Please also see the Purchasing Procedures page for information specific to purchasing.
ACCOUNTING PROCEDURES
Page Sections
Introduction
The purpose of this section is to describe all accounting policies and procedures currently in use at AvaCon and to ensure that the financial statements conform to generally accepted accounting principles; assets are safeguarded; that we are in compliance with guidelines of grantors and donors; and that AvaCon’s finances are managed with accuracy, efficiency, and transparency.
All AvaCon staff with a role in the management of fiscal and accounting operations are expected to comply with the policies and procedures in this manual.
These policies will be reviewed annually and revised as needed by the staff and approved by the Executive Board.
Basis of Accounting
AvaCon uses the accrual basis of accounting. The accrual basis is the method of accounting whereby revenue and expenses are identified with specific periods of time, such as a month or year, and are recorded as incurred. This method of recording revenue and expenses is without regard to date of receipt or payment of cash.
Throughout the fiscal year, which runs from January 1st to December 31st, expenses are accrued into the month in which they are incurred. The books are closed no later than the 15th after the close of the month. Invoices received after closing the books will be counted as a current-month expense.
The only exception is at the close of the fiscal year when all expenses that should be accrued into the prior fiscal year are so accrued, in order to ensure that year-end financial statements reflect all expenses incurred during the fiscal year. Year end books are closed no later than 90 days after the end of the fiscal year.
Division of Responsibilities
The following is a list of personnel who have fiscal and accounting responsibilities:
– Executive Board
1. Reviews and approves the annual budget
2. Reviews annual and periodic financial statements and information
3. Three members of the board are appointed to be authorized signatories on all AvaCon bank accounts
4. Two members of the board are appointed to be authorized signatories on AvaCon handwritten checks
5. Reviews and approves all contracts
6. Reviews and approves all non-budgeted expenditures over $200.
7. Reviews, approves, and advises staff on internal controls and accounting policies and procedures
8. Determines whether the organization should have an internal or external audit, and selects and contracts with the auditor for external audits
9. Reviews and approves all grant submissions
10. Reviews and approves all financial reports including cash flow projections
11. Approves all non-budgeted program expenditures
12. Makes bank deposits
13. Approves Purchase Orders
14. Approves Reimbursement Requests
15. Approves Purchasing Card Applications
– Director of Administration & Finance
1. Provides final signature on all issued checks
2. Reviews all contracts prior to submission to the Executive Board
3. Reviews all grants prior to submission to the Executive Board
4. Approves and processes all inter-account bank transfers
5. Reviews all digital bank statements, reviews for any irregularities, and reviews completed monthly bank reconciliations
6. Oversees adherence to all internal controls
7. Monitors program budgets
8. Reviews all payrolls
9. Is responsible for all personnel files
10. Reviews all incoming and outgoing invoices
11. Monitors and manages all expenses to ensure the most effective use of assets
12. Monitors grant reporting and appropriate release of temporarily restricted funds
13. Oversees expense allocations
14. Monitors and makes recommendations for asset retirement and replacement
15. Reviews, revises, and maintains internal accounting controls and procedures
16. Oversees donor thank you letter acknowledgements
17. Reviews financial reports
18. Processes payroll
19. Mails vendor checks
– Bookkeeper
1. Overall responsibility for data entry into accounting system and integrity of accounting system data
2. Processes invoices and Purchase Orders
3. Maintains general ledger
4. Prepares monthly and year-end financial reports
5. Reconciles all bank accounts
6. Manages Accounts Receivable
Chart of Accounts & General Ledger
AvaCon has designated a Chart of Accounts specific to its operational needs and the needs of its financial statements. The Chart of Accounts is structured so that financial statements can be shown by natural classification (expense type) as well as by functional classification (program vs. fundraising vs administration).
The Bookkeeper is responsible for maintaining the Chart of Accounts, and revising with the approval of the Director of Administration & Finance as necessary.
The general ledger is automated and maintained using QuickBooks accounting software. All input and balancing is the responsibility of the Bookkeeper, with final approval by the Director of Administration & Finance.
