Policies and Procedures Manual

Policies and Procedures Manual Volume 6: Financial Systems/Checks & Balances 67 West Washington Street Bradford, PA 16701 814 362-6527 www.bradfordlibrary.org i

Table of Contents Purpose 1 Summary of BAPL Financial Roles and Responsibilities 1 Reporting 2 Separation of Duties (Cash Receipts, Cash Disbursements and Payroll) 2 Budgeting Process 4 Financial Statements 4 Audit and 990 4 Accounts Payable 5 Signature Policy 5 Purchasing and Recording Expenditures 5 Credit Cards & Expenditures 6 Local Travel and Expense Reimbursement 6 Petty Cash 6 Accounts Receivable 6 Recording Receipts (Cash or Checks) 7 Configuration and Processing Online Transactions 7 Recording Receipts (Credit Card) 9 Notes, Loans and Other Forms of Indebtedness 9 67 West Washington Street Payroll Taxes Bradford, PA 916701 Checking Account 814 362-6527 9 Bank Reconciliations www.bradfordlibrary.org 10 Insurances 10 Property and Equipment 10 Contributions and Donated Materials and Services 11 i

Financial Management Policy It is the policy of BAPL to implement and maintain sound financial management practices. BAPL will employ sufficient and effective internal controls to facilitate fiscal responsibility within the boundaries of Generally Accepted Accounting Principles (GAAP). Summary of BAPL Financial Roles and Responsibilities Board Finance Committee Staff Budget Approves budget that reflects BAPL goals and board policies Revises budget and make recommendations Financial Statements Financial Controls Audit & 990 Investments Overall Financial Competency Reviews at regular board meetings Ensures adequate financial controls and financial reports are in accordance with accounting practices Reviews audited financial statement, management letter and senior staff s response. Hires the auditor. Approves the BAPL s investment policies and reviews them annually. Is well-informed about BAPL s finances. Reviews monthly with executive director and accountant Reviews accounting control policies in conjunction with the executive director and accounting firm and makes recommendations for improvement Reviews the audited financial statements, management letter and senior staff s response with staff & auditor. Conducts quarterly reviews of investments and makes recommendations about investment policies. Coordinates board training on financial matters. Acts as liaison between full board and staff on fiscal matters. Prepares budget and presents to finance committee with back up information Monitors income and expenses on a daily basis. Prepares financial and program reports which can be compared to the budget and projected activities Raises policy issues and providers recommendations for standard accounting policy decisions. Carries out policies established by board. Provides information and offers recommendations to finance committee. If necessary, responds to the management letter. Provides information and analysis needed. Provides training and information as requested. 1

The following sections of this document contain procedures that are designed to assure a system of checks and balances. These day to day procedures are to be overseen by the BAPL staff. Proposed changes do not need to be approved by the board but do need to be presented to the BAPL Board of Trustees Finance Committee prior to adoption. Reporting BAPL prepares financial statements on the accrual basis of accounting in accordance with generally accepted accounting principles. A set of financial reports prepared by the accountant is provided to the Executive Director and Treasurer in preparation for regular board meetings and upon request. An independent auditor s report is prepared annually by a Certified Public Accountant in accordance with generally accepted auditing standards. The annual return IRS form 990 is prepared and submitted annually in accordance with IRS regulations. The form BCO-10 is filed annually in compliance with the State Bureau of Charitable Organizations. This form is completed in tandem with the IRS Form 990 and needs to be submitted with a copy of the 990. BAPL is currently using Quickbooks (financial software) for accounting and GiftWorks (development database) for fundraising tracking. BAPL uses a chart of accounts with numbers to track income, expenses, assets and liabilities. Separation of Duties (Cash Receipts, Cash Disbursements and Payroll) In creating checks and balances, duties will be separated in the following way: Treasurer Serves as chair of Finance Committee Renders to the Board at least quarterly an account of all transactions and the financial status of the corporation Performs oversight of the Executive Director s responsibility of financial resource management Finance Committee Authorizes all inter-fund transfers over $5,000 Oversees and makes recommendations regarding preparation of annual budget and allocations spent on programs, management and general, and fundraising for approval by the Board of Trustees Executive Director 2

