SAMPLE DOCUMENT Type of Document: Financial Policies & Procedures Museum Name: Alutiiq Museum and Archaeological Repository Date: 2011 Type: Natural History Budget Size: $5 million to $9.9 million Budget Year: 2011 Governance Type: Private, Nonprofit Organization Notes on strengths or special features: The document addresses the following topics: Authority & Responsibility Governing Authority Committees Staff Bank Accounts & Authorized Signatories Approval of Documents & Contracts Fiscal Year Budget Process Financial Reporting Audit & Recordkeeping Accounting Structure Division of Duties Revenues Admissions Donations Life Insurance Gifts of Real Property Gifts of Tangible Property Securities Donation Boxes Grants Memberships Accredited: Yes Museum Store Program or Service Fees Received by Mail Special Events Telephone Revenue Other Disbursements Check Requests Museum Credit Cards Payroll Petty Cash Purchase Orders Routine Expenses Travel Advances & Reimbursements Accounts Payable Accounts Receivable Bank Deposits Competitive Bids Fixed Assets Donated Goods & Services Museum Store Inventory Other: Internal controls, conflicts of interest USE STATEMENT & COPYRIGHT NOTICE The AAM Information Center has provided this sample document. It serves as an example of how one museum addresses a particular issue. Museums should compose original materials based on their unique circumstances. Any document produced by the recipient should not substantially use the contents of this sample as the basis. Materials in the AAM Information Center are provided "as is," without any guarantee or warranty of any kind, expressed or implied. NOTICE CONCERNING COPYRIGHT RESTRICTIONS Under certain conditions specified in the copyright law of the United States (Title 17, United States Code), libraries and archives may furnish a photocopy or other reproduction. The photocopy or reproduction may not be used for any purpose other than private study, scholarship or research. If a user makes a request for, or later uses, a photocopy or reproduction for purposes in excess of fair use, that user may be liable for copyright infringement.
ALUTIIQ MUSEUM & ARCHAEOLOGICAL REPOSITORY Business and Financial Administration Policy PURPOSE The Alutiiq Heritage Foundation s commitment to preserving and sharing the Alutiiq culture requires careful stewardship of the resources entrusted to the Alutiiq Museum. All board and staff members must insure the wise and effective use of the museum s funds, facilities, collections, staff time, volunteer time, merchandise, educational tools, and gifts. All museum resources will be used to support the mission of the museum. Providing for the sound management of the museum s finances is essential to this effort. The primary functions of the museum's financial and business practices are to: To assist board and staff in accomplishing the mission of the museum through the best use of financial resources To maintain accounts and prepare reports which show the financial impact of museum activities and programs To provide for the stewardship of donated and granted funds To assist in determining policies and developing workable plans To direct, coordinate, and control financial and business operations To maintain records and procedures which protect all interests of the museum To assist board and staff members in administering the museum s business and financial practices, the Alutiiq Heritage Foundation establishes this policy. Compliance with this policy is the obligation of all board and staff members. AUTHORITY As the policy setting body for the Alutiiq Museum, the Alutiiq Heritage Foundation board represents the final authority in all museum operations. This fiduciary responsibility includes making decisions regarding the administration of museum finances and insuring public confidence in the museum s financial and business practices. The procedures for meeting these responsibilities are outlined below. The Alutiiq Heritage Foundation Board of Directors entrusts decisions regarding the daily administration of the museum s finances to the Museum s Executive Director. The Executive Director shall work with the Museum s Museum Manager to establish and maintain financial and business procedures that support the provisions of the museum s Code of Ethics, Personnel Policy, Collection Policy, Museum Store Policy, Donor Support Policy, Whistle Blower Policy, and any other policies enacted by the Board, as well as professionally accepted business and accounting procedures, and all applicable state, federal, and municipal laws. 1
