Summer Leadership Conference 2007 Money Matters…A Lot!

1. Summer Leadership Conference 2007 Money Matters…A Lot! Presented by: Sue Kelly and Kim Toman

2. Course Overview • Basic Duties of the Treasurer • Helpful Toolkits • Setting Up Your Books • Establishing a Budget • Recordkeeping & Accounting Systems • Reporting • BREAK!!! • Internal Controls and Fraud Prevention • % Dues Update • What’s New? • Helpful Links • Q&A

3. FIDUCIARY DUTY Treasurers have a fiduciary duty to safeguard the assets of the association.

4. Financial and Operational Standards of the Michigan Education Association And Local Affiliates As leaders and staff, we are the entrusted fiduciaries of the Association finances. Members believe in us, support us and trust us with Association finances. We, the governance and staff of the Michigan Education Association, accept the responsibility to treat Association resources with the utmost of care and to adhere to the highest ethical standards. To that end, we acknowledge the principles that will guide us, the internal and external control activities we will use to protect the resources entrusted to us and our process to monitor those controls. • Code of Financial Ethical Conduct • In fulfillment of our obligation we commit to: • Exercise appropriate fiduciary responsibilities over Association resources; • Fully and fairly disclose and act appropriately in avoiding conflicts of interest; • Comply with applicable rules and regulations of the Association and government agencies; • Respect confidentiality of information acquired in the course of our work; • Provide Association members with information that is complete, accurate and appropriate; • Carry out activities professionally, with honesty and integrity; • Not knowingly be a party to any illegal activity or breach of fiduciary responsibility; • Report violations of this Code in accordance with all applicable rules of procedure; • Institute due process policies for violations of this Code of Financial Ethics; • Be accountable for adhering to this Code.

5. How do I make sure I’m safeguarding our assets? • Deposit and record cash receipts on a timely basis. • Document expenditures and pay all bills timely, including the remittance of MEA/NEA dues. • Have bank statements reconciled monthly. • Report financial position to Executive Board.

6. Other Duties…….. • Update bank signature cards annually • Verify membership dues billing with school district payroll list • Prepare annual financial statements • Prepare and file state & federal tax (and/or labor) forms • Arrange for internal review by an independent person or audit committee • Prepare budget for new year

7. MOST IMPORTANT……… PRACTICE GOOD INTERNAL CONTROLS OVER YOUR MEMBERS ASSETS

8. Getting Started…. • Kits • Employer ID • Incorporate • Tax Exempt Status

10. Where to find your kits: • go to: www.mymea.org • Departments • Finance • Scroll to bottom of page

11. www.mymea.org

12. So…..You’ve got your IDYou’ve Incorporated, And your tax exempt…….. Now what?

13. NEXT, • Checking Account • Verify it’s in your local’s name only! • Develop and follow a budget • Establish an accounting system • Report as required • And practice good internal controls!!

14. Checking Account • Make sure your checks are: • Pre-numbered for making disbursements • Are signed by a minimum of two signers • Each check is supported by an approved authorization for disbursing • Make sure current signature cards are on file with the Bank • By policy do not allow the use of an ATM card or counter checks

15. Establish a Budget HOW DO WE DO THAT? • Select a small budget committee • 6 members is ideal • Establish a timetable & stick to it • Develop a method for determining general desires and needs of your members

16. Budget Questions to Ask • What are the local’s goals? • How are we going to achieve these goals? • What resources does the local have available?

17. For additional help: • Visit: www.mymea.org • Departments • Finance • Treasurer’s Handbook • Or • Visit: www.mea.org • For Leaders • Financial and Membership Information • Treasurer Training Tidbits

18. Develop an Accounting System • You will need: • Accounting software or a spreadsheet application to record transactions • A chart of accounts • Disbursement procedures

19. Accounting Software • An accounting software package will help you capture your financial data • When picking a system, base decision on: • The size of your Local • How many transactions are processed daily/weekly/monthly/annually • And your bookkeeping experience • Examples: • Excel ($229) • Quicken ($59.99) • Quickbooks ($99.99)

20. Chart of Accounts What is a chart of accounts? • A listing of the titles or names of the various accounts, somewhat comparable to a table of contents. • Use your budget to help set up your chart of accounts. • Accounts are classified into two general groups: • Balance sheet – assets, liabilities and net assets • Income statement – revenues and expenses

21. Disbursement Procedures • Use disbursement request forms for ALL disbursements. • Require back up documentation • Per the IRS: • Receipts required for all hotel stays • Receipts required for all expenses of $75 or more • Information required for all meals: who the attendees are, amount, business purpose, place and date

22. Disbursement Procedures • Keep receipts for supporting documentation • If no receipt, develop one • Get proper approval for all payments

23. Recording Transactions RECEIPTS: • You received a dues check from your school district: • Immediately stamp “For deposit only” upon receipt • Record the receipt of the dues • Deposit the check in the bank • Do not co-mingle PAC dollars with dues dollars!

24. Recording Transactions DISBURSEMENTS: • Sue Smith wants reimbursement for a conference she attended: • Verify the expenditure was approved • Have her completely fill out a disbursement form, sign it and attach receipts • Have another officer review and approve the disbursement form by initialing approval • Write the check with two signers • Record the disbursement in your check book and your accounting system • File the backup documentation

25. Workbook Sample

26. Direct Pay Your Dues • Save time • Never have to remember to write that check • MEA initiated • Shores up internal controls • Saves money • No interest charges • No postage • Never have to worry about RA seating • Contact the MEA membership department to sign up today.