The Director of Administration & Finance periodically reviews the general ledger for any unusual transactions. In addition, the Executive Board may review the general ledger at any time for oversight and to ensure compliance with these policies.
Revenue & Accounts Receivable
– Revenue Recognition
All contributions will be recorded in accordance with GAAP, with specific attention to standards FASB 116 and FASB 117. Contributions are recorded as pledged or received in accordance with FASB 116, and must be credited to the appropriate revenue lines as presented in the annual budget and coded as designated in AvaCon’s Chart of Accounts.
1. The Director of Administration & Finance reviews all revenue and indicates how the revenue shall be recognized (as earned/contributed, conditional/unconditional and restricted/unrestricted). If there is a question or uncertainty about how to recognize a particular contribution, the Director of Administration & Finance will ensure that the donor is contacted to clarify the intent of the contribution.
- Conditional – A donor’s promise to give or donation specifies a future and uncertain event whose occurrence or failure to occur gives the promisor a right of return of the assets transferred or releases the promisor from its obligation to transfer assets promised. Unconditional promise to give means there are no conditions that must be met.
- Restricted – A donor’s promise to give or donation limits the use of contributed assets; it specifies a use that is more specific than broad limits resulting from the nature of the organization, the environment in which it operates, and the purposes specified in its articles of incorporation or bylaws or comparable documents for an unincorporated association. Unrestricted promise or donation can be used for any legal purpose.
2. The Bookkeeper is responsible for posting revenue to the general ledger in accordance with the determination made by the Director of Administration & Finance..
– Invoice Preparation
All grants and projects are invoiced each month to capture all billable time and expenses and ensure a regular healthy cash flow for the organization. All final invoices for the prior month are completed by the 15th of the following month (ex: June 15th for May).
1. The Bookkeeper gathers relevant expense documentation, prepares all invoices, and submits to the Director of Administration & Finance for approval by the 10th of each month.
2. Following approval, the Director of Administration & Finance mails a copy of the invoice to the client/customer no later than the 15th of the month. A digital copy is filed in the appropriate directory.
3. As part of the monthly close process, the Bookkeeper reviews an Accounts Receivable Aging report and alerts the Director of Administration & Finance of invoices more than 60 days overdue.
4. The Director of Administration & Finance determines appropriate collection efforts for long outstanding invoices, with advice and consent of the Executive Board. The Executive Board is specifically notified of any invoices outstanding for longer than 90 days or for an amount over $1000.
– Cash Receipts
Cash receipts generally arise from:
1. Contracts and Grants
2. Director Donor Contributions
3. Fundraising Activities
The principal steps in the cash receipts process at AvaCon are as follows:
– Checks by Mail
1. The appropriate member of the Executive Board receives and opens incoming mail.
2. The board member immediately writes FOR DEPOSIT ONLY on the back of the check.
3. The check is scanned on both sides to make a digital copy and filed in the appropriate Deposits directory for that year.
4. The board member enters the deposit in the Bank Acct – Check Register.
5. The board member locks the check in a secure location until it can be taken to the bank for deposit.
6. The board member takes the check to the bank for deposit.
7. A copy of the deposit slip is scanned to make a digital copy and filed in the appropriate Deposits directory for that year.
8. During the monthly review of bank statements, the Director of Administration & Finance marks the deposit has cleared on the Bank Acct – Check Register.
9. The Bookkeeper makes the correct allocation for each deposit in the general ledger.
– Cash Receipts
1. All cash received will be independently counted and verified by a staff member and the Director of Administration & Finance or a member of the Executive Board.
2. The cash will immediately be posted by the Bookkeeper using the appropriate allocation
3. A receipt will be given to the paying party and a physical copy of the receipt will be sent to the Director of Administration & Finance.
4. The Director of Administration & Finance will make a digital copy of the receipt and file it in the appropriate Deposits directory for that year.
5. The cash will be kept in a locked, secure location and deposited within 24 business hours.
Expense & Accounts Payable
– Payroll
See the Payroll Processing page for more detailed information about processing payroll.
