Accounting Policies and Procedures Manual
Sarah Wilkening, School Finance Manager
|Reviewed By |
MDS Board of Directors
MDS Board of Directors
- 1.00 BACKGROUND INFORMATION
- 2.00 CHART OF ACCOUNTS
- 3.00 ACCOUNTING PRINCIPLES & PROCEDURES
- 4.00 CASH DISBURSEMENTS
- 5.00 CASH RECEIPTS
- 6.00 BANK RECONCILIATION
- 7.00 END OF MONTH ACCOUNTING PROCEDURES
- 8.00 END OF YEAR ACCOUNTING PROCEDURES
- 9.00 COST ALLOCATIONS
- 10.00 INVESTMENTS
- 11.00 DEBT
- 12.00 RESERVES AND DESIGNATED FUNDS
- 13.00 INTERNAL CONTROLS AND FINANCIAL AUDIT
- 14.00 COMPLIANCE
- 15.00 BUDGETING
- 16.00 COMPUTER AUTHORIZATION AND BACKUP
- 17.00 ACCESS TO RECORDS AND RECORD RETENTION
- 18.00 SAMPLE ACCOUNTING FORMS
- 19.00 MAINTENANCE OF ACCOUNTING POLICIES AND PROCEDURES MANUAL
- 20.00 PREPARATION OF INFORMATIONAL RETURNS
- 21.00 PROPERTY AND EQUIPMENT INVENTORY
- 22.00 GRANTS AND CONTRACTS
1.00 BACKGROUND INFORMATION
1.01 Tax Status & Purpose
The following manual is a description of the accounting system and responsibilities for the accountant of Milestone Democratic School, Incorporated. Milestone Democratic School, Incorporated is a not-for-profit organization incorporated as a 501(c)(3) organization. Milestone Democratic School, Incorporated is registered with the Secretary of State in Wisconsin with a June 30th year end. Milestone Democratic School, Incorporated is also registered with the Wisconsin Department of Regulation and Licensing to raise funds from the general public. The articles of incorporation state that the purpose of the Milestone Democratic School, Incorporated shall include:
to establish and maintain a school for the education of especially educationally-disadvantaged members of the community, including youth in poverty, migrant and immigrant youth, youth racialized into oppressed identities, youth with disabilities, LGBTQ+ youth, and youth living with trauma, that:
- is founded upon the principles of restorative, consensus-driven, participatory design;
- provides a curriculum determined by the iterative design of students, teachers, families, and communities;
- considers the responsibilities of governing the school to be a core learning component of the school, to be shared democratically among students, families, staff, and representatives of the community;
- and maintains a critical, iterative approach to its structure which allows on-going innovations in democratic participation.
In accordance with IRS Code section 501(c)(3) the Milestone Democratic School, Incorporated is organized and operates exclusively for the exempt purpose as described in Form 1023, the application for exemption. In compliance with the restrictions on organizations qualifying under the 501(c)3 code:
- No part of the net earnings of the organization may inure to the benefit of any private shareholder or individual.
- No substantial part of the activities of the organization may consist of the carrying on of propaganda or of attempting to influence legislation (lobbying).
- The organization may not participate in, or intervene in, any political campaign on behalf of any candidate for public office.
Milestone Democratic School, Incorporated is organized as a public charity under Section 509(a)(2) of the Internal Revenue Code as an organization that normally receives:
1) no more than 1/3 of its support from gross investment income and unrelated business taxable income (less section 511 tax) from businesses acquired by the organization after June 30, 1975, and
2) more than 1/3 of its support from contributions, membership fees, and gross receipts from activities related to its charitable, etc. functions.
1.02 Service Area
The primary service areas include the surrounding Neighborhood Community.
2.00 CHART OF ACCOUNTS
Cash Accounts 10###
Receivable Accounts 11###
Prepaid Accounts 12###
Land & Building 15###
Furniture & Equipment 16###
Other Assets 18###
Current Accounts Payable 20###
Accrued Payroll & Payroll
Taxes Payable 21###
Accrued Liabilities 23###
Deferred Revenue 24###
Mortgages and Notes
2.03 Net Assets (Fund Balance)
Net Assets 3####
Rental Revenue 40###
Contributed Revenue 41###
Program Revenue 42### Other Revenue 43###
Personnel Expenses 50###
Office Expenses 51###
Building Expenses 52###
*repairs & maintenance
*garbage & snow removal
Program Expenses 53###
Administration Expenses 53###
Printing & Promotion 54###
Other Expenses 55###
(Note: Description should be provided for each account.)
3.00 ACCOUNTING PRINCIPLES & PROCEDURES
The accounting principles of Milestone Democratic School, Incorporated will be consistent with all applicable laws. These include: Generally Accepted Accounting Principles, Statements of Financial Accounting Standards Numbers 93, 116 and 117, SOP 87-2 on Joint Costs, SOP 94-2 on the applicability of the accounting rules to nonprofits, and SOP 98-3 on accounting for federal awards.
