Accounting Policies & Procedures Manual

Transcription

1 Accounting Policies & Procedures Manual Updated and Approved: 1

2 CAWST Accounting Policies & Procedures Index 1. Accounting Policies APL100 Financial statement concepts and accountability APL210 Cash and cash equivalents APL220 Investments APL230 Accounts receivable APL240 Prepaid expenses APL250 Capital assets APL260 Liabilities APL265 Deferred revenue APL300 Revenue recognition 2. Accounting Procedures APR100 Overview APR210 Cash and cash equivalents APR220 Investments APR230 Accounts receivable APR240 Prepaid expenses APR250 Capital assets APR260 Liabilities APR265 Deferred revenue APR300 Revenue recording APR310 Expenses accounts payable and accruals APR320 Expenses expense reports APR330 Payroll Updated and Approved: 2

3 Accounting Policy: Financial Accounting Concepts and Accountability Policy is Responsibility of: Board of Directors or delegate APL 100 Date Initially Prepared: Previous Policy No. The management of CAWST is responsible for the preparation and presentation of the organization s financial statements. The statements will be prepared in accordance with Canadian Generally Accepted Accounting Principles 1 and as applicable, Canadian Generally Accepted Accounting Principles applicable to not-for-profit organizations. As such, CAWST uses the accrual basis of accounting whereby all revenue is recorded when earned and collection is reasonably assured and expenses are recorded when incurred. CAWST uses fund accounting and currently has only one fund 2, the Operating Fund which is unrestricted and accounts for CAWST s program delivery and administrative activities. If additional funds are added in the future, a brief description of the purpose of each fund in the financial statements shall be provided. The accounting records and the financial statements based upon them include certain amounts that have been based on estimates and judgments relating to matters not concluded by a period end. Actual results could materially differ from the estimates. Financial information presented in other documents, such as an annual report, periodic reports, and fund raising documents will be consistent with the information contained within the financial statements. The statements are prepared within reasonable limits of materiality 3 and within the framework of the accounting policies deemed appropriate and adopted by management. Management will endeavour to ensure that the information contained within the financial statements have the qualitative characteristics of understandability, relevance, reliability and comparability. 1 Generally accepted accounting principles The term used to describe the basis on which financial statements are prepared. The term encompasses not only specific rules, practices and procedures but also broad principles and conventions of general application. 2 Fund Accounting - Fund accounting comprises the collective accounting procedures resulting in a self-balancing set of accounts for each fund established by legal, contractual or voluntary actions. Elements of a fund can include assets, liabilities, net assets, revenues and expenses (and gains and losses, where appropriate). Fund accounting involves an accounting segregation, although not necessarily a physical segregation, of resources. 3 Materiality Materiality should be judged in relation to the significance of financial statement information to decision makers. An item of information, or an aggregate of items, is material if it is probable that its omission or misstatement would influence or change a decision. Updated and Approved: 3

4 As part of its accountability for the achievement of the organization s objectives, management will put in place policies and procedures to assist in achieving the objective of ensuring, as far as practical, the orderly and efficient conduct of CAWST s Business. Policies and procedures are guidelines to CAWST decision making and courses of action established and maintained to meet internal control objectives. The responsibility for ensuring adequate internal control is part of management s overall accountability for the ongoing activities of CAWST. As part of its accountability for adequate internal control, management, recognizing there are limitations within a small organization, will endeavour to ensure that through an appropriate control environment and control systems, that controls support the reliable achievement of CAWST s objectives. CAWST s control environment should reflect the collective effect of various factors on establishing, enhancing, or reducing the effectiveness of specific policies and procedures. For example, given the size of CAWST and limitations or the absence of certain control systems, it is expected that the CEO, along with the Board of Directors, will have an increased level of awareness and involvement in CAWST s activities. Their level of involvement would be expected to be reduced in time as the organization growths in the number of staff, systems, and processes, thereby enhancing the control systems environment. Control systems will be established to collect, record, and process data and report the resulting information. From a Board of Directors perspective, control will be viewed as effective to the extent that it provides reasonable assurance that CAWST will achieve its objectives reliably. Or, stated another way, control is effective to the extent that the remaining (uncontrolled) risks of CAWST failing to achieve its objectives are deemed acceptable. On an annual basis, management will engage independent external auditors 4 who will consider internal controls to determine the nature, extent, and timing of their work. Their audit opinion is based on the reasonability of financial statements, not internal controls reliability. On an annual basis, management will review these policies and procedures to determine what, if any, changes may be required. The Board of Directors shall approve any changes. 4 Audit An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Updated and Approved: 4

