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FINANCIAL PROCEDURES. For Locals & Regions. HANDBOOK SECTIONS. Administration & Fiduciary Oversight Regulatory Requirements Technical Tasks. WHY ARE YOU HERE?. All local/region leaders need to be aware of financial concepts Oversight Emergency coverage Treasurer needs to know in detail

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financial procedures

FINANCIAL PROCEDURES

For Locals & Regions

handbook sections
HANDBOOK SECTIONS
  • Administration & Fiduciary Oversight
  • Regulatory Requirements
  • Technical Tasks
why are you here
WHY ARE YOU HERE?
  • 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)

bank issues
BANK ISSUES
  • How to choose a bank
    • Financial
    • Service
    • Location
    • Auditability

44-45

opening a bank account
OPENING A BANK ACCOUNT
  • Banks are required by regulation to collect various information
  • Every bank interprets these regulations in their own way: CALL FIRST!
  • You will definitely need:
    • Drivers license for all signers
    • Taxpayer identification number of your local

DO NOT OPEN AN ACCOUNT WITH SOMEONE’S SOCIAL SECURITY NUMBER, YOUR SCHOOL’S TIN, ETC.

taxpayer id number
TAXPAYER ID NUMBER
  • 9-Digit number assigned by the IRS
  • Unless you are a new local, you already have a number
  • If you don’t know your number, contact IEA Accounting
  • If you are a new local, contact IEA Accounting; they will apply for one
  • Do NOT apply for a number yourself!

27

signatures
SIGNATURES
  • We recommend that all bank accounts require two signatures
  • So you will want at least three and perhaps four-five people with the ability to sign

45, 76

other new account issues
OTHER NEW ACCOUNT ISSUES
  • You are an unincorporated, not for profit labor union
  • If the bank wants your articles of incorporation, you don’t have them
  • If they want your “IRS Determination Letter,” you don’t have one
  • If they want proof of your tax exempt status, IEA Accounting can provide this
how many accounts do you need
HOW MANY ACCOUNTS DO YOU NEED?
  • See info in the book- pages 43-44
  • If you have IPACE funds, this requires a separate bank account

43-44

ipace account
IPACE ACCOUNT
  • Must be separate from regular checking account
  • Only deposits- From IPACE
  • Only disbursements- For local political expenses

35, 82

dues from employer
DUES FROM EMPLOYER
  • Make sure all checks are received
  • Maintain supporting detail, e.g. dues deduction registers and check stubs
  • Deposit as soon as received!
  • Someone needs to verify amounts (Treasurer or Membership Contact)

51-52

ipace rebates
IPACE REBATES
  • Deposit into (separate) IPACE bank account
  • Deposit as soon as received
  • Keep documentation on file (copy of check, check stub, etc.)

35-36, Appendix 9, 16

ipace rebates1
IPACE REBATES
  • IPACE is funded by member contributions
  • Locals can receive up to $15 per contributing member each year
  • Must be used for specific political purposes

22-23, 35-36, Appendix 9, 16

ipace rebates2
IPACE REBATES
  • 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

22-23, 35-36, Appendix 9, 13 &16

other deposits
OTHER DEPOSITS
  • Deposit as soon as received
  • Keep documentation on file (copy of check, check stub, etc.)
  • Five years from now, must be able to demonstrate what each deposit was for (payee, reason for payment, etc.)

52

dues billing from iea
Dues Billing From IEA
  • 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

49-52

ipace
IPACE
  • Must be for local political purposes: See info from IPACE
  • Do not spend IPACE funds for local operations
  • Documentation is especially important

Appendix 9, 13 & 16

travel
TRAVEL
  • For many locals this is their biggest expense
  • Documentation is especially important due to IRS issues
  • Your local/region can set guidelines, but these need to be based on IRS rules (your rules can be more restrictive, but not less)
  • Above all, travel expenses must be reasonable and necessary

53-56, Appendix 8

travel1
TRAVEL
  • NORMALLY YES: Hotel, mileage, airfare, meals at meeting location, parking, tolls, taxi, car rental
  • NORMALLY NO: Expenses for family members, gasoline (unless with car rental), gifts/clothing, entertainment, contributions to NEA FCPE
  • MAYBE: Tips, alcohol

53-56, Appendix 8

other payments
OTHER PAYMENTS
  • Must be reasonable and related to your local/region’s status as a not for profit labor union
  • Beyond that, local rules may apply
  • Again, local rules may be more restrictive, but not less
  • Documentation!

