Small Local Treasurer
Training
Larry McBride and
Steve Campbell
Welcome
Agenda
•
•
•
•
•
Financial Procedures
New Treasurer info
Annual Budget
Annual Audit
Local President’s responsibilities
Financial Procedures
Safeguard and manage your
organization’s resources
SAFEGUARD AND…. WHAT??
• Make sure your members’ funds are not:
–
–
–
–
Stolen or misplaced
Lost due to failure to collect them in the 1st place
Wasted/used inappropriately or illegally
Spent on fines, fees and penalties
• And manage your funds so they are used
effectively:
–
–
–
–
Budget
Financial reports
Banking arrangements
Etc.
THAT’S THE TREASURER’S JOB, RIGHT?
The Treasurer may do most of the work, but…
…your governing body and officers have the
fiduciary duty to:
–
–
–
–
See that proper systems and procedures are in place
Monitor for compliance
Insist on transparent, ethical activity by everyone
Make sure things get done in the Treasurer’s absence
If you are a local leader, all of this material pertains
to you, but your responsibility will vary
depending on your role
TOP 5
• “Top 5” safeguarding/management tools:
– 1. Verify your dues income
– 2. Comply with IRS rules
– 3. Internal controls/Fraud prevention
– 4. Budgeting
– 5. IPACE funds
• Other important stuff
• Resources available to you
BEFORE WE START…
• Your “FPLR” book is an important resource
• Out of necessity, this presentation is an
overview. There is much more detail on all of
these topics in the FPLR book
• The book addresses topics that we don’t even
have time to mention today
“FPLR” HANDBOOK
• Administration & Fiduciary Oversight
• Regulatory Requirements
• Technical Tasks
• Appendices (Some of the previous
Appendices have been moved to the IEA
website)
Try to be familiar with contents!
1. VERIFY YOUR DUES INCOME
You need to invest whatever effort is needed in
order to make sure that:
– Your employer collects the correct amount of dues
from all of your members/feepayers
– All of this money is turned over to you per your
contract’s terms
– All dues paid by your employer are deposited
intact
– Your IEA-NEA dues are paid in full & on
schedule
WHY IS THIS IMPORTANT?
• Your local dues are probably all that you have
to fund your local programs
• Your local is responsible for paying 100% of
your members’ IEA-NEA dues, even if you don’t
collect them
• If you don’t collect enough to cover the IEANEA obligation, the difference has to be made
up out of local funds
Remember: It’s your members’ money;
they deserve to have it used appropriately
WHAT COULD POSSIBLY GO WRONG?
• Local forgets to update the dues-per-member
provided to the employer at the beginning of
the year
• District reduces the number of pay periods for
withholding; local forgets to raise the duesper-pay-period accordingly
• Local pays/reimburses dues for too many
leaders and runs out of money
WRONG (Continued)
• Treasurer deducts (and pockets) cash when
depositing district’s checks
• Amount withheld per pay period is wrong and
it’s not discovered until the end of school year
• Treasurer and Membership Contact not on the
same page at year-end = late payment
penalties
RESOURCES
• FPLR manual
• Website
– Video
– Spreadsheets
• Other local treasurers/mentors
• IEA office
ANNUAL INFORMATION RETURN
• All IEA locals must file ONE of these forms
every year, based on the size of their “average
annual gross receipts”
• “Gross receipts”= All $$ collected, EXCEPT for
IEA-NEA dues
– Over $200,000= Form 990
– $50,000 to $200,000= Form 990-EZ
– Under $50,000= Form 990-N (“E-Postcard”)
ANNUAL INFORMATION RETURN
• All but about 30 IEA locals file the E-Postcard
• All except about 2 of these have authorized
the IEA to file the E-Postcard for them
• The other 30 file the 990 or the 990-EZ
• We strongly recommend that if you file the
990 or the 990-EZ, you hire a CPA to do it for
you
UNRELATED BUSINESS INCOME
• Income not related to union business
• Rarely occurs, examples:
• Rental income
• Newsletter ads (not sponsorships)
• Merchandise sales
• Need $1,000 in UBI to incur a tax liability
INCOME REPORTING REQUIREMENTS
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
1099-MISC
• Stipends: officers
(W-2 vs. 1099)
• Stipends: non-officers
• Payment of dues for officers/others
• Undocumented expenses: report even if
under $600
1099 ISSUES
•
•
•
•
Copy to recipient by 1/31
Copy to IRS by 2/28
Form is carbonized- can’t download
Also need “1096”
1099-MISC
1096
IRS NOTICES
• DO NOT IGNORE!
