FINANCIAL PROCEDURES

for Locals and Regions(FPLR)

Administration & Fiduciary Oversight

Regulatory Requirements Technical Tasks

Handbook Sections

2

FP 101: Survival!FP 102A: Need to DoFP 102B: Need to KnowFP 103: Best PracticesFP 104: Management Issues

Session Overview

3

All local/region leaders need to be aware of financial concepts• Oversight• Emergency coverage

Treasurer needs to know in detail

Following these guidelines helps you to avoid problems and be more accountable

Note FPLR handbook page references at bottom of slides

(centered and green)

Session Overview, continued

4

FP 101Survival!

5

IEA dues- Pay monthly except SEPTEMBER/OCTOBER

Member reimbursementVendor bills

Pay the Bills

45, 506

Check supply

Types of checks

Record in checkbook/Accounting system

7

Bills, continued

IEA DuesTransmittal Policy

November 1 10% of obligationDecember 1 20% of obligationJanuary 1 30% of obligationFebruary 1 40% of obligationMarch 1 50% of obligationApril 1 60% of obligationMay 1 70% of obligationJune 1 80% of obligationJuly 1 90% of obligationAugust 1 100% of obligation

850

Employer dues checks◦Make sure you obtain and retain

supporting detail!

Other checks◦Keep copies and documentation!

Deposit Checks

9Appendix 6

Deposit slips- Ample supply

Deposit checks when received

Do NOT withdraw cash from deposit!

10

Deposit, continued

Taxpayer ID Number (TIN)Annual filing requirementNonemployee compensationUnrelated Business Income

IRS Issues

1126-33, Appendix 13

“Social Security Number” for associations and corporations:9 digits (xx-xxxxxxx)

Need when opening a bank account Need when filing IRS forms IEA has your number on file IEA will apply for numbers when needed

Taxpayer ID Number (TIN)

1227

IRS Form 990-N (“E-Postcard”)• “Gross Receipts” under $50,000

“Gross Receipts” do NOT include IEA-NEA dues!

All except around 30 IEA locals file this form!

IRS Annual Reporting

1328, Appendix 13

“Gross Receipts”$50,000-$200,000: IRS Form 990 EZ

“Gross Receipts”Over $200,000: IRS Form 990

Most locals pay a CPA to file these forms.

IRS Annual Reporting, continued

1428, Appendix 13

If you tell us that you are filing the 990/990-EZ but fail to do so, after a period of time the IRS will take away your tax exemption!

◦ Serious financial consequences for your local◦ Significant time, effort and expense to get it back

15

IRS Annual Reporting, continued

Must file if not required to file 990 or 990-EZ

“Simple” electronic submission

IEA files on your behalf

E-Postcard

1628, Appendix 13

Income not related to union business• Rarely occurs, examples:

• Rental income• Newsletter ads (not sponsorships)• Merchandise sales

Need $1,000 in UBI to incur a tax liability

Unrelated Business Income

1728, Appendix 13

Must report payments to INDIVIDUALS to the IRS, IF:

Over $600 in total for a calendar year

For Services: Not for products, supplies or expense reimbursements

Gifts and awards don’t count

Form 1099-Misc

1829-31, Appendix 13

Stipends: officers(W-2 vs. 1099)

Stipends: non-officersPayment of dues for officersUndocumented expenses: report even if under $600

Form 1099, continued

1929-31, Appendix 13

Form

1099—

Mis

c

2030

Form

1096

2131

You need to know if your local association is currently filing quarterly reports with the State Board of Elections.

If so, you need to continue to file them in order to avoid penalties.

Keep IPACE funds in separate bank account!

Political Funds

2234-35

There are some tips for new Treasurers on the IEA website

Click on RESOURCES Then FINANCIAL PROCEDURES

23

More Info for New Treasurers

FP 102ANeed To Do

24

Every dollar that goes in or out of your bank account needs to be documented• Possible audit• Fiduciary duty: “Other People’s Money”

Proof of business purpose Proof of dollar amount Proof of date/place

Documentation

2552-57

Where fromWhat forDollar amountEmployer checks- Be sure to retain detailed list of dues deducted, etc.