53-54

accounting system
ACCOUNTING SYSTEM
  • 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”

38-43

what system to use
WHAT SYSTEM TO USE
  • One size does not fit all
    • Size/complexity of organization
    • Prior treasurer’s system
    • Current treasurer’s preference

38-43

system goals
SYSTEM GOALS
  • Your system needs to:
    • Record all transactions in sufficient detail
    • Allow you to produce financial reports efficiently
    • Provide a record that others can follow

`

38-43

examples
EXAMPLES
  • Some possibilities
    • Checkbook/check stubs
    • Cash receipts and disbursements journals
    • Excel/Access
    • Specialized accounting software (Quicken, etc.)

38-43

documentation general
DOCUMENTATION (GENERAL)
  • 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

52-57

money deposited
MONEY DEPOSITED
  • Where from
  • What for
  • Dollar amount
  • Employer checks- Be sure to retain detailed list of dues deducted, etc.
  • Other Checks: Copy of check with notes/attachments

52

money spent
MONEY SPENT
  • 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

53-57

practical issues
PRACTICAL ISSUES
  • 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

53-57

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

58

practical issues1
PRACTICAL ISSUES
  • 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

58

financial reports1
FINANCIAL REPORTS
  • How much money do we have?
  • How much income have we received?
  • How much has been paid for expenses?
  • How does this compare to the budget?
  • How does this compare to prior years?

47-48

financial report
FINANCIAL REPORT
  • Primary audience is probably your governing board (may be shared with general membership)
  • Get in the habit of doing a WRITTEN report every month
  • Include the budget
  • Include explanations of large variations from budget
  • Line items depend on your local’s major activities

47-48

budget
BUDGET
  • Your budget should be included in your financial statements
  • Of course, this means that you should have a budget!

12-15, Appendix 2, 3, 4, 5

budget1
BUDGET
  • Why have a budget?
    • Ensures proper financial planning
    • Discussion of how to use members’ resources
    • Qualification for financial assistance

12-15, Appendix 2, 3, 4, 5

financial assistance for mediation arbitration etc
FINANCIAL ASSISTANCE FOR MEDIATION, ARBITRATION, ETC.
  • IEA policy provides for significant financial assistance, IF:
    • Local dues at least $15
    • Your budget includes a line item for Mediation, etc. with at least $3/member budgeted
  • This can mean thousands of dollars of potential assistance

14-15

budget process locals
BUDGET PROCESS: LOCALS
  • Check constitution/bylaws for requirements
  • Get Member Input
  • See Budget Training Video on IEA Website

12-15, Appendix 2, 3, 4, 5

audit
AUDIT
  • All but the smallest of locals should consider an annual audit
  • The audit should address the accuracy of your financial reports, among other things
  • More details under “Oversight”

9-11

outside agencies
OUTSIDE AGENCIES
  • 990/990-EZ (IRS)
    • ~30 Large locals
  • LM-3 (Dept. of Labor)
    • Small number of higher ed locals
  • For these reports, your accounting system must report your transactions in the same line items as shown on the reports

Appendix 13

irs annual reporting
IRS ANNUAL REPORTING
  • 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!