– Purchases & Procurement
See the Purchasing Procedures policy for more detailed information about purchasing.
– Cash Disbursements
Requests for cash disbursements are submitted to Accounting in three ways:
1. An original invoice is submitted
2. A Purchase Order is submitted on an approved form with all required documentation
3. A Reimbursement Claim is submitted on an approved form with all required documentation
Part 1 – The Director of Administration & Finance reviews all requests for payment and:
1. Verifies the expenditure and amount
2. Approves for payment if in accordance with an approved budget item, or submits to Executive Board for approval for non-budgeted items
3. Provides or verifies appropriate allocation information
4. Submits to the Bookkeeper for processing if approved
5. Replies to requestor if the request is not approved, either to seek additional information or to deny the request
Part 2 – The Bookkeeper processes all approved requests for payments:
1. Immediately enters them into the Accounts Payable module
2. Files all backup documentation into the appropriate file
3. Notifies the Director of Administration & Finance that the request for payment has been processed by Accounting and can be disbursed
Part 3 – The Director of Administration & Finance prepares the payment:
1. Prints the check according to allocation and payment date provided
2. Submits the check with appropriate backup documentation to a designated member of the Executive Board for signature
Part 4 – A designated member of the Executive Board signs the check:
1. Reviews all attached documentation for irregularities
2. If all is in order, signs the check and returns the original materials to the Director of Administration & Finance
Part 5 – The Director of Administration & Finance makes the payment:
1. Adds second signature to the check
2. Records the check on the Bank Acct – Check Register.
3. Mails checks and appropriate backup documentation
Part 6 – The Bookkeeper marks the invoice as paid and runs an accounts payable aging at the middle and end of each month to assure timely payment of all invoices.
– Petty Cash Fund
AvaCon does not generally maintain a petty cash fund, except in the event of an in-person conference, convention, event, or workshop that requires cash on hand to make change for cash sales. In the event that petty cash is needed to make change, the following procedures will apply:
1. The petty cash fund will not exceed $250 and will be kept in a secure location at all times.
2. The petty cash fund will be overseen by a responsible member of the management team.
3. All disbursements made from petty cash will be acknowledge in writing by the receiving party.
4. All monies returned to the petty cash fund will be counted and verified by the responsible party and the Director of Administration & Finance or a member of the Executive Board.
5. Receipts for items purchased with petty cash must be included with the return and should include appropriate account allocations as well as supervisor approval.
6. At the conclusion of the event, all remaining petty cash will be deposited back into the bank account by a member of the Executive Board.
7. No checks will be cashed by the petty cash fund.
Inter-Account Bank Transfers
The Bookkeeper monitors the balances in the bank accounts to determine when there is a shortage or excess in any account. The Bookkeeper recommends in writing to the Director of Administration & Finance when a transfer should be made and in what amount to maximize the potential for earning interest. The Director of Administration & Finance makes the transfer when the amount is less than or equal to $2000, or seeks approval by the Executive Board for amounts greater than $2000. A copy of the transfer is recorded in the general ledger and reconciled in the monthly statements.
Bank Account Reconciliations
1. All mailed bank statements are received by a member of the Executive Board and reviewed monthly for unusual balances or transactions. The bank statements and any supporting documentation are maintained in a secured file at the site of AvaCon’s main office.
2. All digital bank statements are received monthly by the Director of Administration & Finance, who uploads the digital file to the appropriate Bank Statements directory for that year.
3. The Director of Administration & Finance then records each transaction in the appropriate Bank Balance Ledger spreadsheet, assigns an appropriate allocation, checks to ensure that receipts or other appropriate documentation has been recorded for each charge, and submits the spreadsheet ledger to the Bookkeeper for processing.
4. The Bookkeeper makes a comparison of dates and amounts of deposits as shown in the accounting system and on the statement, a comparison of inter-account transfers, an investigation of any rejected items, a comparison of cleared checks and other expenditures, and enters the appropriate transactions into the accounting software.
5. The Bookkeeper will investigate and alert the Director of Administration & Finance for any checks that are outstanding over six months.