5 Accounting Policy: Cash and cash equivalents APL 210 Policy is Responsibility of: Board of Directors or Date Initially Prepared: delegate Previous Policy No. Cash for reporting purposes will include cash in the bank and any petty cash. Cash equivalents to be included on the cash line in the financial statements - will consist primarily of term deposits, certificates of deposit, and all other highly liquid investments with a maturity of twelve months or less. Cash equivalents are stated at cost. The following should be excluded from the cash and cash equivalents line in the financial statements reported in current assets: a) Cash subject to restrictions that prevent its use within the next year; and b) Cash appropriated for other than current purposes unless such cash offsets a current liability Updated and Approved: 5

6 Accounting Policy: Investments Policy is Responsibility of: Board of Directors or delegate APL 220 Date Initially Prepared: Previous Policy No. Cash that is excess to current needs shall be invested and treated as short-term investments for internal and external financial reporting purposes. Short-term investments have a maturity of greater than three months but less than one year. Such investments are stated at cost and reported as part of current assets only if capable of reasonably prompt liquidation. Where such investments have a maturity beyond one year they will be recorded and reported as non-current assets and treated as long-term investments for reporting purposes. If any investments consist of marketable securities, their quoted market value as well as the carrying value shall be disclosed. If the market value of any investments treated as current assets have declined below the carrying value, they should be reduced to market values. Refer to CAWST s Investment Policy. Investments with a maturity longer than one year should be held at Fair Market Value. The investment should be written down based on whether the value has gone up or declined in the Statement of Operations. Income from investments should be recorded and reported separately in the accounting records and financial statements. Updated and Approved: 6

7 Accounting Policy: Accounts receivable APL 230 Policy is Responsibility of: Board of Directors or Date Initially Prepared: delegate Previous Policy No. All revenue shall be invoiced and recorded when the service and/or materials have been provided. All customer invoices shall be recorded as accounts receivable if payment is expected within the next year. If circumstances should dictate that the payment will not be received for a period greater than 12- months, such receivables shall be segregated and treated as a non-current receivable for recording and reporting purposes. Because there are always some customers who cannot pay their debts, selling on credit necessarily involves credit losses and may require the recording of an allowance for doubtful accounts or the removal of the receivable from the accounting records completely if there is the belief that the receivable will not be collected, such as if the customer is bankrupt. The amount of the allowance for doubtful accounts at the end of a financial period should be calculated by reference to the accounts outstanding at the end of the financial period after taking into consideration all circumstances known at the date of review. The allowance for doubtful accounts shown in the Statement of Financial Position should be netted with the accounts receivable balance and the resulting number shown net in the financial statements. Where it is determined that a receivable is wholly or partially uncollectible, an allowance for doubtful accounts should be recorded. Managements assessment of individual accounts will determine the magnitude of the allowance. If there are many accounts of a like nature, an allowance could be determined based upon the aging of such accounts and applying to the totals so determined by percentages based upon past experience. The allowance should be reviewed periodically and updated as necessary. The allowance for doubtful accounts should be shown in the Balance Sheet as part of the Accounts Receivable line i.e. Accounts Receivable (2004 -net of $xx for doubtful accounts; 2003 net of $xx for doubtful accounts). Any disclosure will be based on the materiality of any allowances. If it is determined that the account will not be collected, the receivable should be removed from the books along with the allowance that was set up. Amounts subsequently recovered from accounts previously considered uncollectible and written off should be recorded and credited to the Statement of Operations in the period of recovery. Updated and Approved: 7

8 Accounting Policy: Prepaid expenses APL 240 Policy is Responsibility of: Board of Directors or delegate Date Initially Prepared: Previous Policy No. Prepaid expenses are cash paid amounts that represent costs incurred from which a service or benefit is expected to be derived in the future. The future write-off period of the incurred cost will normally be determined by the period of benefit covered by the prepayment. When the period arrives to which a prepaid cost relates the costs will be treated as a period cost for the period in question. Normally such prepaid costs will be written off based on the elapse of time. Prepaid expenses should be classified as current assets unless a portion of the prepayment covers a period longer than 12-months. If they are prepayment costs with a benefit beyond 12-months, they should be classified as deferred charges in the Statement of Financial Position. When payments may be accounted for as prepaid expenses but the payment will be amortized within the current fiscal period and is not considered material to the presentation of CAWST s financial position, such payments may be expensed in the month the payment is made. This treatment will still ensure that the expense is properly accounted for in the fiscal period and yet there are not excess accounting entries within the fiscal period. Updated and Approved: 8