Certain procedures resulting from these accounting pronouncements and releases are discussed below.
3.21 Revenue Recognition
Contributions will be recorded as revenue in the period received or the period in which a pledge is received. Any pledges receivable will be closely reviewed each month to determine whether the amount is still collectible and whether the balance of the pledges receivable is adequately reserved with the allowance for doubtful pledges.
Rents will be recognized in the period for which the rent is paid. Any rents receivable will be reviewed monthly to determine if the amounts are collectible and to review what collection actions are being taken.
Grants which are classified as exchange transactions with the grantor will be recognized as revenue when the grant money is earned. This will generally be determined by the costs reportable to the grantor. Each restricted grant will be set up as a separate cost center to allow for accurate and consistent recording of the expenses of each grant.
3.22 Matching of Revenues and Expenses
In order to present accurate and consistent financial statements, the revenues and expenses attributable to each period will be reflected in that period to the degree possible. The Chapters on month and year end procedures review this in greater detail. Generally, all entries required to accurately reflect the revenues and expenses of each period will be made in that period.
The organization records transactions on the accrual basis of accounting.
3.23 Fixed Assets and Depreciation
The general capitalization policy is that all equipment and other fixed assets costing in excess of $5,000 will be recorded as an asset. To determine if a repair or improvement will need to be capitalized, the following additional factor needs to be considered: does the expenditure extend the useful life of the asset repaired or improved? For example painting would not be capitalized, but replacing the boiler or repairing the roof would be capitalized, if the dollar value was in excess of $5,000.
All capital assets will be depreciated over their estimated useful lives. The straight line basis will be used, with depreciation charged beginning in the month that the asset is placed in service. Some sample estimated lives are:
Computers and related equipment — 3 years
Office furniture — 5 years
Building and building
improvements — 40 years
Parking lot and landscaping — 10 years
All capital assets purchased with grant or other restricted funds will be cataloged.
See Section 21 for property and equipment inventory and management.
3.24 Donated Materials and Services
Generally donated materials, assets and services will not be recorded in the accounting records.
In order to comply with the rules of SFAS 116, certain services would be recorded as revenues and expenses. Such services would be those professional services which we would otherwise have paid for which were provided by a person whose work would normally include providing those services.
Any donated assets which would meet the definition to be capitalized, outlined in Section 3.23, will be recorded as revenue and as a fixed asset.
3.25 Data Cutoff
In order to meet the deadlines for producing reports discussed in Section 7 & 8, the gathering of information to use in making the month end entries must be cutoff by a certain date.
The monthly financial statements are due to the Board by three weeks after the month end. For these reports a cutoff of two weeks will be used. Any payables or other information not available by two weeks after a month end will be classified in the next period. The Accountant may need to use estimates if final information is not available on a significant additional transaction.
The year end financial statements are due to the Board six weeks after year end. For these reports a cutoff of four weeks will be used. Since the year end is the most important period cutoff, the general ledger will continue to be held open for additional material transactions through the conclusion of the financial audit fieldwork.
3.26 Donations, Gifts, Bequests
The School may accept and use any donation, gift of money, object, materials, property, or bequest for a purpose deemed by the Board or their designee to be of benefit to the School and consistent with the vision and mission.
No gift shall be given or received for the purpose of influencing an individual employee, Board member, or other influential person.
All gifts and bequests shall become property of Milestone Democratic School to be used at the discretion of the School, including funds raised by non-school groups through fundraising activities whose proceeds go to the School.
Gifts to the School, exceeding $5000.00 must be accepted by the Board of Directors. The EC may accept gifts made to the School of a lesser value without formal Board acceptance.
A preferred use specified by the donor shall be taken into consideration in determining the use to be made of the gift.
The School shall not discriminate in acceptance and administration of gifts, bequests, scholarships and other aids, benefits or services to students on the basis of sex, gender identification, race, national origin, creed, pregnancy, marital or parental status, sexual orientation, or physical, learning, emotional, or mental disability. All discrimination complaints shall be processed in accordance with established procedures.
Gifts will not be accepted when they:
1. Result in the association of the School with a person or entity that may be seen as
disreputable or otherwise inappropriate.
2 Bring undesirable or hidden costs to the School.
3. Be inappropriate or harmful to the best education of pupils.
4. Require endorsement of any business or product.
5. Be in conflict with any provision of the School’s policies or public law.
No School employee, including those employees associated with Educators’ Cooperative, is to accept any commission, expense paid trips or anything of value from individuals or companies for promoting equipment or materials required in the operation of the schools. “Operation of the Schools” includes the purchase of materials for the repair and maintenance of the school plant, for the conducting of student classes, for materials and supplies used in school organizations, such as clubs, and for comparable items.
A School receipt will be provided for all gifts of money. The receipt will indicate the donor, amount received and purpose of the gift.
The funds shall be deposited intact in the designated School depository as soon as possible.