28, Appendix 13

irs annual reporting1
IRS ANNUAL REPORTING
  • “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 (complexity/public disclosure requirements)

28, Appendix 13

irs annual reporting2
IRS ANNUAL REPORTING
  • 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

28, Appendix 13

form 1099 misc
FORM 1099-MISC
  • 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

29-31, Appendix 13

form 1099
FORM 1099
  • Stipends: officers(W-2 vs. 1099)
  • Stipends: non-officers
  • Payment of dues for officers
  • Undocumented expenses: report even if under $600

29-31, Appendix 13

state board of elections
STATE BOARD OF ELECTIONS
  • D-2 (State Board of Elections)
    • ~30 large locals registered with the State
    • More may be required to file due to increase in the IPACE rebate amounts!
  • Your financial system must produce reports showing receipts and payments needed to complete the D-2

Appendix 13

state political reports
STATE POLITICAL REPORTS
  • 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

22-23, 35-36, Appendix 9, 16

oversight
OVERSIGHT
  • Local leaders
  • Regulatory agencies
  • General public
  • Members
local leaders
LOCAL LEADERS
  • Internal controls
  • Signs of fraud
  • Audit
  • Policies
  • Monitor deadlines
internal controls
INTERNAL CONTROLS
  • 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

17-18

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

17-18, Appendix 6

fraud malfeasance
FRAUD/MALFEASANCE
  • 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

18-21, Appendix 7

the fraud triangle
The “FRAUD TRIANGLE”

18-21, Appendix 7

signs of possible fraud
SIGNS OF POSSIBLE FRAUD
  • 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

18-21, Appendix 7

audit1
AUDIT
  • Having an “independent” person or group examine the financial records is a good internal control
    • Deters shenanigans
    • Catches honest mistakes
    • Shows your members you are concerned about safeguarding their money\
  • Don’t create a false sense of security!

9-11, Appendix 1

annual audit
ANNUAL AUDIT
  • 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

9-11, Appendix 1

r a delegates
R.A. DELEGATES
  • 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

21-22, 55-57, Appendix 8

monitor deadlines
MONITOR DEADLINES
  • Having a calendar with all significant deadlines, and having this monitored by your governing body, ensures;
    • Reporting deadlines, with possible financial penalties for noncompliance, are not missed
    • Promotes awareness of what goes on at the local
    • Everything gets done!
regulatory agencies1
REGULATORY AGENCIES
  • If you are required to file reports,
    • They will be reviewed and followed up on
    • If you miss a filing date it may be costly
    • The reports may be audited
  • These agencies can also audit other areas within your operation, for compliance with laws
  • They may send you “Notices” requesting information
  • Solution: KNOW THE RULES; GOOD RECORDKEEPING!
irs notices
IRS NOTICES
  • DO NOT IGNORE!
  • Seek help
  • Check TIN
  • Keep copies/proof of delivery

32-33

tax exemption
TAX EXEMPTION
  • 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!

26-27

not for profit
NOT FOR PROFIT?
  • You can, AND SHOULD, make a “profit”
    • Only way to build up funds
    • Must be used for exempt purpose

26-27

general public
GENERAL PUBLIC
  • 990s, 990-EZs, LM-3s, and virtually all info filed with the State Board of Elections are available online to anyone
  • Anyone can walk in and demand a copy of your 990 or 990-EZ, and you are legally required to provide it
  • Anything you post on the Web is fair game
members
MEMBERS
  • Financial reports
  • Budget
  • They are part of the “General Public”
slide76
IEA
  • Failure to remit IEA-NEA dues will result in scrutiny and possible audit
  • Regions must follow protocol in submitting budgets and other documentation
  • Random audits of regions
iea resources
IEA RESOURCES
  • Questions
  • Online resources
  • On-Site training
resources
RESOURCES
  • Randy Welchrandy.welch@ieanea.org
  • Al Llorensal.llorens@ieanea.org
  • Annual training sessions
resources1
RESOURCES
  • IEA Website www.ieanea.org
  • Financial Procedures for Locals and Regions handbook
  • Financial procedures video
  • Membership processing video
  • Budget video
  • NEA online treasurer training
  • Tips for new Treasurers
iea website
IEA WEBSITE

CLICK “RESOURCES”

iea website1
IEA WEBSITE

CLICK “FINANCIAL PROCEDURES”

iea website2
IEA WEBSITE

CLICK here for the handbooks

CLICK here for workshops & webinars