Transcript FINANCIAL PROCEDURES - Illinois Education Association

For Locals & Regions

Administration & Fiduciary Oversight

Regulatory Requirements

Technical Tasks
2

All local/region leaders need to be aware
of financial concepts
• Oversight
• Emergency coverage


Treasurer needs to know in detail
Following these guidelines helps you to
avoid problems and be more accountable
Note FPLR handbook page references at
bottom of slides (centered and green)
3
DUES
IPACE
OTHER
FILING
CASH
RECEIVED
DOCUMENTATION
BANK ISSUES
HOW TO CHOOSE
TIN
HOW MANY
HOW TO OPEN
IPACE
BOOKKEEPING
SYSTEM
BUDGET
FINANCIAL
REPORTS
BOARD
AUDIT
CASH
SPENT
DUES
TRAVEL
OUTSIDE
AGENCIES
IPACE
OTHER
OVERSIGHT
LOCAL LEADERS
INTERNAL CONTROLS
SIGNS OF FRAUD
AUDIT
MONITORING OF DEADLINES, ETC.
REGULATORY AGENCIES
IRS
STATE BD OF ELECTIONS
DOL
OTHER
PUBLIC
MEMBERS
ONLINE REPORTS
FINANCIAL REPORTS
IEA RESOURCES
QUESTIONS
ONLINE RESOURCES
LOCAL TRAINING
DUES
IPACE
OTHER
CASH
RECEIVED
BANK ISSUES
HOW TO CHOOSE
TIN
HOW MANY
HOW TO OPEN
IPACE
CASH
SPENT
DUES
TRAVEL
IPACE
OTHER
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How to choose a bank
◦
◦
◦
◦
Financial
Service
Location
Auditability
44-45
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Banks are required by regulation to collect
various information
Every bank interprets these regulations in
their own way: CALL FIRST!
You will definitely need:
◦ Drivers license for all signers
◦ Taxpayer identification number of your local
DO NOT OPEN AN ACCOUNT WITH SOMEONE’S
SOCIAL SECURITY NUMBER, YOUR SCHOOL’S TIN,
ETC.
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9-Digit number assigned by the IRS
Unless you are a new local, you already have
a number
If you don’t know your number, contact IEA
Accounting
If you are a new local, contact IEA Accounting;
they will apply for one
Do NOT apply for a number yourself!
27
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We recommend that all bank accounts require
two signatures
So you will want at least three and perhaps
four-five people with the ability to sign
45, 76
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You are an unincorporated, not for profit
labor union
If the bank wants your articles of
incorporation, you don’t have them
If they want your “IRS Determination Letter,”
you don’t have one
If they want proof of your tax exempt status,
IEA Accounting can provide this
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See info in the book- pages 43-44
If you have IPACE funds, this requires a
separate bank account
43-44
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Must be separate from regular checking
account
Only deposits- From IPACE
Only disbursements- For local political
expenses
35, 82
DUES
IPACE
CASH
RECEIVED
OTHER
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Make sure all checks are received
Maintain supporting detail, e.g. dues
deduction registers and check stubs
Deposit as soon as received!
Someone needs to verify amounts (Treasurer
or Membership Contact)
51-52
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Deposit into (separate) IPACE bank account
Deposit as soon as received
Keep documentation on file (copy of check,
check stub, etc.)
35-36, Appendix 9, 16
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IPACE is funded by member contributions
Locals can receive up to $15 per
contributing member each year
Must be used for specific political
purposes
22-23, 35-36, Appendix 9, 16
16
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Must be kept in a separate bank account
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May be state reporting requirements
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Members’ contributions are not taxdeductible
Unused funds can be returned to IPACE, at
the local’s discretion
22-23, 35-36, Appendix 9, 13 &16
17
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Deposit as soon as received
Keep documentation on file (copy of check,
check stub, etc.)
Five years from now, must be able to
demonstrate what each deposit was for
(payee, reason for payment, etc.)
52
CASH
SPENT
DUES
TRAVEL
IPACE
OTHER
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Locals are billed at the beginning of
the month: November-August
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Bill is sent to “Membership Contact”
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Penalties for late payment
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Need to pay entire amount shown!!
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See Appendix 15 for “How to Read the
Statement”
Some locals arrange for direct
payment by employer
49-52
20
November 1
December 1
January 1
February 1
March 1
April 1
May 1
June 1
July 1
August 1
10% of obligation
20% of obligation
30% of obligation
40% of obligation
50% of obligation
60% of obligation
70% of obligation
80% of obligation
90% of obligation
100% of obligation
50
21
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Must be for local political purposes: See info
from IPACE
Do not spend IPACE funds for local
operations
Documentation is especially important
Appendix 9, 13 & 16
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For many locals this is their biggest expense
Documentation is especially important due to
IRS issues
Your local/region can set guidelines, but
these need to be based on IRS rules (your
rules can be more restrictive, but not less)
Above all, travel expenses must be
reasonable and necessary
53-56, Appendix 8
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NORMALLY YES: Hotel, mileage, airfare, meals
at meeting location, parking, tolls, taxi, car
rental
NORMALLY NO: Expenses for family
members, gasoline (unless with car rental),
gifts/clothing, entertainment, contributions
to NEA FCPE
MAYBE: Tips, alcohol
53-56, Appendix 8
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Must be reasonable and related to your
local/region’s status as a not for profit labor
union
Beyond that, local rules may apply
Again, local rules may be more restrictive, but
not less
Documentation!
53-54
FILING
DOCUMENTATION
BOOKKEEPING
SYSTEM