The EC shall be responsible for the proper accounting of all gifts of money and shall do so in accordance with the School’s Accounting System.
The Board of Directors will publicly recognize individuals, organizations, and businesses that provide a contribution to the School, unless anonymity is requested by the donor.
The Board recognizes that some potential donors would prefer to make an anonymous contribution to the education and future of our children. Such donors are encouraged to contact the EC regardless of the category or size of the contribution. Upon acceptance of such gifts, the EC will make every reasonable effort to guarantee the privacy of the donor.
4.00 CASH DISBURSEMENTS
The positions authorized to sign checks are; Director of Operations, Director of Learning, Board President, Board Vice-President and Board Treasurer. Only one signature will be required on checks. Anyone signing a check must review the supporting invoice or other documentation. Individuals may not sign a check payable to themselves.
The Accountant will maintain the accounts payable system. Prior to payment, the Accountant will code each invoice and organize the documentation. The accountant will review banking activity and cross-reference it with invoices and check images provided.
4.21 Capital Acquisitions
Three bids are required for the purchase of budgeted capital assets in excess of $5,000, if practical. The Director of Operations selects a bidder. Board approval is required if the low bidder is not selected, or if bidding was not deemed practical by the Director of Operations. Any capital assets not budgeted by the Board must be approved by the Board prior to soliciting bids.
4.22 Supplies, Services, and Other Invoices
Purchase requisitions may be generated by anyone in the office. The requisitions are submitted to the Director of Operations for approval. Once approved, any of the following individuals are authorized to make the purchase: Director of Operations, Director of Learning. The approved purchase requisitions are given to the Accountant and filed with any estimate/invoice.
When the goods or services are received, the office assistant pulls the purchase requisition and compares the order received to the packing slip and the purchase requisition for accuracy. The packing slip is submitted to the Accountant to file with the approved purchase requisition and estimate.
Mail is received and opened by the office assistant in the presence of the Director of Operations. All invoices are routed to the Accountant, who matches the invoice to the approved purchase requisition and the packing slip and determines an account coding for the transaction. The Accountant gives the invoice and support documentation to the Director of Operations for payment. The Director of Operations submits check images and receipts to the Accountant proving payment. The Accountant enters this payment into the accounting software. Once the payment has cleared with the bank (check is deposited by recipient), the Accountant matches the transaction from the bank activity to the invoice and payment.
4.23 Invoice Payment Procedures
Invoices (that are not on autopay) are paid as invoices arrive or as money is available to pay them (whichever is later). Prior to writing checks, the Accountant generates a list of invoices needing payment with due dates. The Director of Operations reviews this list and indicates the invoices from the list that should be paid (ideally all of them). This list is provided to the office assistant who writes the checks and addresses the envelopes. The Director of Operations signs the checks and submits images of the checks to the Accountant for review and filing. The checks are sealed in envelopes by the check signer.
4.24 Payroll Procedures
Milestone does not have employees and as such defers to its contractors to develop their own Payroll Procedures.
5.00 CASH RECEIPTS
Dual controls over cash and checks received in the mail will be maintained.
The Office Assistant will receive and open the mail in the presence of The Director of Operations in order to maintain dual control over receipts.
Pre-numbered receipts will be used for any monies received directly from an individual.
The office assistant will scan each check received or pre-numbered receipt to log its presence.
The Director of Operations will restrictively endorse all checks when received and submit the scan of the check to the Accountant.
The office assistant will make daily bank deposits.
If the Office Assistant is unavailable to perform these duties, the Director of Operations will assign an employee other than the Accountant to carry them out.
6.00 BANK RECONCILIATION
The Director of Operations and the Accountant conduct a bank reconciliation and adjust the general ledger at least monthly.
Bank statements are available online, however will not arrive in the mail.
Bank activity has been feeding into the Accountant’s software in real-time throughout the month and has been coded/categorized in real-time.
After a month has closed, the Accountant prepares the monthly bank reconciliation (see Section 18) and provides a report of financial transactions for the Director of Operations to review.
The Director of Operations reviews all checks listed from the bank activity for unusual items or charges and reviews all categorizations of all invoices or payments accrued for the month.
The Accountant will work with the School Developer to adjust the general ledger to reflect all transactions found in the reconciled bank statement.
After the general ledger is reconciled to the bank statement, the monthly bank statement and cancelled checks and other forms and the actual reconciliation form are filed in the bank reconciliation file.
7.00 END OF MONTH ACCOUNTING PROCEDURES
The Accountant prepares the monthly financial statements that are reviewed by the Director of Operations and then the Board of Directors.
The Board of Directors approves the monthly financial statements.
The cutoff for information in the monthly statements is two weeks after the month end.
Upon completion of the monthly bank reconciliations, the Accountant will formulate the monthly journal entries. There are two types of monthly journal entries, those that remain consistent from month to month (recurring) and those that are specific to that month. The recurring journal entries (Section 18) are determined after the annual audit with the help of the CPA firm. These include depreciation and expensing of prepaid insurance. The specific journal entries include recording of principal/interest breakdown for the mortgage payment, interest and dividend income, bank transfers, NSF checks, bank charges, receivables, etc.
