SCASFAA



SCASFAA

Guide to Financial Management

TABLE OF CONTENTS

1. PURPOSE AND SCOPE 2

2. BUDGET PLANNING AND PREPARATION 2

2.1 BUDGET COMMITTEE 2

2.2 BUDGET PREPARATION 3

2.3 INITIAL OPERATING BUDGET 3

3. GUIDE TO INVESTMENTS 3

3.1 SHORT-TERM INVESTMENTS 3

3.2 LONG-TERM INVESTMENTS 4

3.3 CASH BALANCE AND RESERVE FUNDS 4

3.4 SAFEKEEPING INVESTMENTS 5

4. CONTRACTUAL OBLIGATIONS 5

4.1 CONTRACTS WITH HOTELS 5

4.2 OTHER CONTRACTS 6

4.3 FIDELITY BONDING 6

4.4 LIABILITY INSURANCE 6

5. FINANCIAL INSTITUTIONS AND FUNDS MANAGEMENT 6

5.1 CHECKING ACCOUNT 7

5.2 TRANSFER OF BANKING ACCOUNTS 7

5.21 RETAINING THE SAME FINANCIAL INSTITUTION: 7

5.22 ESTABLISHING BUSINESS WITH A DIFFERENT FINANCIAL INSTITUTION: 8

5.3 SAVINGS 9

5.4 OTHER INVESTMENTS 10

5.5 ACCOUNT MANAGEMENT 10

5.6 DISASTER RECOVERY 11

6. DUTIES AND RESPONSIBILITIES OF THE TREASURER 11

7. AUDIT AND ACCOUNTABILITY STANDARDS 12

7.1 INCOME, EXPENDITURES AND ADJUSTMENTS TO INCOME 12

7.2 INVESTMENTS 12

7.3 ACCOUNTABILITY TO THE EXECUTIVE BOARD 12

7.4 RECORDS MAINTENANCE AND RETENTION STANDARDS 13

1. Purpose and Scope

The SCASFAA Guide to Financial Management is established under the direction of the 1998-1999 Executive Board. The Executive Board accepts fiduciary responsibility for the Association. As such, it is implicitly responsible for maintaining the standards for financial stability and for updating this guide to keep it consistent with financial trends and to meet the needs of the membership.

This guide addresses the basic financial management and investment procedures for use by the Association’s Executive Board, Committee Chairpersons and committee members, with the following objectives.

a. To provide guidelines and procedures that help ensure good management and safekeeping of the Association’s financial resources and safeguard the Association against financial liabilities.

b. To offer guidance to the office of Treasurer for effective administration of the Association’s budget and finances.

c. To provide investment guidance that will result in financial stability and ensure the viability of the Association’s resources.

d. To describe parameters for planning and developing the Association’s operating budget.

e. To identify avenues by which financial practices may be evaluated objectively and serve as standards of accountability.

f. To recommend a means for the review of the financial management practices of the Association.

2. Budget Planning and Preparation

1. Budget Committee

The Budget Committee is appointed by the SCASFAA President and consists of the President, the President-Elect, the Treasurer and other members as appointed by the President. It is this committee’s responsibility to design a budget that is consistent with the goal of maintaining financial stability, to adhere to the Association’s investment strategies, and to allocate the resources available to provide services and activities consistent with the purposes and mission of the Association.

2. Budget Preparation

a. The budget for an upcoming year should be drafted by the Budget Chairperson (Treasurer) and discussed with the Budget Committee as close to July l as possible.

b. The President should solicit information and recommendations from all existing and incoming committee chairpersons to represent adequately the budgetary expectations for projects, activities, services and committee operational expenditures.

c. The Budget Committee must prepare a proposed budget to present to the Executive Board at their first post-June meeting. At this time, the Board must approve the operating budget for the upcoming year (July 1 – June 30). This action may entail amending the proposed budget previously presented.

d. In no instance shall the budgeted expenses exceed the projected income for the budget year.

3. Initial Operating Budget

The prior year budget is the official budget for the Association until the Executive Board approves a new budget. It is not intended, nor recommended, that the prior year budget be used any longer than the date of the first Board Meeting for that fiscal year, when a new budget is expected to be presented for approval.

3. Guide to Investments

Given the limited resources of the Association, proper selection of investments is important to ensure that funds are not placed unnecessarily at risk. As such, all investments must ensure no loss of principal invested. Guidance to selecting investment options follows:

1. Short-Term Investments

Normally, the Association selects short-term investment opportunities such as a Certificate of Deposit (CD), to provide liquidity of funds with minimal or no monetary loss for early withdrawal. A certificate of Deposit shall be the primary source of short-term investment of the Association.