Approves all transactions and signs checks for disbursement Performs ultimate oversight and management of resources Reviews and approves all financial reports Signs or approves all financially related correspondence Reviews payroll for appropriateness of payees and amounts Reviews weekly deposit report and funds to be deposited Randomly receives incoming mail, processes receivables and makes deposits Processes payroll and distributes paycheck and expense checks Maintains electronic files and hard files of all accounting transactions Prepares and maintains fixed asset log Assures timely processing of accounts payable and accounts receivable Executive Assistant Manages petty cash account Oversees purchasing requests Receives incoming mail and stamps checks for deposit only Receives mail and processes receivables Mails signed checks for payment Maintains fundraising database and accounts for all contributions Randomly takes deposits to the bank Reviews payroll for appropriateness of payees and amounts in Executive Director s absence Reviews weekly deposit report and funds to be deposited in Executive Director s absence Randomly receives incoming mail, processes receivables and makes deposits in Executive Director s absence Processes payroll and distributes paycheck and expense checks in Executive Director s absence Mails signed checks for payment Assures timely processing of accounts payable and accounts receivable in Executive Director s absence Accountant Processes all cash receipts and cash disbursements Maintains and reconciles general ledger Prepares financial reports Reconciles bank accounts and trust statements 3

Processes accounts payable and receivable Backs up Quickbooks and relevant accounting data regularly Budgeting Process BAPL operates on an annual budget that reflects anticipated BAPLs needs and resources and forecasts revenues and functional expenses. The Executive Director develops a draft budget to be presented to the Finance Committee in October and for Board of Trustees review in November. It is then presented to the Board of Trustees for ratification in December. Financial Statements BAPL s financial statements shall be prepared on an accrual basis in accordance with Generally Accepted Accounting Principles ( GAAP ). Under GAAP, net assets and revenues, expenses, gains, and losses are classified based on the existence or absence of donor-imposed restrictions. Accordingly, the net assets of the BAPL and changes shall be classified as unrestricted, temporarily restricted and permanently restricted. Separate from Unrestricted Funds, resources for various purposes are classified for accounting and maintained for each fund. Several funds are in place for this purpose and may include but not limited to: Endowment or Trust Funds, Restricted Funds, Cash Management Fund, Property and Equipment Fund, etc. The accountant shall prepare and present Monthly Financial Statements in a format approved by the Executive Director and Finance Committee. The statements shall be presented to the Executive Director and the Finance Committee for review. Audit and 990 BAPL will have an audit of its financial statements annually, within four months of the end of each the fiscal year. The audit shall be completed by a firm of Independent Certified Public Accountants. The Executive Director and the Treasurer of the Board shall have direct responsibility in overseeing the implementation of the Annual Financial Audit. The Finance Committee shall have board oversight. The Executive Director and Treasurer shall recommend to the Finance Committee for approval, the selection of a firm to perform the annual audit. In addition, the Finance Committee shall assist when necessary in the audit preparation, and report the final results to the Board of Trustees. The board will be given the opportunity to review the completed audit and 990. A representative of the audit firm shall be invited to attend the annual presentation to the Finance Committee, and shall be required to make a presentation to the Board if the audit report is other than unqualified, or if the auditor reports material weaknesses in internal controls or reportable conditions. The accounting firm shall prepare the Form 990 and it shall be reviewed by the Executive Director and the Finance Committee before submission to the IRS. 4

Accounts Payable Accounts payable check runs are completed weekly or as deemed necessary. Factors taken into account include the urgent nature of the check and the need to meet A/P aging requirements tied to effective cash management. Signature Policy Two signatures are required on all checks. The Executive Director, Chairman, Vice Chairman, Secretary and Treasurer are authorized to sign checks. Appropriate signature cards and corporate resolutions shall be on file for each check signer. Only the Board of Trustees by resolution can appoint a new check signer. Purchasing and Recording Expenditures For all purchases, a Purchase Order must be completed by the requestor and submitted to the Executive Director for approval and availability of funds. Note: the Executive Director s Purchase Order requests must be reviewed by the Executive Assistant. Any expenditure in excess of $1,500.00 must be approved by the Board of Trustees. Any purchase in excess of $500 should have bids from three (3) suppliers, if possible, or can be justified to use only one. These bids are reviewed by the Executive Director. Purchases of less than the approved amount may be made at the discretion of the Executive Director without competitive bids. However, for fixed assets, reasonable diligence must be exercised to comparatively shop for available sources. Whenever possible, BAPL will recognize community considerations in its purchasing activities. The Executive Assistant will compare accounts payable invoices with packing slips and Purchase Orders to verify the receipt of all items ordered and billed. Disbursements are only made to documented invoices and/or check requests. The Executive Director will then initial the check request or accounts payable invoice and indicate the appropriate account to be charged. Upon approval, the accountant prepares the checks to pay each invoice and the pre-numbered checks are submitted to two of the authorized people to sign manually. At the time of signing, payments are checked against supporting documentation for appropriateness of payee and amount. All signed checks are immediately forwarded to payees. Upon payment of a bill, a copy of the check or duplicate of stub shall be stapled onto the bill and payment date and check number shall be printed on the invoice. The paid invoices shall be filed according to the month they were paid. The monthly Statement of Invoices, provided by the accountant, will be attached to the invoices for that particular month. 5