The Accountant will maintain a file for each month which includes workpapers which document the balance of each balance sheet account. The file will also include copies of the grant billings. All balance sheet accounts will be reconciled monthly to help ensure that accurate statements are provided to management and the Board.
Once the final general journal entries are posted, the monthly financial statement is printed along with a copy of the general ledger for that month as well as the general journal entries posted.
The Director of Operations approves the financial statements before being sent to the Board of Directors. The financial statements should be to the Director of Operations at least two days prior to the mailing of Board packets in order to facilitate this review.
The adjusted financial statements are to be delivered to the Board of Directors within three weeks after the end of the month.
The Accountant prepares a budget to actual expense report for the Director of Operations and the Board of Directors to be included with the monthly financial statements.
The year end financial statements will be delayed for additional procedures (see Section 8.0).
8.00 END OF YEAR ACCOUNTING PROCEDURES
The Accountant prepares the year end financial statements and works with the external financial auditing firm.
The Board of Directors approves the year end financial statements.
The Accountant is responsible for preparing for the annual financial audit and for working with the outside accountants to complete the audit.
The cutoff for June financial statements is extended to four weeks after year end.
Upon completion of the June financial statements, the preliminary year end report is run by the Accountant and given to the Director of Operations for review.
The Director of Operations approves the financial statements before being sent to the Board of Directors. The financial statements should be sent to the Director of Operations at least one week prior to the mailing of the Board packet in order to facilitate this review.
The Accountant calculates the recurring entries (with the help of the CPA firm if needed) for the new year.
The Accountant will arrange to move all physical file records from the year which is closing to storage.
8.21 Financial Audit
The Accountant will contact the independent accountants as soon as the Director of Operations signs the audit engagement letter to begin planning the scheduling and work needed to complete the audit. The Accountant will ensure that adequate space is provided for the independent accountants to work in our offices if the audit happens in-person. This would include one or more large tables, space to keep our records provided to the independent accountants, light and electrical outlets.
The Accountant will work with the independent accountants to determine what confirmations will be required. This process will be completed as soon after year end as possible. The Accountant will oversee typing the confirmations. The Director of Operations will review and sign the confirmations. The Accountant will mail the confirmations to the independent auditors.
The Accountant will be responsible for preparing as many of the schedules which the auditors will use as possible. The completed monthly reconciliations for June will partially fulfill this requirement.
Some of the information which needs to be organized and made available includes: the complete general ledger for the year, a chart of accounts, all bank statements and cancelled checks, all paid invoices, all W-9’s for contractors paid, all cash receipts (scanned), 941s, UC-101s, and W-2s, Board minutes for the year under audit through the most recent minutes available, grant contract files, printouts of the donor database (including all restricted donations), lease agreements, insurance policies, documentation for fixed assets capitalized and documentation for donated services or donated assets recorded in the general ledger.
The Accountant will be available at all times throughout the audit to facilitate the work of the independent accountants. The Director of Operations will schedule some time to meet with the independent accountants as needed during the audit. The Office Assistant will also be available for any work which the Accountant may delegate to them.
The Accountant and Director of Operations will plan a meeting with the independent accountants at the end of the audit to discuss any issues raised, review the audit journal entries, evaluate the audit process, and plan improvements for the following year.
9.00 COST ALLOCATIONS
Milestone Democratic School, Incorporated is required to follow various guidelines for allocating costs which benefit more than one program or grant. A cost allocation plan will be adopted each year which satisfies the requirements of all grants for that year. This cost allocation plan will need to be modified any time a new program is started or at the end or beginning of any fiscal year grants. Due to the frequent modifications to the cost allocation plan, it will be maintained outside of this accounting procedures manual. The plan will contain at least the following information: the grant name and breakouts (percentage or dollar amounts) of the funding that goes to categories of Personnel, Equipment, Travel, Professional Development, and others.
9.20 Curriculum Development Cost Allocations
Milestone Democratic School, Incorporated can approve contracts for curriculum development each year for staff as needed throughout the year and summer. Up to a maximum of $35,000 total per year can be allocated as curriculum development to be reimbursable by the Wisconsin Charter School Implementation Grant.
Cash not needed for immediate working capital will be transferred to interest bearing investments, unless the funds are designated for a particular account.
Milestone Democratic School, Incorporated will maintain collateralization of the total at any one bank in excess of the FDIC coverage. If this is not deemed to be practical or cost effective, a second bank will be used.
The Board of Directors must approve any investments beyond the options listed below.
Milestone Democratic School, Incorporated will maintain a money market account at the same bank where the checking account is maintained. Certificates of deposit may also be used to invest excess cash. The Director of Operations will initiate the transfer of funds or setting up new certificates of deposit based on the projected cash flow requirements and budgets of Milestone Democratic School, Incorporated. The Accountant will prepare the projected cash flow requirements as requested by the Director of Operations.