ACCOUNTING PRINCIPLES AND PRACTICES All business and accounting will conform to generally accepted accounting principles and practices for museums, unless otherwise stated in this policy. Basis of accounting Generally, the Museum uses the accrual method of accounting modified to include obligations. In accrual accounting, revenues are recorded when earned, not necessarily when received. Expenditures are recorded when materials or services are received, not necessarily when they are paid. Asset accounting Assets owned by the Museum for the purpose of carrying out Museum programs are recorded at cost or, in the case of donated assets, at fair market value at the time of donation. Financial statements The Museum reports on its financial condition using a balance sheet. Additional reports are prepared as necessary to provide relevant management information. APPROVAL OF DOCUMENTS AND EXPENDITURES Signature Authority Authorized employees may delegate authority to sign official financial documents to other responsible employees. Such delegation does not relieve the original signer of the responsibility for any action taken. The Alutiiq Heritage Foundation Board delegates authority to the executive director to approve all Museum expenditures and grant applications. The Executive Director delegates his / her authority as follows: Expenditures greater than $50,000 The Alutiiq Heritage Foundation Board must approval all expenditures greater than $50,000. Expenditures less than $50,000 and greater than $10,000 Written approval for expenditure $10,000 or higher must be given by the Executive Director. Purchases greater than $1,000 The Deputy Director and Museum Manager must inform the Executive Director of all purchases greater than $1,000. This written notification must be done before the purchase is complete. Grant Applications Signatory delegation for grant applications and reporting is delegated to the Deputy Director, Museum Manager and Language Manager, with the written approval of the Executive Director, on a case by case basis. CONTRACTS AND LEASES Execution Except where an outside party requires a Board member signature, all contract documents to which the Museum is a part, are executed by the Museum s Executive Director. Lease of real estate and office space The Museum s Executive Director has full authority for leases, amendments and renewal changes. 2
CONFLICT OF INTEREST Authorized certifiers/approvers of Museum business transactions may not create contracts payable to their immediate supervisor, the supervisor's business or the supervisor's immediate family (parent, guardian, spouse or child). In addition, authorized certifiers or approvers cannot approve contracts which are payable to, or on behalf of: Individuals where a conflict of interest is perceived, including current employees Situations involving "conflict of interest" may take various forms, but arise when an employee is or may be in a position to influence Museum business, research, or other decisions in ways that could lead to any form of personal gain for the employee or the employee's family, or give improper advantage to others to the Museum's detriment. Family members Documents and transactions should be reviewed and authorized by an independent person at an appropriate authority level to ensure that transactions are approved without undue influence and to avoid the appearance of a conflict. "Family or immediate family includes an individual's parent, guardian, spouse, child or sibling. Goods, Contractual Services and Other Expenditures Credit Card The Alutiiq Museum authorizes approved staff to use Alutiiq Museum business account credit cards, to purchase supplies and equipment based on the cardholder's approval and purchasing delegations. Cardholders are responsible for proper use of the card, obtaining and turning in receipts for purchases to the Museum Manager. The Museum Manager is responsible for managing the cardholder application process and processing card payments. The Executive Director is responsible for determining approval limits. The approval limit for the Executive Director s credit card will be determined by the AHF Board. Petty Cash Petty cash expenditures are overseen by the Museum Manager with a maximum cash balance of $300. Checks on Museum Funds All checks presented for payment from Museum funds must carry the signatures of one authorized Museum staff member and one AHF Board member; or two AHF Board members, unless otherwise authorized. Tax Returns The Chair and the Treasurer of the AHF Board are the signatories on the Museum s annual tax returns and Form 990s. 1099 Reports, or reports to state or federal government for withholding or excise taxes are delegated to the Museum Manager or bookkeeper, as appropriate. Insurance Proof of loss form Proof of loss forms, where the Museum agrees to release an indemnifying company for a settlement of the Museum's claim, may be signed by the Executive Director. 3