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Every dollar that goes in or out of your
bank account must be recorded
Permanent record
• Future audits by IRS, etc.
• Internal questions
• Financial reporting
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What system do you use: “It depends”
38-43
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 One
size does not fit all
• Size/complexity of
organization
• Prior treasurer’s system
• Current treasurer’s
preference
38-43
28
 Your
system needs to:
• Record all transactions in
sufficient detail
• Allow you to produce
financial reports efficiently
• Provide a record that others
can follow
`
38-43
29
 Some
possibilities
• Checkbook/check stubs
• Cash receipts and
disbursements journals
• Excel/Access
• Specialized accounting
software (Quicken, etc.)
38-43
30
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Every dollar that goes in or out of
your bank account needs to be
documented
• Possible audit
• Fiduciary duty: “Other People’s Money”
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Proof of business purpose
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Proof of dollar amount
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Proof of date/place
52-57
31
 Where
 What
from
for
 Dollar
amount
 Employer
checks- Be sure to
retain detailed list of dues
deducted, etc.
 Other
Checks: Copy of check with
notes/attachments
52
32
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IEA dues: Maintain copy of monthly
statement
Member reimbursement
• Travel: Use travel form with receipts attached
• Other: Need original vendor bill, not a handwritten
note
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Outside vendors
• Detailed bill needed
• No bill (stipends, scholarships, etc.): document in
minutes
53-57
33
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Forms:
• Use some sort of voucher system (p 54)
 Attach bills, etc. to vouchers
• For travel expenses: USE A TRAVEL EXPENSE
FORM!!
 Example on page 57
 Label receipts and staple them to the forms
 No stapled envelopes with miscellaneous random
receipts!!
• If travel funding is provided by another body,
make sure there is no duplication of
reimbursement
53-57
34
54
35
57
36
 Should
be able to look at any item
on the bank statement or your
accounting system and find the
source document easily and
quickly.
58
37
 Examples:
• Cross reference vendor
bills/vouchers with check numbers
• Attach bills to bank statements, or
• File vouchers numerically
(chronologically)
• No envelopes/sacks with
miscellaneous random documents
58
38
BUDGET
FINANCIAL
REPORTS
BOARD
AUDIT
OUTSIDE
AGENCIES
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How
How
How
How
How
much money do we have?
much income have we received?
much has been paid for expenses?
does this compare to the budget?
does this compare to prior years?
47-48
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Primary audience is probably your governing
board (may be shared with general
membership)
Get in the habit of doing a WRITTEN report
every month
Include the budget
Include explanations of large variations from
budget
Line items depend on your local’s major
activities
47-48
MIDTOWN EDUCATION ASSOCIATION
STATEMENT OF RECEIPTS AND EXPENDITURES
EIGHT MONTHS ENDED APRIL 30, 2005
ACTUAL
2004
4,870
ACTUAL
2005
5,000
BUDGET
2005
5,000
REMAINING
BUDGET
0
RECEIPTS:
IEA-NEA Dues
Local Dues
Fundraisers
Interest
16,500
1,280
600
370
17,000
1,300
800
400
28,000
2,000
1,000
500
11,000
700
200
100
Total Receipts
18,750
19,500
31,500
12,000
16,500
0
600
240
335
17,000
0
500
400
400
28,000
300
800
500
600
11,000
300
300
100
200
17,675
18,300
30,200
11,900
NET INCREASE (DECREASE) TO CASH
1,075
1,200
1,300
(100)
ENDING CASH BALANCE APRIL 30
5,945
6,200
6,300
(100)
BEGINNING CASH BALANCE SEPTEMBER 1
PAYMENTS:
IEA-NEA Dues
Mediation/Fact-Finding/Arbitration
Meeting Expenses
Newsletter
Office Supplies
Total Expenses
47-48
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Your budget should be included in your
financial statements
Of course, this means that you should have a
budget!
12-15, Appendix 2, 3, 4, 5
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Why have a budget?
◦ Ensures proper financial planning
◦ Discussion of how to use members’ resources
◦ Qualification for financial assistance
12-15, Appendix 2, 3, 4, 5
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IEA policy provides for significant financial
assistance, IF:
◦ Local dues at least $15
◦ Your budget includes a line item for Mediation, etc.
with at least $3/member budgeted
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This can mean thousands of dollars of
potential assistance
14-15
 Check
constitution/bylaws
for requirements
 Get Member Input
 See
Budget Training Video
on IEA Website
12-15, Appendix 2, 3, 4, 5
46
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All but the smallest of locals should consider
an annual audit
The audit should address the accuracy of
your financial reports, among other things
More details under “Oversight”
9-11
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990/990-EZ (IRS)
◦ ~30 Large locals
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LM-3 (Dept. of Labor)
◦ Small number of higher ed locals
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For these reports, your accounting system
must report your transactions in the same
line items as shown on the reports
Appendix 13
 IRS
Form 990-N (“E-Postcard”)
• “Gross Receipts” under $50,000
 “Gross
Receipts” do NOT include
IEA-NEA dues!
All except around 30 IEA locals file
this form!
28, Appendix 13
49
 “Gross
Receipts”
 “Gross
Receipts”
$50,000-$200,000: IRS Form 990 EZ
Over $200,000: IRS Form 990
Most locals pay a CPA to file these
forms (complexity/public
disclosure requirements)
28, Appendix 13
50
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If you tell us that you are filing the 990/990EZ but fail to do so, after a period of time the
IRS will take away your tax exemption!
◦ Serious financial consequences for your local
◦ Significant time, effort and expense to get it back
28, Appendix 13
51