9 Accounting Policy: Capital assets APL 250 Policy is Responsibility of: Board of Directors or Date Initially Prepared: delegate Previous Policy No. COST: Capital assets will be primarily comprised of office furniture, fixtures, equipment, computer hardware, and software. As well, there may be leasehold improvements. Such assets will be recorded at cost. The cost of a capital asset includes the purchase price and other acquisition costs such as installation costs, the 50% of the GST not recoverable from the government, legal fees, freight charges, transportation, and insurance costs. For a contributed capital asset, cost is considered to be fair value 5 at the date of contribution. In unusual circumstances, when fair value cannot be reasonably determined, while the capital asset could be recorded at a nominal value of $1, it is felt that in such circumstances that the asset is likely of nominal value and hence should not be recorded, even at a nominal value of $1. For capitalization purposes, capital assets should have a useful life of greater than one year and meet the following capitalization thresholds: Asset Description Capitalization Threshold Equipment $1,000 Computer hardware $1,000 Computer software $1,000 Office furniture $1,000 Leasehold improvements $1,000 Subject to materiality, the nature and amount of contributed capital assets received in the period and recognized in the financial statements should be disclosed. Any capital asset purchased from a donor at substantially below fair value would also be recognized at its fair value with the difference between the consideration paid for the capital asset and fair value reported as a donation contribution. The cost incurred to enhance the service potential of a capital asset is a betterment. Service potential may be enhanced when there is an increase in the previously assessed service capacity, associated operating costs are lowered, the useful life is extended, or the quality of output is 5 Fair value - The amount of the consideration that would be agreed upon in an arm's length transaction between knowledgeable, willing parties who are under no compulsion to act. Updated and Approved: 9

10 improved. The cost incurred in the maintenance of the service potential of a capital asset is a repair, not a betterment. If a cost has the attributes of both a repair and a betterment, the portion considered to be a betterment is included in the cost of the capital asset. When a capital asset no longer has any long-term service potential, the excess of its net carrying amount over any residual value should be recognized as a depreciation and amortization expense in the Statement of Operations. A write-down cannot be reversed. If an asset is sold, any gain or loss on sale should be recorded as such in the general ledger. Where assets are no longer in use and effectively scrapped or otherwise disposed of, the remaining book value should be written off to the depreciation and amortization expense account and the asset in question removed from the books. Where assets are fully written off but remain in use, the asset shall continue to be carried on the books. When an asset has been fully depreciated but has been disposed of, the asset shall be removed from the listing. DEPRECIATION and AMORTIZATION: The cost, less any residual value 6, of capital assets with a limited life will be amortized using the straight-line method over the following estimated useful lives: Asset Description Equipment Computer hardware and software Computer software Office furniture Leasehold improvements Useful Life 5 years 3 years 3 years 10 years Term of lease Periodically, assets may be acquired e.g. a used computer whose useful life may be less than that stated above. In that case, a period less than the stated policy may be selected as the depreciation and amortization period. Depreciation and amortization will be recorded commencing in the month of acquisition. Depreciation and amortization will be recognized as an expense in the Statement of Operations and Accumulated Depreciation and Amortization will be netted with the capital asset cost for presentation in the Statement of Financial Position. The amortization method and the estimate of the useful life of a capital asset will be reviewed annually. 6 Residual value -The estimated net realizable value of a capital asset at the end of its useful life. In most cases it is expected that residual will be negligible and will be ignored for purposes of determining depreciation and amortization. Updated and Approved: 10

11 Accounting Policy: Liabilities APL 260 Policy is Responsibility of: Board of Directors or Date Initially Prepared: delegate Previous Policy No. As part of the process of maintaining the accounting records in conformity with Canadian Generally Accepted Accounting Principles, once a transaction or event obligating CAWST has taken place, the liability shall be recorded in the accounting records. This will normally occur upon the receipt of the invoice. However in order to prepare the monthly accounting records and financial statements on a timely basis, it will be necessary to accrue for obligations where invoices are not been received from the supplier of the goods or services during the monthly preparation of the accounting records and financial statements. However, materiality shall be considered in the month end accrual process in order not to accrue trivial amounts. As such, in the month end process, where amounts to be accrued are in total estimated at less than $1,000, an accrual entry need not be prepared. A contingent liability 7 is distinguished from recorded liabilities by the fact that the probability of payment being required on the contingent liability is not determinable or if there is the likelihood of a liability, the liability cannot be estimated with any reasonable degree of accuracy. However, the amount of a contingent loss should be accrued in the financial statements by a charge to income when both of the following conditions are met: a) It is likely that a future event will confirm that an asset had been impaired or a liability incurred at the date of the financial statements; and b) The amount of the loss can be reasonably estimated. 7 Contingency - A contingency is defined as an existing condition or situation involving uncertainty as to possible gain or loss that will ultimately be resolved when one or more future events occur or fail to occur. Resolution of the uncertainty may confirm the acquisition of an asset or the reduction of a liability or the loss or impairment of an asset or the incurrence of a liability. Updated and Approved: 11

