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Model Policies and Procedures for Not-for-Profit Organizations, 4th Edition

Model Policies and Procedures for Not-for-Profit Organizations, 4th Edition

Edward J. McMillan

ISBN: 978-0-470-24920-8

Mar 2008

320 pages



What every not-for-profit must know about accounting, tax, and reporting requirements

In the challenging world of not-for-profit management, executives are held responsible for virtually every aspect of their organization's activities, such as legal issues, marketing, lobbying, editorial, membership operations, budgeting, and, of course, finance. For one person to be an authority in every area, however, is virtually impossible.

Completely revised and expanded, the Fourth Edition of this invaluable tool is useful as a guide to nonprofit accountants, financial managers, and executives new to the area of financial management. Addressing the accounting, internal control, and office administration issues that confront executives in nonprofit organizations, this book:

Helps professionals develop formal policies in accounting and finance

Shows how to strengthen an organization's financial procedures while assuring board members that they are meeting fiduciary responsibilities

Provides more than 200 sample policies and forms both in the book and on the accompanying Web site offering downloadable and customizable versions of those forms

Covers major topics including accounting and financial policies, office administration policies, and internal control and risk reduction policies

Contains dozens of new model accounting and financial policies and forms, covering Sarbanes-Oxley issues, codes of ethics, identity theft, fraud, binding arbitrations, compensation committees, new bank rules, fiduciary obligations of board members, and many more topics

Model Policies and Procedures for Not-for-Profit Organizations, Fourth Edition offers provocative strategies for financial management and serves as a road map to sound fiscal and organizational structure for nonprofit organizations.

List of Forms xvii

About the Author xxi

Preface xxiii

Section 1 Internal Financial Statement Formats 1

Statement of Financial Position 2

Consolidated Statement of Unrestricted Activities 4

Statement of Unrestricted Activities by Function 5

Statement of Temporarily Restricted Activities 6

Statement of Permanently Restricted Activities 6

Statement of Changes in Net Assets 6

Section 2 Chart of Accounts 7

Chart of Accounts Issuance Form 8

Assets 9

Clearing Accounts 12

Liabilities 13

Net Assets 14

Revenues 15

Expenses 18

Functions 22

Section 3 The Policies and Procedures Manual 23

Important Note: The sample policies and procedures found in Section 3 (Parts 1 through 6) are also available in MS Word format on a Web site designed for this book:

