Accounting Policies and Procedures
Accounting Policies and Procedures
The CIL is committed to efficient and accurate accounting and fiscal management principles. These policies and procedures are designed to orient Board members and train staff. They are organized as follows:
I Accounting Systems
II Receipt of Money
III Disbursement of Cash
IV Purchasing
V Internal Fiscal Controls
VI Federal, State and Local Taxes
VII Billing and Receivables
VIII Inventory and Property
IX Miscellaneous Policies
I Accounting System
A. The CIL uses a computerized bookkeeping system (One Write Plus for IBM compatible computer), and a modified accrual system, which has been designed to ensure the following objectives:
1. Proper financial operation of the agency.
2. Compliance with applicable laws, contracts and regulations.
3. Maintenance of records of all financial transactions.
4. Maintenance of maximum financial management and internal controls given the limitations of funds and personnel.
5. Generation of reports required by:
a. Board of Directors
b. Funding Agencies
c. Tax Agencies
d. Others, as directed by the Executive Director
B. These objectives are accomplished by:
1. An account (color) code structure that readily identifies all grants, funding sources, cost centers revenue and expense categories. (See Appendix A, Chart of Accounts)
2. A segregation of duties within the CIL to ensure proper internal controls.
C. The CIL’s accounting controls are designed to provide reasonable assurances that:
1. Transactions are executed in accordance with management’s general or specific authorization;
2. Transactions are recorded as necessary to (a) permit preparation of financial statements in conformity with generally accepted accounting principals or any other criteria applicable to such statements and (b) maintain accountability for assets;
3. Access to assets is permitted only in accordance with management’s authorization;
4. The recorded accountability for assets is compared with the existing assets at reasonable intervals, and appropriate action is taken with respect to any differences.
II. RECEIPT OF MONEY
A. Objective: To ensure that all cash (including checks) intended for the organization is received, promptly deposited, properly recorded, reconciled, and kept under adequate security.
B. Control Procedures:
1. The responsibility for receiving and receipting money shall be that of the Administrative Assistant.
2. The responsibility for ensuring that bank statements are reconciled with internal records of receipts and disbursements shall be that of the Administrative Assistant.
3. The general process for receiving money shall be as follows:
a. When money is received, the Administrative
Assistant endorses the checks with the CIL’s bank account
stamp and completes the
Check / Cash / Deposit Record, writing the date
received, whether the receipt was in cash or by
check, who the money was received from, the
purpose or reason (e.g., membership dues,
draw down, etc.), the account number / cost center,
and the amount. The Administrative Assistant makes a copy of all the
checks received, attaches the copies to the Check/ Cash/ Deposit Record. The Administrative Assistant writes his or her initials on the check to indicate that it has been recorded.
b. All money received is deposited immediately in the bank. If this is not possible, the check is placed in a folder marked "To Be Deposited", and stored in a locked area (safe) which the Administrative Assistant and the Executive Director have access to the key..
c. The deposit slip receipt and the Check / Cash / Deposit Record and copies of the checks are stapled together and placed in a folder marked "Accounting Data Entry" in the financial office. After data entry has occurred, the deposit slip receipt and the Check / Cash / Deposit Record are marked as posted.
III. DISBURSEMENT OF CASH
A. Objective: To ensure that cash is disbursed only upon proper authorization of management, for valid business purposes, and that all disbursements are properly recorded.
B. Control Procedures:
- All expense checks are written by the Administrative Assistant (or in his/her absence the Executive Director) upon receipt of proper authorization and documentation.
2. All check requests must be approved by the Executive Director. The Administrative Assistant who prepares the checks does not have the authority to approve disbursements or sign checks.
3. All requests for unusual office supplies must be upon an appropriate order form and must be contained by appropriate documentation.
4. All requests for expense reimbursements must be supported by appropriate receipts and/or approval indicating receipt of goods and services.
5. All expenditures must be by check. Checks are not issued to cash or bearer and may not, under any circumstances, be signed in advance in blank. Checks are not signed based on verbal authorization. Checks must be supported by documentation that clearly indicates the propriety and requirement for payment.
6. All payroll checks are prepared by the Administrative Assistant and signed by authorized Executive Director or Treasurer of the Board of Directors. All checks over $1,000, except for rental of office space, medical insurance premiums and, quarterly payroll taxes, must be signed by the Treasurer.
IV. PURCHASING
A. Objective: The CIL attempts to buy in large quantities to cut down on the cost of office supplies and to maintain a well-stocked inventory.
B. Control Procedures:
1. Supplies are ordered on the 15th of each month,
unless there is an emergency shortage.
2. Each purchase requires completion of a Purchase order form which must be signed by the person requesting the items, and the Executive Director. The Purchase Order form must include the company and stock item number (if known), quantity, cost (if known), date needed and a brief description including color, if applicable.
3. When an order is received, it is delivered to the
person ordering it unless it was agreed to keep the
item in the office stock. If for some reason an
order cannot be filled, the original Purchase Order
form is to be returned to person placing the original
order with an explanation or second choices
available.
V. INTERNAL FISCAL CONTROLS
A. Objective: To safeguard the assets of our CIL and to ensure the reliability of internal reports and analysis.
B. Control Procedures: In order to protect our CIL from the loss of assets, protect the Administrative Assistant from an unscrupulous employee, and protect honest employees from suspicion, CIL maintains internal controls in its operations as follows:
1. In order to minimize the probability of someone else cashing a check intended for our CIL. Checks received are endorsed immediately, with our CIL's bank account stamp.
