Pathway to Social Transformation and Development

ACCOUNTING, FINANCIAL MANAGEMENT AND REPORTING POLICIES

BACKGROUND

It is the objective of FOUNDATION FOR YOUTH INITIATIVE that fiscally responsible policies and procedures be adopted that ensure that effective, efficient and uniform methods are utilized regarding , financial management and reporting. FOUNDATION FOR YOUTH INITIATIVE will ensure that under its control will be appropriately employed in support of the organization’s goals, and will be done so consistent with the avoidance of significant financial, business and operational risk.

SCOPE OF POLICY

These policies shall include those aspects of FOUNDATION FOR YOUTH INITIATIVE involving accounting, financial management and reporting and shall, at a minimum, be consistent with the statutory and contractual requirements of those entities providing financial support and best business practices.

POLICIES

Basis of Accounting

FOUNDATION FOR YOUTH INITIATIVE may report program and program income on either the or basis, but must select one method and maintain consistency for the entire fund . For reports prepared on a cash basis, expenses are the sum of actual cash disbursements for direct charges for goods and services, the amount of indirect charged, the value of any in-kind contributions applied, and the amount of advances and payments made to subgrantees if any. For reports prepared on the accrual basis, expenses are recorded when a liability is incurred (i.e., when an invoice has been received or the amount can be readily estimated), but is not recorded until actually earned by or is available to the recipient. "Available" means that the revenue is both recognizable and collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period.

1 Accounting Standards

FOUNDATION FOR YOUTH INITIATIVE shall adhere to the accounting principles generally accepted in the United States, the primary domicile of FOUNDATION FOR YOUTH INITIATIVE or within the country of program activities. As a recipient of US Government funding FOUNDATION FOR YOUTH INITIATIVE is subject to per governmental auditing standards issued by US Government funding agency.

Fund Accounting

Because FOUNDATION FOR YOUTH INITIATIVE exists to accomplish a goal and not to return a , accounting standards shall be structured to illustrate the success of a program or activity. For donors to understand how an entity is accomplishing its goal, the standards shall require financial information to be presented in a prescribed format. Therefore, FOUNDATION FOR YOUTH INITIATIVE shall utilize a Fund Accounting system to provide a self-balancing fund or set of funds within its overall accounting structure. A fund shall consist of a set of assets, liabilities, and net accounts which is maintained in balance using the accounting equation Assets = Liabilities + Net Assets.

The overarching objectives of fund accounting for FOUNDATION FOR YOUTH INITIATIVE will include:

• Making decisions regarding the best uses of limited resources

• Identifying crucial decisions, objectives and goals as they relate to the financial management of the organization

• Reporting on the custodianship of available resources

• Providing information to help resource providers assess the services that the organization provides and its ability to continue to provide those services

• Providing information about the organization during a specific period of time to measure the changes in the amount and nature of the net assets of the organization

• Providing information regarding how the organization obtains and spends cash and other liquid resources

In applying fund accounting FOUNDATION FOR YOUTH INITIATIVE will utilize basic accounting methods that shall include:

• A double-entry system of accounts

• Using documents to form basic records

2 • Keeping books of original entry or journals which are posted to general and subsidiary

• Generating trial balances to prove the equality of

• Using a that is properly classified and fitted to the organization's structure

FOUNDATION FOR YOUTH INITIATIVE shall use funds to segregate their accounts by objective - to track a particular grant, for example. The expectation shall be that granting organizations may often require an audit of how the grant money was spent.

The grant may be used for such things as salaries, postage, office expenses, program fees, etc. Each expense will be recorded in an appropriate category; however, additional information will be required to create an overall picture of how the specific grant was used. By doing a fund accounting based and report, FOUNDATION FOR YOUTH INITIATIVE will demonstrate how the grant was used and show its current remaining assets.

Elements of an Acceptable Financial Management System

FOUNDATION FOR YOUTH INITIATIVE will maintain records and make reports in such form and containing such information as may be required by its funding sources. will FOUNDATION FOR YOUTH INITIATIVE maintain such accounts, systems, controls and documents as will serve to permit expeditious determination of the status of funds and the levels of services, including the disposition of all monies received from its funding sources and the nature and amount of all charges claimed against such funds.