Part 1 Accounting and Financial Policies 25

Accounting and Financial Interns 25

Accounting Computer File Back-Up Procedure 26

Accounting Information Releases 28

Accounting Method 28

Accounts Payable Accruals 29

Accounts Receivable Write-Off Procedures and Authority (Bad Debts Procedures) 29

Amortization 31

Annual Leave Accrual 32

Board-Designated Funds 32

Budget 33

Budget and Finance Committee 33

Cancellation of Purchase Order 34

Capitalization Cutoff Points 36

Chart of Accounts 36

Check Imprinter Machine 38

Check Preparation and Mailing 38

Clearing Accounts 38

Collection Procedures 39

Contributions 41

CPA Firms: Audited Financial Statements 41

CPA Firms: The Engagement Letter 44

CPA Firms: The Management Letter 44

CPA Firms: Selection of Firm 47

CPA Firms: Use of Other Firms 47

Credit Card Receipts 48

Date and Time Received Stamp 48

Deferred Revenues 49

Deposit of Receipts 49

Depreciation 50

Discounts Lost 50

Discounts on Accounts Receivable 51

Donated Property 51

Endowment Funds 53

Expense Reimbursements—Chief Staff Executive 53

Finance Department Employee Orientation 54

Financial Statement Preparation and Distribution 54

Grants and Contracts 55

Holding Funds for Other Organizations 55

Inventory: Give-Aways 55

Inventory: Receiving 57

Inventory Valuations 57

Inventory: Write-Off 58

Investment Policy 60

IRS Forms: Form 990-T 62

IRS Forms: Form 1099 62

Journal Entries 64

Leasehold Improvements 66

Leases 66

Loans/Lines of Credit 67

Lobbying Expenditures 67

Long-Term Debt 67

Monthly Budget Meetings 68

Nondeductibility of Dues 68

Nondistribution of Earnings 69

Nonsuffi cient Funds Checks 69

Occupancy Expenses 71

Optional Proxy Tax 71

Overhead Allocation 72

PAID Stamp 72

Payment Terms 73

Permanently Restricted Net Assets 75

Permanent Travel Advances 75

Petty Cash Fund Disbursements 77

Photocopying Expenses 80

Postage Log 82

Prepaid Expenses 84

Purchase Orders 84

Quid Pro Quo Contributions 87

Records Retention 87

Refunds 93

Reimbursement of Board/Committee Expenses 93

Rent 94

Repairs and Improvements 94

Reserves 95

Return Policy 95

Salaries and Fringe Benefits Accruals 95

Sales Tax Collection 96

Sales Tax Exemption Certificate 96

Serial Numbers (Fixed Assets) 96

Spousal Travel 97

Telephone Expenses 97

Temporarily Restricted Net Assets 100

Travel Advances 100

Travel Expenses 102

Unrelated Business Income Tax (UBIT) 107

Unrestricted Net Assets 107

Voided Checks 108

Write-Off of Old Checks 110

Part 2 Office Administration Policies 113

Absenteeism and Tardiness 113

Affinity Programs 113

Age Discrimination in Employee Act (ADEA) 114

Alcohol and Controlled Substances 114

Amendments to Policies and Procedures 115

Americans with Disabilities Act 115

Anniversary Date 116

Annual Leave Payments 116

Antitrust 116

Antivirus 117

Aptitude/Ability Tests 117

At-Will Employment 117

Background Checks—Prospective Employees 118

Ballots 120

Bartering Prohibited 120

Bereavement (Funeral) Leave 120

Bid Requirements 121

Binding Arbitration 123

Board of Director Fiduciary Responsibilities 124

Bulletin Boards 126

Business Cards 126

By-Laws 126

Certificate of Authority 126

Committee Meeting Attendance 128

Committee Meeting Attendance by Members 128

Computer Passwords 128

Conditions of Employment Agreement 129

Confidentiality of Information 132

Consolidated Omnibus Budget Reconciliation Act (COBRA) 135

Consumer Protection Act 135

Contract Signing Authority 135

Correspondence 136

Credit Rating Release 138

Data Processing Manual 138

Disciplinary Action 138

Discrimination 139

Diversity 139

Document Shredding 140

Document Sign-Out Form 140

Dress Code 142

E-Mail and Internet 142

Emergency Contact Form 145

Employee Retirement Income Security Act (ERISA) 147

Equal Opportunity Employer 147

Equal Pay Act 147

Evaluations (Staff) 148

Executive Sessions 148

Exit Interview 148

Facilities 149

Fair Labor Standards Act (FLSA) 149

Family and Medical Leave Act (FMLA) 151

Fax Machine 151

Federal Identification Number 152

Fire Protection 152

Form I-9/Immigration Reform and Control Act (IRCA) 152

Forms Manual/Retired Forms Manual 153

Form W-4 154

Fringe Benefits 154

Fringe Benefits Day 155

Garnishments 155

Grievances and Complaints 155

Hold Harmless Agreements 156

Holidays 158

Hours of Operation 158

Inclement Weather 158

Independent Contractor Files 159

Independent Contractors 159

Injuries/Worker’s Compensation 163

Job Descriptions 165

Jury Duty 165

Key Employee Insurance 165

Key Employees 166

Leave without Pay 168

Leaving the Office 168

Legal Audit 168

Legal Counsel Attendance at Board Meetings 169

Legal Protection for Board and Staff 170

Libel/Slander 172

Lines of Credit 172

Loans—Employees 174

Lobbying Activities/Omnibus Budget Reconciliation Act (OBRA) 174

Lobbying Disclosure Act (LDA) 174

Logo 175

Mailing List Sales 175

Management Day 176

Mandatory Vacations/Leave 178

Maternity Leave 178

Military Obligations 178

Minutes of Board and Committees 179

Music 179

Music Licensing 179

Nepotism 180

Nicknames 180

Noncompete Agreements 180

Occupational Safety and Health Act (OSHA) 183

Office Decor 183

Office Equipment 183

Office Supplies 185

Open Board of Directors Meetings (Sunshine Laws) 185

Outside Employment 185

Ownership of Records 186

Paternity Leave 186

Permissions/Waivers 186

Personal Leave 188

Personnel Records 188

Plagiarism 188