Credit Cards & Expenditures It is the policy of the BAPL to issue a credit card to the Executive Director who will sign a Credit Card Issuance Form. All credit card expenses will be accompanied by a Purchase Order form which will be reviewed for accuracy and appropriateness by the Executive Assistant. It is the policy of the BAPL to have credit card statements addressed directly to the Executive Assistant who will review the charges and investigate unusual transactions. Any unusual transaction will be brought to the attention of the Board Treasurer. If all transactions are customary and in line with the appropriate documentation, the Executive Director will approve and request payment by the accountant. Local Travel and Expense Reimbursement Employees must abide by the BAPL s Travel and Expense policy. Travel and expense reports for mileage, meals, hotel, supplies, etc., will be maintained by each employee and then submitted to the Executive Director for approval. Reimbursement payment will be made on a bi-weekly basis by the accountant. The Executive Director will submit expense reports to a board officer (Chair, Vice Chair, Treasure or Secretary) for approval. Mileage to and from the employee s residence to the place of work will not be reimbursed. Approved reimbursements will be based on the travel rate established by the IRS Guidelines. All parking and other expenditure receipts must be attached to the expense voucher as a condition for payment. Reimbursement to the employee will only be made with the proper documentation and authorization. Furthermore, employees who incur unapproved expenditures may be personally liable for the expenditure and may face disciplinary action. Petty Cash One hundred dollars ($100.00) for petty cash purposes is retained in the Executive Director s office in a locked safe in the finance file cabinet. The Executive Assistant and Executive Director are the custodians of the petty cash fund. Petty cash disbursements are substantiated by vouchers and/or receipts. As needed, a check request summarizing the receipts is submitted for payment and the fund is replenished to $100.00. Petty cash disbursements are recorded in Quickbooks and are charged to the appropriate functional/program accounts. No checks of any kind will be cashed through the petty cash fund. Accounts Receivable 6

The accounts receivable process will occur at regular intervals and no less than once each month. Any and all funds and payments due to BAPL should be identified by the Executive Director and the appropriate documentation prepared and submitted to the appropriate party. On a monthly basis, the accountant shall enter the accounts receivable. The accountant is also responsible for informing the Executive Director when A/R s are more than 30 days past due. Recording Receipts (Cash or Checks) The following procedures for cash received through the mail or given to a staff person shall be in place: Mail will be opened by the Executive Assistant who will record all checks and cash by date, name of company or individual, designation, and amount. Checks shall be endorsed with BAPL official stamp. A record of all cash and checks received through the mail shall be forwarded to the accountant who records it for accounting purposes. An individual deposit ticket shall be prepared with duplicate copies, bearing a different designation of each account. That record shall include date of deposit, name of sender, amount, and designation. A copy of the bank deposit slip is retained in chronological order with copies of the deposited checks. All cash and checks shall be deposited as soon as possible with a minimum of two bank deposits each week. The same procedures followed for cash receipts shall be followed when monies are received by employees as contributions for special events. Gifts received electronically, such as stock transfers or on-line contributions should be properly recorded by the Executive Assistant. Transactions should be periodically rechecked by the Executive Director. Configuration and Processing of Online Transactions Online contributions are processed through the BAPL donation module on bradfordlibrary.org website hosted by 360psg. Currently there are three choices on the webpage: 1. Annual Ask 2. Derby Fundraiser 3. In Memorial or Honor of These choices and others that are added in the future may be adjusted as needed and be date sensitive 7