• Seek help
• Check TIN
• Keep copies/proof of delivery
IRS AUDIT
• Not likely, but . . .
• Random audits
• Reported by disgruntled members
OTHER IRS ISSUES
• You CAN make a profit!
• You MUST pay state sales tax
• To the IRS, almost all gift cards are TAXABLE
COMPENSATION
– Employees: Add to W-2 income
– Others: They “count” toward the $600 1099 threshold
– So try to avoid using them, but if you must, make sure
you keep good records (name, date, amount,
purpose)
TAXPAYER IDENTIFICATION NUMBER
• “Social Security Number” for
associations and corporations:
9 digits (xx-xxxxxxx)
• Need when opening a bank account
• Need when filing IRS forms
• IEA has your number on file
• IEA will apply for numbers when
needed
3. INTERNAL CONTROLS/FRAUD
PREVENTION
• Most fraud consists of theft or misuse of funds
• In many cases, fraud is actually easier to get
away with in nonprofit organizations
– Everyone knows and trusts each other
– Leaders aren’t trained in detection and
prevention
• Don’t think “It can’t happen here;” history says
otherwise
• Solution: Don’t be paranoid, just have good
controls in place
WHY DOES FRAUD OCCUR?
• Honest people: Financial pressures
– Medical bills
– Drugs/Gambling
– Investment losses
– Other financial needs
• Less-than-honest people: Perception
that no one will find out
PROGRESSION
•
•
•
•
$20/month for movie with spouse, then
$50/month for nice dinner, then
$500 for a new TV, then
Monthly house payment or son’s college
tuition
THE “FRAUD TRIANGLE”
YOUR JOB AS A LEADER IS…
• Know the signs of possible fraud, and
don’t be afraid to seek help if something
makes you uncomfortable
• Make sure there are good controls in
place
• Remember, even if today’s leaders are
100% honest, controls must be in place
just in case future leaders are not!
SIGNS OF POSSIBLE FRAUD: APPENDIX 4
• If you see the signs…
–
–
–
–
DON’T IMMEDIATELY ASSUME THE WORST!!
Probably just substandard business practices
Check with your U.D.
Don’t ignore the signs… this can end up
reflecting on you
• Completely arbitrary “Top 5 Signs of
Potential Fraud” list:
#5
• No “separation of duties” between President,
Treasurer, Membership Contact
#4
• Local is consistently behind in paying its IEANEA dues, especially at the end of the year
– Leaders need to stay on top of this and not accept
excuses such as “The check is in the mail” or “IEA
Membership keeps making mistakes”
#3
• Poor documentation of financial transactions
– No documentation at all
– Documentation is sloppy and poorly organized
– Documentation is insufficient
• Handwritten notes
• Photocopies of invoices
#2
• Local/Region deals in cash
– Checks payable to Cash
– Cash deducted from deposits
– Cash given to RA delegates as an advance
#1
• No oversight by the governing body
– No audit
– No financial reports
– No dual-signature requirement
– Bank statements sent directly to Treasurer
– No oversight over banking arrangements
AN OUNCE OF PREVENTION:
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
CONTROLS
• List of controls- Appendix 3 (NOT all-inclusive)
• Read the example on page 16
• Completely arbitrary “Top 5 Controls” list:
#5
• Don’t have credit or debit cards for your local
or region
– Convenience outweighed by risk
– Remember the future!
#4
• Have “Two Signatures Required” and two
signature lines on your checks
– Instruct the bank to require two signatures
– Don’t allow checks to be signed before they are
completely filled out
#3
• Have an independent audit
– Large locals- CPA
– Smaller locals, and regions: Audit committee
• No “insiders”
• Consider nearby local Treasurer, bookkeeping
teacher, etc.