CDs are to be selected bearing either a 6-month or 12-month maturity to ensure the liquidity needed and provide an opportunity to roll over the CD into a higher yield CD, if such option is available.

2. Long-term Investments

Any investment that obligates Association funds for more than one year is considered a long-term investment. Long-term investments should be considered using the following guidelines:

a. Until such time as the SCASFAA reserve funds exceed $100,000 all investments should be placed into Certificates of Deposit.

b. Long-term CDs should be obtained with maturities of not less than 18 months nor greater than 60 months.

c. CD amounts should be of approximately equal value.

d. Consideration of interest rates for shorter term CDs may be appropriate based on market conditions. As a result, consideration may be made to move long-term CDs to short-term CDs to take advantage of higher rates, whether or not the CD is scheduled to mature before the transfer.

To liquidate a CD prior to its maturity date, an evaluation by the Budget Committee of net gains must be made and submitted for approval by the Executive Board before the CD can be liquidated.

e. No single CD shall be greater than $25,000.

3. Cash Balance and Reserve Funds

Due to the potential of contractual liabilities, SCASFAA should maintain liquidity of its cash and reserves.

The Association should maintain a reserve fund balance of no less than 25% of its operating budget. Such funds may be comprised of both savings and investment accounts, provided the funds are not intermingled with the Association’s checking account. The long-term goal should be to increase the Association’s reserve fund to a value equal to or greater than one year’s operating expenses.

a. The Treasurer should review the cash balances and investments at least quarterly to determine the need for investments or whether funds should revert to the operating budget.

b. When cash balances exceed $10,000 above the operating budget, the Treasurer should secure a short-term CD to attain maximum interest earnings.

c. Cash balances in excess of $100,000 shall not be maintained in a single account, as this is the maximum insurable limit on a single account.

d. In any instance where purchasing a CD is considered, approval of both the President and Budget Committee must first be obtained to complete the purchase.

4. Safekeeping Investments

The following practices shall be observed in order to protect the assets of the Association.

a. SCASFAA accounts must be fully insured by the FDIC or the FSLDIC.

b. Certificates of Deposit must be held in a bank lock box along with a copy of the Articles of Incorporation, owned by the Association with signatory power of the Treasurer, President, and President-Elect.

4. Contractual Obligations

All contracts must be reviewed to determine if the Association has considered all possible financial obligations and liabilities, especially in the event that the contract is terminated. In addition, it is important to search for any “hidden” or underlying charges. Only the President of SCASFAA, or his/her designee, may sign a contract on behalf of the Association.

1. Contracts with Hotels

When entering into a contract with a hotel, in addition to reviewing direct costs (e.g., room rate, meals, etc.), contracts should be reviewed for the following:

a. Required liability insurance.

b. Conditions which allow or pertain to cancellation of the contract by either the hotel or SCASFAA; and

c. Charges for meeting room space in the event the reserved room block is not met.

2. Other Contracts

Other types of contracts under which the Association might be financially responsible include, but are not limited to, contracts for:

a. Exhibit/Drayage

b. Private Transportation (e.g., busses)

c. Entertainment (e.g., Band and DJ)

3. Fidelity Bonding

Fidelity Bonding is secured by the Treasurer to cover any individual having direct access to the Association’s funds. Generally, the bond provides for a $50,000 coverage each for the Treasurer and the President, the designated signers for the Association’s checking and savings accounts.

If other individuals are given direct access to Association funds, a Fidelity Bond of the same value must also cover them before any funds are handled.

4. Liability Insurance

In some instances, the Association will be required to secure short-term liability coverage, especially where functions require the use of a third party facility. All contracts must be reviewed to determine if liability insurance is required, and if so, to identify the party responsible for purchasing the coverage.

The cost of liability insurance must be considered when developing the annual budget for the Association and should be incorporated into development of the annual budget. Expenses incurred as a result of existing contracts for future events as well as any obligations contracted for the fiscal year are to be included in the budget.

5. Financial Institutions and Funds Management

Funds of the Association must be maintained in financial institutions that properly protect the financial interests of the Association. The parameters by which financial institutions should be selected and accounts established are outlined in this section.

1. Checking Account

SCASFAA’s most frequently used asset is its checking account. The checking account is the largest source of funds for the Association and its most liquid asset.

