From the Shredded Files of Big Business

1
From the Shredded Files of Big Business

• Assuring safeguards with effective
• Financial Policies

Pam Baker and Ernest Werstler
2
Corporate Failures

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

3
COMMON THREADS

• Lack of oversight
• By board of directors
• By Senior Executives
• By Outside Professionals

4
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

5
BOARDFINANCIAL POLICES

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

6
Fiscal Objectives

• Board has the authority and responsibility to
  prepare and adopt budget approve bids, levy
  taxes and approve each expenditure of the
  District.

7
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)

8
Fiscal Objectives

• Institute effective business practices by
  Administration.
• Appropriate staff, equipment and technology as
  recommended by Administration.

9
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

10
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

11
BOARD POLICY ON BUDGET PREPARATION

• Outline how board wants
• budget presented,
• timeline,
• approval process,
• public comments,
• fund balance target.

12
BOARD POLICY FOR TAX COLLECTION

• Procedure in event of vacancy
• Bonding requirements
• Setting of salary and/or commission for next
  term.

13
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

14
BOARD POLICY ON DISTRICT AUDIT

• Annual audit by independent, certified public
  accountant.
• Auditor Generals office audit
• Audit by special interest groups not permitted.
• Available to general public

15
BOARD POLICY FORINVESTMENT

• Objectives
• Legality applicable laws of PA
• Preservation of capital
• Liquidity to meet operating requirement
• Yield
• Reporting requirements

16
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

17
BOARD POLICY FOR CAPITALIZATION

• Objectives
• Continuity of reporting
• Adherence to accounting principles
• Consistency between reporting periods
• Effective use of estimates

18
Auditor Expectations

• Board oversight
• Administration adherence to Board policy
• Documented accounting procedures

19
Board Oversight

• Existence of policy
• Determined through communication with
  finance/audit committee
• Tests of selected transactions (bid approvals,
  new hire approvals, etc)

20
Adherence to Board Policy

• Effectiveness of written procedures
• Communication throughout organization
• Determined through tests of transactions
• Evaluation of integrity of management

21
Documented accounting procedures

• Statewide accounting manual
• Identification of internal control cycles
• Procedures to explain flow of activity, including
  approvals and personnel involvement

22
Pitfalls

• Uninformed Board
• Confusion within organization
• Audit issues
• Unwanted publicity