Other Checks: Copy of check with notes/attachments

Funds Received

2652

IEA dues: Maintain copy of monthly statement

Member reimbursement• Travel: Use travel form with receipts attached

• Other: Need original vendor bill, not a handwritten note

Outside vendors• Detailed bill needed

• No bill (stipends, scholarships, etc.): document in minutes

Funds Disbursed

2753-57

Forms:• Use some sort of voucher system (p 54)

Attach bills, etc. to vouchers

• For travel expenses: USE A TRAVEL EXPENSE FORM!! Example on page 57 Label receipts and staple them to the forms No stapled envelopes with miscellaneous

random receipts!!

• If travel funding is provided by another body, make sure there is no duplication of reimbursement

Funds Disbursed, continued

2853-57

Sam

ple

Vou

ch

er “Sample” Expense Voucher

_____________________________ Association _ _ Date Check No. Amount Explanation: ______________________________________________________________________ ______________________________________________________________________

Approved for Payment ______________________ _____________________________ President Signature ______________________ Treasurer

(Attach to Receipt/Invoice)

“Sample” Expense Distribution Acct. No. Expense Classification ________________

410 Office Maintenance ________________

420 Administration Salaries, Expenses & Taxes ________________

430 Negotiations ________________

435 Mediation, Arbitration & Fact-Finding ________________

440 Professional Rights & Responsibilities ________________

450 Legislative ________________

460 Public Relations – Membership ________________

470 Instructional/Prof. Development ________________

490 Miscellaneous ________________

2954

Sample Travel Form

3057

Every dollar that goes in or out of your bank account must be recorded

Permanent record• Future audits by IRS, etc.

• Internal questions• Financial reporting

What system do you use: “It depends”

Record Your Transactions

3138-43

One size does not fit all•Size/complexity of organization

•Prior treasurer’s system•Current treasurer’s preference

Accounting Systems

3238-43

Your system needs to:•Record all transactions in sufficient detail

•Allow you to produce financial reports efficiently

•Provide a record that others can follow

Systems, continued

`

3338-43

Some possibilities• Checkbook/check stubs• Cash receipts and

disbursements journals• Excel/Access• Specialized accounting

software (Quicken, etc.)

Systems, continued

3438-43

Perform and document monthly

Detects errors by the bank and/or yourself

Bank Reconciliation

3545, Appendix 14

This is the link between “Documentation” and “Recording”

Should be able to look at any item on the bank statement or your accounting system and find the source document easily and quickly.

Filing

3658

Examples:• Cross reference vendor bills/vouchers with check numbers

• Attach bills to bank statements, or• File vouchers numerically (chronologically)

• No envelopes/sacks with miscellaneous random documents

Filing, continued

3758

FP 102BNeed to Know

38

Checks/balances and separation of duties

Helps protect the organization from undetected fraud

Helps protect officers from potential embarrassment and liability

Protects the treasurer’s credibility

Internal Controls

3917-18

List of controls, Appendix 6Please read the example on page 18!

CONTROLS, continued

4017-18, Appendix 6

Checks and cash should be deposited daily, with the date of the deposit indicated in the applicable records. The bank deposit slip totals should match the total in the books.

Cash should NOT be withdrawn when making a deposit

Controls, continued

41Appendix 6

All disbursements, except petty cash items, should be made by checks. Complete supporting documentation should be maintained.

Controls, continued

42Appendix 6

Checks should never be made payable to “Cash”.

Controls, continued

43Appendix 6

Checks should be paid from original vendor invoices.

Controls, continued

44Appendix 6

Two (2) signatures are recommended on all checks.

Controls, continued

45Appendix 6

Signing of blank checks should never be permitted.

Controls, continued

46Appendix 6

A person other than the treasurer should receive bank statements directly from the bank.

Controls, continued

47Appendix 6

Controls, continued

48Appendix 6

Locals are billed at the beginning of the month: November-August

Bill is sent to “Membership Contact” Penalties for late payment Need to pay entire amount shown!! See Appendix 15 for “How to Read the Statement”

Some locals arrange for direct payment by employer

Dues Billing From IEA

4949-52

Include home e-mail addresses for your new members on their enrollment forms

Encourage all of your members to use the “My IEA Profile” portal to update their home e-mail addresses

50

MEMBERSHIP CONTACT RESPONSIBILITIES

IPACE is funded by member contributions

Locals can receive up to $10 per contributing member each year ($15 effective 2013-2014)

Must be used for specific political purposes

IPACE Rebates

5122-23, 35-36, Appendix 9, 16

Must be kept in a separate bank account May be state reporting requirements Members’ contributions are not tax-

deductible Unused funds can be returned to

IPACE, at the local’s discretion

52

IPACE Rebates (Cont’d)