The operating reserve fund and any cash designated by the Board will be maintained in a money market account or certificate of deposit. The Board will specify the investment method for the operating reserve and for each designated fund, so that the timeline of the investment will match the timeline of the reserve or designation.
Board approval is required for incurring any debt of Milestone Democratic School, Incorporated other than operating trade payables and budgeted payroll payables. The Director of Operations will be authorized to negotiate such debt as needed by the Board of Directors.
Any loan covenants and restrictions will be reported to the Board when the debt is authorized. The Accountant will periodically review these covenants and report to the Director of Operations if there are any violations or potential violations of the covenants.
The Director of Operations and Board President or Treasurer will sign any debt agreements after receiving full Board approval.
The Accountant will reconcile the general ledger debt balances to statements or amortization schedules each month. In addition, accrued interest will be recorded in the general ledger as needed.
12.00 RESERVES AND DESIGNATED FUNDS
Milestone Democratic School, Incorporated will have a plan to build and maintain an operating reserve to assist in maintaining financial stability. The target for the operating reserve will be six months of general operating expenses. This will be a cash reserve held separately from other funds of Milestone Democratic School, Incorporated. The reserve may be invested consistent with the investment policy of Milestone Democratic School, Incorporated. Any income of the reserve fund will stay in the reserve fund.
The Board of Directors may designate portions of the net assets of Milestone Democratic School, Incorporated for specific purposes.
During the annual budget preparation, the Board will review the operating reserve and set a target for funds to be set aside that year. The Director of Operations will establish and maintain the operating reserve bank account as directed by the Board.
Designation of net assets will be made by resolution of the Board. A purpose and timeline must be specified for each designated fund. The designation may also specify whether a separate cash fund is to be used.
13.00 INTERNAL CONTROLS AND FINANCIAL AUDIT
The review of internal controls and the annual audit are two of the most important procedures the Board has for fulfilling for its fiduciary responsibilities to Milestone Democratic School, Incorporated.
Internal controls pertaining to the accounting records are established by the Director of Operations and Board Treasurer in consultation with the Accountant.
The Board of Directors selects the public accounting firm which will perform the year end financial audit. The financial audit report is presented to the Board of Directors who has the authority to approve the audit.
Whenever there is a change in administrative personnel or a change in the operating structure of the organization, the Treasurer and Director of Operations will meet to determine that the internal control system continues to meet the needs of Milestone Democratic School, Incorporated. If appropriate, the changes will be reflected in this accounting procedures manual.
The key features of the internal control system are that the Accountant, who maintains the property management software, is not involved in handling checks and cash received, signing checks, transferring money or establishing cash accounts or investments and does not receive the unopened bank statement (if they come via snail mail). The other aspect of this is that the Accountant reviews the transactions of the other employees and is responsible for noting any problems to the Director of Operations or directly to the Board Treasurer or President.
The Board of Directors will approve, as part of the budget process, the public accounting firm to perform the annual audit.
The Board Treasurer will attend the audit exit conference at the conclusion of the audit. The public accounting firm will present the audit to the Board each year. The Board will review and approve the financial audit.
The Accountant and Director of Operations will be responsible for scheduling the audit, preparing the information needed by the auditors and answering questions during the audit.
In order to continue receiving government grants and restricted donations, Milestone Democratic School, Incorporated must have systems in place to ensure compliance with the restrictions imposed by those grants and restricted donations.
The Accountant is designated as Milestone Democratic School, Incorporated ‘s compliance officer and will be responsible for overseeing the compliance with all applicable grant restrictions.
The Director of Operations will be responsible for communicating the nature of all donor restrictions to the Accountant. This information will be used to ensure that the General Ledger restricted donations account will reflect the restricted donations and the spending of those restricted amounts, as appropriate.
14.21 Compliance Committee
If Milestone begins to claim Title I through IV funding, a compliance committee will be formed. The compliance committee will be chaired by the Accountant and consist of the Director of Operations and primary program personnel. The Accountant will be responsible for discussing new compliance requirements in the grants which fund the programs with the committee. The Accountant will be responsible for preparing a report documenting how Milestone is ensuring compliance with grant rules in all Title grant programs. The Accountant will also produce a similar report for overall compliance procedures of the agency. These reports, plus any correspondence with granting agencies regarding compliance issues, will be kept in a central compliance file.
The compliance committee will also oversee the maintenance of grant files. The grant files will contain the final signed copy of the grant, any addenda, and correspondence.
14.22 Restricted Donations
The Director of Operations will maintain a record of all restricted donations in the donor database so that periodic reports of the year’s cumulative restricted donations can be produced. When a restriction has been satisfied, that will be noted in the database. If appropriate, the Director of Operations will be responsible for communicating the satisfaction of the restriction to the donor.
