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Financial Management for Geographic Units IEEE Sections Congress October 2005 - PowerPoint PPT Presentation

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Financial Management for Geographic Units IEEE Sections Congress October 2005 Agenda Overview – IEEE Finances Geographic Unit Funding Q&A Protection of Funds Q&A IEEE Finances 2004 Actual Financial Overview Revenue US$277.0 million (Includes investment returns)

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Financial Managementfor Geographic UnitsIEEE Sections CongressOctober 2005

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  • Overview – IEEE Finances

  • Geographic Unit Funding

  • Q&A

  • Protection of Funds

  • Q&A

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IEEE Finances2004 Actual Financial Overview

  • Revenue US$277.0 million

    (Includes investment returns)

  • Expenses US$255.0 million

  • Net Surplus US$ 22.0 million

  • Net Assets (Reserves) US$138.6 million

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2004 IEEE Revenue

US$277.0M Total






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2004 IEEE Expenses

US$255.0M Total







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IEEE Financial Management

  • IEEE is responsible for maintaining records for all units worldwide

  • Compliance with IEEE Policies is important; in particular to IEEE maintaining the Institute’s nonprofit tax-exempt statusin the US

  • IEEE is incorporated in New York State & must comply with both State & US rules and regulations

  • IEEE’s Fiscal Year is the calendar year (1 January through 31 December)

  • Updated controls are being established to ensure that the interests of the IEEE, its units and their officers are protected

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IEEE Financial ManagementGeographic Units

  • Funds for geographic unit activities come directly & mostly from member dues

  • Treasurers & Section leaders make significant contributions to IEEE’s financial management by maintaining appropriate records & timely annual financial reporting

  • IEEE Geographic Units are not independent organizations but are essential components of IEEE

  • Subsections, Chapters & Affinity Groups are sub-units of Sections & their financial activities should be incorporated in the Section’s financials (L-50)

  • Geographic unit operations & reporting are to be based on the calendar year

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Exemption from US Federal Income Tax

  • The IRS has determined that IEEE is exempt from USfederal income tax as an organization, described in Section 501(c)(3) of the Internal Revenue Code

  • In a group ruling, the IRS has determined that IEEE’s US geographic units qualify for federal income tax exemption

  • No unit should separately apply to the IRS for exemption from US Federal Income Tax

  • Should any Unit be requested to apply by the IRS, contact the IEEE Tax Compliance staff immediately

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Managing Section AssetsWhere is the Money Kept?

  • Concentration Banking program

  • Checking account in local bank

  • Custody Accounts (Regions 8-10)

  • IEEE Investment Fund

  • There are 971 accounts for 389 geographic units

    • 595 local bank accounts, cash & investment

    • 315 Concentration Banking accounts

    • 61 geographic unit participants in the IEEE Investment Fund

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Concentration Banking Program Details

  • Wachovia Bank

  • Local unit retains control of funds

  • No monthly service charges or “per-check” fees

  • 6-month CD rate paid on daily account balances

  • Access monthly statements & cancelled checks online

  • Custody accounts maintained for non-US units

  • Units not required to submit bank statements with their annual financial report (L-50) for these accounts

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Unit Local Bank Accounts

  • Must be opened in the legal name “Institute of Electrical and Electronics Engineers, Incorporated _______ Section (or Chapter)”

  • IEEE policy specifies that 2 local volunteers must be authorized signers on each account plus the IEEE Staff Director, Financial Services as an alternate signatory

  • Exemptions can be filed with RAB where local laws do not allow for IEEE Staff Director on accounts

  • Units submit signature/bank account card, signed by all authorized unit officers to the IEEE Regional Activities Department

  • IEEE staff will secure the signature of Staff Director, Financial Services & forward the card directly to the bank, with copies to authorized signers

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Custody Accounts

  • Used in countries in Regions 8-10 to address:

    • Difficulties in exchanging currency

    • High fluctuations in exchange rates

  • Rebate is deposited to Section’s custody account

  • At the Section’s request, IEEE pays membership & renewal fees from this account, based on membership forms submitted by the Section

  • Accounts are interest bearing on their monthly balances

  • 47 active custody accounts

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Geographic Unit Funding

IEEE Sections Congress – October 2005

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Section Rebate Program

  • Each Section receives US$2,000 plus

    • $3/member (including Students)

    • $4/Senior Member & Fellow

    • $1.50/Affiliate

    • $200/eligible Chapter & Affinity Group

    • $500/eligible Subsection

    • 10% bonus for reporting on time (Feb)

    • Activity bonus possible

  • Unit & subunits must comply with activity & annual reporting requirements

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Additional Funding Sources

  • Region - Section Support Via Regions (SSVR)

  • Societies - Each Society has its own programs to support Section Chapter activities

  • Workshops/Tutorial/Conferences

  • Other IEEE Units (IEEE-USA, Life Members Committee) & programs

  • External Sources (industry support)

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Appropriate Use of Funds

  • Technical, Non-Technical & Administrative meetings

  • Newsletters

  • Student Branch support

  • Distinguished Lecturers

  • Subsection, Chapter & Affinity Group support

  • Recognition Supplies (banners, plaques, pins, certificates)

  • Donations, with prior authorization from the IEEE Executive Committee

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Inappropriate Use of Funds

  • Electioneering of any kind

  • Personal or commercial loans

  • Purchase of real estate, without prior authorization from the IEEE Executive Committee

  • Investment of surplus funds in any investment vehicle other than IEEE Investment Fund

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Contract Administration

  • Contracts in excess of US$5,000 & less than US$25,000 can be executed (signed) locally with a copy sent to IEEE Procurement Department.

  • All contracts with a stated or expected value at or above US$25,000 ... negotiated & approved locally, executed (signed) at the Operations Center after review by subject matter experts.

  • Review by subject matter experts:

    • Staff, Legal, Volunteers (as appropriate)

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Unit Financial Reporting

  • All units must prepare & submit an annual Financial Report (L-50)

  • Electronic submittal recommended (use Excel spreadsheet)

    • or

    • Hard copy submittal allowed

  • Account for all financial activity associated with the unit (revenue & expenses)

  • Include all unit & subunit data

    • One L-50 preferred or

    • Include an L-50 for each subunit

  • For questions:

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Protection of Funds

IEEE Sections Congress – October 2005

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Heightened Awareness of Corporate Financial Activities

  • Evidence of this is in the news weekly, even daily

  • Major changes in corporate financial management processes are being made in response

  • IEEE is a large corporation & annually must consolidate all of its units’ financial activities into a single financial report; IEEE retains an external auditor to audit its annual financial activities

  • IEEE recently selected Ernst & Young (E&Y) as its external auditor & IEEE financial activities are being reviewed

  • E&Y required this year that IEEE consolidate all Section financial activity; Section reserves for 2004 totaled US$14.2 million

  • As part of this decision, E&Y conducted a bank account balance confirmation process for external accounts of several Sections (Thank you to all who assisted with this process)

  • We expect E&Y to continue & expand on this process in the future

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How is IEEE Addressing This for Geographic Units?

  • IEEE wants to ensure that the corporation, the units & unit officers are protected

  • To do this, we must ensure that all IEEE Organizational Units are empowered & expected to follow a set of sound financial practices

  • A volunteer & staff team in RAB is looking at the financial processes of all geographic units

    • Regional Treasurers are being kept current on progress & provide valuable suggestions & feedback

  • To this end, Regional Activities will be considering & implementing a series of best business practices that are common place in many organizations worldwide

  • These practices are presented in this part of the financial management presentation

  • We expect that many of the practices are already included as part of the Sections’ current financial management processes

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Regional ActivitiesBudget Management Philosophy