• Give them a list of procedures
• Have them file a short report
#2
• Do not deal in Cash
– No checks written to Cash
– No cash deducted from deposits
– No cash given for travel
• Possible exception: SMALL petty cash
fund
#1
• Have the bank mail all statements to
someone besides the Treasurer
– Other person reviews statement and
cancelled checks, initials the statement, sends
to Treasurer
– Best way to prevent fraud involving checks or
other withdrawals
– However, it’s 90% worthless unless your bank
provides check copies
4. BUDGETING
Locals: No specific requirement, but there are at
least five good reasons to have one:
#5
• Argument prevention
– Expense items are discussed and approved long
before the expense is actually incurred
– Gives you a reason to deny requests for off-thewall spending requests (“It’s not in the budget”)
#4
• Makes members happy
– Gives them input on how you spend their money
– Shows you are carefully considering how their
money is spent
#3
• Helps you plan for future needs
– Manage your annual profit/loss
– Control the size of your “reserve funds”
– Set long-term financial goals
#2
• Avert financial disaster
– Overspend dues income so that there’s nothing
left to pay IEA-NEA
– Plan for “non-cash” expenses such as paying
leaders’ dues
#1
• IEA financial assistance: Mediation,
Factfinding, Arbitration
• Requirements:
– Local dues at least $15
– BUDGET containing at least $3/member for the
above items
5. IPACE FUNDS
• IPACE is funded by member contributions
• Your local (not region) can receive up to $15 per
contributing member as a “rebate” each year, to
be used for local political purposes
• Your obligations when requesting IPACE funds:
– Know the rules regarding use of the funds
– Keep them in a separate non-interest bearing bank
account
– Understand and comply with State disclosure
requirements
STATE POLITICAL REPORTS
• DO YOU HAVE TO FILE?
• One-time threshold: $5,000 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
•
•
•
•
•
•
•
OTHER IMPORTANT TOPICS
A. IEA-NEA dues payment
B. Banking
C. Accounting system
D. Financial reports
E. Policy- RA delegates
F. Treasurer transition issues
G. Annual calendar
A. IEA-NEA DUES PAYMENT
• Be aware of schedule
• Make sure you get the monthly IEA
statement from your Membership Contact
• Pay the amount on the statement
• Pay by the due date (avoid late payment
penalties!)
• Have employer pay IEA direct?
• See Appendix 10- How to read the
statement
PAYMENT SCHEDULE
November 1
December 1
January 1
February 1
March 1
April 1
May 1
June 1
July 1
August 1
10% of obligation
20% of obligation
30% of obligation
40% of obligation
50% of obligation
60% of obligation
70% of obligation
80% of obligation
90% of obligation
100% of obligation
B. BANKING ISSUES
• How to choose a bank
– Financial (interest and fees)
– Service (online banking ,etc.)
– Location (if you will be there a lot)
– Auditability
• Detailed monthly statement
• Copies of all transactions- checks, deposits, etc.
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.
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
SIGNATURES
• We recommend that all bank accounts require
two signatures
• So you will want at least three and perhaps
four or five people with the ability to sign
C. 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”
MY LOCAL HAS 200 MEMBERS, WHAT
ACCOUNTING SYSTEM DO I NEED??
• One size does not fit all
• Size/complexity of organization
• Prior treasurer’s system
• Current treasurer’s preference
BASIC REQUIREMENTS
Your system needs to:
• Record all transactions in sufficient detail
• Allow you to produce financial reports
efficiently
• Provide a record that others can follow
WHAT ARE MY CHOICES?
Some possibilities
• Checkbook/check stubs
• Cash receipts and disbursements
journals
• Excel/Access
• Specialized accounting software
(Quicken, etc.)