Factors bearing on the selection of a financial institution include:

a. A provision that the checking account be interest bearing.

b. An assessment as to whether the financial institution offers a special checking account for non-profit organizations with a higher rate of interest than a regular checking account.

c. Determination of the service charge costs, if any, associated with the checking account (e.g., costs to order new checks,

deposit books, monthly service fees, etc.).

Computerized account management software must be used to track the Association’s income and expenses. Such software must be compatible with other software used for other functions of the Association.

The software is to be transferred from the outgoing Treasurer to the incoming Treasurer for continuity between tenures and availability of information for historical data.

2. Transfer of Banking Responsibilities

Coordinating the transfer of banking responsibilities between the outgoing and incoming Treasurers is important for a smooth transition to insure no disruption in the operation or service of the Association. In order to facilitate the transfer of responsibilities from one Treasurer’s tenure to the next, the following steps should be taken:

5.21 Retaining the same financial institution:

A. Prior to July 1:

1. The current Treasurer changes the authorized signers on the checking account and, if appropriate, changes the address on the account to the Treasurer’s address. The effective date of access to these funds shall be no earlier than July 1.

2. The current Treasurer pays as many expenses as possible prior to the June 30 year-end to reduce the amount of prior year debt to be carried forward to the next fiscal year.

3. The current Treasurer prepares a preliminary year-end budget summary.

B. On or after July 1:

1. The past Treasurer sends an up-to-date copy of the account management database and the original accounting software to the new Treasurer.

2. The new Treasurer receives the first post-July 1 bank statement and reconciles the account, reporting the results to the President and Budget Committee.

3. If there is a new Treasurer, the past Treasurer issues a final year end budget summary based on the prior year figures received from the new Treasurer.

5.22 Establishing business with a different financial institution (if necessary):

A. Prior to July 1:

1. No earlier than 30 days prior to July 1, the new Treasurer opens the new checking account.

2. The current Treasurer adds the President-Elect (incoming President) and the incoming Treasurer as signers on the checking account and changes the address on the account to the incoming Treasurer’s address. Check writing authority for the incoming Treasurer and incoming President shall be no earlier than July 1.

3. The current Treasurer pays as many expenses as possible prior to the June 30 year-end to reduce the amount of prior year debt to be carried forward to the next budget year.

4. The current Treasurer prepares a preliminary year-end budget summary,

B. On or after July 1:

1. If appropriate, the past Treasurer sends an up-to-date copy of the account management database and accounting software to the new Treasurer.

2. The Treasurer shall leave sufficient funds in the previous checking account to cover any outstanding checks.

3. The Treasurer sets up the new checking account on the accounting software and provides a report of the opening balance to the Budget Committee.

4. If appropriate, the Treasurer communicates the results of the first post-July 1 bank statement on the previous checking account to the previous Treasurer for balancing purposes and communicates this information to the President and Budget Committee.

5. The new Treasurer closes all previous checking accounts and transfers remaining proceeds into the new checking account when outstanding checks have cleared the account.

6. The previous Treasurer issues a final year-end budget summary based on the prior year figures received from the new Treasurer and provides a copy of the account file for the period ending June 30 to the Budget Committee and to the archivist.

3. Savings

SCASFAA’s savings normally are in the form of short-term Certificates of Deposit (CD). The Certificates of Deposit mature at intervals, usually 6 to 12 months, allowing the Association liquidity of funds, if needed, or the option to reinvest the proceeds in another, higher yielding, certificate. Providing short intervals for CD maturity enables the Association to reinvest without incurring interest penalties or adversely affecting the access to funds.

As a benchmark for CD rates, the Treasurer should evaluate the current CD rate yields of various institutions to make sure that CD rates under consideration for investment purposes are the best value for the Association.

Certificates of deposit must be opened at financial institutions protected by the Federal Deposit Insurance Corporation (FDIC) or the Federal Savings and Loan Insurance Corporation (FSLDIC). No more than $100,000 may be invested in any one account.

4. Other Investments

It is recommended that alternative sources for investments be evaluated at the point the Association’s reserves reach $100,000. At that point, the following forms of investments are to be considered:

a. Jumbo CD’s (usually paying high yields and requiring larger deposits);

b. Bonds (such as Ginnie Mae’s); and

c. Mutual Funds.

In addition, the following factors must be considered when selecting an investment type:

a. Protection of Principal Investment (Government Insurance);

b. Liquidity (Ease of liquidating funds);

c. Minimal Risk; and

d. Yield.

After appropriate consideration, the Budget Committee will recommend a specific investment.