Amounts are set at: $5 $10 $15 $25 $50 $75 $100 $250 and other BAPL utilizes a Merchant Account service to manage online transactions. The current service is First Data Global Gateway : https://secure.linkpt.net/lpc/servlet/lpclogin Merchant account number 898201799886 Store Number: xxxxx User ID: xxxxx Password: xxxxx 24 Hours a Day, 7 days a week US: 1-888-477-3611 The Merchant Account Service facilitates the transfer of online funds to BAPL s primary checking account at Northwest Savings. When an online transaction occurs, an email with the details of the transaction is transmitted to the BAPL Executive Director. Example: Dear: Guy Bennett On 11-MAY-14 your merchant account 898201799886 was funded for $00.00. Deposit Summary Net Sales Amount: xx.xx Total Adjustments/Fees: xx.xx Net Deposit: xx.xx For additional details and merchant account activity please logon to www.businesstrack.com. We thank you for your business. Sincerely, Merchant Services 8

Upon receipt of that email, BAPL Executive Director informs the executive assistant who then informs J&S accounting service noting that an online transaction has been processed, including the date of the transaction, the dollar amount and the account number to apply it to. Recording Receipts (Credit Card) If someone makes a purchase or donation while visiting BAPL, it is entered through the BAPL website using the Online Transaction module and processed as defined above. Notes, Loans and Other Forms of Indebtedness All notes, loans and other indebtedness to be contracted in the name of the BAPL (except open accounts and all other routine banking transactions), shall require approval of the Board of Trustees. Payroll Taxes Under the direction of the Executive Director, the accountant prepares payroll taxes which are due based in federal, state and local payroll tax requirements. Tax payments are submitted by the accountant. A confirmation of receipt is received and kept on file at the BAPL. Internal Revenue Service regulations will be followed in completing W-2s and 1099s. Checking Account All checks, cash, money orders, and credit card deposits, are reviewed by the Executive Director and deposited in the appropriate Accounts. Fundraising events, foundations and corporate donations and miscellaneous contributions, shall be deposited into the accounts. Monies shall be transferred from the Checking account into the investment account when necessary, by the Executive Director. Lost Checks Checks that are reported lost will have a stop payment placed on them. Once the bank has approved the stop payment, a new check can be reissued. Voided Checks It is the policy of the BAPL to maintain a Voided Checks File and document every check that has been voided, regardless of the reason. Write-Off of Old Checks It is the policy of the BAPL to make every attempt possible to contact the payees of outstanding checks that have failed to clear the bank. Checks that have been outstanding will be handled in 9

accordance with applicable state escheat or unclaimed property law. According to PA escheat a 5 year statute of limitation applies in a business context where a business is required to report unclaimed paychecks or dividends. Bank Reconciliations Bank statements are received electronically. Bank reconciliations shall be completed monthly by the accountant and cross-referenced with the cash and receipts logs and the monthly Financial Statements. The accountant will notify the Executive Director of any discrepancies or any items rejected by the bank. The Executive Director will investigate and rectify these discrepancies and make appropriate adjustments to the general ledger. Completed bank reconciliations are reviewed by the Executive Director. Copies of reconciled bank statements will be kept in the Executive Director s office in the finance file. Insurances Reasonable and adequate coverage will be maintained to protect the BAPL s interests as well as the Board of Trustees and the BAPL s employees. The following insurance policies shall be kept on a yearly basis: Commercial Property Contents and Computer Policy, General and Professional Liability Insurance, Directors and Officers Liability Insurance, Employee s Dishonesty Bond Insurance, Employee s Life Insurance, Workers Compensation Insurance, Long-Term Disability Insurance, Builders Risk Insurance and Employees Health Insurance. Insurance Policies shall be fully reviewed by the Executive Director before renewal each year. Property and Equipment The Executive Director will be responsible for assuring that all property and equipment are maintained in an Excel spreadsheet and stated at historical cost. A Depreciation schedule shall be prepared and maintained by the accountant on an annual basis, taking into consideration the annual equipment inventory. A Property Removal Form shall be required for the removal of the BAPL s property, supplies, and/or equipment from the BAPL s premises. Purchase, installation and maintenance of telephone equipment, telephone lines, office equipment, computer equipment, etc. shall be approved by the Board of Trustees after discussion and approval by the Executive Director. Contributions and Donated Materials and Services Contributions It is the policy of the BAPL to send thank-you letters and gift receipts on the BAPL's letterhead acknowledging all contributions, regardless of the amount. The letters will indicate the dollar amount contributed. 10