DO YOU HAVE TO FILE?• One-time threshold: $3,000 spent in any 12-month period

• Only certain expenses “count”• If you exceed the threshold, you must register as a PAC immediately and then file quarterly reports forever

Keep up with state due dates and requirements

State Political Reports

5322-23, 35-36, Appendix 9, 16

NEA Fund used for national initiatives

Fundraising rulesNo use of local or IPACE funds for contributions – including reimbursement to RA delegates

NEA PAC FUNDFund for Children and Public Education

(FCPE)

5436, Appendix 15

Federal/State/Local Income Tax-EXEMPT

Sales Tax - NOT EXEMPT Exemption requires that your funds are spent for your “Exempt Purpose”

You must be able to demonstrate this if audited, hence the importance of documentation!

Locals and Regions:Tax Exemption

5526-27

You can, AND SHOULD, make a “profit”• Only way to build up funds

• Must be used for exempt purpose

Not-for-Profit?

5626-27

DO NOT IGNORE!Seek helpCheck TINKeep copies/proof of delivery

IRS Notices

5732-33

Not likely, but . . .• Random audits• Reported by disgruntled members

IRS Audit

5832-33

Articles of incorporation, bylaws, IRS determination letter

Board/Committee meeting minutes Conflict of interest policy Copy of expense reimbursement plan General ledger, cash receipts journal, cash

disbursements journal

59

What Do They Ask For?

List of all bank accounts Copies of bank statements and cancelled

checks Credit card statements and receipts Invoices and receipts Schedule of donors to the organization All expense reimbursement requests,

including documentation

60

And…..

Copy of any contract of $5,000 or more Documentation of process to determine

compensation of officers, including committee minutes

Copies of Forms 941, W-2 and 1099-MISC List of officers Breakdown of dues received: IEA-NEA vs.

local Copy of two newsletters

61

And….

Copy of union handbook All workpapers used to prepare the annual

tax return (990-EZ) Charter Document retention policy  

62

And…

Are regular Board meetings held? Describe. How often are dues paid to IEA-NEA? What portion of the dues are for political

activities? How are members notified that part of their

dues are used for lobbying activities? What geographic area do you cover?

63

And….

Describe your history and activities. Describe your internal controls over your

financial transactions. Do you have a budget? Is your 990-EZ shared with your governing

body? How large is your governing body?

64

And….

Do you have an annual general meeting of the membership?

Do you have an audit? If so, provide copies of reports.

Who maintains the books? Do you provide monthly financial reports?

What is in them? How are your officer stipends computed?

65

And…

How do you report stipends (W-2, 1099-MISC, etc.)?

What are your sources of income? How are your convention delegates chosen? How many delegates do you have? What do

they do? How long do they serve?

66

And…

Do you have special events, if so, describe. Do you give gifts? Describe. What is the length of your contract with

your employer? Do you track your valuable assets, e.g.

computers? Provide list.  

67

And….

Sleep well: Keep your books and other documentation in order, and follow the rules

Seek help

Let us know

68

IRS Audit

FP 103Best Practices

69

Regions - Annual Budget is Required in Order to Receive Rebate

Locals - No Specific Requirement, but a Budget . . .• Ensures Proper Financial Planning• Discussion of How to Use Member

Resources• Qualification for Financial Assistance

Budgeting

7012-15

Check constitution/bylaws for requirements

Get Member InputSee Budget Training Video on IEA Website

Budget Process: Locals

7112-15, Appendix 2, 3, 4, 5

Large Organizations: Outside CPA• “Audit” vs. “Review”

Smaller Organizations: Audit Committee• Independent of Governance• Start with a Checklist(Sample on page 62)

• Final Report to the Board

Share Report with Members

Annual Audit

729-11, Appendix 1

 TO: ____________________ President (or Region Chair) ____________________ Education Association (or Region) We have performed the procedures enumerated in the checklist for review

of financial records. Based upon completion of those procedures we have satisfied ourselves that the Association’s (Region’s) cash basis transactions for the twelve‑month period ending ____________ ____, 20__, are accurately and reasonably recorded in the books and records, are adequately documented, and were for authorized purposes.

