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KOI Financial Policies and Procedures: Difference between revisions

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Adopted by Board of Directors of KOI on: TBD
Adopted by Board of Directors of KOI on: TBD


Review cadence: Semi-annually
Review cadence: Semi-
 
== Purpose, scope, and definitions ==
== Purpose, scope, and definitions ==
=== Purpose ===
=== Purpose ===
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* For compliance with grants
* For compliance with grants
* For compliance with audits
* For compliance with audits
* For reference by KOI volunteers
* For reference by KOI


=== Recognition of Capitalism and Harm ===
=== Recognition of Capitalism and Harm ===
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Internal controls prevent fraud and ensure proper spending of the funds of KOI.  
Internal controls prevent fraud and ensure proper spending of the funds of KOI.  


=== Separation of Powers ===
=== Separation of Duties ===
Separation of powers (sometimes called segregation of powers) is an internal control that prevents misuse of funds by ensuring every transaction has at least two eyes on it. Ideally, each transaction would have at least three KOI volunteers involved with it.
Separation of Duites (sometimes called segregation of duties) is an internal control that prevents misuse of funds by ensuring every transaction has at least two eyes on it. Ideally, each transaction would have at least three KOI volunteers involved with it.


KOI recognizes the following three powers in a transaction process:
KOI recognizes the following three duties in a transaction process:


* '''Authorization''' – Authorization is the power to approve a transaction. These can include expense approvals, check signatory powers, contract signatory powers, payroll initiation, etc.
* '''Authorization''' – Authorization is the power to approve a transaction. These can include expense approvals, check signatory powers, contract signatory powers, payroll initiation, etc.
* '''Custody –'''  Custody is the physical holding of the funds of KOI. This can include physical checks, P2P transaction app access, credit cards, and cash
* '''Custody –'''  Custody is the physical holding of the funds of KOI. This can include physical checks, P2P transaction app access, credit cards, and cash
* '''Record Keeping''' - Record keeping is the logging, and documentation of transactions. Examples include paper files, journal entries, employee records, billing, and payables, financial statement preparation, etc.
* '''Record Keeping''' - Record keeping is the logging, and documentation of transactions. Examples include paper files, journal entries, employee records, billing, and payables, financial statement preparation, etc.
* '''Materiality'''
The most dangerous duty to have combined with another is authorization.
** Materiality for evacuee expenses
 
** Materiality for non-evacuee expenses
Finance Comrades forbidden from holding authorization duties. Bank Signatories are forbidden from holding record-keeping duties.
 
=== Materiality ===
 
==== Materiality for evacuee expenses ====
Materiality will determine the amount of scrutiny an evacuee expense incurs. A set amount will be determined and referable by the Finance Committee. There can be multiple scales of materiality for an evacuee expense.
 
The lowest on the materiality threshhold will involve the following:
 
* The least amount of authorizers needed.
* The least amount of documnetation
* The least amount of natural consequences in cases of misappropriation.
 
The highest amount of materiality will involve the following:
 
* Clearest enforcement of Internal Controls
* Concise recording of authorization, and authorizors.
* Contracts if needed.
* The clearest understanding of natural consequences when it comes to misappropriation and fraud.
 
If there is a prohibited transaction for an evacuee, there will be no materiality threshold and scrutiny will be in place.
 
==== Materiality for non-evacuee expenses ====
Materiality will determine the amount of scrutiny an non-expense incurs. A set amount will be determined and referable by the Finance Committee. There can be multiple scales of materiality for an evacuee expense.
 
The lowest on the materiality threshhold will involve the following:
 
* The least amount of authorizers needed.
* The least amount of documnetation
* The detail in a Journal Entry Workpaper
* The least amount of natural consequences in cases of misappropriation.
 
The highest amount of materiality will involve the following:
 
* Clearest enforcement of Internal Controls
* Concise recording of authorization, and authorizors.
* Contracts if needed.
* Highest detail required for a Journal Entry workpaper.
* The clearest understanding of natural consequences when it comes to misappropriation and fraud.


=== General Ledger Account Control ===
=== General Ledger Account Control ===
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* The Petty Cash account will have to go through reconciliation on a set periodic basis.
* The Petty Cash account will have to go through reconciliation on a set periodic basis.
* Separation of controls will be held (Authorizor, vs. Record Keeper vs. Custodian) with no exceptions.
* Separation of controls will be held (Authorizor, vs. Record Keeper vs. Custodian) with no exceptions.
* Withdraws from the Petty Cash fund will need two signatories.
* Withdraws from the Petty Cash account will need two signatories.


== Organization Budgeting ==
== Organization Budgeting ==
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If the budget is not approved by the organization, then there is no operational budget. The budget has to be recomposed, and re-submitted.
If the budget is not approved by the organization, then there is no operational budget. The budget has to be recomposed, and re-submitted.


The draft budget should be available on an accessible platform where changes can be tracked, and colloborated
The draft budget should be available on an accessible platform where changes can be tracked, and collaborated.


The following committees are responsible for:
The following committees are responsible for:
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In the scenario where KOI secures the funds to hire paid staff, the Wage Schedule will be composed by the Finance Committee based upon the inputs of the Board.
In the scenario where KOI secures the funds to hire paid staff, the Wage Schedule will be composed by the Finance Committee based upon the inputs of the Board.
If there is a new expenditure/program that materially effects the organization, then either:
* The budget must be amended, or
* An entire re-forecast of the budget must occur.
A Re-forecasted budget, or budget amendment, must be approved by majority vote in the Finance Committee. The Finance Committee must alert the rest of the organization about the changes in the budget.