12 Accounting Policy: Deferred revenue APL 265 Policy is Responsibility of: Board of Directors or Date Initially Prepared: delegate Previous Policy No. Periodically, donations received may be restricted as to when the money should be used or its use maybe restricted to a specific project. In order to ensure that the cash received is properly matched with the applicable time period or project, some or all of the cash received will be treated as deferred revenue. Where the deferred revenue relates to activity in the next 12 month period, such deferred revenue will be included with current liabilities. Where the use of the funds will be restricted beyond the next 12 month period, the deferred revenue should be treated as a non-current liability. See APL 300 revenue recognition for a further discussion relative to restricted contributions. Updated and Approved: 12

13 Accounting Policy: Revenue recognition APL 300 Policy is Responsibility of: Board of Directors or Date Initially Prepared: delegate Previous Policy No. CAWST s primary sources of revenue will be from donations 8 from individuals, corporations, or government agencies. Other sources of revenue include project funding, fees for services provided (for example, training courses and consulting services), and net investment income. Donations and Project Funding: CAWST shall follow the deferral method of accounting for project funding. If the amount to be received can be reasonably estimated and collection is reasonably assured, revenue is recognized. However, donations are recorded at the time of receipt and not when pledged see APR 300. There are three types of contributions that CAWST may receive that will have recognition, measurement, presentation, and disclosure implications for purposes of this policy. a) A restricted contribution is one subject to externally imposed stipulations that specify the purpose or time period for which the donated asset is to be used. A donation restricted for the purchase of a capital asset or a donation of the capital asset itself is a type of restricted donation. b) An endowment contribution is a type of restricted donation subject to externally imposed stipulations specifying that the donation be maintained permanently, although the constituent assets may change from time to time. c) An unrestricted contribution is a donation that is neither a restricted donation nor an endowment donation. Restrictions are stipulations imposed that specify how resources must be used. External restrictions are imposed from outside the organization, usually by the contributor of the resources. Internal restrictions are imposed in a formal manner by the organization itself, usually by resolution of the Board of Directors. Restrictions on donations may only be externally imposed. Net assets or fund balances may be internally or externally restricted. Any internally restricted net assets or fund balances will be referred to as reserves or appropriations. Under the deferral method of accounting for contributions: 8 Donation - A non-reciprocal transfer of cash or other assets or a non-reciprocal settlement or cancellation of its liabilities. Government funding provided is considered to be a donation. Note: The word donation may be used interchangeably with the word contribution. Updated and Approved: 13

14 a) Externally restricted contributions related to general operation expenses of future periods should be deferred in the Statement of Financial Position and recognized in the Statement of Operations as revenue in the period in which the related expenses are recognized. The assessment of whether government funding contributions in a particular situation represents a restricted or an unrestricted contribution depends on the characteristics of the contribution. Restrictions may be indicated by such factors as the fact that the funding is provided based on the organization's approved operating budget or more closely relates to time periods than the incurring of specific expenses. For example, a funder may contribute funds for a particular period without specifically identifying the expenses towards which the contribution is to be applied. Such contributions, when received in advance of the period that is being funded, are in effect restricted contributions related to expenses of the future period being funded. Such funds should not be recognized in the Statement of Operations immediately but rather deferred and recognized in the appropriate period. That the funding is restricted may be a requirement to report to the funder as to how the resources were actually used. Sometimes restricted government funding left over at the end of the period must be returned to the funder. If this is the case, such funds would not be accounted for as deferred but rather as a liability in the Statement of Financial Position. Restricted contributions for the purchase of capital assets that will be amortized should be deferred and recognized as revenue on the same basis as the depreciation and amortization expense related to the acquired capital assets. Restricted contributions for the purchase of capital assets that will not be amortized should be recognized as direct increases in net assets. Restricted contributions for the repayment of debt that was incurred to fund expenses of one or more future periods should be deferred and recognized as revenue in the same period or periods as the related expenses are recognized. Restricted contributions for the repayment of debt that was incurred to fund the purchase of a capital asset that will not be amortized should be recognized as direct increases in net assets. Restricted contributions for the repayment of debt that was incurred for purposes other than those described in the preceding two paragraphs should be recognized as revenue in the current period. b) Endowment contributions are reported as direct increases in net assets. Under the deferral method, any endowment contributions are not recognized as revenue in the Statement of Operations at all since they must be maintained permanently. c) Unrestricted contributions are recognized as revenue of the Statement of Operations in the year received or receivable. Periodically CAWST will receive contributions of materials and services. Material contributions Updated and Approved: 14