Insurance contracts Insurance policies, endorsements, and riders that require the signature of the Executive Director are signed by the Executive Director. BUDGET The Museum s annual operating budget is a statement of proposed expenditures for a particular fiscal year. It identifies the proposed sources of funds to finance programs, as well as the functional nature of the expenditures (e.g., personnel, services, travel, supplies, contractual). When approved by the Board, this document is the Museum's authorization to incur expenditures and to collect and apply revenues to appropriate activities. The annual budget planning function utilizes a Museum wide budget planning system to allocate funds into the Museum's operating account structure, and to prepare annual budget documents for the Board of Directors. Budgetary control is one mechanism used by the Museum to regulate, direct, and coordinate its activities and affairs. The budget also provides an effective analytical tool for measuring estimates against actual results. Funding Sources The annual operating budget is divided into two major fund groups: Unrestricted Funds Unrestricted funds include gaming revenues, general donations, store revenues, admissions, self supporting activities and any other funds coming into the museum without a specific project associated. Restricted Funds Restricted funds include State and Federal grants, contracts, project specific donations, and sponsorships for specific programs. Expenditure budgets for restricted funds are presented in the annual budget. There are special financial restrictions on the use of restricted funds: The budgets of external restricted funds (grant and contract accounts) are based upon agreements with the sponsor or agency. Restrictions imposed by the sponsor usually include a period of time during which funds must be spent or obligated, object of appropriation budget restrictions, the specific project or purpose for which the funds must be expended (in some cases the contract may call for deliverables), and sponsor regulations. The budgets of internal restricted funds are based on estimated income from their services and are modified in relation to the realization of the income. Expenditures are limited to actual income and any excess or receipts over expenditures may be expended only for the operation of the activity. Each project manager is responsible for the oversight of their project s financial activity in accordance with Museum policies and funding source. Project managers are responsible for monitoring, amending, and operating within their budgets. Endowment funds are also restricted and follow the procedures established for the particular endowment. Year End Budget and Account Balances Museum account balances are carried forward into the succeeding fiscal year. The review of Museum accounts at year end is on an account total basis. 4
The Museum is expected to submit a financial report to grantors that shows how grant and contract funds were expended, as requested. The timing of the review of grant and contract accounts is based on each account's project period rather than the fiscal year. MUSEUM PAYROLL ADMINISTRATION All employment and salary levels are set by the Executive Director, with the exception of the Executive Director s salary which is determined by the AHF Board, and approved in the annual budget. All salary changes or changes in compensation must have written approval from the Executive Director. The Museum is required and will comply with Federal and State law to pay all Museum employees salary and wages within specified time periods according to employee contracts or other agreements. The Museum is required to make these payments in a form convertible to cash, such as check or direct deposit to a financial institution. The Museum is required to make deductions from the salary and wage payments according to Federal and State laws and liens, and is able to make further deductions as agreed between the Museum and the employee for payments to retirement and insurance plans. The Museum is required to issue an itemized statement of all deductions for each pay period. INSURANCE The Museum purchases insurance for its property and liability risks, as specific circumstances require. The Museum requires contractors, consultants, service providers, and/or vendors doing business with the Museum, as well as outside organizations and individuals using Museum premises and/or facilities, to maintain liability insurance and other insurance as necessary to reasonably protect the Museum's financial interests, and in amounts deemed adequate by the Museum. Insurance Procurement The Executive Director will procure insurance for the Museum. Types of Coverage The Museum carries the following types of insurance coverage: General Liability Insurance, Collections Insurance, Director s & Officers Insurance, and Volunteer Insurance. In addition, the Museum will occasionally carry event insurance or exhibit insurance when Museum activities are scheduled off Museum property or specialized activities warrant additional coverage. Employee Dishonesty The Museum purchases commercial insurance to protect against financial loss resulting from employee dishonesty. Other Coverage Staff Insurance The Museum provides group policies for staff who qualify, including Health, Dental, Vision and Life Insurance. Implementation of these plans is handled by the Museum Manager. Workers' Compensation As required by law, the Museum provides Workers' Compensation coverage. For information, or to file a claim, contact the Museum Manager. 5