Policy Amendment, Deletion, or Additions 190

Political Action Committees (PACs) 192

Political Education Funds 192

Postal Permit 193

Press Releases/Media Contacts 193

Protection of Member/Contributor/Customer/Employee Confidential Information 195

Quarterly Staff Meetings 195

Reasonable Accommodation 196

Reference Letters 196

References (Former and Current Employees) 196

Registered Agent 197

Reinstatement of Benefits 197

Remote Access to Computer Network 197

Resignation 199

Rest Periods 199

Safe and Safe Combination 199

Safe Deposit Box 202

Safety Committee 205

Sexual Harassment 207

Smoking 207

Software Licenses (Anti-Piracy) 207

Staff Conduct 208

Staff Contact by Board Members 208

Staff Training 208

Statutory (Legally Mandated) Employee Benefits 209

Suggestions 209

Taking Work Home 211

Tellers’ Committee 213

Temporary Employment Agencies 213

Time Off to Vote 215

Time Sheets 215

Trademark 217

Unemployment Compensation 217

Uniformed Services Employment and Reemployment Rights Act (USERRA) 217

Use of Premises 218

Utilization of Office Equipment 221

Vacancies 223

Voice Mail 223

Worker’s Compensation Insurance 223

Weapons 224

Wrongful Dismissal (Avoidance) 224

Year-End Manual 224

Part 3 Internal Control and Risk Reduction Policies 227

Acronyms 227

Approved Vendor Listing 229

Automobile Insurance 231

Bank Account Reconciliations 231

Bank Statement Mailings 232

Bonding Eligibility 233

Business Interruption Insurance 233

Cash Register Issues 233

Cash Transactions 234

Certificate of Insurance 235

Changeover Audit 235

Check 21 Issues 235

Check Disbursements 236

Check and Wire Transfer Signatures 239

Check Signers 239

Check Stock 240

Check Supply 241

Control Over Checks and Cash 241

Convention Cancellation Insurance 242

Credit Cards 242

Credit Card Statements 246

Deposit Security and Restrictive Endorsements 246

Direct Deposit 247

Documenting a Fraud Action Plan 248

Employee Credit Cards (Elimination) 251

Errors and Omissions Insurance 251

Fidelity Bond (Employee Dishonesty Insurance) 252

General Liability Insurance 252

Ghost Employees 252

Ghost Vendors 254

Gifts 256

Insurance 259

Insurance Committees 259

Inventory Issues 260

Kiting 261

Lockbox 262

Malpractice Insurance 264

Manual Checks 264

Officers and Directors Liability Insurance 264

Payroll Processing 265

Payroll Tax Issues 265

Positive Pay 266

Professional Liability Insurance 266

Property Insurance 267

Segregation of Duties 267

Statement of Auditing Standard No. 99 (SAS99) 267

Two Signature Checks 268

Umbrella Insurance 268

Unannounced Bank Statement Reconciliation 268

Window of Opportunity for Embezzlement 269

Wire Transfers 273

Part 4 Disclosure of Information Policies 275

Disclosure of Information 275

Disclosure of Records, General Public, Requests Made in Person 279

Disclosure of Records, General Public, Requests Made in Writing 279

Disclosure of Records, Members or Contributors, Requests Made in Writing 280

Disclosure of Records, Members or Contributors, Requests Made in Person 280

Board of Directors’ Examination of Records 280

Form 990-T 281

Part 5 The Sarbanes-Oxley Act of 2002 283

The Sarbanes-Oxley Act of 2002 283

Code of Ethics for Financial Management 284

Rotation of the Independent CPA Firm Partner 286

Whistle-Blower Protection 286

Internal Audit Committee 287

Certification of Financial Statements 288

Conflict of Interest Form 290

Summary 292

Part 6 State Issues 293

State Issues 293

Access to Accounting Records 293

Committee Meeting Attendance 293

Disclosure of Forms Filed with State 294

Executive Sessions 294

Loans 294

Minutes 294

Open Meetings 294

Posting Meetings 294

Registration as Fundraiser 295

Registered Agent 295

Personnel Files 295

Glossary of Accounting and Financial Terminology 297

Index 303

Form 3.9Download
Form 3.4Download
Form 3.63Download
Form 3.67Download
Form 3.70Download
Form 3.74Download
Form 3.75Download
Form 3.80Download
Form 3.20Download
Form 3.22Download
Form 3.45Download
Form 3.58Download
Form 3.59Download
Form 3.78Download
Section 3-Part 6Download
Form 3.12Download
Form 3.25Download
Form 3.28Download
Form 3.2Download
Form 3.3Download
Form 3.41Download
Form 3.47Download
Form 3.49Download
Form 3.53Download
Form 3.60Download
Form 3.62Download
Form 3.65Download
Section 3-Part 4Download
Form 3.10Download
Form 3.16Download
Form 3.30Download
Form 3.35Download
Form 3.38Download
Form 3.40Download
Form 3.42Download
Form 3.5Download
Form 3.8Download
Form 3.14Download
Form 3.19Download
Form 3.39Download
Form 3.51Download
Form 3.54Download
Form 3.64Download
Form 3.68Download
Form 3.6Download
Form 3.69Download
Form 3.7Download
Form 3.79Download
Form 3.81Download
Page IntroductionDownload
Section 3-Part 5Download
Form 3.11Download
Form 3.13Download
Form 3.15Download
Form 3.17Download
Form 3.18Download
Form 3.1Download
Form 3.27Download
Form 3.48Download
Form 3.55Download
Form 3.56Download
Form 3.57Download
Form 3.66Download
Form 3.73Download
Form 3.77Download
Section 3-Part 1Download
Form 3.21Download
Form 3.23Download
Form 3.29Download
Form 3.31Download
Form 3.33Download
Form 3.37Download
Form 3.50Download
Form 3.61Download
Form 3.76Download
Section 3-Part 2Download
Form 3.26Download
Form 3.44Download
Form 3.52Download
Form 3.68Download
Form 3.71Download
Form 3.72Download
Form 3.82Download
Section 3-Part 3Download
Form 3.24Download
Form 3.32Download
Form 3.34Download
Form 3.36Download
Form 3.43Download
Form 3.46Download