15 will be recorded in the financial statements at fair market value when fair market value can be reasonably estimated. Volunteers contribute substantial donated time and services to assist CAWST in carrying out its activities. Because of the difficulty of determining fair market value of these donated services, they are not recorded in the financial statements. Fees for Services: Revenue related to fees for services are recorded when the service is provided, all contractual commitments (whether verbal or written) have been met, and collection is reasonably assured. Net Investment Income: CAWST will recognize: a) Net investment income that is not externally restricted in the Statement of Operations; b) Externally restricted net investment income that must be added to the principal amount of resources held for endowment as direct increases, or decreases, in net assets; and c) Other externally restricted net investment income in the Statement of Operations, in the appropriate deferred contributions balance or in net assets, depending on the nature of restrictions, on the same basis as described in paragraph (a) above. Other: The invoicing done to record services and/or goods provided should be done as soon as is possible after it is determined that CAWST is legally able to invoice for the service and/or goods provided. While the service and/or goods provided will normally occur in a short period of time i.e. a month or two, in some situations the service and/or goods may be provided over a protracted period of time. In these situations, a number of interim invoices maybe required to be issued. The interim invoicing will ensure that the accounting records and financial statements will appropriately reflect the activity related to the project and ensure that there is no unfavourable cash flow impact from not doing interim project billings. Updated and Approved: 15

16 Accounting Procedures: Overview APR 100 Procedure is Responsibility of: Board of Date Initially Prepared: Directors or delegate Previous Procedure No. The day-to-day accounting is undertaken to capture and record the activities of CAWST and allow management and members and the Board of Directors to be aware of the financial condition and financial results of the activities of the organization as presented in the financial statements. This information will be captured not only in the accounting records and the financial statements derived from such records, but also used in the determination of some of the key performance indicators of the organization and used as necessary in such other documents as the annual report, grant submissions, and other documents and reports as determined from time to time. In carrying out the various accounting procedures, attention should always be given to the fact that some of the information maybe of a confidential and private nature and as such the privacy and security of such information is important. While obvious examples of such information are payroll, donor and member information, all other information should only be shared and provided to internal and external people and/or organizations on a need to know basis. In carrying out the various record keeping, accounting and financial statement preparation work, it is desirable that from a control perspective, and to add to the integrity of information, that other individuals be involved where possible, resulting in a segregation of duties between the preparer of the accounts and the reviewer. This second set of eyes approach can help to ensure that any human errors are caught, invoicing is done on a timely basis, and supplier bills are all paid as and when required. While there can be no assurance of error free work, this approach can help to provide reasonable assurance of adequate stewardship of the organization. It is recognized that given the size of the organization and the practical need to get work done in a cost effective and timely manner, that there will be judgment exercised that will at times preclude the ideal control environment. The timely preparation of information is critical for all organizations and this reality will at times dictate that not all functions can be controlled in an ideal manner, even in an organization as small as CAWST. On a monthly basis, all balance sheet accounts need to be reconciled so that the components of the account balance are fully identified and listed and that the item(s) comprising the account balance are correct. This will entail ensuring what is recorded is correct and ensuring that no amounts have been excluded from the account balance. This may be the case where items have been recognized in the income statement prematurely. Updated and Approved: 16

17 The individual preparing the reconciliation should initial and date the reconciliation evidencing when the reconciliation was prepared. Someone other than the preparer of the reconciliation should review and then initial all balance sheet reconciliation accounts on a monthly basis, noting where necessary, adjustments that may need to be recorded in the subsequent period. Updated and Approved: 17

18 Accounting Procedure: Cash and cash equivalents APR 210 Procedure is Responsibility of: Board of Date Initially Prepared: Directors or delegate Previous Procedure No. General: Business Services has primary responsibility for the ensuring that timely bank deposits are made, that suppliers and employees are paid on their due dates, and that such information is recorded in the accounting records on a timely basis. Amounts received or paid should be entered in the accounting records as soon as possible, which may be before a deposit is made or a cheque mailed. This will ensure that at any point in time the accounting records present the current status of the financial position of CAWST. Receipts: Upon receipt of cheques, Business Services will determine if the cheque represents a donation (see Appendix A to this Procedure) or a payment with respect to training revenue or project funding: i.e. an invoice. All deposits must be made within five business days from receipt. As a general principle, sufficient information should be recorded with respect to any receipt in order that the appropriate allocation for accounting purposes may be made and/or tax receipts issued if the funds represent a donation. See below for more specific comments. Donations: The donation information will be captured in a database and reconciled by Business Services and Fund Development. This database will serve as the backup for the monthly cash entry for the Donations Cash Receipts. The database should capture all the information with respect to the donor name, address, telephone number and if applicable, as well as the date of the donation, the amount and if any of the funds are restricted and if so how much. This will ensure that all information is available to prepare the tax receipt for the donation. At year end, where donations are received by December 31 but the amounts are not deposited until the following year, such donations will be treated as a previous year (December 31) donation and a tax receipt will be issued. Donations will be recorded in the accounting records in the month received, irrespective of the month the donation is deposited. Updated and Approved: 18