  • Keep the funds as close to the member as possible

  • Budget is managed by Volunteers

    • RAB Finance Committee reviews and endorses

    • Region Treasurers are corresponding members of RAB FinCom

    • RAB Committee Chairs provide oversight and endorsement of items included in RA Budget

    • 10 Region Directors/BoD members elected by the membership endorse the budget

  • Maintain metrics to ensure effective processes

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Basic Asset Fund & Cash Controls

  • Review unit expenses – check register

  • Review monthly account activity

  • Submit original bank statements

  • Bank account signature cards

  • Annual audit process

  • Continuity/Volunteer transition

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Review Unit Expenses –Check Register

  • Treasurer presents the Section/Chapter check register(s) to the Section ExCom on a periodic basis

    • Present check register at least 2 times per year

    • Check register includes: name, date, amount, budget line & purpose for each transaction (for example, expense reimbursement, services provided, etc.)

    • Request review & approval of check register report

  • Why?

    • Independent review of expenses

    • Ensure Section ExCom is informed & approves unit expenses

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Review Monthly Account Activity

  • Section Chair & Treasurer periodically review the original monthly statements of account & compare to recent financial report

  • Treasurers should be reconciling account activity monthly

  • Chair/Treasurer will receive initial reminder from IEEE Regional Activities Department mid-November 2005

  • Why?

    • Good practice for unit leaders to review account activity

    • Emphasize that more than one person has oversight of the financial records

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Submit Original Bank Statements

  • Original bank statements for all local accounts (Sections, Chapters, Affinity Groups) must be submitted with the annual financial report (L-50)

  • Section officers may be asked to provide assistance in securing verification of account balances by E&Y or IEEE staff

  • Why?

    • To protect the integrity of the bank account information reported annually

    • Independent confirmation (verification) is required for annual IEEE Audit

      Note: Not required for Concentration Banking & IEEE Investment Fund participant accounts

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Bank Account Signature Cards

  • Units submit signature/bank account card, signed by all authorized unit officers, to IEEE for the required staff signature & directly to bank

  • Why?

    • Ensure that appropriate authorized signers & accurate signatures are on all accounts

    • Protection of IEEE assets

    • Protection of unit Treasurer, Chair & unit ExCom

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Annual Audits

  • Ensure that all geographic units conduct local audits on an annual basis

    • Units that have $100K or more revenue or expenses must continue to have a more formal audit

  • Getting Started

    • Implement a process to ensure audits are conducted by local volunteers (Pilot)

    • Units may be audited as part of the IEEE corporate audit process

    • E&Y may confirm account balances in local banks used by Sections for financial transactions

  • Why?

    • Required for annual IEEE corporate audit

    • Protection of unit Treasurer, Chair & unit ExCom

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Continuity & Volunteer Transition

  • Both outgoing & incoming Section Chairs/ Treasurers sign off on annual L-50 financial report

  • Begin with 2005 Financial Report signed by 2005 & 2006 Chairs & Treasurers

  • Why?

    • Ensures the smooth transition of officers & mutual understanding of the unit’s financial status by both sets of officers

    • Protection for both outgoing & incoming Volunteer Officers

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2005 L-50 Changes

  • Complete & submit external account balance confirmation form to facilitate possible E&Y requirements

  • Submit original bank statements for local accounts

  • Signed by outgoing & incoming Section Chairs & Treasurers

  • To ensure that consolidation can be completed in a timely manner, L-50s are to be submitted by 31 March instead of 30 June (Pending RAB approval in Nov 2005)

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  • Bi-annually:

    • Review check register

  • Monthly:

    • Review accounts

  • Annually:

    • Review & update bank signature cards

    • Conduct local Section audit

    • Assist in IEEE Audit if requested

  • Consider Concentration Banking program/ custody account

    • Easiest way to be compliant with most of the IEEE processes & policies

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Assistance is Available

  • IEEE Treasurers’ Handbook


  • IEEE Policy Manual


    • Section 11 addresses financial management issues to be addressed by Chairs & Treasurers

  • IEEE Financial Operations Manual