The Director of Operations will forward copies of each month’s new and outstanding restricted donations to the Accountant. The Accountant will create a journal entry each month to ensure that the restricted donations are correctly presented in the financial statements.
14.23 Wisconsin Charter School Program Grant Allowability Determination Procedure
When it is determined by the Director of Operations and Accountant that the salary and/or wages of an individual operating under a co-employment contract with the School and the EC may be allowable under the Charter School Program (“CSP”) grant, the following procedure shall be used:
The Director of Operations shall consult the grant requirements identified in the “Allowable Costs Guide” and also consult with technical assistance organizations (i.e. Wisconsin Resource Center for Charter Schools) to confirm eligibility.
The Director of Operations shall prepare a written justification for the allowability of the individual’s salary and/or wages, with specific reference to grant requirements and technical assistance. The written justification shall include a distribution of the individual’s time as a fraction of their Full Time Equivalency employment, based on the individual’s actual work schedule described in the individual’s employment contract and adopted work schedules of the EC.
Any individual whose salary and/or wages are determined to be allowable under the CSP grant shall maintain a weekly “Time and Effort Log” according to a template provided by the Director of Operations, which shall indicate hours of allowable time and tasks for each work day. This Log shall be signed and submitted to the Director of Operations weekly.
As the School does not serve as direct employer of any individuals, but instead operates under a contractual agreement with an independent Educators’ Cooperative (“EC”), the EC shall include in monthly billing invoices for services the total number of hours of allowable salaries and/or wages as a percentage of the total invoice for services. This agreement shall function in lieu of the School tracking allowable salaries and/or wages via a payroll system.
The Accountant shall prepare claims for the CSP grant for all such salaries and/or wages, and shall include the Time and Effort Logs as well as the distribution calculation in the invoices for services in all such claims. The Director of Operations shall review and verify the claim against invoices from the EC and payments made. After verification, the Accountant shall sign and file the claim with the DPI.
The Board of Directors is responsible for guiding the budget process and for approval of the annual budget.
The Director of Operations and Accountant will be responsible for preparing the proposed budget.
The budgeting process will begin in September for the following fiscal year. This will allow for eight months of results to be used in planning the budget.
All budget documents will be submitted to the Accountant by September 30 for consolidation into an overall agency budget. The Director of Operations and Accountant will then review this to determine if there are any obvious areas which may need to be reworked. The collated budget will be submitted to the Finance Committee by October 15 for review and feedback. Any further revisions will be made and the budget presented to the Board by November 15.
The responsibility for each area of the budget is as follows:
Director of Operations — Program revenues and expenses, fundraising revenues and expenses, donations revenue, operations expenses, and capital budget.
Accountant — Accounting expenses, investment income, projected balance sheet.
Board Treasurer — Board and committee expenses.
After completion and approval of the budget by the Board of Directors, the budget will not be modified for subsequent activities.
16.00 COMPUTER AUTHORIZATION AND BACKUP
The accounting software will have access controlled by passwords. The Director of Operations will control the master password. The Accountant will be given a complete system password and will control which other personnel will be given passwords.
The Accountant is responsible for maintaining the disaster recovery plan for the accounting software and for periodically testing the plan.
The Accountant will maintain a record of all authorized users and the level of password access each user has. Passwords will be changed once each year in June.
The back up procedures are designed to maintain records of various periods until that period is closed.
Backups will likely be handled by the software system (hosted on the cloud), however if this is not the case then the following procedure of manual tape backups will be implemented.
An annual tape backup will be maintained of the accounting data prior to the close. This tape will be maintained until the subsequent year accounting data is backed up and closed.
A monthly tape backup will be maintained of the accounting data for each month until that month is again backed up the subsequent year.
A weekly tape backup will be maintained of the accounting data for each week, as of Friday evening until that week is backed up the subsequent month.
A daily tape backup will be maintained of the accounting data for each day that work is performed until that day is backed up the following week.
A copy of all tapes will be kept in a fireproof tape safe in the office. A copy of the annual and monthly tapes will be taken home by the Accountant for storage. The Director of Operations and the Accountant will have keys to the fireproof safe.
The Accountant will ensure that the appropriate backups are made at the end of each day.
16.23 Disaster Recovery
Again, the software system (hosted on the cloud) will have disaster recovery procedures so that documents and records can be accessed at all times when the user has internet access.
17.00 ACCESS TO RECORDS AND RECORD RETENTION
The records of Milestone Democratic School, Incorporated are generally open to public inspection due to IRS rules, open records laws and the spirit of public service. However, certain information is not open to public examination and may only be released with the permission of the Director of Operations. Questions in this area are to be resolved by the Director of Operations. If the answer to a request is unclear then the Director of Operations may contact Milestone Democratic School, Incorporated ‘s attorney for a consultation.
Record retention is governed by various rules, statutes of limitations and common sense. Certain documents must be retained indefinitely, while others may have little use after a year.
17.21 IRS Forms
Payroll tax forms are not public information and will not be released.