19 Donations may also be made on-line at Canadahelps.org or through other payment processors, such as PayPal. This information is retrieved by Business Services or Fund Development. The gross amount of the donation (by donor) should be shown in the database. However, since CAWST will pay a fee to the payment processor, an entry will need to be made to expense the service fee and reduce the cash. Assuming a $100 donation and a $2 service fee the entry would be: Debit Miscellaneous Expense: $2 Credit Donations: $2 A copy of the donor s cheque will be photocopied and retained and attached to the deposit slip. Donations received in cash should be received using a Receipt of Cash form, which forces the donation to be received by two people. In the case where the donation is received from an individual, a pledge card should also be filled out, where possible, in order to capture the actual and specific amount of cash they meant to give. Donations not deposited in the month received will be shown as an outstanding deposit in the preparation of the bank reconciliation. But even though not deposited, such amounts must still show as a donation receipt in the month. All envelopes need to be kept on file for any donations received after December 31, which will determine if the donation is a current year donation vs. previous. If an envelope is post marked on or before December 31, then the revenue is recorded as a previous year donation. If the envelope is post marked on or after January 1, then the revenue is recorded as a current year donation. The database will also indicate whether a tax receipt has been issued. It should be noted that monthly donors will receive one tax receipt with all of their donation information for the year after the year end.. For donations received through an online payment processor, tax receipts may be issued immediately. For all other donations, prior to issuing the tax receipts the Director, Business Services or Manager, Accounting must review and approve all donations and tax receipts, including the determination if some of the donations have been restricted. The approval should be tracked in the database. For donations not mailed in but rather hand delivered to an employee, the employee will initial confirmation of receipt of the cheque before giving the cheque to Business Services to make the deposit. If a donor provides a cash donation the recipient should confirm the amount of the cash with the donor and obtain all necessary information in order to be able to provide an income tax receipt. Cheque(s) received will be added to deposit slip for the day in question. Note: Given the personal nature of donations, this database should be treated as confidential and should only be shared with others on a need to know basis. Updated and Approved: 19

20 Cash held at the office: Cash kept at the office must be stored in the safe and a secured office. Training Revenue: Cheque (s) received are added to the deposit slip A photocopy of the cheque received will be made for future reference purposes. Training receipts will usually be issued on the first day of training if the cheque has been cleared through the bank. If a cheque is received during a workshop and does not clear through the bank within the workshop period, then an acknowledgement letter will be given to the trainee and a training receipt will be mailed. Project Funding: Cheque(s) received are added to the deposit slip A photocopy of the cheque received can be made if it is felt necessary to have for future reference purposes. Business Services ensures that sufficient information is captured in order that the accounts receivable records may be updated and determine if there is an over or underpayment of the outstanding invoice. If such is the case, reference should be made to APR 230 Accounts Receivable. Disbursements: All cheques require the signature of any two of the cheque signing individuals once the expense has been approved. All direct payments, except for payroll and expense reimbursements, require the signature of any two of the authorized signing individuals. Payroll and expense reimbursements require one signature. To the extent changes need to be made to the signatories, Business Services will prepare the paper work for the bank to request for an addition or deletion and present to the CEO for approval. Once approved, the necessary paper work will be forwarded to the bank. Business Services will determine when a cheque run is required and if so, prepare a cheque run and present the approved supporting invoices and/or employee expense reports along with the accompanying cheque to be signed. In some cases an employee travel advance maybe requested. Approval, based on the Grants of Authority, is required for employee travel advances. Updated and Approved: 20

