FINANCIAL PROCEDURES For Locals Regions HANDBOOK SECTIONS Administration
FINANCIAL PROCEDURES For Locals & Regions
HANDBOOK SECTIONS Ø Ø Ø Administration & Fiduciary Oversight Regulatory Requirements Technical Tasks 2
�All WHY ARE YOU HERE? 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
WHAT ARE “FINANCIAL PROCEDURES”? ?
BASIC FINANCIAL TRANSACTIONS
BANK ISSUES � How ◦ ◦ to choose a bank Financial Service Location Auditability 44 -45
OPENING A BANK ACCOUNT � 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.
TAXPAYER ID NUMBER � 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
SIGNATURES � 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
OTHER NEW ACCOUNT ISSUES � 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
HOW MANY ACCOUNTS DO YOU NEED? � See info in the book- pages 43 -44 � If you have IPACE funds, this requires a separate bank account 43 -44
IPACE ACCOUNT � Must be separate from regular checking account � Only deposits- From IPACE � Only disbursements- For local political expenses 35, 82
DEPOSITS
DUES FROM EMPLOYER � 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
IPACE REBATES � 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
IPACE REBATES �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
IPACE REBATES � Must � May be kept in a separate bank account be state reporting requirements � Members’ deductible contributions are not tax- � Unused funds can be returned to IPACE, at the local’s discretion 22 -23, 35 -36, Appendix 9, 13 &16 17
OTHER DEPOSITS � 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
CHECKS/DISBURSEMENTS
Dues Billing From IEA �Locals are billed at the beginning of the month: November-August �Bill is sent to “Membership Contact” �Penalties �Need for late payment to pay entire amount shown!! �See Appendix 15 for “How to Read the Statement” �Some locals arrange for direct payment by employer 49 -52 20
DUES TRANSMITTAL SCHEDULE (Some Exceptions Apply) 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
IPACE � 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
TRAVEL � 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
TRAVEL � 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
OTHER PAYMENTS � 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
ACCOUNTING/FILING
ACCOUNTING SYSTEM �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 �What system do you use: “It depends” 38 -43 27
WHAT SYSTEM TO USE �One size does not fit all • Size/complexity of organization • Prior treasurer’s system • Current treasurer’s preference 38 -43 28
SYSTEM GOALS Ø 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
Ø Some EXAMPLES possibilities • Checkbook/check stubs • Cash receipts and disbursements journals • Excel/Access • Specialized accounting software (Quicken, etc. ) 38 -43 30
DOCUMENTATION (GENERAL) �Every dollar that goes in or out of your bank account needs to be documented • Possible audit • Fiduciary duty: “Other People’s Money” �Proof of business purpose �Proof of dollar amount �Proof of date/place 52 -57 31
MONEY DEPOSITED �Where from �Dollar amount �What for �Employer checks- Be sure to retain detailed list of dues deducted, etc. �Other Checks: Copy of check with notes/attachments 52 32
�IEA MONEY SPENT dues: Maintain copy of monthly statement �Member reimbursement • Travel: Use travel form with receipts attached • Other: Need original vendor bill, not a handwritten note �Outside vendors • Detailed bill needed • No bill (stipends, scholarships, etc. ): document in minutes 53 -57 33
PRACTICAL ISSUES �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 Sample Voucher
Sample Travel Form 57 36
FILING �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
PRACTICAL ISSUES �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
FINANCIAL REPORTS
FINANCIAL REPORTS � 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
FINANCIAL REPORT � 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
SAMPLE REPORT 47 -48
BUDGET � 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
BUDGET � 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
FINANCIAL ASSISTANCE FOR MEDIATION, ARBITRATION, ETC. � 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 � This can mean thousands of dollars of potential assistance 14 -15
BUDGET PROCESS: LOCALS �Check constitution/bylaws for requirements �Get Member Input �See Budget Training Video on IEA Website 12 -15, Appendix 2, 3, 4, 5 46
AUDIT � 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
OUTSIDE AGENCIES � 990/990 -EZ (IRS) ◦ ~30 Large locals � LM-3 (Dept. of Labor) ◦ Small number of higher ed locals � For these reports, your accounting system must report your transactions in the same line items as shown on the reports Appendix 13
IRS ANNUAL REPORTING �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
IRS ANNUAL REPORTING �“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
IRS ANNUAL REPORTING � If you tell us that you are filing the 990/990 EZ 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
FORM 1099 -MISC Ø 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
FORM 1099 �Stipends: officers (W-2 vs. 1099) �Stipends: non-officers �Payment of dues for officers �Undocumented expenses: report even if under $600 29 -31, Appendix 13 53
30 54 Form 1099—Misc
31 55 Form 1096
STATE BOARD OF ELECTIONS � 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! � Your financial system must produce reports showing receipts and payments needed to complete the D-2 Appendix 13
STATE POLITICAL REPORTS �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 9, 57
OVERSIGHT � Local leaders � Regulatory agencies � General public � Members
LOCAL LEADERS � Internal controls � Signs of fraud � Audit � Policies � Monitor deadlines
INTERNAL CONTROLS �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
CONTROLS, continued �List of controls, Appendix 6 �Please read the example on page 18! 17 -18, Appendix 6 61
FRAUD/MALFEASANCE Ø Don’t think “It can’t happen here” • Numerous cases at IEA locals in past few years • Usually involves people in positions of trust Ø Pressures/Opportunities • Many factors can induce someone to commit fraud • Lack of good controls presents an opportunity 18 -21, Appendix 7 62
The “FRAUD TRIANGLE” 18 -21, Appendix 63
Ø If SIGNS OF POSSIBLE FRAUD you see the signs. . . • DON’T ASSUME THE WORST!!! • They could just signify substandard practices • Check with your Uni. Serv director • Don’t ignore the signs; doing so can end up reflecting on you 18 -21, Appendix 7 64
AUDIT � 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 � Don’t create a false sense of security! 9 -11, Appendix 1
ANNUAL AUDIT Ø Large Organizations: Outside CPA • “Audit” vs. “Review” Ø Smaller Organizations: Audit Committee • Independent of Governance • Start with a Checklist (Sample on page 62) • Final Report to the Board Ø Share Report with Members 9 -11, Appendix 1 66
Ø Ø R. A. DELEGATES Have a written policy on documentation and reimbursement • Overall expectations • What is covered/not 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
MONITOR DEADLINES � 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
REGULATORY AGENCIES � 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 � 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 IRS NOTICES NOT IGNORE! �Seek help �Check TIN �Keep copies/proof of delivery 32 -33 71
TAX EXEMPTION �Federal/State/Local EXEMPT �Sales Income Tax- 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
Ø You NOT FOR PROFIT? can, AND SHOULD, make a “profit” • Only way to build up funds • Must be used for exempt purpose 26 -27 73
GENERAL PUBLIC � 990 s, 990 -EZs, LM-3 s, 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
MEMBERS � Financial � Budget � They reports are part of the “General Public”
IEA � 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
IEA RESOURCES � Questions � Online resources � On-Site training
RESOURCES �Randy Welch randy. welch@ieanea. org �Al Llorens al. llorens@ieanea. org �Annual training sessions 78
RESOURCES ØIEA Website www. ieanea. org ØFinancial Procedures for Locals and Regions handbook ØFinancial procedures video ØMembership processing video ØBudget video ØNEA online treasurer training ØTips for new Treasurers 79
IEA WEBSITE CLICK “RESOURCES” 80
IEA WEBSITE CLICK “FINANCIAL PROCEDURES” 81
IEA WEBSITE CLICK here for the handbooks CLICK here for workshops & webinars 82
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