IRS Forms 990 and 990A, the exempt organization information returns, must be made available to anyone upon request. The specific rules are outlined in the instructions for form 990. All pages, schedules and attachments, except the detailed schedule of contributors must be made available. The prior three years of 990s and 990As must be available upon request for free review in our office. If the requestor wishes to have a copy, that will be provided immediately or may be mailed to the person. We ask that the person pay the legally allowed fee of $1 for the first page and 15 cents for each additional page, plus actual postage, if applicable.
The application for exempt status, Form 1023, and the IRS determination letter are also available to anyone upon request for a free review in our office. Copying charges are the same as for the 990 if the person wishes to take a copy. The specific rules are outlined in the instructions for the form 990.
The Accountant is responsible for furnishing copies of these documents to the office assistant in a form suitable for public release. The office assistant will keep a copy of each form and make photocopies if requested.
17.22 Wisconsin Annual Charitable Organization Report
Although public disclosure by our organization is not required, the Wisconsin report is available to the public from the State Department of Regulation and Licensing. For this reason, we will make this return available with the forms 990 and 990A.
17.23 Personnel Records
All requests for personnel records, job references and credit inquiries will be referred to the Director of Operations.
17.24 Financial Information
Financial statements and other financial information is regularly distributed to Milestone Democratic School, Incorporated ‘s employees and the Board. This information is not to be made available to persons who are not regularly authorized to receive that particular report. Any such requests for information must be approved by the Director of Operations.
17.25 Records Retention
A schedule of record retention follows. Any discarding of records should follow this schedule. However, prior to discarding of records, the permission of the Director of Operations and the Accountant are required to ensure that they have no reason that an exception should be made to the policy. All discarded documents are to be shredded or sent to our recycling company, which has a confidentiality agreement with us.
For tax purposes, records should be maintained until the expiration of the statute of limitations. Generally, that period expires three years after the later of the due date of the return or the date filed. While there are a few exceptions to this rule, the three-year period normally should be adequate.
For non-tax purposes, records should be maintained only as long as they serve a business purpose or until all legal requirements are met. Unfortunately, there are not specific standards that will cover all situations. The following are some of the factors that should be considered:
Federal, state, and local statutes and regulations
Industry requirements or standards
Potential claims or litigation
RECORD RETENTION SCHEDULE
Type of Retention Period Record (Years)
Accident reports & claims 7*
Articles of incorporation, by laws P
Assets records 7*
Bank statements, reconciliations 4
Bills of sale-assets 7*
Budgets & projections 2
Cancelled checks – general 4**
Capital stock & bond records P
Charts of accounts P
Check vouchers, stubs 4
Contracts & agreements 7*
Credit and collection 7
Routine with customers or vendors 1
Credit memos 4
Damage and theft reports 7
Deposit slips 4
Depreciation schedules 7*
Disability, unemployment claims 7
Employment applications 4
Expense reports 4
Personnel files 7*
Time reports, earnings records 4
Withholding & exemption
certificates (W-2, W-4, etc.) 4*
Annual, audited P
Freight bills, bills of lading 4
Insurance policies & records 4
Internal reports, memos, work
orders, etc. 2
Inventory records 4
Fixed assets 7
Sales & general expenses 4
Ledgers & journals
Cash receipts & disbursements P
General ledger, journal entries P
Payroll journal 4
Purchases & sales 7
Subsidiary ledgers (receivables,
payables, etc.) 7
Minute books P
Pension & profitsharing records P
Petty cash records 4
Purchase orders, invoices 4
Receiving reports 4
Repair & maintenance records 4
Sales records & cash register tapes 4
Shipping reports 4
Tax returns and related records
Sales and use 4
Union contracts P
P means records should be kept permanently
* Retention period begins with settlement of claims, disposal of asset, termination of contract, etc.
** Some should be kept longer, e.g. checks for tax payments should be kept with the tax returns, checks for asset acquisitions should be kept with bill of sale, etc.
*** Legal and important correspondence should be kept as long as the documents to which they relate.
18.00 SAMPLE ACCOUNTING FORMS
The organization’s accounting forms and a brief explanation of their use should be included here.
Sample Inventory Document: Inventory Template
19.00 MAINTENANCE OF ACCOUNTING POLICIES AND PROCEDURES MANUAL
The accounting policies and procedures manual is critical to the accounting function of Milestone Democratic School, Incorporated.
The Accountant is responsible for maintaining the manual.
All proposed changes must be approved by the Accountant and by the Director of Operations.
The policies and procedure manual will be dated with the date of each approved revision.
Each year the Accountant will review the manual and formulate proposed changes. This update will be completed no later than October of each year. All changes must be approved in writing by the Director of Operations. If the Accountant has no proposed changes, a memo to that effect must be approved by the Director of Operations.
Whenever changes to the accounting procedures are made, a review of the accounting policies and procedures manual will be made by the Accountant to determine if a revision is required. Any minor revisions to the manual which are not reflected in the manual immediately should be kept on file to incorporate into the formal annual update.