6. The Bookkeeper will reconcile all statements and make a report to the Director of Administration & Finance for approval and verification of the following balances: cash accounts match the bank reconciliations, fixed assets accounts reflect all purchases, write-downs and retirements, accounts receivable and payable accounts match outstanding amounts due and owed.
End of Month and Fiscal Year-End Close
1. The Director of Administration & Finance will review and sign off on all month and year-end journal entries. They will be printed and filed for audit trail purposes.
2. At the end of each month and fiscal year, the Director of Administration & Finance will review all balance sheet accounts including verification of the following balances: cash accounts match the bank reconciliations, fixed assets accounts reflect all purchases, write-downs and retirements, accounts receivable and payable accounts match outstanding amounts due and owed.
3. The income and expense accounts review will include reconciliation to amounts received and expended and verification that payroll expenses match the payroll reports including federal and state payroll tax filings.
4. Once the final monthly and fiscal year-end financial statements are run, reviewed, and approved by the Director of Administration & Finance, no more entries or adjustments will be made into that month or year’s ledgers, and the final statement will be submitted at the next scheduled Executive Board meeting.
5. At the end of the fiscal year, the Director of Administration & Finance or outside CPA will prepare the annual Return for Organization Exempt from Income Tax (IRS Form 990). The return will be presented to the Executive Board for their review and approval. The appropriate member of the Executive Board will then file the return with the Internal Revenue Service by the annual deadline.
6. All other appropriate government filings including those required by the state tax board and attorney general’s office will be completed and filed with the appropriate agency.
Financial Statements & Reports
AvaCon’s financial statements are prepared in accordance with Generally Accepted Accounting Principles (GAAP). The presentation of the Financial Statements shall follow the recommendation of the Financial Accounting Standards Board (FASB) No. 117, “Financial Statements of Not-For-Profit Organizations.” Under GAAP, revenues are classified based on the existence or absence of donor-imposed restrictions. Accordingly, the net assets of the organization are classified as unrestricted, temporarily restricted and permanently restricted.
The Bookkeeper will prepare the monthly and annual financial reports for distribution to the Director of Administration & Finance. The reports will include:
1. Balance sheet,
2. Statement of income and expenses,
3. Budget versus actual report for each program which has an established budget
4. A budget versus actual report for the organization
5. Accounts receivable aging,
6. Accounts payable register and aging,
7. Cash flow projection,
8. And any other requested reports.
Periodic and annual financial reports will be submitted to the Director of Administration & Finance and the Executive Board for review and approval.
Fiscal Policy Statements
1. All cash accounts owned by AvaCon, Inc. will be held in financial institutions which are insured by the FDIC. No bank account will carry a balance over the FDIC insured amount.
2. All capital expenditures which exceed two thousand dollars ($2,000) will be capitalized.
3. Employee or public personal checks will not be cashed through the petty cash fund.
4. No salary advances will be made under any circumstances.
5. No travel cash advances will be made except under special conditions and pre-approved by the Executive Board.
6. Reimbursements will be paid upon complete expense reporting and approval using the official AvaCon Reimbursement Claim form. Reimbursements to any member of the Executive Board will be approved by at least two other members of the Executive Board.
7. Any donated item with a value exceeding ($50) will be recorded and a letter acknowledging the donation will be sent to the donor within two weeks of the receipt of the donation.
8. All volunteer time shall be recorded as in-kind donations.
9. Three members of the Executive Board are authorized signatories of AvaCon, Inc.’s bank accounts. Disbursements by check require a signature by an authorized member of the Executive Board and a signature by the Director of Administration & Finance. Checks for non-budgeted items over $200 require approval from the Executive Board.
10. Bank statements will be reconciled monthly. All bank statements will be mailed unopened to a designated member of the Executive Board for review.
11. Correction fluid and/or tape will never be used in preparing timesheets or any accounting documents.
12. Accounting and personnel records will be kept in secure digital locations or for physical paperwork in locked file cabinets and only parties with financial and/or HR responsibility will have access to the files.
Policy last updated 2014-07-02, Chris Collins.