Must report payments to
INDIVIDUALS to the IRS, IF:
 Over $600 in total for a calendar
year
 For Services: Not for products,
supplies or expense
reimbursements
 Gifts and awards don’t count
29-31, Appendix 13
52
 Stipends:
officers
(W-2 vs. 1099)
 Stipends:
 Payment
non-officers
of dues for officers
 Undocumented
expenses:
report even if under $600
29-31, Appendix 13
53
30
54
31
55
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D-2 (State Board of Elections)
◦ ~30 large locals registered with the State
◦ More may be required to file due to increase in the
IPACE rebate amounts!
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Your financial system must produce reports
showing receipts and payments needed to
complete the D-2
Appendix 13
 DO
YOU HAVE TO FILE?
• One-time threshold: $3,000 spent in
any 12-month period
• Only certain expenses “count”
• If you exceed the threshold, you
must register as a PAC immediately
and then file quarterly reports
forever
 Keep
up with state due dates and
requirements
22-23, 35-36, Appendix
57
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Local leaders
Regulatory agencies
General public
Members
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Internal controls
Signs of fraud
Audit
Policies
Monitor deadlines
 Checks/balances
duties
and separation of
 Helps
protect the organization
from undetected fraud
 Helps
protect officers from
potential embarrassment and
liability
 Protects
the treasurer’s credibility
17-18
60
 List
of controls, Appendix 6
 Please read the example on
page 18!
17-18, Appendix 6
61
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Don’t think “It can’t happen here”
• Numerous cases at IEA locals in past few
years
• Usually involves people in positions of
trust

