From the Shredded Files of From the Shredded Files of Big BusinessBig Business

From the Shredded Files of From the Shredded Files of Big BusinessBig Business

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Financial PoliciesFinancial PoliciesPam Baker and Ernest Werstler

Corporate Failures• ENRON, • WORLDCOM, • SUNBEAM, • TYCO, • RITE-AIDE• ??????

COMMON THREADS• Lack of oversight

– By board of directors– By Senior Executives– By Outside Professionals

Good Board Policies• Policies are Board action;

– Set minimum standard; reference law – Outlines what the Board expects and

what the board will do.– Allow procedures (how policy gets

converted to action) to be set by Administration

BOARDFINANCIAL POLICES

• Effective Guidelines for establishment of policy:– Affix responsibility (Board committee)– Role of administration– Role of solicitor– Frequency of review/revision

Fiscal Objectives• Board has the authority and

responsibility to prepare and adopt budget; approve bids, levy taxes and approve each expenditure of the District.

BOARDFINANCIAL POLICES

• FISCAL OBJECTIVES:– Outline what the Board expects as to

the fiscal program, reporting of the District• Adherence to laws and regulations• Empowerment of Administration• Methods for effective monitoring

(reporting, audits, etc)

Fiscal Objectives• Institute effective business

practices by Administration.

• Appropriate staff, equipment and technology as recommended by Administration.

Fiscal Objectives• Allow Superintendent and Business

Manager to take actions prior to approval by Board:– Enter into agreements/contracts that

are consistent with approved budgets and in compliance with bid requirements.

– To Pay:

Fiscal Objectives– Payments due under contracts which

have been approved by board– Payroll costs, personnel expense

reimbursement– Utilities – Invoices result of emergency situation– Invoices subject to discount or penalty

BOARD POLICY ON BUDGET PREPARATION• Outline how board wants

– budget presented, – timeline, – approval process, – public comments, – fund balance target.

BOARD POLICY FOR TAX COLLECTION

• Procedure in event of vacancy• Bonding requirements• Setting of salary and/or

commission for next term.

TAX COLLECTOR• Guidelines for Tax Collector

– When deposits are made– Monthly statements of taxes collected– Meet with Finance committee of board – Audit of office yearly– Delinquent tax certification and

submission to tax claim

BOARD POLICY ON DISTRICT AUDIT

• Annual audit by independent, certified public accountant.

• Auditor General’s office audit• Audit by special interest groups

not permitted.• Available to general public

BOARD POLICY FORINVESTMENT

• Objectives:– Legality – applicable laws of PA– Preservation of capital– Liquidity to meet operating

requirement– YieldReporting requirements

STUDENT ACTIVITY FUNDS

• Reference to PASBO guide• Funds raised by students and

expended for purposes related to the activity with student participation in decision in decision making process

• Internal Control and audit

BOARD POLICY FOR CAPITALIZATION

• Objectives:– Continuity of reporting– Adherence to accounting principles– Consistency between reporting

periods– Effective use of estimates

Auditor Expectations• Board oversight• Administration adherence to Board

policy• Documented accounting

procedures

Board Oversight• Existence of policy• Determined through

communication with finance/audit committee

• Tests of selected transactions (bid approvals, new hire approvals, etc)

Adherence to Board Policy

• Effectiveness of written procedures• Communication throughout

organization• Determined through tests of

transactions• Evaluation of integrity of

management

Documented accounting procedures

• Statewide accounting manual• Identification of internal control

cycles• Procedures to explain flow of

activity, including approvals and personnel involvement

Pitfalls• Uninformed

Board• Confusion within

organization• Audit issues• Unwanted

publicity