=== Budgeting Procedure ===
=== Budgeting Procedure ===
== Fund Management ==
== Fund Management ==
=== Fund Policy ===
=== Fund Policy ===
As a 501(c)(3), KOI is responsible in dividing the net assets into dedicated funds. The IRS required KOI to track expenses by funds, and to report expenses per funds in a statement of functional expenses on the tax return document the 990. The spending of expenses per fund is made transparent to the public on the 990 and on Washington State's Secretary of State's website.
As a 501(c)(3), KOI is responsible in dividing the net assets (equity) into dedicated funds. The IRS requires KOI to track expenses by funds, and to report expenses per funds in a statement of functional expenses on the tax return document the 990. The spending of expenses per fund is made transparent to the public on the 990 and on Washington State's Secretary of State's website.


KOI is required to keep track of only three Funds: Management, Fundraising, and Programs. However, to properly operate KOI keeps track of additional funds as need be.
KOI is required to keep track of only three Funds: Management, Fundraising, and Programs. However, to properly operate KOI keeps track of additional funds as need be.
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===== Programs (undesignated) Fund =====
===== Programs (undesignated) Fund =====
Programs is our general fund that allows KOI to do the work for the mission. Unless otherwise stated, these funds are unrestricted. There can be restricted funds that are sub-funds of the Programs Fund.
Programs is the general fund that allows KOI to do the work for the mission. Unless otherwise stated, these funds are unrestricted. There can be restricted funds that are sub-funds of the Programs Fund.


All Evacuee Expenses come from the programs fund. Any other expense that is for the mission of KOI also comes from the Programs Fund.
All Evacuee Expenses come from the programs fund. Any other expense that is for the mission of KOI also comes from the Programs Fund.
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If such expenses were to occur, then a misappropriation of funds (at the minimum) is considered to have occurred.  
If such expenses were to occur, then a misappropriation of funds (at the minimum) is considered to have occurred.  
==== Evacuee Expense Authorization ====
Expenses that require authorization must have:
* The name of the KOI volunteer that approved the expense.
* The name of the KOI Volunteer that proposed the expense
* The date of the approval
A KOI Volunteer cannot approve their own expense.
Expenses that do not require authorization are either budgeted to include documentation only, or are a re-occurring expense that has pre-authorization to occur.
Those with record-keeping, or custody, powers cannot authorize an expense.


=== Evacuee Expenses Procedures ===
=== Evacuee Expenses Procedures ===
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If a card is approaching the spending limit, the card holder may request a signatory to complete an early payment. The board treasurer can confirm if there are cash reserves available for such a payment.
If a card is approaching the spending limit, the card holder may request a signatory to complete an early payment. The board treasurer can confirm if there are cash reserves available for such a payment.


Credit card holders may attach the credit card to a peer-to-peer (P2P) monetary option<!-- recommend "service" --> such as Venmo, Cash App, Paypal, etc.
Credit card holders may attach the credit card to a peer-to-peer (P2P) monetary service such as Venmo, Cash App, Paypal, etc.
 
Credit card holders may use the credit card for recurring expenses. These expenses need approval for the first instance. Afterwards, no further authorization is needed barring changes in the purpose of the transaction, amount, or timing.<!-- Recommend "only need approval for the first instance" or similar. Also perhaps add something about needing re-authorization if the cost of the recurring expense changes beyond a set percentage of the primary amount.


Credit card holders may use the credit card for recurring expenses, and may<!-- Recommend "only need approval for the first instance" or similar. Also perhaps add something about needing re-authorization if the cost of the recurring expense changes beyond a set percentage of the primary amount. --> only ask for approval once due to the consistent nature of the expense.
Josh - Good point. I rephrased it. -->  


If there is an unknown, and/or unauthorized, transaction on the card, the card holder must notify the signatories within 24 hours of the posting date.
If there is an unknown, and/or unauthorized, transaction on the card, the card holder must notify the signatories within 24 hours of the posting date.
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==== Cessation of Credit Card use ====
==== Cessation of Credit Card use ====
Credit card cessation is required when:
Credit card use cessation is required when:


* Violation, or violations, of policy threaten KOI’s sustainability and going concern
* Violation, or violations, of policy threaten KOI’s sustainability and going concern
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The immediate next step is to close the credit card. No further credit card can be issued to the credit card holder unless it was determined there was an error in the decision of cessation.
The immediate next step is to close the credit card. No further credit card can be issued to the credit card holder unless it was determined there was an error in the decision of cessation.


Only the board treasurer, the board chair, and the executive director<!-- Recommend noting more explicitly that all three are required. --> can make the decision to cease use of a credit card for a credit card holder. No vote is required out of the three, but disclosure must be made. No veto regarding such a decision can be made.
Only the board treasurer, the board chair, or the executive director<!-- Recommend noting more explicitly that all three are required. - Clarifying that only one is needed to deny CC usage. --> can make the decision to cease use of a credit card for a credit card holder. No vote is required out of the three, but disclosure must be made. No veto regarding such a decision can be made.


Once there is a decision to remove the credit card from the credit card holder, the decision must be disclosed to the credit card holder, the evacuees depending on the credit card, the finance committee, and to the bank. A bank signatory will then close the account<!-- Close the account, or just the card? -->.
Once there is a decision to remove the credit card from the credit card holder, the decision must be disclosed to the credit card holder, the evacuees depending on the credit card, the finance committee, and to the bank. A bank signatory will then close the card.


Further consequences can include:
Further consequences can include:
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