27. Reporting Requirements

28. Internal Financial Reports • Monthly Reconciliations • Monthly Financial Reports • Quarterly Financial Reports • Annual Financial Reports • Yearly Audit

29. External Reports • Update Annual Incorporation Info • File annual IRS 990, 990 EZ or 990N • Form 944, if necessary • Mail 1099’s and File w/IRS • Form LM-2, 3 or 4 if required

30. Form LM-2, 3 or 4 Every labor organization subject to the Labor-Management Reporting Disclosure Act must file a financial report each year with OLMS. • Labor organizations with total annual receipts of $200,000 or more must file the Form LM-2 for their fiscal year beginning before July 1, 2004. Labor organizations with total annual receipts of $250,000 or more must file the Form LM-2 for their fiscal year beginning after July 1, 2004. • Labor organizations with total annual receipts of less than $200,000 and more than $10,000 must file the Form LM-3 for their fiscal years beginning before July 1, 2004. Labor organizations with total annual receipts of less than $250,000 and more than $10,000 must file the Form LM-3 for their fiscal years beginning after July 1, 2004. • Labor organizations with total annual receipts of less than $10,000 must file the Form LM-4.

31. Miscellaneous • Lobby Registration and Reporting Act • Is a member entertaining a state public official? • Elections • Is the local involved in any non-union elections? • Raffles • Thinking of sponsoring a raffle or giveaway?

32. Internal Controls

33. EMBEZZLEMENTS HAPPEN! FACTS: • Over 40 cases in 20 years • Losses near $1,000,000 • Top of the list nationally – NOT GOOD! FACT: MEA HAS HAD OVER 25 REPORTED EMBEZZLEMENTS IN THE LAST FIVE YEARS!

34. Role of Internal Controls • “Strong Internal Controls” are identified as the most effective measure in the prevention of fraud. • To provide reasonable assurance regarding the achievement of objectives in three categories: • Effectiveness and efficiency of operations • Reliability of financial reporting • Compliance with applicable laws and regulations • Safeguard assets of the organization • Best Deterrent • Internal controls close the door on opportunity • Certified Fraud Examiners Report • Deterrent vs. elimination

35. What is Internal Control? • Internal Controls are procedures that an organization puts in place that are designed to: • safeguard assets; • generate accurate accounting data; • ensure efficient productivity; • And PROTECT YOU!!! Are not convenient, by design!

36. Integrity of Internal Controls A strong internal control structure is fundamental to achieving Association goals. Internal controls must be designed to provide reasonable assurances regarding the safeguarding of resources against mistakes, fraud, abuse, reliability of financial information, continued commitment to compliance with Association policies, applicable laws and regulations, and the overall accuracy of financial records. Internal controls must be built on uncompromising integrity, sound judgment and a culture of good control practices. • A control environment founded on ethical values and technical competence; • The identification and analysis of relevant internal and external risks that can jeopardize Association finances; • The implementation of control activities that mitigate each identified risk, with the appropriate focus on prevention, detection and correction; • The creation and maintenance of a communication structure by and between governance and staff that captures, processes and transmits relevant internal and external information in a timely manner; • Systems of evaluation and assessment to monitor whether internal controls are adequate, effective and adaptive; • Adoption of, and adherence to, formal internal control policies and procedures and document their use; • Outlining the roles and responsibilities of governance and staff within the internal control structure; • Communicating with and education staff and governance on their internal control roles and responsibilities. In fulfillment of our obligation to maintain the highest standards of quality in financial reporting through effective internal controls, we support:

37. Internal Controls - THE BIG TEN • Dual Check Signers – OR Authorizations on invoices • Require supporting Documentation for all disbursements • Have bank statements mailed to someone other than the Treasurer • Issue monthly financial reports

38. Internal Controls - THE BIG TEN • Deposit Cash promptly • Form a local independent audit committee • Submit IRS forms • Balance the checkbook monthly • Keep PAC funds separate • Verify membership monthly

39. INTERNAL REVIEW WHAT? • An internal review is when an independent person or audit committee reviews the financial records of the local association.

40. WHY? • Helps to ensure accurate records are being kept. • Accurate records help safeguard assets. • Safeguarding assets protects YOU from liability. WHEN? • Annually, or • When there is a change in Treasurer’s

41. WHO? • An independent person who is familiar with accounting techniques • For Example: • a business school teacher • Another local treasurer • An internal review committee

42. Things reviewed during an internal review: • Mathematical accuracy • Bank account reconcilement • Disbursements • Basically everything you do with an emphasis on what may have been missed!

43. When do I need an outside auditor? • If your internal review report reveals unusual or suspicious activity • If you or someone else suspects that embezzlement is occurring • If you are a large local and required to file a 990 annually

44. REMEMBER…..Your members are counting on you to do the right thing! • ALWAYS REQUIRE: • TWO SETS OF EYES • TWO SIGNERS • SEGREGATE DUTIES • RECONCILE • REVIEW & REPORT

45. Percentage Dues Update • Enhancements to the system • What we’re doing now • What you should be doing now • Timelines

46. Percentage Dues Update • Percentage dues information • www.iammea.org/percentagedues/ • Read the MEA Voice • www.mea.org or www.mymea.org • Check with your local Uniserv Office • Training • Summer Leadership Conference • Webinar • On line manual

47. What’s New……

48. 990 Update – form changes • 990N • Audit committees (part of new 990 questions) • New auditing standards • Department of Labor audits • Taxability of cell phone reimbursement

49. Helpful Links: www.mea.org www.mymea.org www.iammea.org/percentagedues/ www.irs.gov www.dol.gov/esa www.toolkit.cch.com

50. Information Available on the Web www.mymea.org • Treasurer’s handbook • Treasurer’s tips • Membership processing handbook • Various kits, etc. • MEA budget • Etc.