PREPARING AN ACCOUNTING PROCEDURES MANUAL By John D

PREPARING AN ACCOUNTING PROCEDURES MANUAL By John D. Daum, CPA, Partner James W. Gilson, CPA, Partner of Condon O’Meara Mc. Ginty & Donnelly LLP

TABLE OF CONTENTS/OVERVIEW • 1) Introduction • 2) General • 3) Billing, cash receipts and accounts receivable • 4) Payroll • 5) Purchasing, cash disbursements and accounts payable • 6) Receiving and inventory management • 7) Asset management • 8) Property and equipment • 9) Club activities • 10) Other items for consideration • 11) Recent developments • 12) In summary

INTRODUCTION • Major reasons for having an accounting procedures manual • Changes in the composition of the board, senior management and finance and accounting employees requires that appropriate accounting and internal control procedures be documented for future reference • Auditors are required to report to those charged with governance “other findings or issues, if any, arising from the audit that are, in the auditor’s professional judgment, significant and relevant to those charged with governance regarding their responsibility to oversee the financial reporting” (AU 260. 12) Not having an internal control process accurately documented would in most cases fall under this requirement.

INTRODUCTION • The accounting procedures manual is a great road map to training new personnel or, in case of emergency, to help keep the accounting department running • Documentation of management’s assessment of risks of material misstatement of the financial statements • Committee of Sponsoring Organizations (“COSO”) 2013 Framework • Control environment • Risk assessment • Control activities • Information and communication • Monitoring activities

POLL QUESTION # 1 What is the main reason why you should have an accounting procedures manual for your entity? A. It documents the internal control structure of your entity B. Accounting standards require that you evaluate and document your internal controls formally C. It’s a good road map to assist employees in doing their respective accounting functions D. All of the above

POLL QUESTION # 1 D) All of the above

GENERAL • Organizational flow chart • Including detailed breakout of accounting department • Detailed job descriptions for accounting department positions • Accounting and computer system overview • Password/Control/Safeguard Protocols • Access • Data backup procedures - Disaster recovery plan • Vulnerability Assessment • Record retention policy/storage of old records/permanent documents • Reporting

GENERAL • Daily, Monthly, Quarterly, Annual Reports • Types of reports to be completed • Deadlines • Various board/committees requirements and interaction • Annual audit, review or compilation process • Annual review of various insurance policies • Document the responsible person and the timing of renewals

POLL QUESTION # 2 When documenting your various internal controls in the accounting procedures manual? A. You should document them based on what you think they should be B. Exactly the same as a walk-through of the process, as it is done actually C. With as little detail as possible D. What will look good for the independent auditors

POLL QUESTION # 2 B) Exactly the same as a walk-thorough of the process, as it is performed

BILLING, CASH RECEIPTS & ACCOUNTS RECEIVABLE • Documenting day to day responsibilities of A/R clerk or equivalent • Billing of monthly charges • Documenting what reports are needed monthly • Documenting the timing of the monthly billing • General description of the process followed within the accounting system • Posting of member payments • Segregation of duties • Who summarizes the daily receipts • Who records the member payments into the accounting system • Who prepares the daily deposit • Who makes the actual deposit (either actually going to the bank or electronically, lockbox, etc. ) • Oversight by CFO/Controller to compare the actual daily deposit slip to daily cash receipts report in the accounting system and monthly general journal entries made to the ledger • Policy on handling cash payments if applicable • Credit card payments received

BILLING, CASH RECEIPTS & ACCOUNTS RECEIVABLE • CFO/Controller monthly review of aged trial balance report • Review of delinquent accounts and communication to delinquent members (30/60/90 day letters) • Process of how write-offs and other credits to members’ accounts are determined and approved by CFO/Controller, General Manager and Treasurer or Finance Committee

PAYROLL • Documenting payroll system controls, payroll period, access, employee time records and how it interfaces with the third party service provider that processes payroll • Documenting day to day responsibilities of the payroll clerk or equivalent • Documenting the human resources function • How new hires are processed, entered into payroll system and what forms need to be completed/interfacing with appropriate department heads • Documenting non participation in medical and retirement plans • How the discharging of employees is processed • Safeguards over personnel records/information • Direct deposit process • Process of recording employee hours/timecards/punching and related controls

PAYROLL • Process of the review of payroll period hours worked by department heads and how they get to the payroll clerk for processing • Processing of payroll and related approval process by CFO/Controller/GM • Review of the monthly payroll journal entries by CFO/Controller • Paycheck and direct deposit stub dispersal • Annual payroll payoff • Review of third party payroll service provider • Service auditor’s report (i. e. SOC-1 or SOC-2 Report) • Assess risks identified in SOC-1 or SOC-2 Report • Develop mitigating controls, as necessary