FOUNDATION FOR YOUTH INITIATIVE recognizes that an operable accounting system that is under general control is of paramount importance when performing activities directly or indirectly funded by the US Government. The system must be capable of ensuring that the organization's books, records, program documentation and other materials related to the grants received or other sources of funding are maintained in accordance with generally accepted accounting principles and that the system, procedures and associated accounting records are, at a minimum, adequate to confirm that:

• Accumulation of is under control; • The timekeeping system identifies employees’ labor by final objective (e.g., award, contract, fund, or funder); • The labor distribution system that expenses direct and indirect labor accurately allocates the costs to the appropriate objective; • Full details (supplier or vendor, amount, nature of expense and date) of all costs incurred under a grant, award or other source of funding are recorded;

3 • Full details of the receipt and use of goods and services acquired under the grant are recorded; • Proper segmentation of direct costs from indirect costs occurs; • There is a logical and consistent method for the allocation of indirect costs; • There is an accurate accounting for costs of the program supplied from other funding sources; • Full details on overall progress (elapsed time and ) of the program occurs; • Procedures are maintained that will minimize the time elapsing between the transfer of funds from a funding source and their disbursement; • All documentation consistent with the funder’s records retention requirement are appropriately retained; • That there are the necessary financial resources required to complete the grant activity and to provide the required level of any required matching (cost share) funds; • Grant funds are separately maintained from all other organization funds; • There is compliance with the cost principles of OMB-A-122; • Costs charged that are unallowable are excluded according to funder cost principles; • There is the ability to monitor compliance with the Grant Agreement financial reporting terms; • Reporting deadlines are met and that there are interim (no less frequently than monthly) determination of costs charged to contracts, awards, etc., through routine posting of books of accounts; • There is identification of costs by contract and/or budget line item if required by an award or contract. • Ensure that questioned costs arising from recipient or funder or investigations are promptly resolved.

FOUNDATION FOR YOUTH INITIATIVE will maintain on a contemporary basis a management system that will include, at a minimum, the following system components:

• , • General Ledger, • Cash Receipts and Disbursements Journals or Voucher Register, • Payroll Register • Fixed Assets Register for all owned and leased property and equipment, • In-Kind Journal/Worksheets, • Project Cost Subsidiary Ledger or Worksheets, • A comparison of actual expenses incurred versus budget, and

4 • Reconciled Bank statements

Segregation of Duties

Accounting and cash management duties performed by accounting staff and management are to be performed by separate individuals to the greatest extent possible in every functional area that is involved in the receipt or disbursement of cash (including bank checks, wire transfers and other forms of electronic funds transfers).

Appropriate controls based on an implementation of “segregation of duties” shall be in place at all times so as to provide an adequate system of review, confirmation, reconciliation and oversight of transactions. Cash item handling, record keeping and reconciliations will be assigned to different people, regardless of automated accounting processes. A second person will verify reconciliations and deposits of cash items.

When complete segregation of duties is not possible, it is the appropriate departmental director and supervisor’s responsibility to scrutinize all documents to ensure that the amount deposited includes everything that was collected. Inability to provide separation of functions due to a lack of adequate staffing shall be documented and approved in writing by the organization.

Cash Receipts and Disbursement Management

It shall be the policy of the organization that appropriate physical and automated controls are established and implemented over all forms of cash receipts and payments (cash, checks, credit cards, waivers, and Electronic Fund Transfers (EFT) so as to:

• Ensure that payments are deposited promptly in company bank accounts; • Ensure that cash receipts are protected from misappropriations; • Ensure that physical access to cash receipts and cash receipt records are limited to authorized personnel; • Properly inform and train accounting staff acting in the role of cashiers regarding the rules, regulations, and internal controls about cash collections; • Provide a uniform set of accounting rules and regulations to cashiers and accounting personnel in the areas of cash receipts, reconciliations, refunds and waivers.

Only cash necessary to meet anticipated day-to-day outlays plus a reasonable for contingencies will be kept available.

5 A schedule of aged accounts receivables will be prepared weekly and reviewed for collection. Appropriate collection procedures will be initiated. Follow-up contacts will be recorded and maintained in a log for use in any legal proceeding.

Budgets

It shall be the policy of the organization to establish an effective budgeting process so that any budget created includes the following parameters:

• Realistic - Any budget designed to serve as a guide for fundraising efforts and program activities in the future is to be well-reasoned and reflect current economic conditions. Unsubstantiated revenue projections cost estimates will render the budget ineffective as a management tool. • Consistent – The budget must be consistent with short- and long-term strategic plans and with the organization’s mission. • Flexible – The budget is to be based on a combination of factual evidence and thoughtful assumptions. If actual events and conditions vary from these assumptions, there must be opportunities to amend the budget to address revenue shortfalls and windfalls, and unexpected expenses. • Measurable – The basis on which the budget is created should be the same basis on which the accounting records are maintained.

