From the Shredded Files of Big Business Assuring safeguards with effective Financial Policies Pam 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

BOARD FINANCIAL 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.

BOARD FINANCIAL 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 FOR INVESTMENT Objectives: –Legality – applicable laws of PA –Preservation of capital –Liquidity to meet operating requirement –Yield Reporting 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