POLL QUESTION # 3 Once your accounting procedures manual is complete how often should you update it? A. Never B. Once every five years C. Regularly, it is never complete, it’s a work in process D. Once every 2 years

POLL QUESTION # 3 C) Regularly, it is never complete, it’s a work in process

PURCHASING, CASH DISBURSEMENTS AND ACCOUNTS PAYABLE • Documenting the day-to-day responsibilities of the AP clerk or equivalent • Approved vendor list • Documentation of the procedures followed by the purchasing department if applicable, or the procedures followed by employees responsible for placing orders • Use of purchase orders if applicable • Documenting the process of entering vendor invoices into the accounting system and the monthly reports to be generated • Process of invoices/purchase orders getting approved and forwarded to accounting from the various department heads or purchasing department • Process of submitting invoices and their approval and payment • Payment procedures • Check signing procedures – dual signature requirements • Electronic payment (EFT/ACH) procedures – multi-step authentication • Appropriate filing of paid invoices • Oversight by CFO/Controller/GM and officer involvement and review of any monthly general journal entries made to the ledger

PURCHASING, CASH DISBURSEMENTS AND ACCOUNTS PAYABLE • Documenting when various federal and state tax payments are due and calculated • Process of competitive quotes/bids on purchases, including when are they required and how many must be obtained • Documentation of credit card information and usage • Listing of card holders • Usage policy (allowable expenses) • Submission of receipts for expenses monthly • Oversight by CFO/Controller of monthly statements and periodically by an officer for adherence to the usage policy • Documenting purchase reward programs and the allowable usage of the benefits

RECEIVING AND INVENTORY MANAGEMENT • Summary of controls and safeguards over inventories including, access, monitoring, requisitions, etc. • Procedures for receipt of deliveries • Periodic test counts of units • Food, beverage, golf course supplies, etc. • Periodic tests of weight • Kitchen scale • Periodic participation by finance/accounting employees • Monthly inventory counts • Timing of counts • Employee responsible for counts • Periodic participation by finance/accounting employees • Periodic updating of inventory unit costs based on recent vendor invoices • Accounting procedures upon submission of final count to accounting department

ASSET MANAGEMENT • Documenting cash and investment account information • Bank resolutions • Updated authorized signature cards • Investment policy/cash management procedures • Safeguarding of unused checks • Controls over electronic transfers between accounts and electronic debit charges • Process of reconciling bank accounts • Who reconciles each account monthly • Review of the bank reconciliations monthly by CFO/Controller if reconciliations are not done by them • Periodic officer review of reconciliations and unopened bank statements

ASSET MANAGEMENT • Outline of petty cash boxes, their amounts and who is responsible for them • How boxes are replenished • Who is able to cash petty cash checks • Controls over petty cash transactions • Approval of transactions • Oversight and review of transactions as submitted for payment by CFO/Controller • Keep boxes on imprest basis

PROPERTY AND EQUIPMENT • Capital budgeting process • Capitalization policy • Depreciation policy, including method of depreciation and general rules for depreciable lives of assets • Maintenance of detailed asset and related depreciation schedules • Periodic inventory of equipment (i. e. greens, etc. ) • Procedures for the disposal of assets (i. e. sales, trade-in, scrap, etc. )

CLUB ACTIVITIES • Documenting procedures over accounting for revenue from greens fees/golf cart fees • Include the starter and pro shop responsibilities • Forwarding of the daily play sheet to accounting for verification with the daily sales reports • Documenting a consistent method of departmental distribution of outing/function revenue • Process of how outing petty cash payments are handled • Accounting should perform an annual audit of moorings for rental income at yacht clubs • Room rental revenue and the procedures ensuring its capturing • Housekeeping reports • POS process and controls over verifying daily sales reports to chits and how that is posted and forwarded to accounting daily

OTHER ITEMS FOR CONSIDERATION • Prepaid expenses • Accrued expenses • Long-term debt and lines of credit • Membership certificates • Capital and other funds

RECENT DEVELOPMENTS • Accounting Standards Update (ASU) 2016 -14 – Presentation of Financial Statements of Not-for-Profit Entities • Net Asset Classes • Investment Return • Expenses • Liquidity • ASU 2016 -02 – Leases • Recognition of leases on statement of financial position (balance sheet)

IN SUMMARY • The accounting procedures manual is never finished it’s a work in progress and should be updated regularly for new happenings at the club. • The procedures documented for each department should mirror a walk-through or actually be documented as they are actually done/performed