D. 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?
FINANCIAL REPORTS
• 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 and your outside reporting
requirements
SAMPLE REPORTS
MIDTOWN EDUCATION ASSOCIATION
STATEMENT OF RECEIPTS AND EXPENDITURES
EIGHT MONTHS ENDED APRIL 30, 2005
ACTUAL
2004
4,870
ACTUAL
2005
5,000
BUDGET
2005
5,000
REMAINING
BUDGET
0
RECEIPTS:
IEA-NEA Dues
Local Dues
Fundraisers
Interest
16,500
1,280
600
370
17,000
1,300
800
400
28,000
2,000
1,000
500
11,000
700
200
100
Total Receipts
18,750
19,500
31,500
12,000
16,500
0
600
240
335
17,000
0
500
400
400
28,000
300
800
500
600
11,000
300
300
100
200
17,675
18,300
30,200
11,900
NET INCREASE (DECREASE) TO CASH
1,075
1,200
1,300
(100)
ENDING CASH BALANCE APRIL 30
5,945
6,200
6,300
(100)
BEGINNING CASH BALANCE SEPTEMBER 1
PAYMENTS:
IEA-NEA Dues
Mediation/Fact-Finding/Arbitration
Meeting Expenses
Newsletter
Office Supplies
Total Expenses
E. POLICY- RA DELEGATES
Have a written policy on documentation and
reimbursement (See Appendix 5)
• Overall expectations
• What is covered/not
• Repayment of unspent funds
• Consequences
• Documentation requirements
• Donations to FCPE (NO!)
F. TREASURER TRANSITION ISSUES
• Treasurer candidates should be “qualified”
• “Full Disclosure” of job requirements
• There should be an orderly transition of
treasurers
• Demonstration/Instruction
• Written procedures/Calendar
• Books/Records in good order
• More info in FPLR handbook and on the
website
G. ANNUAL CALENDAR
• Don’t incur fines/penalties, or let important
things slip through the cracks!
–
–
–
–
Outside reporting deadlines
Internal reporting deadlines
IEA dues payment deadlines
Annual tasks such as Board review of banking
arrangements
– Milestones in the budget process
– Etc.
RESOURCES
• IEA website
– Publications
– Videos
– FAQs
– Tips for new Treasurers
– NEA information
RESOURCES
•
•
•
•
•
•
FPLR handbook
Annual training sessions
IEA Secretary-Treasurer
IEA Director of Business Services
Your local IEA office
Other IEA locals
New Treasurer Info
A Quick-Start Checklist of Financial and
Membership Processing Issues
CONGRATULATIONS!
• No matter whether this is your lifelong dream
or whether you were appointed while you
were out of the room… it’s your job now!
• High importance= high reward
OVERVIEW
• This is a “101 level” summary
• Detail on all topics is in the “fplr” book
• You may have circumstances that are not
covered here- ask questions!
GETTING STARTED
• FPLR manual
• Membership processing guide
• Info on IEA website
– Financial procedures
– IPACE (if applicable)
• Go to the annual training at your office
(or one nearby)
TRANSITION
• Your predecessor owes it to you and
your local to have everything up to date
and in order for you
• Review the “transitioning the treasurer”
material in the FPLR manual and on the
website for suggestions and checklists
• Remember your “transition experience”
at the end of your term!
IMPORTANT POINTS TO PONDER
• Don’t stay in a silo- the other officers
are expected to support you and
provide oversight over your activities
• Major problems occur when the
treasurer has no accountability or
oversight- don’t get offended about
checks and balances
• Don’t be shy about asking for help or
support in enforcing policies, etc.
MEMBERSHIP PROCESSING?
• If you are also the membership contact for
your local, direct training should come from
the IEA membership department
• If not, you still need to know the basics and
also work closely with your membership
contact
TOP 5 PRIORITIES
•
•
•
•
•
1. DUES COLLECTION & PAYMENT
2. CONTROLS
3. IRS REQUIREMENTS
4. BOOKKEEPING ISSUES
5. BUDGET
1. DUES COLLECTION
• IEA Computes a “dues obligation” for your
local based on your membership listing
• Your local is required to remit this amount to
IEA according to a predetermined schedule…
DUES COLLECTION
• ….Regardless of whether you collect all
of the dues from your employer
• So it is very important that between
you and the membership contact,
someone verifies that your employer is
paying you all the dues that they should
be!
• This is an ongoing process all year long
DUES COLLECTION
• Deposit checks as soon as they are received
• Or better yet - have them direct deposited
• Some locals have IEA-NEA dues sent directly
to Springfield
– Talk to Membership Department first
– You are still responsible for verifying accuracy
DUES PAYMENT
• Get a copy of the payment schedule
and make sure that all payments are
made on time
• Pay the amount on the statement!