The revised manual will be distributed to the Accountant, Director of Operations, and Board Treasurer.
20.00 PREPARATION OF INFORMATIONAL RETURNS
Milestone Democratic School, Incorporated is required to file IRS forms 990, Return of Organization Exempt from Income Tax and 990 Schedule A, Organization Exempt Under Section 501(c)(3), and Wisconsin Department of Regulation and Licensing form 1952, Charitable Organization Annual Report.
The preparation of these reports will generally be contracted out to the independent accountants.
The Accountant will be responsible for providing the information needed to prepare the report.
The Accountant and Director of Operations will review the reports prior to filing them to ensure that they are accurate and do not indicate any potential problems with the tax status or fundraising license of Milestone Democratic School, Incorporated.
The IRS forms are due September 15 (two and one-half months after year end). If the forms are not ready, an extension may be requested for an additional 3 months using form 2758.
The Wisconsin form must have the completed 990 and 990A attached and is due November 30. No extensions are granted on this filing. If donations from the general public, including federated fundraising and foundation grants, exceed $100,000, the annual audit will need to be included with the Wisconsin form.
These forms will be prepared primarily from the final audited financial statements. Additional information which is required includes a current list of the Board of Directors, the salary and benefits amounts of the Director of Operations, a list of all donations of $5,000 or more from individuals, corporations, and foundations, and a report on the nature and dollar value of any lobbying during the year. The Accountant will be responsible for gathering this information and providing it to the independent accountants.
The Accountant and Director of Operations will review the activity of the prior year to determine if there was any unrelated business income. Such income would include newsletter advertising, sales of the mailing list, sales of items not related to our exempt purposes and debt-financed rental income not received as part of performing our exempt purposes. The unrelated business income tax form is 990T for the IRS and 4T for Wisconsin. Gross unrelated business income in excess of $1,000 requires that a return be prepared, even though the activity is not netting any money. Generally, the 990T and 4T will be prepared by the independent accountants. The due date for these returns is May 15, with an automatic extension of 6 months using form 7004.
21.00 PROPERTY AND EQUIPMENT INVENTORY
An inventory of property and equipment will be maintained. The inventory document will contain sufficient information for insurance and grant requirements.
The Accountant will maintain a database of property and equipment owned by Milestone Democratic School, Incorporated. The database will include: tag number, description, serial number, acquisition date, cost, vendor, location and any grant or other restrictions.
All equipment will have a tag affixed with a unique identifying number.
The property and equipment database will be consulted prior to sale of any item to determine if there are restrictions. Grant purchased equipment may generally not be sold without the grantor’s permission.
An annual inventory will be taken to verify the existence of the property and equipment listed in the database.
Any discrepancies found in the end of the year inventory shall be noted in the spreadsheet and reported to the Board along with a report of items stolen, damaged, lost, or discarded. Capital equipment listed as stolen shall include a police report. All items listed as damaged, lost, or discarded, or non-capital equipment listed as stolen, shall include a signed and dated Damage and Theft Report by the Director of Operations explaining the status of the item.
If items are damaged while a student was acting in good faith, a Damage and Theft Report will be filed. Additionally, a detailed report will be logged on the Annual Inventory Document. If there is damage but the item is still in acceptable condition (it is still fully usable as it was originally intended to be used), the reports will be filed, and no further action will be taken. If it is not in acceptable condition, the school will assess a fine or accept a full replacement from the student’s family, as is detailed in the Student Handbook.
If items are lost, stolen, or damaged while a student was not acting in good faith, a Damage and Theft Report will be filed. Additionally, a detailed report will be logged on the Annual Inventory Document. The school will then assess a fine or accept a replacement by the family, as is outlined in the Student Handbook. In such an event, as is consistent with our School Plan, a student will also be referred to our Restorative Justice Process.
Any items purchased through contract or grants will be itemized, used, stored, discarded and liquidated using the guidelines specified in the contract or grant. If there are no specific guidelines for use, storage, discarding, or liquidating items, then the School’s procedures will be used.
Equipment will be included in the database using the definitions for capitalization in Section 3.
22.00 GRANTS AND CONTRACTS
Grant and contract billings will be prepared and filed timely. Adequate documentation will be maintained to support all billings.
Complete grant and contract files will be maintained.
Grant and contract billings will be prepared monthly or as needed. Billing will be done according to funding source requirements based on reimbursements of expenses, units of service or equal installment as required.
Documentation of billings will be prepared and maintained. For billings based on a reimbursement of expenses, a copy of the program expenses from the software and any reconciliations to the billing will be maintained. For billings based on units of service, a copy of the detailed units of service will be maintained.
The Accountant, Program Manager and Director of Operations will each approve billings prior to issuance.
Billings will be recorded as accounts receivable in the appropriate accounting period.
Grant and contract files will contain at least the following documents: signed copy of contract, application and budget, correspondence, periodic billings and the documentation supporting the billings.