 _______________________________Audit Committee Chair  _______________________________Date

Sample Committee Report

7311

Have a written policy on documentation and reimbursement• Overall expectations• What is covered/not

All expenses must be documented (detail on 53-56)

Donations to FCPE are not reimbursable

Region vs. Local funding

R.A. Delegates

7421-22, 55-57, Appendix 8

Should produce monthly Statement type and detail depend on the size of your organization, but• A verbal report or just a report on the bank balance is never sufficient

Should include a comparison to budget

Share with broad audience

Financial Reports

7547-48

Sample Financial ReportMIDTOWN EDUCATION ASSOCIATION

STATEMENT OF RECEIPTS AND EXPENDITURES EIGHT MONTHS ENDED APRIL 30, 2005

ACTUAL

2004 ACTUAL

2005 BUDGET

2005 REMAINING

BUDGET BEGINNING CASH BALANCE SEPTEMBER 1 4,870 5,000 5,000 0 RECEIPTS: IEA-NEA Dues 16,500 17,000 28,000 11,000 Local Dues 1,280 1,300 2,000 700 Fundraisers 600 800 1,000 200 Interest 370 400 500 100 Total Receipts 18,750 19,500 31,500 12,000 PAYMENTS: IEA-NEA Dues 16,500 17,000 28,000 11,000 Mediation/Fact-Finding/Arbitration 0 0 300 300 Meeting Expenses 600 500 800 300 Newsletter 240 400 500 100 Office Supplies 335 400 600 200 Total Expenses 17,675 18,300 30,200 11,900 NET INCREASE (DECREASE) TO CASH 1,075 1,200 1,300 (100) ENDING CASH BALANCE APRIL 30 5,945 6,200 6,300 (100)

7648

FP 104Managemen

t Issues

77

Don’t think “It can’t happen here”• Numerous cases at IEA locals in past few

years• Usually involves people in positions of

trust

Pressures/Opportunities• Many factors can induce someone to

commit fraud• Lack of good controls presents an

opportunity

Fraud/Malfeasance

7818-21, Appendix 7

The “Fraud Triangle”

7918-21, Appendix 7

If you see the signs . . .• DON’T ASSUME THE WORST!!!• They could just signify substandard practices

• Check with your UniServ director• Don’t ignore the signs; doing so can end up reflecting on you

Signs of Possible Fraud

8018-21, Appendix 7

One person does all of the work related to financial and membership matters. Worst case is someone who serves as president, membership chair and treasurer.

Signs . . .

81Appendix 7

No oversight over the person with the checkbook (controls such as dual signatures are missing, there is no monthly financial reporting, etc.).

Signs . . .

82Appendix 7

Deficiencies in documentation for disbursements:• No documentation• Use of copies instead of originals• Multiple erasures/whiteouts on any kind of financial records (checks, deposit slips, invoices, etc.)

Signs . . .

83Appendix 7

Checks written to “Cash”Cash withdrawals from the local’s bank account

Cash deducted from bank deposits

Signs . . .

84Appendix 7

The local is consistently behind in paying its IEA-NEA dues.

Signs . . .

85Appendix 7

No annual review of the books/records by an outside body.

Signs . . .

86Appendix 7

Signing of blank checks.

Signs . . .

87Appendix 7

Bank statements are not reviewed by someone other than the treasurer.

Signs . . .

88Appendix 7

How much cash to maintain?• Plan for worst case scenario• May have to phase in the increase or decrease as part of annual budget

Investment of funds-look at alternatives• Liquidity• Net income (interest minus fees)

Cash and Investments

8915-16

List of Common Items(provided by NEA)

Call for Items Not on List

Record Retention

9024, Appendix 12

Be familiar with constitution, bylaws, other governing documents• Administrative requirements(budget, audit, fiscal year, etc.)

• Accounting requirements(check signing, reporting, etc.)

Governing Documents

919, 38

Avoid perception of personal gain from role as local/region leader

The organization must come first

Conflict of Interest

9221

Treasurer candidates should be “qualified”

“Full Disclosure” of job requirements There should be an orderly transition of treasurers• Demonstration/Instruction• Written procedures/Calendar• Books/Records in good order

More info in FPLR handbook and on the website

Transition Issues

9358-59

Randy Welchrandy.welch@ieanea.org

Al Llorensal.llorens@ieanea.org

Annual training sessions

Resources

94

IEA Website www.ieanea.orgFinancial Procedures for Locals

and Regions handbookFinancial procedures videoMembership processing videoBudget video

NEA online treasurer training

Resources

95

IEA Website

CLICK “RESOURCES”

96

IEA Website

CLICK “FINANCIAL

PROCEDURES”

97

IEA Website

CLICK here for the handbooks

CLICK here for workshops & webinars

98