1. Financial Management for Geographic Units presented by Don C. Bramlett, PE, SMIEEE IEEE Region 4 Director-Elect

2. Agenda l Overview – IEEE Finances l Geographic Unit Funding l Protection of Funds l Q&A

3. IEEE Financial Management l IEEE is responsible for maintaining records for all units worldwide l Compliance with IEEE Policies is important; in particular to IEEE maintaining the Institute’s nonprofit tax-exempt status in the US l IEEE is incorporated in New York State & must comply with both State & US rules and regulations l IEEE’s Fiscal Year is the calendar year (1 January through 31 December) l Updated controls were established to ensure that the interests of the IEEE, its units and their officers are protected

4. IEEE Financial Management Geographic Units l Funds for geographic unit activities come directly & mostly from member dues l Treasurers & Section leaders make significant contributions to IEEE’s financial management by maintaining appropriate records & timely annual financial reporting l IEEE Geographic Units are not independent organizations but are essential components of IEEE l Subsections, Chapters & Affinity Groups are sub- units of Sections & their financial activities should be incorporated in the Section’s financials (L-50) l Geographic unit operations & reporting are to be based on the calendar year

5. Exemption from US Federal Income Tax l The IRS has determined that IEEE is exempt from US federal income tax as an organization, described in Section 501(c)(3) of the Internal Revenue Code l In a group ruling, the IRS has determined that IEEE’s US geographic units qualify for federal income tax exemption l No unit should separately apply to the IRS for exemption from US Federal Income Tax l Should any Unit be requested to apply by the IRS, contact the IEEE Tax Compliance staff immediately

6. Managing Section Assets Where is the Money Kept? l Concentration Banking program l Checking account in local bank l Custody Accounts (Regions 8-10) l IEEE Investment Fund l There are 971 accounts for 389 geographic units l 595 local bank accounts, cash & investment l 315 Concentration Banking accounts l 61 geographic unit participants in the IEEE Investment Fund

7. Concentration Banking Program Details l Wachovia Bank l Local unit retains control of funds l No monthly service charges or “per-check” fees l 6-month CD rate paid on daily account balances l Access monthly statements & cancelled checks online l Custody accounts maintained for non-US units l Units not required to submit bank statements with their annual financial report (L-50) for these accounts

8. Unit Local Bank Accounts l Must be opened in the legal name “Institute of Electrical and Electronics Engineers, Incorporated _______ Section (or Chapter)” l IEEE policy specifies that 2 local volunteers must be authorized signers on each account plus the IEEE Staff Director, Financial Services as an alternate signatory l Exemptions can be filed with RAB where local laws do not allow for IEEE Staff Director on accounts l Units submit signature/bank account card, signed by all authorized unit officers to the IEEE Regional Activities Department l IEEE staff will secure the signature of Staff Director, Financial Services & forward the card directly to the bank, with copies to authorized signers

9. Custody Accounts l Used in countries in Regions 8-10 to address: l Difficulties in exchanging currency l High fluctuations in exchange rates l Rebate is deposited to Section’s custody account l At the Section’s request, IEEE pays membership & renewal fees from this account, based on membership forms submitted by the Section l Accounts are interest bearing on their monthly balances l 47 active custody accounts

10. Geographic Unit Funding IEEE Sections Congress – October 2005

11. Section Rebate Program l Each Section receives US$2,000 plus l $3/member (including Students) l $4/Senior Member & Fellow l $1.50/Affiliate l $200/eligible Chapter & Affinity Group l $500/eligible Subsection l 10% bonus for reporting on time (Feb) l Activity bonus possible l Unit & subunits must comply with activity & annual reporting requirements

12. Additional Funding Sources l Region - Section Support Via Regions (SSVR) l Societies - Each Society has its own programs to support Section Chapter activities l Workshops/Tutorial/Conferences l Other IEEE Units (IEEE-USA, Life Members Committee) & programs l External Sources (industry support)

13. Appropriate Use of Funds l Technical, Non-Technical & Administrative meetings l Newsletters l Student Branch support l Distinguished Lecturers l Subsection, Chapter & Affinity Group support l Recognition Supplies (banners, plaques, pins, certificates) l Donations, with prior authorization from the IEEE Executive Committee

14. Inappropriate Use of Funds l Electioneering of any kind l Personal or commercial loans l Purchase of real estate, without prior authorization from the IEEE Executive Committee l Investment of surplus funds in any investment vehicle other than IEEE Investment Fund

15. l Contracts in excess of US$5,000 & less than US$25,000 can be executed (signed) locally with a copy sent to IEEE Procurement Department. l All contracts with a stated or expected value at or above US$25,000... negotiated & approved locally, executed (signed) at the Operations Center after review by subject matter experts. l Review by subject matter experts: l Staff, Legal, Volunteers (as appropriate) www.ieee.org/contractsonline contracts@ieee.org Contract Administration

16. l All units must prepare & submit an annual Financial Report (L-50) l Electronic submittal recommended (use Excel spreadsheet) l http://www.ieee.org/scsreports or l Hard copy submittal allowed l Account for all financial activity associated with the unit (revenue & expenses) l Include all unit & subunit data l One L-50 preferred or l Include an L-50 for each subunit l For questions: financial-report@ieee.org Unit Financial Reporting