Solicitations and Charitable Disclosure Statement It is the policy of the BAPL to follow solicitation disclosure laws as set forth by the Commonwealth of Pennsylvania which includes but is not limited to all of the following disclosures at the point of solicitation: 1. Its legal name as registered with the department and location and, if different, the legal name and address of the charitable BAPL as registered with the department on whose behalf the solicitation is being conducted. Any use of a project or program name in a solicitation must be immediately followed by a disclosure of the legal name of the charitable BAPL as registered. 2. If requested, the name and address or telephone number of a representative to whom inquiries could be addressed. 3. A full and fair description of the charitable purpose or purposes for which the solicitation is being made, and a source from which written information is available. 4. If requested, the source from which a financial statement may be obtained. Such financial statement shall be consistent with the annual financial report requested and shall disclose assets, liabilities, fund balances, revenue and expenses for the preceding fiscal year. Expenses shall be separated into program services, administrative costs and fundraising costs. Donated Stock All donated stock will be liquidated immediately upon receipt to minimize the risk of the stock depreciating in value and causing a loss. Notice on printed solicitation On every printed solicitation or written confirmation, receipt and reminder of a contribution, the following statement must be conspicuously printed verbatim: The official registration and financial information of BAPL may be obtained from the Pennsylvania Department of State by calling toll free, within Pennsylvania, 1 (800) 732-0999. Registration does not imply endorsement. Donated Property It is the policy of the BAPL to record the value of donated property among its fixed assets if the value of the property exceeds the BAPL's capitalization cutoff point in accordance with the following guidelines: Value Policy Under $500 Item will not be capitalized 11

$500 $2,500 Capitalize in accordance with value stated in contributor's letter Over $2,500 Capitalize in accordance with appraised value It is understood that except where stated otherwise, these policies are intended as guidelines, and that flexibility must be maintained since some gift situations can be complex, and decisions only made after careful consideration of a number of interrelated factors. Therefore, these policies will in some instances require that the merits of a particular gift be considered by a Resource Development Committee and a final decision regarding acceptance be made only by the Board of Trustees. Donor Relations Policy It is the BAPL s policy to treat donors and contributions to BAPL in an ethical, respectful, confidential manner. To that end, BAPL endorses the Donor Bill of Rights its entirety as developed by the American Association of Fund-Raising Counsel, Council for Advancement and Support of Education, and National Society of Fund Raising Executives. A DONOR BILL OF RIGHTS PHILANTHROPY is based on voluntary action for the common good. It is a tradition of giving and sharing that is primary to the quality of life. To assure that philanthropy merits the respect and trust of the general public, and that donors and prospective donors can have full confidence in the not-for-profit BAPLs and causes they are asked to support, we declare that all donors have these rights: a. To be informed of the BAPL's mission, of the way the BAPL intends to use donated resources, and of its capacity to use donations effectively for their intended purposes. b. To be informed of the identity of those serving on the BAPL's governing board, and to expect the board to exercise prudent judgment in its stewardship responsibilities. c. To have access to the BAPL's most recent financial statements. d. To be assured their gifts will be used for the purposes for which they were given. e. To receive appropriate acknowledgement and recognition. f. To be assured that information about their donations is handled with respect and with confidentiality to the extent g. To expect that all relationships with individuals representing BAPLs of interest to the donor will be professional in nature. h. To be informed whether those seeking donations are volunteers, employees of the BAPL or hired solicitors. i. To have the opportunity for their names to be deleted from mailing lists that BAPL may intend to share. j. To feel free to ask questions when making a donation and to receive prompt, truthful and forthright answers. 12

