The following is the complete text of CACC Internal Control Manual adopted a year and a half after it began operating.
INTERNAL CONTROL MANUAL
THE CENTER FOR ANIMAL CARE AND CONTROL
11 PARK PLACE, 2ND FLOOR
NEW YORK, NEW YORK 10007
adopted on May 29, 1996
CATEGORIES / STATEMENTS
STATEMENT OF Objectives
I. BUSINESS PRACTICES
Conflicts of Interest
Receipt of Gifts
Personal Use of Services of Employees & Property
CACC Minutes & Other Papers
Contracts & Leases
Employee Loans & Advances
II. TRAVEL & ENTERTAINMENT
III. OUTSIDE ACCOUNTANCY SERVICE
IV. BANK ACCOUNTS AND INVESTMENTS
V. DISBURSEMENTS & PURCHASING
Documentation of Paid Invoices
VI. FINANCIAL STATEMENTS
VII. INCOME & CASH RECEIPTS
Segregation of Responsibilities
Background and References
Retention & Security of Records
Tax Returns and Payments
I. Glossary of Words and Definitions
INTERNAL CONTROL MANUAL
The CACC must maintain a system of internal controls sufficient to safeguard the assets of the CACC.
There are a large number of charities in society attempting to provide necessary services. Unfortunately, the dollars available from the public appears to be far short of the funds required. We frequently read or hear news reports about organizations who violate the public's trust and, as a result, often cause problems in fund raising for all of us.
The need to exercise our fiduciary responsibility and properly handle the donated funds, requires a system of internal controls for the CACC. We are being, and will continue to be, held to intense scrutiny by the public, Internal Revenue Service and other Federal and State agencies. We must, in all cases, hold ourselves to standards above the minimums which might be satisfactory for others. Problems encountered will have negative impacts on all. Decreased fund raising, loss of tax exemption could result. The Board of Directors has addressed this issue and, as a result, has developed this manual of internal controls for the CACC.
STATEMENT OF OBJECTIVES
Recognizing our responsibilities to maintain the receipts and expenditures in a systematic and accurate manner, with full accountability, the following manual has been prepared for use by the CACC. This manual represents the framework of good, strong and necessary internal controls, that at a minimum, the CACC must have in place.
We recognize that additional controls do exist and are currently in place. This manual is not necessarily intended to replace those controls but to supplement them.
I. BUSINESS Practices
CONFLICTS OF INTEREST
A conflict of interest exists in any situation where a staff person having official responsibilities for CACC has been empowered to make decisions on behalf of CACC and who, as a result of that power, can potentially benefit personally, directly or indirectly, from an entity or person conducting business with CACC.
All potential conflicts of interest are to be reported to the CACC's Board of Directors prior to engaging in a conflict of interest action. The Board of Directors will then make a decision as to whether the relationship is an appropriate one for CACC.
RECEIPT OF GIFTS
Gifts, payments, discounts, etc. in excess of $50.00 for employees, board members or officers shall not be accepted from any supplier or others doing business with CACC, unless accepted on behalf of CACC.
PERSONAL USE OF SERVICES OF CACC EMPLOYEES AND PROPERTY
The use of services of employees, materials or equipment belonging to CACC, or permitting others the USB of these items for personal purposes, is prohibited unless it is of nominal value.
CACC MINUTES AND OTHER PAPERS
Minutes of meetings of the CACC's Board of Directors, Executive Committee and other committees, as well as tax recturns, incorporation certificate, exemption certificate, etc. are an integral part of the organization's records. These records must be maintained for inspection by appropriate persons at the CACC's regular place of business.
Obligational authority is the level of authority of individuals or committees to expend or commit the use ofCACC resources on behalf of the organization. These include, but are not limited to, cash disbursements, leases and contracts. The individual levels delegated must be defined by resolution of the CACC's Board of Directors.
CONTRACTS AND LEASES
Individuals are not authorized to bind the organization, except the Executive Director or with the express written approval of the CACC's Board of Directors.