2. Should the CIL engage in any sort of affair where collections of money is made at the door, such as a dinner or a dance or other special events, cash collections must involve at least two (2) people selected by the Executive Director.
3. All disbursement shall be made by check. This control provides a permanent record of how much was paid to whom. This also allows the Administrative Assistant and the auditor to trace financial activity with the check serving as documentation. To minimize the probability of a fraudulent disbursement, checks are made payable to a specific person or entity. Checks are never written to cash - not even checks for petty cash.
4. Receipts are deposited in the bank by the Administrative Assistant weekly. This means that the Administrative Assistant puts money that comes to the organization into the bank at the end of the week that .it is receipted. Cash is never used to pay bills. Cash must be deposited and bill paid by CIL's check.
5. The Administrative Assistant does not sign checks. Those authorized to sign checks are: The Executive Director and Board Treasurer. The Administrative Assistant prepares supporting documentation (bill, invoice, etc.) and has it available for the check signers to examine before they sign. A check should never be signed without this information.
6. To ensure that our CIL has a permanent record of all assets, a record of fixed assets (furniture, copy machines, typewriters, etc.) is maintained and a periodic inventory done. This record of assets details as much information about an asset as is reasonable including cost, vendor, date of purchase, location, serial number and any funding source information required.
VI. FEDERAL, STATE, AND LOCAL TAXES
A. Objective: To insure that estimated federal income taxes and other taxes are withheld from all employees of our CIL who meet the common law test of an employee.
B. Who Is An Employee of the CIL?
Under the common law test, an individual is an "employee" when he or she performs services for the CIL and the CIL has the right to control and direct his or her work. The CIL must also be able to dictate the means employed to accomplish the task and has discretion over the results or end products themselves. Although the CIL is a tax-exempt organization, it has the responsibility for withholding federal and state income taxes as well as other legal taxes from all wages paid to employees.
C. Tax Filing
1. On the first day of employment, a new employee of the CIL must fill out and sign an employee's withholding allowances certificate (W-4 forms) for payroll purposes.
2. The Administrative Assistant makes quarterly reports of the amounts of wages and other compensation paid and the amounts of federal income taxes withheld on IRS's and state Department of Revenue Services (DRS) Forms 941. The reports are due on the last day of the month following the end of each calendar quarter. Forms 941 must be accompanied by a check for any withholdings that were not deposited during the quarter. Federal deposits must be made via the EFTPS program at intervals that may vary with the amounts being withheld. DRS deposits are made by mail. Currently deposits are made weekly. At the end of each calendar year (by January 31), the CIL is required to complete an annual wage and tax statement (form W-2) for each employee with copies being distributed to employees, the IRS and the DRS.
3. As a federal tax exempted organization, the CIL is required to file a 990 Form with the IRS annually. This form shall be made available, upon request, to our members, donors, consumers, funders and any other interested parties.
4. The CIL may also contact with individuals on a contractual basis. Any such contractor earning a minimum of $600 within one calendar year receives a copy of IRS form 1099, which is a statement of earnings. This report is filed with the IRS and DRS at the end of each calendar year (by January 31st) Contractors are expected to pay their own taxes. Contractors include free-lance interpreters, personal care assistants, skills instructors, accountants, etc. The Administrative Assistant completes all IRS 1099 forms for the Executive Director's approval.
VII. BILLING & RECEIVABLES
A. Objective: To ensure that all services rendered are promptly billed at authorized rates, recorded as accounts receivable, that payments are received promptly and unpaid accounts adequately followed up.
B. Control Procedures:
1. All billings are prepared by the Administrative
Assistant who in turn reconciles the receivables and
cash received on a monthly basis.
2. All billing rates are negotiated by either the Executive Director or Administrative Assistant.
3. All billings are maintained in distinct open invoice
files by the Administrative Assistant.
VII. INVENTORY AND PROPERTY
A. Objective: To perpetrate the property control process, the following is the responsibility of the:
1. The Administrative Assistant is in charge of all property at the CIL's office.
2. The Administrative Assistant assigns tag numbers to each piece of property at the CIL valued at over $100.00.
3. A master file of all tagged property is maintained at CIL's office by the Administrative Assistant.
A. Objective: To ensure that the inventory or property is maintained for insurance and grant (funding source) purposes.
4. The requirement for maintaining property records applies to all property costing more than $100.00 per unit. A copy of all invoices for purchase of equipment are kept by the Administrative Assistant.
5. Property tags are kept by the Administrative Assistant, numbered and affixed to each piece of property. The list of property with tag numbers and/or stenciled numbers is named the inventory log. Where applicable, the Administrative Assistant lists the grant number which funded the acquisition of a particular piece of property on the inventory log.
6. The Administrative Assistant periodically audits the inventory log against the physical property. The Administrative Assistant completes an inventory count at least once a year.
IX. MISCELLANEOUS POLICIES
Policy Regarding Audits
THe CIL, as a recipient of public funds, is audited annually by a certified public accountant in accordance with generally accepted auditing standards. The CIL engages an external independent auditor to conduct this annual audit.
Policy Regarding Federal, State, Local Taxes and Reporting
The CIL is a tax-exempt organization under Section 501(c)(3) of the Internal Revenue Code. However, CIL complies with all federal, state, and local tax laws and regulations when reporting employee withholdings.