21 The supply of cheques is maintained under the locked control of Business Services. Bank Reconciliation: On a monthly basis, Business Services prepares the bank reconciliation. As part of the bank reconciliation, Business Services should agree total deposits on the bank statement to the amounts recorded in the various general ledger accounts. To the extent the bank statement does not reflect a deposit, the missing deposit should be treated as an outstanding deposit for purposes of reconciling the bank statement and agreeing it to the general ledger account for the bank. There could also be an outstanding deposit from the prior month that will show as a deposit on the bank statement in the current month. For cheques issued in the month and that have not cleared the bank, they should be treated as part of the bank reconciliation i.e. outstanding cheques. In addition, outstanding cheques from prior periods that have still not cleared the bank should remain on the outstanding cheque list. All reconciling items should be individually listed and reviewed to confirm that they are in fact still reconciling items. Where such reconciling items are not current month s transactions, it should be determined why they remain reconciling items. Below is a sample format for the bank reconciliation: Bank Reconciliation for the Month Ending: Bank statement balance as at the end of the month Add Outstanding deposits: Date Deduct Outstanding cheques (listed individually): Date Cheque No. Amount $xxx $xxx Total Outstanding cheques $xxx Add/(Deduct) Other reconciling items and describe fully Balance per general ledger must agree to general ledger closing balance $xxx $xxx ($xxx) $xxx/($xxx) $xxx ==== The bank reconciliation is to be reviewed and initialed by the Director of Business Services or another person so designated. Updated and Approved: 21

22 Appendix A There are three qualifying rules that must be met before a tax receipt can be issued for a donation: 1. Some property usually cash is transferred by the donor 2. The transfer is voluntary 3. The transfer is made without an expectation of a return. No benefit of any kind may be provided to the donor or to anyone designated by the donor, except where the benefit is of nominal value For gifts in kind, the fair market value at the time of the donation will be used for purposes of determining the value for the tax receipt. Reference should also be made to Canada Customs and Revenue Agency (CCRA) Interpretation Bulletin (IT-110R3). Updated and Approved: 22

23 Accounting Procedure: Investments APR 220 Procedure is Responsibility of: Board of Date Initially Prepared: Directors or delegate Previous Procedure No. General: The burn rate is a monthly forecasted expenditures figure. This forecast will be used to help ascertain if excess funds can be invested for a short period of time. If it is determined that there are excess funds, then they shall be invested. The investments shall follow CAWST s Investment Policy. Investment: Business Services will ensure that the necessary accounting entries are recorded to reflect the investment(s) made. The appropriate amount of interest should be accrued if the GIC is outstanding over a year-end. Updated and Approved: 23

24 Accounting Procedure: Accounts receivable APR 230 Procedure is Responsibility of: Board of Date Initially Prepared: Directors or delegate Previous Procedure No. Invoicing: Before closing the books for the month, Business Services should ensure that all invoices have been prepared and entered into the system. Also refer to APR 300. Invoices are prepared by Business Services using the accounting system. Where an invoice is not prepared, an accrual should be recorded with entries booked to receivables and the appropriate revenue account. Cash Receipts: At the time of the preparation of bank deposit, it should be determined if there has been an over or under payment of the invoice being paid or if the invoice reference number on the cheque is different than CAWST s records. If any of these situations exist, the following steps should be taken by Business Services. Unless otherwise noted, the relationship manager will be the initial contact with the customer to resolve invoice discrepancies. Where deemed necessary Business Services and/or the CEO will be advised of material discrepancies and work with the client to resolve the discrepancy. Adjustments: Once all invoicing and cash receipts are posted for the month, Business Services, in discussion with the CEO, should determine if any adjustments are required for amounts that are not expected to be collected. If the balance owing is still being pursued, an allowance for doubtful accounts will be recorded, if deemed necessary. Such an entry will not impact the accounts receivable subledger or general ledger control account. Such an allowance should be recorded in a balance sheet account called Allowance for Doubtful Accounts. If it is determined that an invoice is not collectible in whole or in part- and the amount has not been provided for (Allowance for Doubtful Accounts), then the balance owing should be written off through an adjustment recorded in the records in such a way that the balance in the sub-ledger is removed and the corresponding balance in the control account. Where the amount to be written off has previously been provided for, an entry should be processed to remove both the provision and the receivable amount in the books in such a way that that the balance in the sub-ledger is removed and the corresponding balance in the control account. Updated and Approved: 24

25 Entry: Debit Allowance for Doubtful Accounts Credit Accounts Receivable. For customers slow in paying the balance owing on an invoice, the CEO will determine if a late charge will apply to such invoice. If a late charge is to be applied it shall be at a rate of the Bank of Canada prime + 5% from a date 45-days after the original invoice date. A separate invoice shall by prepared by Business Services for such charge and approved by the CEO before mailing. The entry should be recorded as follows: Debit Accounts Receivable (posted to the control and sub-ledger) Credit Interest income All adjustments are to be approved in writing by the CEO. Month End: Once all transactions have been posted for the month invoicing, cash receipts and any adjustments - Business Services should prepare the aged accounts receivable report from the accounting system sub-ledger. The balance in the aged sub-ledger (accounts receivable) should be reconciled to the general ledger control account. To the extent that any accruals were made but the customer not invoiced, such an accrual will be a reconciling item as it would not be recorded in the sub-ledger but only recorded in the general ledger control account. If differences exist between the sub-ledger and control account (excluding accruals) all such differences must be resolved as soon as possible by Business Services. Once the accounts receivable reconciliation is prepared, it and the aged trial balance should be reviewed with the CEO. Both these reports should be initialed and dated by the preparer and reviewer. Any follow-up calls to customers should be made as soon as possible after this review where there are balances owing that are past due. Whether the CEO or Business Services makes the call will be determined after discussion of the account. It may be necessary to work with a customer to arrange for a series of payments if the full balance owing cannot be paid immediately. If after repeated efforts to collect outstanding funds, consideration will need to be given as to whether the account in question should be sent to a collection agency. As past due balances are reviewed and worked on, consideration will need to be given as to Updated and Approved: 25