The budget process shall include the following elements:

• Determination of Programs and Activities for the Budget Period – Management and staff shall determine the programs and activities that are either expected or desired for the upcoming budget period. Conversely, known budget adjustments may determine what programs and activities are possible, based on known funding. • Establishing a Baseline for Budget Expenses and - Expenses and revenues shall be based on historical data (what is replicable from previous periods) and assumptions (what is likely to happen in the upcoming budget period). Variances between previously budgeted amounts and actual amounts shall be incorporated into the budget, as will the impact of general economic conditions on revenues and demand for services. • Development of a Draft Budget - To facilitate decision-making, data related to previous annual budget periods, current year , and monthly actual activity totals shall be utilized in order to assist in review and making informed decisions. • Review/Modification of the Draft Budget – Senior management or a designated finance committee shall be responsible for reviewing the budget, proposing questions and requesting clarifications of staff, and recommending modifications before a final draft is presented to the board of directors or managers for approval.

6 • Board Review and Approval – the organization’s governing board may approve the budget as presented, or recommend changes or clarifications prior to approval. • Monitoring Budget Activities – Upon approval, the budget shall be incorporated into the organization’s accounting and reporting system. Individual transactions shall be compared against available budget, and the aggregate revenue and expense budget shall be monitored for variances no less than monthly.

FOUNDATION FOR YOUTH INITIATIVE may have prepared and approved by the governing board several types of budgets, including an annual operating budget of revenues and expenses, indirect costs and allocation budget, budget, capital budget and a pro forma statement of financial position.

Cash Forecasting

As a supplement to its operating budget, FOUNDATION FOR YOUTH INITIATIVE will maintain a financial forecasting system to adequately forecast its fund cash flows.

A cash flow forecast will be prepared that will include an estimate of cash receipts and cash disbursements during a given period. The expectation is that the forecast will support the optimized use of funds as well as insure sufficient liquidity for the organization.

The forecast should be updated on no less than a quarterly basis, based on operating department funding requirements, and should take into the following considerations:

• All operating departments should be involved in developing reasonable expectations of timing and amounts of planned expenditures. This ensures all possible outflows of resources are measured, and if needed, prioritized. • Forecast time frames should accurately reflect the cash transactions of the organization. • The organization’s goals should drive the prioritization of expenditures. Further, fixed items such as payroll, employee benefits, insurance, and service should have priority of cash demand over discretionary expenditures. • Historical data should be used to measure activity of a cyclical nature, both for receipts and disbursements. A well-established base of financial activity predicated on historical data should enable the cash forecaster to anticipate disbursements and receipts. This activity should be verified by the operating department for its likely recurrence. • A forecast for receipts should include expected inflows and maturities. Inflows include payments such as property taxes, utility payments,

7 and user fees. Maturities include all items held in that will mature during the forecast time frame. • Forecasts should be made conservatively. Fluctuations may occur in both receipts and disbursements for a variety of reasons. The level of precision required in a forecast or tolerance for variance should be determined at the organizational level and not on an ad hoc basis. • Forecasts should be updated on a regular basis, for example, monthly or quarterly and the frequency of such updates is determined by the volatility of revenues and expenditures. • Daily monitoring and recording of actual revenues and expenditures by major categories can greatly enhance the organization’s ability to prepare timely updates to the cash flow forecast..

Monitoring Subrecipients and Grantees

FOUNDATION FOR YOUTH INITIATIVE program and fiscal personnel will develop criteria to categorize subrecipients and grantees for monitoring as follows. FOUNDATION FOR YOUTH INITIATIVE shall require that all subrecipients of pass-through funding be held the same standards accounting, financial management and reporting as is required of primary funders of FOUNDATION FOR YOUTH INITIATIVE. FOUNDATION FOR YOUTH INITIATIVE shall evaluate and monitor financial activities of subrecipients based on the following evaluation methodology:

Category 1 – Evaluation by FOUNDATION FOR YOUTH INITIATIVE has shown that sub recipients and grantees may be relied upon to submit well prepared and documented grant applications, have highly qualified program and fiscal personnel and systems and can be relied upon to comply with the principal requirements. For organizations in this category, FOUNDATION FOR YOUTH INITIATIVE will arrange an annual fiscal assessment, rely upon the subrecipient's annual audit and respond to reports for technical and other assistance.

Category 2 – Evaluation by FOUNDATION FOR YOUTH INITIATIVE indicates that sub recipients and grantees in this category have fairly reliable procedures and controls. FOUNDATION FOR YOUTH INITIATIVE will rely upon a quarterly visit/contact and the annual audit.

Category 3 – Evaluation by FOUNDATION FOR YOUTH INITIATIVE indicates that these other subrecipients are known to be less effective or less proficient in grant application preparation, grant , reporting and grant/contract compliance. These subrecipients or grantees will be intensively and regularly visited and follow-up actions taken.