EMPLOYEE MONETARY LOANS AND ADVANCES
Personal monetary loans and advances are bad business practices and are prohibited. This prohibition shall not cover employees receiving vacation pay on the pay day immediately prior to their approved vacation period.
II. TRAVEL & ENTERTAINMENT
This section establishes definitions of, and standards for, documentation and reporting of business-related travel and entertainment expenses. While reasonable and necessary expenses must be incurred in the conduct of theCACC's business, the eligibility for reimbursement will be dependent upon meeting specified guidelines and documentation procedures.
AIR TRAVEL - The normally expected class of travel is coach. When two or more airlines fly to the location on the same date within a reasonable time frame, the lower fare should be paid.
CAR RENTALS - When rented cars are clearly the most economical means of transportation, economy or compact cars should be chosen. When possible, the gasoline tank should be filled before returning the rental car to eliminate the excessively high refueling charge. If rented cars are used for personal as well as business travel, the business portion of the expense should be reimbursed on a pro rata basis.
LODGING - When traveling on CACC business, accommodations should be booked in reasonably priced, single occupancy rooms, unless the situation (i.e. convention or group meeting) requires other accommodations. Receipts are required for lodging regardless of the amount.
MEALS - Meals should be at a moderate rate commensurate with good quality and service. Tips for meals should not generally exceed 15%.
PRIVATELY OWNED VEHICLES - Whenever possible, the use of public transportation is encouraged. However, when an employee must use his or her own vehicle for the conduct of CACC business, mileage will be reimbursed at a level not exceeding the internal Revenue Service approved mileage rate for reimbursement. Employees shall not receive reimbursement for commutation mileage to their first business location or home from their last business location of the day.
OTHER - Receipts are required for all expenditure reimbursements.
III. OUTSIDE ACCOUNTANCY SERVICES
The CACC must have an independent annual audit of its books and records. The hiring of accountants must be approved by the CACC's Board of Directors.
IV. BANK ACCOUNTS AND INVESTMENTS
The opening of all bank accounts must be approved and authorized by the CACC's Board of Directors.
Bank reconciliations must be done on a monthly basis, generally within one week of receipt. Bank reconciliations should be prepared by someone not having responsibility for check disbursements and handling of cash receipts.
All check signers should be approved by the Board of Directors and, sample copies of their signatures maintained at the CACC's office.
The Executive Director, the Secretary and a member of the Board of Directors of the CACC (preferably the Treasurer) shall be signatories on any/all cash accounts held by the CACC. Two signatures shall be required on any/all checks over $1,000.00.
Only investments in money market accounts, certificates of deposit, savings accounts or U.S. treasury paper should be considered. CACC is not in the investment business. Any stocks or bonds received by the CACC, unless restricted by the donor, should be liquidated immediately.
V. DISBURSEMENTS & PURCHASING
All purchases must be approved by the party responsible for receipt of the merchandise or service. This will help insure that the CACC receives what it pays for.
As a general rule, two (2) signatures should be used to release checks from the operating and money market accounts. All other accounts require two signatures when the check exceeds $1,000.00. Checks generated by our payroll company must have the signature of the Executive Director.
Persons having the authority to sign checks must never sign checks payable to themselves or their family.
Wire transfers between banks should follow the same procedure as normal cash disbursements.
The supply of unused checks is to be controlled by the treasurer or controller, as deemed appropriate. All spoiled checks are to be mutilated to preclude subsequent use and preserved for purposes of documenting the reconciliation process.
Whenever possible, and certainly at CACC defined thresholds, a competitive bidding process should be utilized. This will assist in not only getting the best available price, but also in maintaining levels of quality of material and service.
DOCUMENTATION OF PAID INVOICES
After payment of invoices, invoices should all be marked "PAID," usually giving the check number and date of payment.
All bills received should be paid in a timely fashion. Discounts which may be available for prompt payments should be taken wherever it makes economic sense to do so.
VI. FINANCIAL STATEMENTS
The issuance of periodic financial statements to the CACC s Board of Directors and the general public is an excellent means of communicating how the CACC' s funds have been received and utilized. The Board of Directors shall be provided with a copy of all monthly financial reports.
