Transcript And then there is banking! - Association of International

…and then there is banking!
AISA Business Managers Institute
Nairobi, Kenya
19 – 22 October 2010
Importance of a sound banking relationship

How well do you know your bank?
1.
What is its financial condition and credit rating?
What are its strengths & weakness?
Is it proactive and informative regarding possible market changes or opportunities?
How often do you seek information about your bank?
2.
3.
4.

1.
2.
3.
4.
5.
How well does your bank know your school’s financial
needs?
Are banking products & services tailored to specific needs?
Are you informed about (new) banking products & services?
Do you receive immediate responses to your inquiries?
Does it provide user friendly on-line banking services?
Is technical support and other help readily available?
OVERALL, the banking relationship should be mutually beneficial!!!
2
Banking best practices
A “good” bank should provide:














State of the art on-line banking system that is extremely user friendly
24/7 accessibility
Safe and secured (encryption with dual control requirements and security token
protection)
ACH payroll capabilities
Web based Domestic & International wire transfer capabilities
On-line book transfers between accounts
On-line stop payments
View complete detailed information on-line for incoming wire transfers
View all paid checks on-line for a period of 365 days
View all deposited items on-line for a period of 365 days
Elimination of check fraud via positive pay capability
Elimination ACH debit fraud via debit blocker capability
Monthly account statement reconciliation capability
Remote deposit capability via the Internet
3
Requirements for expediting
International wire transfers








Name and complete address of the beneficiary as it is titled at the receiving financial
institution
Name and complete address of receiving financial institution
Purpose of the wire payment (i.e. salary payment, purchase of …, etc.). This is a
requirement to be in compliance with the US Patriot Act.
Sort Code is a required unique number assigned to banks based in the United Kingdom
to identify a bank and account number
IBAN (International Bank Account Number) is a series of alphanumeric characters
that uniquely identifies a customer’s account held at a bank anywhere in the world
(required for all European wire transfers). Example of a UK IBAN: GB 12 CPBK 0892
9965 0449 91
SWIFT (Society for Worldwide Interbank Financial Telecommunication) is an
international banking co-operative supplying secure messaging services and interface
software to approximately 7,000 financial institutions in over 200 countries. A SWIFT
Code is required for all international wires.
The role of intermediary banks
The logistics to recall a wire transfer
4
Requirements for expediting Domestic
US wire transfers

Name and complete address of the beneficiary, as it is titled at the receiving
financial institution

Name and complete address of receiving financial institution

Purpose of the wire payment (i.e. salary payment, purchase of …, etc.). This
is a requirement to be in compliance with US Patriot Act.

ABA Routing Number (A.K.A. ABA number or routing Transit number) The
ABA Routing Number serves to identify the specific financial institution
responsible for the payment of a negotiable instrument.

Possible issues with ABA Routing numbers:
* 7,350 commercial banks, 1,265 thrift institutions and 8,000 CU
* Multiple mergers and acquisitions and non synchronization of internal
systems.
5
Requirements for error free ACH payroll
payments










Name of the beneficiary as it is titled at the receiving financial
institution
Account number (checking or savings)
Name of receiving financial institution
Correct ABA Routing number
Can be used for all US based payroll & vendor payments
Fast, easy, and FREE
Create a payroll batch listing all beneficiaries
Send a pre note payroll batch (assure accuracy of information)
Download copies of payroll reports for audit purposes
Enhances employee moral knowing their payroll will always be
timely!
6
Types of financially related fraud

Cybercrime - illegal activity committed on the internet

Phishing - The act of sending e-mail to a user falsely claiming to be an
established legitimate enterprise. Warning! Never ever click the links within
the text of the e-mail

Check fraud – Payment of fraudulent checks that have been printed by using
sophisticated, low-cost technology, including laser printers and desktop
publishing software programs. Color copiers have also been used as means to
mass-produce any type of check in the market

ACH electronic debit fraud – Payment of unauthorized electronic banking
transactions made possible through the use stolen of banking information

Nigerian letter or “419” – A letter or e-mail message originating from Nigeria
offering the recipient an opportunity to receive a substantial amount of money
(transactional fee) if the recipient is willing to provide personal account
information.
7
Best ways to eliminate account fraud









The best protection against check fraud: What is positive pay and
how does it work?
The best protection against ACH debit fraud: How does debit blocker
work?
Do not compromise passwords
Keep security tokens locked up
ALWAYS require dual control approval on all payment transactions
Be cautious with URL links requesting banking information
Do not list bank account related information on school’s Web site
Be cautious when providing parents with banking information for
tuition payments
Reconcile bank data frequently (ideally daily)
8
The importance of a clearly crafted
investment policy statement
Your school’s Investment Policy Statement should:









Clearly define its investment goals and objectives
Define required performance standards
Stipulate acceptable level of risk tolerance
Propose how investments will be diversified
Identify appropriate and inappropriate investment products
Set specific guidelines and restrictions for investment managers
Specify a regular review process to keep the document current
Provide for proper control and oversight
Specify responsibilities assigned to the business manager, school
director, school board or investment/finance committee
9
Short Overview on Investments
What Does Risk Tolerance Mean?