Donor Privacy Policies The purpose of the Donor Relationships and Privacy Policies is to ensure that the BAPL respects and honors its donors rights to privacy. This policy includes the following: BAPL will abide by all laws governing the charitable sector, and to demonstrate its commitment to donors, endorses the principles outlined in A Donor Bill of Rights which appears at the end of this page. BAPL staff, volunteers, consultants, or others soliciting on behalf of the BAPL will not disclose privileged or confidential information regarding their donors or prospective donors to unauthorized parties. Only authorized personnel will have access to donor records and files. Records will be stored in a secure manner with special protection given to records pertaining to anonymous donors and their gifts. BAPL will give donors the opportunity when making a donation to request that their name, amount of their gift, or other information not be publicly released. BAPL will not sell, rent or exchange with other BAPLs its donor lists. BAPL will honor requests by donors to curtail repeated solicitations. BAPL staff, volunteers, consultants, and others soliciting on behalf of the BAPL will not place undue influence or excessive pressure on donors or potential donors and will be respectful of their needs and interests. Gift Acceptance Policy The gift acceptance policy will ensure that donations are used to further the mission of BAPL and include appropriate consideration of donor objectives. The policy and procedures provide clarification, along with roles, responsibilities and expectations of both the BAPL and its donors. The gift acceptance policy provides guidance for decision-making. It ensures that gifts to the BAPL are made in accordance with legal and ethical regulations and guidelines. The policy promotes consistent practices and exercise of fiduciary responsibility, and protects the BAPL from potential liability related to gifts that come with (sometimes unforeseen) financial consequences. The following procedures can help to enhance long-term relationships with donors, and encourage donors and agency representatives to work together to provide the most effective benefits to our community congruent with donors' broad philanthropic wishes. 13

The Executive Director will approve all fundraising and gift solicitation activity by staff, volunteers, consultants, and others soliciting on behalf of the BAPL. BAPL volunteers, friends and staff members are authorized to encourage donors to make both outright and deferred gifts. The types of deferred gifts to be offered include bequests, gifts of residual interests, charitable remainder trusts, gifts of life insurance policies and proceeds, and such other gift arrangements as the Board of Trustees may from time to time approve. Persons acting on behalf of BAPL shall inform, serve, guide or otherwise assist donors who wish to support the BAPL s activities, but never under any circumstances are they to pressure or unduly persuade. Persons acting on behalf of the BAPL shall, in all cases of potential major new gifts, encourage the donor to discuss the proposed gift with independent legal and/or tax advisors of the donor's choice so as to ensure that the donor receives a full and accurate explanation of all aspects of the proposed charitable gift. Senior staff members are authorized to negotiate planned gift agreements with prospective donors, following guidelines approved by the Board of Trustees. Gifts will be planned to further the BAPL s mission, and to effectively interpret donors' charitable interests. All gift agreements must be reviewed and approved by the Finance Committee or Board of Trustees. The Board of Trustees reserves the right to decline to accept a gift based on lack of congruency with the BAPL s mission; desire of the donor to exert unacceptable conditions or controls over disbursement of the net income from the gift; cost-ofownership implications related to administration time, management and marketability of the gift; unacceptable risks; gifts that are illegal; or other factors agreed to by the Board of Trustees. Gift-related costs such as legal fees, appraisals, real estate commissions and taxes relating to acceptance, maintenance, management or re-sale of a gift of property, will normally be the responsibility of the donor, unless the BAPL, upon prior agreement, agrees to assume responsibility for any portions of these items. BAPL will obtain independent assessment of the value of gifts of property. BAPL will not serve as executor of a donor's will or trustee of a charitable remainder trust, but may refer the donor to a trust institution that has agreed to provide this service. Donors' wishes regarding recognition or anonymity regarding a gift will be respected, provided that any recognition is congruent with BAPL s usual standards of practice and legal requirements. 14

Grants and Contracts It is the policy of the BAPL to comply with all regulations and laws with regard to grants and contracts. Mailing List Sales It is the policy of the BAPL to maintain the privacy of donor/client mailing lists. Quid Pro Quo Contributions It is the policy of the BAPL to inform contributors in writing of a good faith estimate of the nondeductible portion of any quid pro quo contributions made for any fundraising activity of the BAPL if the contribution exceeds $75 individually. Donated materials and equipment in excess of $100 shall be reflected in the Financial Statements at their estimated values measured on the date of receipt. Contributed services are generally not reflected in the BAPL s financial statements, since there is no objective way of assessing their value. 15