5.5 Account Management

Proper account management is critical for SCASFAA’s financial stability. As such, specific controls must exist to ensure proper handling of accounts and funds. The two accounts, which were discussed previously, are as follows:

a. Checking Account

b. Savings Account in the form of Certificates of Deposit

Both accounts are liquid and should be interest bearing.

Proper safeguards should be in place to prevent misuse of funds. These include, but are not limited to:

a. Daily cash reconciliation at the Fall and Spring Conferences by the Treasurer.

b. Checkbook audit performed by the prior Treasurer at the close of the fiscal year. The results of the audit are reported to the Executive Board at the first post audit board meeting.

c. Written receipts required for any cash received with a copy of the receipt retained for corporate records.

d. Requiring signature of the President on any expense reimbursement form for expenses incurred by the Treasurer.

e. The Treasurer should maintain a copy of the Association’s software, with the Treasurer providing monthly back-up copy to the President for audit and disaster recovery purposes. (Also see Section 5.6 Disaster Recovery).

6. Disaster Recovery

Proper controls must be in place to facilitate the recovery of financial records in case of a natural disaster, computer hardware failure, or incapacitation of the Treasurer. Some of these include:

a. The Treasurer provides a backup of the account file to the President on a monthly basis. The Treasurer keeps a backup copy of the file in a secure location different from where the computer is kept. During peak periods when income and expense transactions are more frequent (e.g., month preceding and following a conference or workshop), the Treasurer should make a backup of the account file any day on which new activity on the file has occurred.

b. The Treasurer informs the President at the beginning of the fiscal year of the checking account and savings account balances, account numbers and the amount of each investment. The Treasurer will update this information on at least a quarterly basis or when a certificate of deposit matures and/or when a new certificate of deposit is opened. The Treasurer shall also include a contact name, address and telephone number at the financial institution for each investment.

c. The Treasurer must keep a copy of the signature card used to open the checking account and send copies to the President and President-Elect.

6. Duties and Responsibilities of the Treasurer

The detailed descriptions of the duties and responsibilities for the office of Treasurer are located in an attachment to this Guide. The current Budget Committee reviews and makes recommendations for revision to the Guide.

7. Audit and Accountability Standards

To ensure the financial stability of the Association, it is imperative that there exist measures to verify the income and expenditures and to prompt immediate detection of errors, to provide the means to correct any deficiency and to safeguard Association funds.

1. Income, Expenditures and Adjustments to Income

To provide an adequate audit trail, all income, expenditures and adjustments should be tied to at least one of the following supporting documents:

a. Expense (reimbursement) forms including receipts, where appropriate;

b. Invoices from vendors and service providers;

c. Registration and membership forms;

d. Vendor/sponsor contributions;

e. Written receipts for cash advances;

f. Bank statements indicating interest income;

g. Canceled checks.

2. Investments

Statements from financial institutions, which contain the investment amount and earnings, shall be retained by the Treasurer.

The Treasurer shall perform a periodic review of the investment accounts with each financial institution with which the Association has an account in order to verify the status and balance of each account. Such reviews shall be documented and the results reported to the Executive Board as a part of the Budget Committee Chairperson’s report to the Board.

3. Accountability to the Executive Board

Oversight of the Association’s finances is important for ensuring sound financial practices throughout the year. As such, certain accountability measures are necessary.

a. The Treasurer shall arrange for an annual financial audit.

b. The annual financial audit shall be conducted by the most recent past Treasurer under the direction of the President. A report of the annual financial audit will be made by the appointed auditor to the Executive Board at the first post audit board meeting.

c. As part of the year-end report to the Board, the Treasurer should provide an evaluation of the time required to perform the duties and responsibilities associated with that office. The focus of this evaluation should be directed to any needed restructuring.

4. Records Maintenance and Retention Standards

The Association’s financial records provide documentation to support all financial transactions. This may be critically important in the event of an audit where proof of expenditures is necessary.

a. Audits of the Association are to be retained in the Association’s Archives.

b. Fiscal records and documentation of the Treasurer pertaining to specific financial transactions (expenditures and income) are to be retained for a period of five years from the close of the last fiscal year covered by the audit. Such records may be retained by the current Treasurer for no longer than six months in the event they need to be used to reconcile transactions from the prior year. After this six-month period, they are to be released to the Archives.

c. At the close of each fiscal year (June 30), one copy of the account management software file and supporting hard copy shall be archived.

d. General records that do not support specific financial transactions may be destroyed at the end of the second fiscal year of the Treasurer’s term of office.

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