The degree of uncertainty that an investor can handle in regard to a negative
change in the value of his or her portfolio
Risk tolerance varies according to age, income requirements, financial goals, etc.
What Does Diversification Mean?


A risk management technique that mixes a wide variety of investments within a
portfolio
A portfolio of different kinds of investments will, on average, yield higher returns
and pose a lower risk than any individual investment found within the portfolio
10
Short Overview on Investments
What Does Sector Diversification Mean?

The mix of sectors within a fund or portfolio, typically expressed as a
percentage of the equities asset class. Sector designations vary slightly
depending on the criteria used, but the most common equity sectors include:
-Industrials/Basic Materials
-Consumer Durables/Staples
-Consumer Cyclicals
-Technology
-Healthcare
-Financials
-Energy
-Utilities

A diversified stock portfolio should hold stocks across most, if not all, sectors.
11
Short Overview on Investments
What Does Asset Mix Mean?



The classification of all assets within a fund or portfolio.
Assets are assigned to one of the core asset classes: stocks (equities), bonds (fixed
income), cash and real estate.
Other categories that are sometimes considered asset classes are commodities,
international investments, hedge funds and limited partnership interests.
What Does Asset Allocation Mean?


An investment strategy that aims to balance risk and reward by apportioning a
portfolio's assets according to an individual's goals, risk tolerance and investment
horizon.
The three main asset classes - equities, fixed-income, and cash and equivalents have different levels of risk and return, so each will behave differently over time.
12
Short Overview on Investments
What Does Bond Mean?



A debt investment in which an investor loans money to an entity
(corporate or governmental) that borrows the funds for a defined period of
time at a fixed interest rate.
Bonds are used by companies, municipalities, states and U.S. and foreign
governments to finance a variety of projects and activities.
Bonds are commonly referred to as fixed-income securities and are one of
the three main asset classes, along with stocks and cash equivalents
13
Short Overview on Investments
What Does Stock Mean?

A type of security that signifies ownership in a corporation and represents a
claim on part of the corporation's assets and earnings.

There are two main types of stock: common and preferred. Common stock usually
entitles the owner to vote at shareholders' meetings and to receive dividends.

Preferred stock generally does not have voting rights, but has a higher claim on
assets and earnings than the common shares.

Owners of preferred stock receive dividends before common shareholders and
have priority in the event that a company goes bankrupt and is liquidated.
14
Short Overview on Investments
What Does Cash And Cash Equivalents Mean?


An item on the balance sheet that reports the value of a company's assets
that are cash or can be converted into cash immediately.
Examples of cash and cash equivalents are bank accounts, marketable
securities and Treasury bills.
15
Short Overview on Investments
What Does a Mutual Fund Mean?



An investment vehicle that is made up of a pool of funds collected from
many investors for the purpose of investing in securities such as stocks,
bonds, money market instruments and similar assets.
Mutual funds are operated by money mangers, who invest the fund's
capital and attempt to produce capital gains and income for the fund's
investors.
A mutual fund's portfolio is structured and maintained to match the
investment objectives stated in its prospectus.
16
Establishing a not for profit 501(c)(3)
PROS:

Eligible to apply for government and foundation grants

Donors can receive tax deductions for gifts to 501(c)(3) organizations.

Can set up bulk mail permit (minimum 200 pieces) at reduced rates

Exempt from paying US federal income tax.

Limited Liability
17
Establishing a not for profit 501(c)(3)
CONS:




Considerable amount of organizational paperwork
Costs associated with legal and accounting fees
Governmental fees for obtaining tax-exempt status
Effort and costs associated with annual 990’s tax
returns
18
Thank you & Best wishes!
Should you need additional information,
please contact:
Joseph D. Pereira
Vice President & Relationship Manager
American Overseas Schools
TD Bank, NA.
Direct Phone: 703-663-4404
E-mail: [email protected]
19