Pressures/Opportunities
• Many factors can induce someone to
commit fraud
• Lack of good controls presents an
opportunity
18-21, Appendix 7
62
18-21, Appendix
63
 If
you see the signs . . .
• DON’T ASSUME THE WORST!!!
• They could just signify substandard
practices
• Check with your UniServ director
• Don’t ignore the signs; doing so can
end up reflecting on you
18-21, Appendix 7
64
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Having an “independent” person or group
examine the financial records is a good
internal control
◦ Deters shenanigans
◦ Catches honest mistakes
◦ Shows your members you are concerned about
safeguarding their money\
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Don’t create a false sense of security!
9-11, Appendix 1

Large Organizations: Outside CPA
• “Audit” vs. “Review”

Smaller Organizations: Audit
Committee
• Independent of Governance
• Start with a Checklist
(Sample on page 62)
• Final Report to the Board

Share Report with Members
9-11, Appendix 1
66
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Have a written policy on
documentation and reimbursement
• Overall expectations
• What is covered/not
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All expenses must be documented
(detail on 53-56)
Donations to FCPE are not
reimbursable
Region vs. Local funding
21-22, 55-57, Appendix 8
67
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Having a calendar with all significant
deadlines, and having this monitored by your
governing body, ensures;
◦ Reporting deadlines, with possible financial
penalties for noncompliance, are not missed
◦ Promotes awareness of what goes on at the local
◦ Everything gets done!
REGULATORY AGENCIES
IRS
STATE BD OF ELECTIONS
DOL
OTHER

If you are required to file reports,
◦ They will be reviewed and followed up on
◦ If you miss a filing date it may be costly
◦ The reports may be audited
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These agencies can also audit other areas
within your operation, for compliance with
laws
They may send you “Notices” requesting
information
Solution: KNOW THE RULES; GOOD
RECORDKEEPING!
 DO
NOT IGNORE!
 Seek help
 Check TIN
 Keep
copies/proof of
delivery
32-33
71
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Federal/State/Local Income TaxEXEMPT
Sales Tax - NOT EXEMPT
Exemption requires that your funds
are spent for your “Exempt Purpose”
You must be able to demonstrate this if
audited, hence the importance of
documentation!
26-27
72
 You
can, AND SHOULD,
make a “profit”
• Only way to build up funds
• Must be used for exempt
purpose
26-27
73
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990s, 990-EZs, LM-3s, and virtually all info
filed with the State Board of Elections are
available online to anyone
Anyone can walk in and demand a copy of
your 990 or 990-EZ, and you are legally
required to provide it
Anything you post on the Web is fair game


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Financial reports
Budget
They are part of the “General Public”
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Failure to remit IEA-NEA dues will result in
scrutiny and possible audit
Regions must follow protocol in submitting
budgets and other documentation
Random audits of regions
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
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Questions
Online resources
On-Site training
 Randy
Welch
[email protected]
 Al Llorens
[email protected]
 Annual training sessions
78
IEA Website www.ieanea.org
Financial Procedures for Locals and
Regions handbook
Financial procedures video
Membership processing video
Budget video
NEA online treasurer training
Tips for new Treasurers
79
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