17. Protection of Funds IEEE Sections Congress – October 2005

18. Heightened Awareness of Corporate Financial Activities l Evidence of this is in the news weekly, even daily l Major changes in corporate financial management processes were made in response l IEEE is a large corporation & annually must consolidate all of its units’ financial activities into a single financial report; IEEE retains an external auditor to audit its annual financial activities l IEEE selected Ernst & Young (E&Y) as its external auditor & IEEE financial activities are being reviewed l E&Y required, starting in 2005, that IEEE consolidate all Section financial activity; Section reserves for 2004 totaled US$14.2 million l As part of this decision, in 2005 E&Y conducted a bank account balance confirmation process for external accounts of several Sections l We expect E&Y to continue & expand on this process in the future

19. How is IEEE Addressing This for Geographic Units? l IEEE wants to ensure that the corporation, the units & unit officers are protected l To do this, we must ensure that all IEEE Organizational Units are empowered & expected to follow a set of sound financial practices l A volunteer & staff team in RAB looked at the financial processes of all geographic units l Regional Treasurers were kept current on progress & provided valuable suggestions & feedback l To this end, Regional Activities has implemented a series of best business practices that are common place in many organizations worldwide l These practices are presented in this part of the financial management presentation l We expect that many of the practices are already included as part of the Sections’ current financial management processes

20. Regional Activities Budget Management Philosophy l Keep the funds as close to the member as possible l Budget is managed by Volunteers l RAB Finance Committee reviews and endorses l Region Treasurers are corresponding members of RAB FinCom l RAB Committee Chairs provide oversight and endorsement of items included in RA Budget l 10 Region Directors/BoD members elected by the membership endorse the budget l Maintain metrics to ensure effective processes

21. Basic Asset Fund & Cash Controls l Review unit expenses – check register l Review monthly account activity l Submit original bank statements l Bank account signature cards l Annual audit process l Continuity/Volunteer transition

22. Review Unit Expenses – Check Register l Treasurer presents the Section/Chapter check register(s) to the Section ExCom on a periodic basis l Present check register at least 2 times per year l Check register includes: name, date, amount, budget line & purpose for each transaction (for example, expense reimbursement, services provided, etc.) l Request review & approval of check register report l Why? l Independent review of expenses l Ensure Section ExCom is informed & approves unit expenses

23. Review Monthly Account Activity l Section Chair & Treasurer periodically review the original monthly statements of account & compare to recent financial report l Treasurers should be reconciling account activity monthly l Chair/Treasurer will receive initial reminder from IEEE Regional Activities Department mid- November 2005 l Why? l Good practice for unit leaders to review account activity l Emphasize that more than one person has oversight of the financial records

24. Submit Original Bank Statements l Original bank statements for all local accounts (Sections, Chapters, Affinity Groups) must be submitted with the annual financial report (L-50) l Section officers may be asked to provide assistance in securing verification of account balances by E&Y or IEEE staff l Why? l To protect the integrity of the bank account information reported annually l Independent confirmation (verification) is required for annual IEEE Audit Note: Not required for Concentration Banking & IEEE Investment Fund participant accounts

25. Bank Account Signature Cards l Units submit signature/bank account card, signed by all authorized unit officers, to IEEE for the required staff signature & directly to bank l Why? l Ensure that appropriate authorized signers & accurate signatures are on all accounts l Protection of IEEE assets l Protection of unit Treasurer, Chair & unit ExCom

26. Annual Audits l Ensure that all geographic units conduct local audits on an annual basis l Units that have $100K or more revenue or expenses must continue to have a more formal audit l Getting Started l Implement a process to ensure audits are conducted by local volunteers (Pilot) l Units may be audited as part of the IEEE corporate audit process l E&Y may confirm account balances in local banks used by Sections for financial transactions l Why? l Required for annual IEEE corporate audit l Protection of unit Treasurer, Chair & unit ExCom

27. Continuity & Volunteer Transition l Both outgoing & incoming Section Chairs/ Treasurers sign off on annual L-50 financial report l Begin with 2005 Financial Report signed by 2005 & 2006 Chairs & Treasurers l Why? l Ensures the smooth transition of officers & mutual understanding of the unit’s financial status by both sets of officers l Protection for both outgoing & incoming Volunteer Officers

28. 2005 L-50 Changes l Complete & submit external account balance confirmation form to facilitate possible E&Y requirements l Submit original bank statements for local accounts l Signed by outgoing & incoming Section Chairs & Treasurers l To ensure that consolidation can be completed in a timely manner, L-50s are to be submitted by 31 March instead of 30 June (Pending RAB approval in Nov 2005)

29. Summary l Bi-annually: l Review check register l Monthly: l Review accounts l Annually: l Review & update bank signature cards l Conduct local Section audit l Assist in IEEE Audit if requested l Consider Concentration Banking program/ custody account l Easiest way to be compliant with most of the IEEE processes & policies

30. Assistance is Available l IEEE Treasurers’ Handbook l http://www.ieee.org/treasurers l IEEE Policy Manual l http://www.ieee.org/policies l Section 11 addresses financial management issues to be addressed by Chairs & Treasurers l IEEE Financial Operations Manual l http://www.ieee.org/about/whatis/policies/finop smanual.pdf l financial-report@ieee.org