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Financial Reporting and Financial Statements

The primary purpose of financial statements is to provide relevant information to meet the common interests of donors, members, creditors and others who provide resources to not-for-profit organizations. Those external users of financial statements have common interests in assessing the services an organization provides and its ability to continue to provide those services, and how managers discharge their stewardship responsibilities and other aspects of their performance. More specifically, the purpose of financial statements, including accompanying notes, is to provide information about:

• The amount and nature of an organization’s assets, liabilities and net assets;

• The effects of transactions and other events and circumstances that change the amount and nature of net assets;

• The amount and kinds of inflows and outflows of economic resources during a period and the relation between inflow and outflow;

• How an organization obtains and spends cash, its borrowing and repayment of borrowing and other factors that may affects its liquidity .

FOUNDATION FOR YOUTH INITIATIVE will maintain supporting accounting records in sufficient detail to prepare the organization's financial reports, including:

• On a Monthly basis

o

o Details of individual expense transactions by individual grant or funding source

o Funding request and Summary Financial Report

o Bank account reconciliation

• On a Quarterly basis

o Those reports included on a Monthly basis

o Statement of Financial Position, Statement of Activities, and Statement of Cash Flows

o Actual Expenses vs. Budget for each individual funding source

9 • On an Annual basis

o Those reports included on a Quarterly basis

o Indirect cost submission to the cognizant audit agency

• On a Periodic basis

o Government tax reporting

o Payroll tax reporting

o Other government informational returns

Accurate and timely financial reports are to be distributed to all directors and officers and reviewed by them, as well as the principal executive and chief financial officer of the organization. If requested by any funder, the principal executive and chief financial officer of FOUNDATION FOR YOUTH INITIATIVE will certify in writing that the financial statements are accurate and fairly present the financial condition and operations of FOUNDATION FOR YOUTH INITIATIVE.

Audit

FOUNDATION FOR YOUTH INITIATIVE shall comply with all requests made by funders regarding the preparation of organization-contracted or funder-contracted financial audits, including requiring such audits to be contracted with audit firms acceptable to funders. Auditors engaged will be directed to conduct audits consistent with the “Guidelines for Financial Audits Contracted by Foreign Recipients”.

The audit will be a in accordance with the Guidelines and generally accepted auditing standards and will determine whether the grant funds have been used in accordance with grant agreements.

In preparation for an audit FOUNDATION FOR YOUTH INITIATIVE shall maintain applicable documentation and supporting materials including:

• Contractual agreements with funders and subawardees • Budgets and implementation letters • Program financial and progress reports • Charts of accounts • Organizational charts • Accounting system descriptions and procedures • Procurement policies and procedures • Material and equipment receipts

10 • Any previous audits or financial reviews relating to the audit objectives

If requested by the funding organization FOUNDATION FOR YOUTH INITIATIVE will prepare a Fund Accountability Statement, which shall include details of the funding provided by the funder or funders, costs incurred against those specific funds, and the cash balance of funds not yet expensed. The cash balance of funds shall be reconciled with the balance of cash-on-hand and/or in bank accounts. FOUNDATION FOR YOUTH INITIATIVE will be prepared to facilitate the auditor’s evaluation of whether expenses incurred are allowable, allocable and reasonable under terms of the funding agreement and applicable cost principles, and to identify areas where fraud and illegal acts have occurred or are likely to have occurred as a result of inadequate internal control.

If FOUNDATION FOR YOUTH INITIATIVE has charged indirect costs to the funder using provisional rates, FOUNDATION FOR YOUTH INITIATIVE will prepare a Statement of Indirect Rate Calculation to facilitate the auditor’s evaluation of the actual indirect cost pool and distribution base to ensure only allowable items are included in accordance with funder agreement terms and regulations. When indirect costs are charged by FOUNDATION FOR YOUTH INITIATIVE using predetermined authorized fixed rates, FOUNDATION FOR YOUTH INITIATIVE will prepare a Statement of Indirect Rate Calculation to facilitate the auditor’s evaluation of the accuracy of the rates in accordance with funder agreements.

Audit recommendations submitted to FOUNDATION FOR YOUTH INITIATIVE will be resolved within six months after issuance of a final report and ANY negotiated settlement on audit recommendations documented in writing. Resolution of monetary findings will be determined by the funding agency through the issuance of a written final decision on the allowability of questioned costs.

FOUNDATION FOR YOUTH INITIATIVE shall promptly honor any bill for collection received from funder to recover unallowed expenses sustained.

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