The CACC must operate on an annual budget system. The budget should be prepared based upon previous experience and future expectations and submitted, prior to the beginning of the fiscal year, to the CACC'sBoard of Directors for approval. Financial statements should be prepared which compare actual financial results to the budget, with explanations of significant variances provided to the Board of Directors.
VII. INCOME AND CASH RECEIPTS
SEGREGATION OF RESPONSIBILITIES
Duties must be segregated so that there is no overlapping of responsibilities for cash receipts and disbursements. Any effective system of internal controls requires that the cash receipts and disbursement functions must be performed by different individuals.
Income received should be recorded in sufficient detail to inform the CACC's Board of Directors of theCACC's various funding sources.
Letters of acknowledgment shall be provided to all contributors of $20.00 or over to assist them with fulfilling their documentation requirements for claiming deductions on their tax returns. This procedure can also be used by the Controller to reconcile a bank deposit. Letters should be signed and dated and copies maintained as part of the CACC's books and records.
In addition, as a not-for-profit organization, we operate numerous fund raising events where cash is received. The need for controls and proper procedures is paramount in these situations. The following controls should be followed in every case:
Cash should be kept under the control of the CACC and care exercised to insure that the cash is protected at all times.
At the end of an event, cash should be counted in the presence of at least two individuals.
Cash turned over to the office staff or Controller should be recounted and a receipt promptly issued. Any discrepancies should be immediately resolved.
Cash should not be given to any individual for substitution with their personal checks so as to appear as an improper tax deduction. If converted, the checks should be made payable to cash.
Deposits should be made timely and regularity so that maximum investment opportunities are made available and so that donors see that funds are immediately deposited to CACC accounts.
Mail receipts must be opened by someone other than the party responsible for completing the deposit. An adding machine listing should be prepared and reconciled to the final deposit. It is a good practice to make deposits routinely and not allow checks or cash to accumulate. Cash receipts must be counted by more than one individual and a receipt signed indicating the amount received.
BACKGROUND AND REFERENCES
It is important that backgrounds and references of all potential employees be checked, and that normal human resource procedures be maintained.
RETENTION AND SECURITY OF RECORDS
Data relevant to an employee's work and performance should be kept up to date and maintained by theCACC. Access to these records should be limited as approved by the Director of Human Resources and the General Counsel.
As a part of a personnel policy, there should be a defined schedule of benefits to avoid any problems with misunderstanding or abuse.
TAX RETURNS AND PAYMENTS
With the payment of salaries comes the withholding of taxes and proper reporting. All required tax deposits and filing of returns must be done in a timely manner.
Glossary of Words and Definitions
Conflict of Interest - a conflict between the private interests and official responsibilities of a person in a position of trust.
Fiduciary Responsibility - a standard of faith or trust assigned to volunteers dealing in public funds.
Regular Place of Business - the location commonly thought of by the public as the official location of theCACC.
Obligational Authority - the financial level at which an individual has received approval to bind the organization.
Privately Owned Vehicles - automobiles owned or leased by individuals.
I.R.S. Approved Mileage Rate - the l.R.S. has a rate approved for individual tax deduction of volunteers to charities and a rate of reimbursement for employees traveling on organization business. This refers to the rate of reimbursement.
Investment Criteria - a standard established which defines the types of investments to be made.
Bank Reconciliation - the process of comparing checkbooks to the bank statements and bringing them into balance by identifying the differences.
Check Signers - those individuals authorized by the governing body to sign organization checks.
Wire Transfer - the ability to electronically transfer funds between banks by written or verbal authorization (as required by the banks).
Competitive Bidding - obtaining the efforts of two or more parties, acting independently, to obtain business at the most favorable terms.
Defined Thresholds - a dollar level which, when reached, requires certain predefined actions.
Discounts - a reduction made from the normal purchase price of an item.
Overlapping Responsibility - when duties are performed by the same individual, but which by their nature, are necessarily segregated and performed by different individuals.
Copyright - the exclusive legal right to reproduce and sell matter.