Executive Director will review payroll expenditures monthly. 7. All quarterly federal and state payroll reports will be prepared and filed appropriately. 8. All W-2 statements are issued to employees prior to January 31 st of the following year for the prior calendar year. 9. Payroll expense as per the general ledger will be reconciled to quarterly payroll tax filings by the Finance Administrator on an annual basis to ensure the completeness and accuracy of both records. Accounting Policies and Procedures Manual Page 18

19 End of Month and Fiscal Year-End Close 1. The Finance Administrator prepares all month- and year-end journal entries. 2. At the end of each month and fiscal year end, the Board Treasurer will review cash account balances. 3. Once the final year-end financial statements are run, reviewed, and approved by the Board of Directors and Executive Director, no more entries or adjustments will be made into that year s ledgers. 4. At the end of the fiscal year, the outside CPA firm will prepare the annual Return for Organization Exempt from Income Tax (IRS Form 990). The return will be presented to the Board of Directors for their review and approval. The Executive Director will then file the return with the Internal Revenue Service by the annual deadline. 5. All other appropriate government filings including those required by the Internal Revenue Service and the state tax board will be completed and filed with the appropriate agency. 6. If determined necessary by the Board of Directors, a financial statement audit will be performed by an outside CPA firm. The Finance Administrator will facilitate this audit. Accounting Policies and Procedures Manual Page 19

20 Financial Reports The Finance Administrator will prepare the monthly financial reports for the Executive Director. This report calculates the monthly profit or loss based on general operating income and expenses. Financial reports will be submitted to the Board of Directors for review and approval. Accounting Policies and Procedures Manual Page 20

21 Fiscal Policy Statements 1. All cash accounts (except petty cash) owned by Heart of the City Neighborhoods, Inc. will be held in financial institutions which are insured by the FDIC. No bank account will carry a balance over the FDIC insured amount. 2. All capital expenditures which exceed five hundred dollars ($500) will be capitalized. 3. No salary advances will be made under any circumstances. 4. No travel cash advances will be made except under special conditions and pre-approved by the Executive Director. 5. Reimbursements will be paid upon complete expense reporting and approval using the official Heart of the City Neighborhoods, Inc. form. 6. The Executive Director and one designated Board member are the signatories on Heart of the City Neighborhoods, Inc. bank accounts. Disbursements exceeding $2,500 require a second signature by an authorized board member. 7. Bank statements will be reconciled monthly. All bank statements will be given unopened to the Executive Director for review. 8. Correction fluid and/or tape will never be used in preparing timesheets or any accounting documents. Accounting Policies and Procedures Manual Page 21

22 Petty Cash Procedures A maximum of $50 cash is kept in a locked, safe deposit box. Each time an amount is deposited or withdrawn, it must be written on a voucher, attached to the receipt, and then logged. The Finance Administrator will reconcile the amount in the safe deposit box to the log, monthly, and then reconcile that to the Quickbooks records. Accounting Policies and Procedures Manual Page 22