26 whether an allowance for the uncollectible balance is required or a complete write-off due to the uncollectibility of the balance. See Adjustments section above. Updated and Approved: 26

27 Accounting Procedure: Prepaid expenses APR 240 Procedure is Responsibility of: Board of Date Initially Prepared: Directors or delegate Previous Procedure No. General: Business Services will determine from a review of invoices if costs incurred represent a benefit that is expected to be derived in the next 12-months. An example would be an insurance premium that covers a 12 month period. Due to a future benefit, the cost should be treated as a prepaid expense with the cost to be written off over the next 12-months. However, as noted in APL 240, to minimize the accounting for amounts within a fiscal period, such amounts may be treated as an expense in the month the liability is incurred. If amounts are treated as prepaid expenses, on a monthly basis Business Services will analyze the balance in the prepaid expense(s) account and ascertain that the balance is correct. This reconciliation and analysis will include confirming that the write-off period is still appropriate. A schedule should be developed to aid in this continuity reconciliation and analysis. This reconciliation should be initialled and dated by both the preparer and the reviewer. Below is a suggested example of how such an Excel spreadsheet should be set up: Nature of the Prepayment/Supplier name Additions in the Current Year Year-to-Date Write-Off Prepaid Insurance: Directors & Officers ABC Insurance Company Prepaid Insurance: Other ABC Insurance Company Prepaid other XYZ Company Balance at Beginning of Year January 1, 20xx (A) (B) Write-off Period for Opening Balance/Write- Off Period for Additions (if different) (C) Balance at End of Period December 31, 20xx (A+B)-C $xxx $xxx Jan Dec $xxx $xxx $xxx $xxx Jan Dec $xxx $xxx $xxx $xxx $xxx $xxx Total $xxx $xxx $xxx (1) $xxx (1) The total in the write-off column (C) should agree to the applicable expense account either in total or by individual write-off category if there are separate general ledger expense accounts. Updated and Approved: 27

28 Accounting Procedure: Capital assets APR 250 Procedure is Responsibility of: Board of Date Initially Prepared: Directors or delegate Previous Procedure No. General: Capital assets will only be acquired once the approval is obtained, based on the Grants of Authority Policy. This approval should be maintained by Business Services. Business Services should confirm that the asset being acquired is in fact a capital asset i.e. it meets the capitalization criteria of a cost of equal to or greater than $1,000 and will have a useful life longer than one year. For the purpose of setting up such assets in the general ledger (and tracking capital assets and determining depreciation and amortization), the costs should be grouped. For example the acquisition of a desk might include the cost of the desk ($950), any freight charges ($25), any assembly charges ($25), the 50% of the GST ($35.00) that is not refundable from the government for a total cost of $1, In recording the $1, cost for the desk, one asset should be set up in the records and not the four components. An asset can be made up of a number of components for the asset to function. For example a computer will cost say $2000, a key board $175, a monitor $225, a mouse $30 and a printer for $225. For the asset to function, one needs all the components and as such all items in this example would be capitalized and shown in the records. As another example, CAWST buys a desk for $1,000 and the chair costs $200. While the desk meets the capitalization threshold the chair on a standalone basis does not. However for the asset to be functional, one needs both components. As such in this example, one would capitalize the total asset i.e. the desk and chair (and the applicable GST) and show the items in the records. While there are other examples, one s judgment will need to be applied in different situations as to the appropriate accounting and recording of various transactions. Where capital assets have been donated to CAWST and the fair value is obtained, such assets will be recorded at that value, assuming it meets the capitalization threshold of $1,000. Business Services will ensure that the invoice for the capital assets is coded to the correct general ledger account upon receipt of the invoice. Where the invoice is not received at the time of the receipt of the capital asset, the cost shall be accrued. Depreciation: On a monthly basis depreciation and amortization will be calculated. Before the depreciation is calculated, agree the total of assets to the general ledger capital assets sub-ledger. Updated and Approved: 28