PURCHASING The Museum Manager has the authority to establish procedures to facilitate the purchase of equipment, materials, commodities, supplies, and services. The Museum Manager issues purchase orders consistent with the authority granted under Approval of Documents and Expenditures (p. 2). Alutiiq Museum credit cards are the preferred method of purchasing approved items. Petty Cash is available from the Museum Manager for small local purchases. PAYMENT OF SALES TAX The Museum qualifies as a tax exempt organization and is exempt from paying sales tax in the City of Kodiak. Individuals making authorized cash or credit card purchases for approved Museum business purposes should present a copy of the Museum's sales tax exemption card to merchants and request that sales tax not be charged. The Museum reserves the right to deduct the amount of sales tax paid when reimbursing individuals for cash purchases that would have been exempt from sales tax. ACCOUNTS PAYABLE The Executive Director delegates authority to the Museum Manager to develop and establish procedures regarding the responsibility and management of the payables function, including encumbrances, payables, and disbursements. The Museum Manager or delegate is also authorized to develop, install, and oversee the operation of appropriate business systems to accomplish this function. Every reasonable effort must be made to ensure that funds are used in a responsible and appropriate manner and that payables are made within a reasonable time. AUDITING, INTERNAL CONTROL, AND EMPLOYEE ETHICS Internal Controls Procedures adopted should enhance the integrity of financial transactions. Sound practices include an annual review by an independent auditor and monthly internal review of up to five routine transactions by the Executive Director, whereby the work of one person is proved independent of or complementary to the work of another. There should be a division of duties and responsibilities so no person has complete control over all aspects of a financial transaction. Employee Responsibility A properly functioning internal control system depends on the selection of supervisors with ability and experience. The staff must be capable of carrying out prescribed procedures efficiently and economically. Employees are to be trained in the position they will perform, and the necessity of adhering to outlined procedures and controls should be stressed. Employee Use of Museum Assets Museum employees may use Museum assets solely for authorized purposes, in accordance with Museum rules, policies, and applicable laws. It is a violation of this policy for any employee to receive or use a Museum asset for a non Museum purpose or gain, except as provided within Museum policy, without prior written authorization from the appropriate Museum administrator. 6
Reporting Violations Any employee, who has reason to believe this policy has been violated, is obligated to report the incident(s) and all relevant information to their supervisor. The Museum s Whistleblower Policy will be followed when appropriate. External Auditing According to its By Laws, the AHF Board has the power to conduct an independent audit of the Museum at any time. Financial audits or reviews are scheduled on a regular basis by the Board. Following the direction of the Board, Museum Manager will facilitate all museum audits. BANKING Account Balances Museum Account balances at any one specific bank will not be allowed to exceed to current maximum deposit balances to be covered under the Federal Deposit Insurance Corporation (FDIC). If the balance is expected to exceed the maximum covered, then the funds will be transferred via check to another bank. If necessary, a new account at a new bank will be opened to insure all Museum funds are protected by the FDIC. Gaming Funds Gaming bank accounts will be managed in a way that follows all state gaming statutes and regulations. GIFTS AND ENDOWMENTS The Museum solicits and receives donations that further its mission of preserving the Alutiiq culture and traditions. The AHF Board has approved a Donor Support Policy that directs the requirements for accepting both individual and corporate donations. CONSULTANTS AND OTHER CONTRACTORS FOR PROFESSIONAL SERVICES The Museum may contract for the purchase of professional and artistic services to accomplish the objectives of the Museum when such services are specialized, highly technical, and cannot be economically or satisfactorily performed by Museum employees as part of their normal duties. Contractors are used for specific tasks and for explicit periods of time. Contractors can be either business firms or individuals who are not employees of the Museum. Payments to contractors must be made in full compliance with all applicable policies and procedures. REVIEW Formal review of this policy will take place at a minimum of once every five years from the date of last review. Proposed changes or amendments will be brought to the attention of the Alutiiq Heritage Foundation s Board of Directors by the Museum s Executive Director. The AHF Board shall review the proposed changes and enact any revisions they believe to be necessary. This policy was first adopted by the Alutiiq Heritage Foundation Board of Directors on. 7