• Watch for FCPE if applicable
• Make sure there is a zero balance at
the end of the year
• Watch for “late statements”
2. CONTROLS
• Your local is a business running on
other peoples’ money (your members)
• Checks and balances help prevent
fraud and serious errors
• Controls are good!
• Forget about “trust”
• Your officers need to help you enforce
them
CONTROLS: CHECKS
• Don’t sign checks payable to yourself
• Require original invoices from vendorsno copies or handwritten notes
• Two signatures
• Blank checks (signing/safeguarding)
• Make sure your bank sends copies of
your cleared checks!!
CONTROLS: OTHER
• See FPLR manual
• Have bank mail statements to someone
besides you!
• Don’t deal in cash!
– No checks paid to cash
– No $$ withheld from deposits
– Don’t give cash to members
• Annual audit!
AUDIT
• Options
– CPA
– Audit Committee
• Anything is better than nothing!
• Don’t develop a false sense of security
3. IRS
• Documentation
• Annual returns
CHECKS- GENERAL
• IRS requirement: supporting
documentation for all payments
–
–
–
–
Payee
Amount
Description
Business purpose
• Keep it where you can find it!! (Staple to
bank statement, etc.)
• Don’t accept handwritten notes as
documentation
CHECKS WRITTEN TO MEMBERS
• Be especially careful with
documentation
• Written guidelines on what will be
reimbursed
• Written guidelines for travel advances
• IRS 1099 rules for stipends, etc.
(Including dues paid on behalf of
officers)
• Gift cards are taxable compensation!!
MONEY RECEIVED
• IRS Requirement: supporting
documentation for all money received
– Payor
– Amount
– Description
– Business purpose
• Keep it where you can find it!! (Staple
to bank statement, etc.)
• Deposit checks when received
IRS RETURN
• ~920 locals- “e-postcard”
• IEA probably files for you - check with
business services to be sure
• ~30 locals- form 990 or 990-EZ
• Mostly filed by large mega-locals
• If you are one of the 30:
– Know the filing requirements
– Have a CPA do it!
4. BOOKKEEPING ISSUES
•
•
•
•
Bookkeeping
Banking
IPACE Funds
Treasurer’s Report
BOOKKEEPING
• Checkbook/excel summary/quicken
– Keep track of cash balance
– Prepare financial report
• Monthly bank reconciliation
• Filing system
– Bank statements/checks
– Documentation
BANKING
•
•
•
•
Opening a new account: call first!
Get copies of your checks!!
Shop around for low fees, etc.
Have the monthly statement (and check
copies) sent to someone besides you
• Keep the signature card up to date
• Keep your board apprised about
banking arrangements
IPACE
• Member contributions
• Local rebates*- your obligations:
– Know what it can be used for
– Know state reporting requirements
– Separate bank account/no interest
* You need to know if your local has an IPACE
account, and you need a general idea of how the
process works when you ask for money for the
first time
TREASURER’S REPORT
• Monthly!
• Keep your board informed
• Make available to members?
CALENDAR OF EVENTS
• Don’t incur fines/penalties, or let
important things slip through the cracks!
– Outside reporting deadlines
– Internal reporting deadlines
– IEA dues payment deadlines
– Annual tasks such as board review of
banking arrangements
– Milestones in the budget process
– Etc.
5. BUDGET
• Planning
– Manage your cash balance
– Make sure you don’t run out of money
– Spend on appropriate/useful things
• Qualify for IEA financial assistance
• Plenty of resources available
– FPLR manual
– Website
RESOURCES
•
•
•
•
•
•
•
•
IEA business services
IEA membership processing
IEA secretary-treasurer
IEA website
Training sessions
Other local treasurers
FPLR manual
If in doubt, ask your U.D.
Local President’s Responsibilities
•
•
•
•
•
•
•
Controls over member dues
Other loss controls
Theft controls
Bookkeeping and financial reporting
Budget
Awareness of government regulations
Atmosphere/Environment of honesty and
transparency
• Personnel considerations
CONCLUSION
• KNOW YOUR RESOURCES and don’t
hesitate to use them!
• If you’re not comfortable with how
something is being done, don’t be afraid
to say so
• Leave the job in better shape than you
found it
Thank You!
Any questions?